Seyfarth Synopsis: On March 17, 2025, the New Jersey Supreme Court ruled that commissions are considered “wages” under the New Jersey Wage Payment Law (“NJWPL”). This critical decision clarifies that commissions are direct monetary compensation for work performed by an employee and must be treated as wages, not supplementary incentives as previous courts had ruled.
Case Summary and Rulings
The ruling stemmed from a case involving a plaintiff who sold personal protective equipment (“PPE”) during the COVID-19 pandemic for the defendant employer. In addition to her base salary, the plaintiff also was to receive commissions for PPE sales. Ultimately, the parties disputed the value of commissions owed after the plaintiff generated approximately $34,448,900 in gross revenue from her PPE sales. The plaintiff then filed a lawsuit claiming that her employer unlawfully withheld some of her commissions owed to her as wages under the NJWPL.
Overruling a previous appellate court ruling that had classified commissions as supplementary incentives and not wages, the New Jersey Supreme Court held that commissions always meet the definition of wages under the NJWPL “because a commission directly compensates an employee for performing a service.”
Classifying commissions as wages requires employers to strictly adhere to the NJWPL’s rules on the timely payments and the prohibition against withholding of wages as illegal deductions. Moreover, such obligations carry the potential for significant financial penalties, including paying 200% of the unpaid wage plus attorney’s fees. Additionally, employees can bring a private cause of action for withheld commission payment under a theory of wage theft claim.
Implications for Employers
Employers utilizing commissions as a mode of employee compensation should review and potentially revise their commission or other payment agreements and processes to ensure compliance with the NJWPL by treating commissions as wages and adhere to the same payment standards as regular wages.
