California Independent Wholesale Sales Representatives Statutes
Independent manufacturers’ sales representatives are typically hired by manufacturers, distributors, and importers to solicit orders for their products from potential customers in designated territories in exchange for a sales commission. Such sales representatives often spend many months or years building up a customer base in their assigned territory and incur substantial up-front sales and marketing expenses that can include travel, lodging, entertainment, and trade show expenses with the hope of generating a stream of future commission income. The sales representative is vulnerable if the principal suddenly terminates their relationship and/or fails to pay all commissions owed to the sales rep.
In response to these concerns, starting in the 1980s and 1990s, many states enacted statutes to protect the interests of these independent manufacturers’ sales representatives. These statutes often:
• Require the sales representative agreement to be in writing;
• Require the principal to provide a copy of the written contract to the sales rep;
• Require the principal to pay the sales rep for all commissions owed promptly following termination (or incur liability for statutory penalties, attorney’s fees, and court costs);
• Strictly limit the circumstances under which the principal can terminate, or fail to renew, a sales representative agreement (e.g., requiring the manufacturer to have “good cause” for termination); and/or
• Prohibit the principal from imposing terms (such as choice of law or exclusive venue provisions) in the sales rep agreement that would effectively require the sales rep to waive its statutory protections under the law.
Thirty-five of the fifty states have enacted some form of sales rep protection legislation.
This article sets forth the text of California’s laws protecting independent manufacturers’ sales representatives, as of January 1, 2023.
The California Sales Representatives Act
California Statutes, Cal. Civ. Code § 1738.10
The Legislature finds and declares that independent wholesale sales representatives are a key ingredient to the California economy. The Legislature further finds and declares the wholesale sales representatives spend many hours developing their territory in order to properly market their products, and therefore should be provided unique protection from unjust termination of the territorial market areas. Therefore, it is the intent of the Legislature, in enacting this act to provide security and clarify the contractual relations between manufacturers and their nonemployee sales representatives.
California Statutes, Cal. Civ. Code § 1738.11
This chapter shall be known and cited as the Independent Wholesale Sales Representatives Contractual Relations Act of 1990.
California Statutes, Cal. Civ. Code § 1738.12
For purposes of this chapter the following terms have the following meaning:
(a) “Manufacturer” means any organization engaged in the business of producing, assembling, mining, weaving, importing or by any other method of fabrication, a product tangible or intangible, intended for resale to, or use by the consumers of this state.
(b) “Jobber” means any business organization engaged in the business of purchasing products intended for resale and invoicing to purchasers for resale to, or use by, the consumers of this state.
(c) “Distributor” means any business organization engaged in offering for sale products which are shipped from its inventory, or from goods in transit to its inventory, to purchasers and intended for resale to, or use by the consumers of this state.
(d) “Chargeback” means any deduction taken against the commissions earned by the sales representative which are not required by state or federal law.
(e) “Wholesale sales representative” means any person who contracts with a manufacturer, jobber, or distributor for the purpose of soliciting wholesale orders, is compensated, in whole or part, by commission, but shall not include one who places orders or purchases exclusively for his own account for resale and shall not include one who sells or takes orders for the direct sale of products to the ultimate consumer.
California Statutes, Cal. Civ. Code § 1738.13
(a) Whenever a manufacturer, jobber, or distributor is engaged in business within this state and uses the services of a wholesale sales representative, who is not an employee of the manufacturer, jobber, or distributor, to solicit wholesale orders at least partially within this state, and the contemplated method of payment involves commissions, the manufacturer, jobber, or distributor shall enter into a written contract with the sales representative.
(b) The written contract shall include all of the following:
(1) The rate and method by which the commission is computed.
(2) The time when commissions will be paid.
(3) The territory assigned to the sales representative.
(4) All exceptions to the assigned territory and customers therein.
(5) What chargebacks will be made against the commissions, if any.
(c) The sales representative and the manufacturer, jobber, or distributor shall each be provided with a signed copy of the written contract and the sales representative shall sign a receipt acknowledging receipt of the signed contract.
(d) The sales representative shall be provided with the following written information and documentation with payment of the commission:
(1) An accounting of the orders for which payment is made, including the customer’s name and invoice number.
(2) The rate of commission on each order.
(3) Information relating to any chargebacks included in the accounting.
(e) No contract shall contain any provision which waives any rights established pursuant to this chapter. Any such waiver is deemed contrary to public policy and void.
California Statutes, Cal. Civ. Code § 1738.14
A manufacturer, jobber, or distributor who is not a resident of this state, and who enters into a contract regulated by this chapter is deemed to be doing business in this state for purposes of personal jurisdiction.
California Statutes, Cal. Civ. Code § 1738.15
A manufacturer, jobber, or distributor who willfully fails to enter into a written contract as required by this chapter or willfully fails to pay commissions as provided in the written contract shall be liable to the sales representative in a civil action for treble the damages proved at trial.
California Statutes, Cal. Civ. Code § 1738.16
In a civil action brought by the sales representative pursuant to this chapter, the prevailing party shall be entitled to reasonable attorney’s fees and costs in addition to any other recovery.
California Statutes, Cal. Civ. Code § 1738.17
This chapter shall not apply to any person licensed pursuant to Division 9 (commencing with Section 23000) of the Business and Professions Code.
California, like a majority of states, has enacted sales representative legislation. Manufacturers, distributors, and importers typically bear the burden of compliance with these statutes and should ensure that their contracts and activities are consistent with applicable law. Sales representatives may wish to review applicable laws to understand their rights. If the laws of multiple states are involved, compliance with the relevant law may become even more complicated, and legal advice from a California sales rep attorney may be appropriate.
About the Author
Craig W. Trepanier is a sales representative attorney who handles disputes under the Minnesota Termination of Sales Representatives Act and the laws of other jurisdictions. He can be reached at email@example.com or at 612.455.0502. Trepanier MacGillis Battina P.A. is a Minnesota sales representative law firm located in Minneapolis. If you need advice regarding your sales representative agreement, or are having a dispute regarding the termination, non-renewal, or modification of a sales rep agreement or unpaid commissions, please contact us. Mr. Trepanier can represent you in the State of Minnesota. If appropriate, we can co-counsel with an attorney in your jurisdiction to leverage our specialized knowledge of sales rep law.