By: Lía Fiol-Matta, Esq. and Ty Hyderally, Esq.
If you are a sales contractor and have not received all sales commissions after your contract with a client ended, regardless of whether you resigned or were terminated with or without cause, you will be glad to know of the New Jersey Sales Representative Rights NJSRRA, N.J.S.A. 2A: 61A-1, et seq. (the “NJSRRA”). Before New Jersey passed the NJSRRA, independent sales representatives often faced a big fight when it came to legal disputes about unpaid commissions. Oftentimes, the amount in dispute was not significant enough to justify incurring legal fees to take on the entity that owed the commissions to the independent contractor. This resulted in many companies taking advantage of independent contractors.
As an independent contractor, a company cannot deny you commissions “and any other compensation” you have earned, except in certain situations, such as if you are a real estate agent or a security broker, which are not covered by the NJSRRA. The law defines a “sales representative” as either an independent sales company or a person, who is not an employee, that contracts with a business, known as a principal, to order goods and services to retailers or other non-consumers, and who receives payment, at least in part, by commission.
You must first be sure that you are not an employee but that you are completely independent of the company that owes you commissions. How do you know you are a contractor? One way of knowing is to ascertain if the company withholds income tax, Social Security, and Medicare from the compensation that is paid to you. If the company does this, then it is more likely that you are an employee and not subject to the protections of the NJSRRA. However, even as an employee, you can pursue a claim for a breach of contract against your employer for the non-payment of commissions. If the company does not withhold such taxes from your compensation, then it is more likely that you are an independent contractor. Another question to ask is whether the company that gives you compensation exercises a high degree of control over you in the performance of your duties and exercises significant direction over how you perform your day to day activities. In other words ask whether the company directs only the outcome or results of your work, or controls every essence of how you accomplish the task. If the answer is that the company does not exercise a high degree of control or high level of direction, then it is more likely you are an independent contractor, subject to the benefits of the NJSRRA.
If you would like to know more about what makes someone an independent contractor, you may review the Internal Revenue Service’s (IRS) guidelines here: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined.
The principal/company does not have to be located in New Jersey, as long as it is any business or person who manufactures, produces, imports or distributes a product or offers a service within New Jersey; contracts with sales representatives, either a company or a person, to solicit orders for the product or service in New Jersey; and pays those sales representatives at least in part by a commission. Principals with headquarters out of state are considered to have consented to personal jurisdiction in New Jersey courts and can face legal action in the state.
The NJSRRA entitles independent sales representatives to commissions earned within 30 days of the date the contract ends, or within 30 days of the date the commissions were due, whichever is later. Contractors are even entitled to commissions on goods that were ordered on or before the last day of the contract, regardless of when the company delivers and pays for the order, which may be after the contract has ended. Sales representatives are entitled to commissions even if the contract includes a waiver of unpaid commissions, which is void and unenforceable under the NJSRRA. Thus, even if the commission comes due after you are no longer performing work for the company, you are still entitled to that commission.
What remedies does the NJSRRA provide to independent sales representatives? In addition to commissions and other compensation, the NJSRRA entitles covered sales representatives to recover “exemplary damages” equal to three times the commissions owed to them. In other words, if you prevail under the statute you will be entitled to receive the extraordinary remedy of quadruple damages (your actual commissions damages, plus triple those damages). Further, a sale representative who wins a case under the NJSRRA can recover his or her reasonable attorneys’ fees and costs from the principal. You must be mindful, though, that the reverse is also true and you could be liable for the principal’s attorneys’ fees and costs if you file a frivolous lawsuit against the principal.
There are other legal remedies that may be awarded to sales representatives. For instance, if your contract included a bonus and the principal terminates it only to avoid paying a bonus you have earned, you may be able to pursue payment of the bonus in court under what is known as the implied covenant of good faith and fair dealing or breach of implied or express contract. If you are an independent sales representative and believe you are owed commissions or other compensation from a business, you are encouraged to seek advice from a lawyer who concentrates in employment law, to talk about the facts and circumstances of your unpaid commissions and your rights under the NJSRRA.
This blog is for informational purposes only. It does not constitute legal advice, and may not reasonably be relied upon as such. If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts. This blog may constitute attorney advertising. This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state of jurisdiction.