The New Jersey Supreme Court Rules: Commissions are Wages

On March 17, 2025, the New Jersey Supreme Court issued a unanimous decision finding that commissions are wages under the New Jersey Wage Payment Law (“WPL”) because they are “direct monetary compensation for labor or services rendered by an employee.” There are no exceptions – compensating an employee by paying a commission for a labor or service always constitutes a wage under the law.

The Underlying Dispute

Plaintiff, Rosalyn Musker (“Musker”), worked as a sales manager for the Defendant company, Sukhi, Inc. (“Suuchi”), which provided a proprietary software platform for apparel manufacturers and primarily generated revenue from subscriptions to its services. Musker earned a base salary of $80,000 and was entitled to receive commissions based on different tiers of sales that she reached in accordance with Suuchi’s Sales Commission Plan (the “SCP”), which included language intended to “cover all sales situations.”

During the onset of the COVID-19 pandemic, Suuchi expanded into selling personal protective equipment (“PPE”), which was a significant departure from its usual line of business. Musker was part of a transaction where Suuchi sold over $32 million worth of PPE to the State of New York. When Suuchi failed to pay Musker commissions on this sale, Musker filed suit, alleging the employer withheld over $1.3 million in “wages” under the WPL.

The Trial Court found in favor of Suuchi, holding that Musker’s PPE commissions were not “wages” under the statute. Instead, the lower court found that they were “supplementary incentives,” a category of compensation that is expressly excluded from the WPL. The Appellate Division agreed and dismissed Musker’s claims, finding that the “special compensation” offered to salespeople were “supplementary incentives” designed to “stimulate the salespersons to sell PPE during a time of sudden pandemic-related demand” and not “wages” as defined by the law.

New Jersey Supreme Court Ruling

The New Jersey Supreme Court disagreed and reversed the Appellate Division’s decision, holding  that commissions qualify as wages under the WPL because they directly compensate employees for their labor or services where the amount is determined on the “time, task, piece, or commission basis.” N.J.S.A. 34:11-4.1(c)(emphasis added). According to the Court, under that definition, compensating an employee by paying a ‘commission’ for ‘labor or services’ always constitutes a wage under the WPL. Therefore, contrary to the Appellate Division’s conclusion, the Court found that a ‘commission’ under the WPL cannot be excluded from the definition of ‘wages’ as a ‘supplementary incentive.’ Supplementary incentives, according to the Court, are a reward for extra tasks beyond an employee’s labor or service, like a bonus for referring a new employee, working out of a particular office, or achieving perfect attendance. In reaching this conclusion, the Court rejected the argument that because PPE was a new venture brought on by the COVID-19 pandemic, the outcome should be different. According to the Court, even if a salesperson is only selling a particular product for a limited time, that does not mean the commissions are not wages.

Takeaway

Businesses that employ and pay salespeople on a commission basis should place close attention to this ruling because, under the WPL, plaintiffs whose commissions are not paid can recover 200% of those unpaid “wages,” plus attorneys’ fees and costs. Thus, employers should be mindful that commissions paid for a “labor or service” are considered wages and failure to pay under the WPL can result in significant liability. It is critical that employers use precise terminology when crafting compensations plans that include commissions, bonuses, or other supplementary incentives to ensure compliance with New Jersey law.

Please contact the Labor & Employment Practice Group at Lindabury, McCormick, Estabrook & Cooper, P.C. with questions.