Legal Question in Business Law in California

I've very confused about something: why do standard commission pay schedules not violate state contest laws?
Here's a quote defining a contest under California law (http://www.dca.ca.gov/publications/legal_guides/u-3.shtml):
A "contest" is any game, puzzle, scheme, or plan which offers prospective participants the opportunity to receive or compete for gifts or prizes on the basis of skill or skill and chance, and which is conditioned wholly or partly on the payment of some value.
To my rather literal mind, every element of this definition is present in a standard commission pay arrangement, e.g., a floor salesperson is paid 10% of all sales he makes. This is clearly a "plan", he is "participant", he receives "prizes" on the basis of skill, and it's conditioned on his "payment of some value", namely his work effort.
Thanks!

Asked on 1/03/14, 2:38 pm

3 Answers from Attorneys

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It is because work is not considered payment number one and number two is a very special form of value government by very specific laws that apply only to work and employment. Those specific laws about working employment supersede general laws about giving things of value in most cases.

Answered on 1/03/14, 3:14 pm

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Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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One important difference is that payment of commissions is necessarily a three-party process, in which the cash comes from Party #1, the Customer, and is thereafter divided between Party #2, the Employer, and Party #3, the Employee. In a contest, there are only two parties, the Contestant and the Operator.

Another difference is that the Labor Code recognizes commissions as a part of wages (see Labor Code section 200).

Finally, the court system and the enforcement of laws does not work on strict Boolean logic or follow literal rules. Consider the difficulty of the U.S. Supreme Court in defining obscenity (Justice Potter Stewart's famous quote that he couldn't give a precise definition, but "I know it when I see it"). Some reasoning, going beyond the literal meaning of words, is required in addition to strict logic, in interpreting and applying statutes as the Legislature intended.

Answered on 1/03/14, 3:21 pm

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