The NJ Supreme Court ruled that “commissions” are considered “wages” under the Wage Payment Law (WPL) and are therefore subject to the WPL’s protections.
The plaintiff in this case worked in sales for a company selling software subscriptions to apparel manufacturers. In addition to her base salary, she was eligible for commissions under the employee’s sales commission plan (SCP). In March 2020, in response to the COVID-19 pandemic, the company decided to sell Personal Protective Equipment (PPE), also on a commission basis, as memorialized in emails to the sales team. The plaintiff generated approximately $34,448,900 in gross revenue by selling PPE. The parties disputed whether the 4% commission she was entitled to for those sales was of gross or net revenue. The parties also disagreed about whether her PPE commissions are “wages” or are excluded from the WPL as “supplementary incentives” under N.J.S.A. 34:11-4.1(c). The plaintiff filed a complaint alleging that the company violated the WPL by withholding her “wages.” The trial judge dismissed the WPL claims, holding that the plaintiff’s PPE commissions were not “wages” under the WPL. The Appellate Division affirmed. 479 N.J. Super. 38, 64 (App. Div. 2024). The court granted leave to appeal. 258 N.J. 470 (2024).
Holding of Case
The WPL defines “wages” as “direct monetary compensation for labor or services rendered by an employee, where the amount is determined on a time, task, piece, or commission basis.” N.J.S.A. 34:11-4.1(c). Under that definition, compensating an employee by paying a “commission” for “labor or services” always constitutes a wage under the WPL. Therefore, a “commission” under the WPL cannot be excluded from the definition of “wages” as “supplementary incentive.”
To constitute a “wage” under the WPL, there first must be “direct monetary compensation for labor or services rendered by an employee.” N.J.S.A. 34:11-4.1(c). Second, an employee’s “direct monetary compensation” can be “determined on a time, task, piece, or commission basis.” Pursuant to the ordinary definition of the word, a “commission” directly compensates an employee for performing a service, and so commissions always meet the definition of “wagers” under N.J.S.A. 34:11-4.1(c).
Excluded from N.J.S.A. 34:11-4.1(c)’s definition of “wages” are “supplementary incentives…which are calculated independently of regular wages and paid in addition thereto.” Applying the ordinary definitions of the terms, a “supplementary incentive” is compensation that motivates employees to do something above and beyond their “labor or services.” A “commission” earned “for labor or services rendered by an employee” can thus never be a “supplementary incentive.”
The PPE commissions, which she earned solely because she performed “labor or services,” are therefore “wages” under N.J.S.A. 34:11-4.1(c). Just because a product is new and potentially sold only temporarily does not mean that sales of that product somehow fall outside the regular “labor or services” an employee provides.
“Labor” means “work of any type, including mental exertion; physical or mental exertion to achieve some useful or desired purpose, especially for gain.” “Service” means “[t]he official work or duty that one is required to perform.” Those unambiguous definitions give context to the requirement that the “direct monetary compensation” must be for work that an employee is required to perform.
A “commission,” which the WPL does not define, means “a fee paid to an agent or employee for transacting a piece of business or performing a service; especially: a percentage of the money received from a total paid to the agent responsible for the business.”
Thus, because a commission holding directly compensates an employee for performing a service, it always meets the definition of “wages” under N.J.S.A. 34:11-4.1(c) as “direct monetary compensation” for “labor or services” rendered by an employee.
To discuss your NJ employment matter, please contact Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Employment Attorney