On March 17, 2025, the New Jersey Supreme Court (in a unanimous decision) held that “commissions” are considered “wages” and protected under the New Jersey Wage Payment Law (“WPL”). N.J.S.A. 34:11-4.1 to 4.15.
Case Background
Plaintiff, Rosalyn Musker, worked for Suuchi, Inc. (since acquired by IgniteTech) selling software subscription packages to apparel manufacturers. In response to the increased demand for Personal Protective Equipment (“PPE”) during the COVID-19 pandemic, Suuchi expanded its business to sell PPE. At all relevant times during her employment, Musker earned a base salary and commissions from her software and PPE sales.
A dispute arose between Musker and Suuchi when they differed on the commissions owed to Musker for PPE sales. On one hand, Musker claimed that she was entitled to commissions in the amount of 4% of Suuchi’s gross PPE sales, while Suuchi contended she was entitled to 4% of net sales – a difference of over $900,000.
Musker filed suit alleging that Suuchi’s failure to pay her commissions was an improper withholding of her wages in violation of the WPL. The trial court dismissed the claims finding that Musker’s PPE commissions were not wages, but instead, “supplementary incentives” expressly excluded from the definition of “wages” under the WPL. The Appellate Division affirmed, and the Supreme Court granted leave to appeal.
The Supreme Court’s Reasoning (and Vocabulary Lesson)
In its evaluation of the case, the Supreme Court analyzed the plain terms of the statutory language, as well as the ordinary meaning of key terms. First, it looked at the definition of “wages” under the WPL, which are defined as:
“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.”
N.J.S.A. 34:11-4.1(c).
The Court interpreted the law to mean that in order to be a “wage” there must be “direct monetary compensation for labor or services rendered by an employee.” Since these terms are not expressly defined in the WPL, the Court ascribed their ordinary meaning and significance and held that “direct monetary compensation” must be for work that an employee performed. “Thus, because a commission directly compensates an employee for performing a service, it always meets the definition of ‘wages’ under [the WPL].”
The Court also looked at the ordinary meaning of the terms “supplementary” and “incentive” to determine whether the legislative intent was to exclude commissions. The Court concluded that since a “supplementary incentive” is not payment for “labor or services,” then a “commission,” which is earned “for labor or services rendered,” can never be a “supplementary incentive.” The key question was not whether the compensation motivates, encourages, and incentivizes an employee (which is arguably accomplished by all forms of compensation), but whether the compensation incentivizes the employee to do something beyond their “labor or services,” in which case it is a supplementary incentive and excluded from the WPL.
Ultimately, the Court found that selling PPE was part of the “labor or services” Musker performed as a Suuchi employee. Therefore, the PPE commissions, which Musker earned solely because she performed “labor or services,” were in fact “wages” under the WPL.
Arguments Rejected by the Supreme Court
First, the fact that PPE was a new product, potentially temporary, and not the primary business of Suuchi was inconsequential to the Court’s decision. Selling PPE became a part of Musker’s job, making her compensation for performing that task a “wage” within the meaning of the WPL.
Second, the Court also rejected the notion that receiving a base salary converts “commissions” into “supplementary incentives” under the WPL.
What Does This Mean for New Jersey Employers?
The WPL provides for significant statutory damages, as well as civil and criminal penalties, which can be costly for employers. Therefore, it is critical that employers ensure they are complying with the strict requirements of the WPL and evaluate current commission plans and practices to ensure that employees are compensated in accordance with all applicable legal parameters.
Please contact an NFC team member if you have any questions or seek further assistance.