Does a Commission Agreement Need to Be in Writing?

In several states, yes. A commission agreement must be in writing and signed, most notably in California (Labor Code 2751) and New York (Labor Law 191(1)(c)). Federal law does not require a written commission agreement everywhere, but a signed written agreement is strongly advisable in every state, because it is the record that settles when a commission is earned and what the rep gets paid.

Last updated July 2026. This is general information, not legal advice. Commission and wage rules vary by state, by whether the worker is an employee or a contractor, and by how each agreement is drafted, so have an employment attorney review your commission plan before you roll it out.

Commission disputes almost always come down to one question: was the commission earned, and under what terms? This guide explains where a written commission agreement is legally required, what California Labor Code 2751 and New York Labor Law 191(1)(c) demand, what happens with nothing in writing, what a solid agreement should include, and how to sign one.

Does a commission agreement need to be in writing?

In some states it is legally required, and everywhere else it is strongly advisable. California and New York both mandate a written, signed commission agreement for employees paid on commission. Other states impose no general writing requirement, but without one you are left arguing over verbal terms, which is where commission claims turn expensive.

The reason the writing matters is that a commission is not a fixed salary. The amount depends on triggers: a closed sale, a collected payment, a shipped order, or a customer that does not cancel. When those triggers live only in someone's memory, both sides remember them differently the moment a deal goes sideways. A written agreement fixes the method, the rate, and the timing in advance. If you employ or pay salespeople, the safe default is to put every commission agreement in writing and get it signed.

What does California Labor Code 2751 require?

California Labor Code section 2751 requires that when an employer pays commissions, the commission arrangement must be in a written contract that sets forth the method by which the commissions are calculated and paid. The employer must give the employee a signed copy of that contract and obtain a signed receipt for the contract from each employee.

The statute applies to employers with employees in California who are paid commissions. It defines a commission as compensation for sales, based proportionally on the amount or value of the sale. That definition is broader than the label an employer uses: a payment can count as a commission even if it is labeled a bonus. Several things are excluded, though, including short-term productivity bonuses, temporary or variable incentive payments, and bonus or profit-sharing plans not tied proportionally to sales value. One more detail: if a commission contract expires and the parties keep working under it, its terms are presumed to remain in effect until it is superseded or the employment relationship ends. The practical takeaway is that California expects two signed artifacts, the contract itself and a separate signed receipt confirming the employee got their copy.

Does New York require a written commission agreement?

Yes. New York Labor Law section 191(1)(c) requires that the terms of employment of a commission salesperson be in writing, signed by both the employer and the employee. The written terms must describe how wages, salary, drawing account, commissions, and all other money earned are calculated.

New York is stricter than most states in that it wants the agreement signed by both parties, not just acknowledged by the employee. The description of how money is calculated is the heart of it: a drawing account (an advance against future commissions) has to be spelled out, and so does the formula for every category of pay the salesperson can earn. Because New York courts have historically resolved ambiguities in a commissioned employee's favor when the employer failed to put clear terms in writing, a vague or missing agreement hurts the employer.

What happens if there is no written commission agreement?

If there is no written commission agreement, you lose your best evidence of what was promised, and in California or New York you may be out of compliance with the wage statutes on top of that. Disputes then get resolved on testimony, emails, and pay history rather than clear signed terms, which usually favors the worker.

Two risks stack up here. The first is state wage law: in California and New York a missing written agreement is itself a violation, and courts tend to read gaps against the employer. The second exists in nearly every state. Many states have separate sales-representative commission statutes that impose penalties, sometimes double or even treble damages plus attorney fees, on a principal who fails to timely pay a rep the commissions earned after termination. These statutes vary widely in who they cover and what they require, so check your specific state rather than assume. Either way, the missing signed agreement is the common thread in expensive commission claims. For companies that run commission payouts through their payables process, the written agreement also tells finance exactly when a commission becomes payable, which prevents paying too early or clawing back too late.

What should a commission agreement include?

A commission agreement should include the commission rate, a precise definition of when a commission is earned, how draws and advances work, any chargebacks or clawbacks, the timing of payment, what happens to commissions after termination, and how disputes are resolved. In California it also needs the method of calculation and a signed receipt; in New York, both parties' signatures.

The single most litigated clause is the earned trigger. Here are the clauses worth getting right before signing.

Whether the person is a W-2 salesperson or a 1099 contractor changes which wage laws apply, so pair the plan with the right underlying document, such as an employment contract for staff or an independent contractor agreement for outside reps. The commission terms can live inside that agreement or as a signed schedule attached to it.

Can a commission agreement be signed electronically?

Yes. A commission agreement is a contract, so an electronic signature on it is valid and enforceable under the federal ESIGN Act and state UETA laws, with no notary required in the ordinary case. Better still, an e-signature platform produces a dated audit trail that cleanly satisfies California's requirement for a signed copy and a signed receipt.

This is where electronic signing does real legal work rather than just saving paper. California Labor Code 2751 wants two things the employer can prove: that the employee received a signed copy of the contract, and that the employee signed a receipt for it. An electronic signature audit certificate records exactly that, with the signer's name, timestamp, and document version, so the signed copy and the signed receipt are captured in one step. New York's demand for both parties' signatures works the same way. When your plan is ready, you can send the commission agreement for signature online and keep the executed contract, the receipt, and the audit trail in one place.

A written, signed commission agreement is the cheapest insurance against a dispute, and in California and New York it is the law. Send your commission agreement for signature with SignSend and capture the signed copy, the signed receipt, and a full audit trail without printing anything.

This guide is general information and not legal advice. Commission and wage laws, sales-representative statutes, and the treatment of earned commissions vary by state, by worker classification, and by how each agreement is drafted. Consult a qualified employment attorney about your specific situation.