The New Jersey Supreme Court overturned prior precedent holding that commissions earned by employees must be considered wages under the New Jersey Wage Payment Law (WPL). The Court’s ruling is widespread, holding that commissions can never be classified as supplementary incentives which are not covered under the WPL.
The Case: Musker v. Suuchi
The case, Musker v. Suuchi, involved unpaid commissions of a sales representative for the sales she finalized by selling personal protective equipment (PPE) during the COVID-19 pandemic. The employer’s business involved software subscriptions, but during the pandemic expanded to PPE. The employer argued the sales generated by the employee for the PPE did not fall under the employee’s sales commission plan, and therefore she was not entitled to commission from the almost $35 million in sales she generated. The parties disagreed on the amount of commission owed to the employee for these sales and further whether or not the commissions were considered supplementary incentives under the WPL.
Legal Definitions and Court’s Interpretation
The WPL defines wages as “direct monetary compensation for labor services rendered by an employee, where the amount is determined on a time, task, piece, or commission basis excluding any form of supplementary incentives and bonuses which are independently of regular wages and paid in addition hereto”. N.J.S.A. 34:11-4.1(c).
The WPL does not include a definition for supplementary incentives. The Supreme Court determined supplementary incentives is compensation that motivates the employee to go above and beyond their labor or services generally required in their job duties.
The Ruling
In its ruling, the New Jersey Supreme Court made clear commissions are wages under the WPL. The Court reasoned the commissions from the PPE were directly related to her labor and services. Employers must abide by all requirements of the WPL when paying commissions to employees.
In summary, the WPL requires employers to:
– Pay employees at least twice during the calendar month;
– Pay wages to an employee who has resigned, been discharged, or laid off no later than the regular pay day for the pay period in which the separation occurred;
– Notify employees of any changes in the pay rates prior to the time of change;
– Pay all wages to a certain person(s) for a deceased employee;
– If there is a dispute over the amount of wages, the employer must pay all wages conceded to be due within the pay period;
– Prohibits employers from retaliating against an employee who makes a complaint regarding unpaid wages, initiates an action under the WPL, or is planning on initiating an action under the WPL.
Employer Obligations Under the WPL
In conclusion, employers offering commission-based wages to their employees should ensure their practices abide by the requirements listed above. The WPL allows an employee claiming a violation to recover the unpaid wages, liquidated damages, and attorney’s fees if successful.By: Lindsey Feeney and Michael Miller
