The New Jersey Wage Payment Law (“WPL”) is an important employment law that requires employers to pay employees their wages on time. Since August 2019, the WPL has entitled employees whose employers fail to pay them on time to recover not only their unpaid wages, but also up to 200% of that amount as liquidated damages plus their attorney’s fees.
The WPL defines wages to include at least some commissions, as follows:
“Wages” means the direct monetary compensation for labor or 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 calculated independently of regular wages and paid in addition thereto.
So far, there is no definitive answer to when commissions fall under the WPL’s exception for “supplementary incentives.” It seems obvious that a “supplemental incentive” has to be a supplement to, rather than a primary component of, the employee’s compensation, and has the goal of incentivizing sales. However, so far no case has established a clear test to determine when that exception applies and commissions fall outside of the WPL’s definition of wages.
On June 24, 2024, the New Jersey Appellate Division considered that issue. In a published opinion, Musker v. Suuchi, Inc., the court concluded that the commissions at issue were a “supplementary incentive” that fell outside of the WPL because it related to sales that were not covered by the employer’s commission plan.
Specifically, in 2020 Suuchi, Inc. offered to pay its employees commissions on sales of Personal Protection Equipment (“PPE”) even though PPE was not covered under its commission plan. Suuchi did so because it wanted to provide an incentive for its employees to sell PPE. Given those facts, the Appellate Division concluded that commissions for sales of PPE were “supplementary incentives” and thus were not covered by the WPL. As a result, while the employee who brought that case, Rosalyn Musker, can pursue her breach of contract claim to seek unpaid commissions, she cannot pursue a claim under the WPL.
The Appellate Division went out of its was to make it clear its decision was based on those unique facts. As it explained: “In many, perhaps most, instances a promised commission will qualify as ‘wages’ under the Wage Payment Law and not comprise a supplementary incentive.”
The Court also made it clear that not every form of compensation that incentivizes employees is a supplementary incentive that falls outside of the WPL. It explained that otherwise all compensation, including both salaries and commissions, would fall outside of the WPL’s definition of wages since they “have the capacity to incentivize workers.” As the Court explained, “[s]uch an overbroad interpretation is unsound” because the “proverbial exception would swallow the rule.”
Unfortunately, however, the Appellate Division did not provide clear guidance about when commissions are wages or when they are supplementary incentives.
Rabner Baumgart Ben-Asher & Nirenberg, P.C. represents employees who have not received all of the commissions they earned, including claims of breach of contract and for violations under the WPL. If your employer has not been paid you all of your commissions, then you can reach us at (201) 777-2250.