The New Jersey Supreme Court recently ruled that commissions are considered “wages” under New Jersey’s Wage Payment Law (“NJWPL”). This decision—which allows employees whose commissions are not timely paid to recover 200% of the unpaid commissions, plus attorneys’ fees and costs—brings the NJWPL in line with its sister state Pennsylvania’s Wage Payment Collection Law.
In Musker v. Suuchi, Inc. (March 17, 2025), the New Jersey Supreme Court considered whether an employee’s commissions from sales of Personal Protective Equipment during the pandemic qualified as “wages” under the NJWPL. The Court held that because commissions “directly compensate[] an employee for performing a service,” they qualify as wages, even if they are based on a formula or tied to sales of temporary or new product lines. The Court reasoned that commissions are a form of direct compensation for labor or services and not merely “supplementary incentives” (such as payments for referring a new employee or for perfect attendance, which are not covered under the NJWPL). Thus, failure to pay earned commissions in accordance with agreed-upon terms may expose New Jersey employers to significant liability, including liquidated damages of up to 200% of the unpaid amount, plus attorneys’ fees and costs.
This ruling signals a notable shift in how New Jersey views commission-based compensation and puts the state on a similar footing with Pennsylvania, which has long treated commissions as wages under its own wage law.
How Pennsylvania Law Treats Commissions:
Under Pennsylvania’s Wage Payment and Collection Law (“WPCL”), commissions have consistently been considered “wages” provided they are earned under the terms of a written or oral agreement. This means that if an employee can show the existence of an agreement to pay commissions, and that commissions were “earned”—typically meaning the conditions for payment, e.g., closing of a sale or payment by a customer, have been satisfied—under the agreement, then nonpayment can result in liability for the employer.
The WPCL, like the NJWPL, allows employees to recover unpaid wages, plus statutory penalties and attorneys’ fees. Pennsylvania does not, however, provide for automatic liquidated damages in the same way New Jersey now does. Instead, courts in Pennsylvania may award additional damages if the employer had no good faith basis to withhold the unpaid wages.
Key Differences and Similarities for Employers to Keep in Mind:
- Liquidated Damages: Under the NJWPL, employees are entitled (subject to limited exceptions) to liquidated damages of up to 200% of unpaid wages—including commissions—without needing to prove employer bad faith. By contrast, Pennsylvania employees are entitled to liquidated damages only if the employer had no good-faith basis to withhold wages.
- Commissions are Wages: Both states now treat commissions as wages, requiring employers to strictly adhere to the NJWPL and WPCL’s prohibition against withholding earned wages.
- Proof and Documentation: A written commission agreement is not strictly required in either state, but having clear documentation (written policies, offer letters, or compensation plans) can be critical in defending against wage claims.
Next Steps for Employers:
- Review Commission Policies: Ensure that commission structures are clearly documented and communicated to employees. Include specific triggering events for when commissions are earned and payable.
- Assess Payment Practices: Audit existing payroll practices to confirm that earned commissions are paid in a timely manner and in accordance with state law and company policy.
- Mitigate Risk: Given the now-higher stakes in New Jersey, employers should treat commission disputes with the same level of caution as disputes over base pay or overtime.
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