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Commission Compensation

Effective January 1, 2013, California Labor Code 2751 requires any employment contract that involves commission compensation to be in writing, explaining “the method by which the commissions shall be computed and paid.”

The Labor Code defines commission as compensation paid to any person for services rendered in the sale of an employer’s property or services and based proportionately upon the amount or value thereof.”

A compensation method needs to comply with two requirements before it is considered to be  “commission wages” in California:

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1.     Employees involved principally in supplying a product or service, not creating the product or rendering a service; and

2.     Amount of employee compensation must be a percent of the price of the service or product.

Some litigation has already surrounded the definition of commission.  For example, in a California appellate case, Keyes  Motors, Inc. v. Division of Labor Standards Enforcement (1987) 197 California Appellate Reports, third series (Cal.App.3d) 557, 564, the “sales only” portion of the Labor Code definition does not mean paying auto mechanics a percentage of the hourly rate charged to customers for repairs leads to  a commission wage. The case stands for mechanics not selling cars, only repairing them.

As new labor laws on wages and hours get introduced, there may be more class action cases in 2013 when the entities that do the hiring do not follow the laws.  In a class action a lead attorney usually gets appointed by the court to represent the lead plaintiff. The lead plaintiff represents the members of the class, and usually must have injuries that are similar to the members.

The lead attorney acts analogous to trustees rather than agents and their responsibility is to pursue the good of all. For instance, it seems they may make tradeoffs to maximize the value of all claims in a group, and need only be reasonable and fair when making the tradeoffs similar to a trustee.

In a class action based on wage and hour violations, a lot of money and attorneys may be involved, as opposed to lawsuits for discrimination or harassment, which may be more difficult to prove. In discrimination and harassment cases, the plaintiffs usually have individual damages fact finding.

In Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2nd Cir. 2000), the court gave these factors for determining a class attorney’s award of fees:  “(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations.”

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Posted by on December 25, 2012. Filed under Business News,Legal News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

 

 

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