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AB 1396: Commission Agreements, Grammar, and Legislative Pollution

A new California law (AB 1396) requires that all employment relationships that involve payment of commissions “shall be in writing and shall set forth the method by which the commissions shall be computed and paid.”  The employee must be given a signed copy, and the employer must obtain a signed receipt from each employee.  The contract and the commission terms “are presumed to remain in full force and effect until the contract is superseded or the employment is terminated by either party.”  This new law will have a dramatic impact on any employer whose compensation arrangements involve commissions.  At a minimum, the customary annual commission plans published for such employees will need to be incorporated into a contract format and written receipts obtained.  Whether the employer routinely uses commissions or does so only on an intermittent or anecdotal basis, the new law requires new procedures and new written contracts.

Curious legislative drafting makes uncertain the effective date of the law.  So, now, let us have some fun with the legislature’s grammar and syntax.  Should we assume the law goes into effect January 1, 2013?

The only reference in the new statute to any effective date states that “[B]y January 1, 2013, whenever…” an employer enters into such a contract, it must be in writing.  Does this mean that starting immediately and only until January 1, 2013, all such contracts must be in writing; or does it mean that “after” January 1, 2013” such contracts “shall be in writing?”  It cannot mean the latter, because the word “after” was not used.  Even the Legislative Counsel’s digest avoids answering the question.  It states, “[T]his bill would, by January 1, 2013, make this contract requirement applicable to all employers entering into a contract…”  This implies that something must occur between now and then – without explanation.  Maybe the legislature intended to say, “This law takes affect January 1, 2013.”  But, it didn’t.  Maybe it meant to say, “We would like to say this law takes effect on January 1, 2013, but we also would like to say that we want employers to comply with it by January 1, 2013.”  Finally, we should ask the question begged by this semantic construction…what about commission arrangement that are made after January 1, 2013 – are they not covered by this new law?  The preposition “by” in this context means “before or no later than.”  Strict construction of the statutory words then requires that the statute means no later than January 1, 2013, employment relationships must comply by the indicated date – logically that can only include employment relationships now existing or created between now and that date. Even if equal interpretive weight is given to the word “whenever,” it seems to conflict with “by” instead of clarifying its use, i.e. “before January 1, 2013, whenever…” or “no later than January 13, 2013, whenever…” “By” is sometimes confused with “until” but neither application in this sense helps clarify the meaning.  Other commentators suggest the effective date is January 1, 2013.  And, if something is to be done between now and January 13, 2013, it must be using written contracts for commission arrangments, which means the law is not effective January 1, 2013, but sooner.  Maybe the legislature will clear this up with an amendment.

If anyone, grammar nerd or not, has any thoughts on what this phrase means, please comment, for fun, if for no other reason.

Stephen C. Gerrish, Employment Group

Thoits Law

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Join the discussion One Comment

  • Steve:
    Thanks for your interest.
    I wrote the resolution that passed the 2009 Conference of California Bar Associations (f.k.a. Conference of Delegates) and was picked up by the State Assembly Labor & Employment Commission, which is responsible for the wording of the bill signed into law about ten days ago.
    The language was intended to create a safe harbor for employers to bring their practices into compliance by January 1, 2013, when the requirement will become effective.
    Mike Sohigian