Federal and New Jersey laws impose rules on employers about how much employees must be paid, when they must be paid, whether they are entitled to time-and-a-half pay for working more than 40 hours a week, and how tips and gratuities must be handled.
One of the most common areas in which we represent employees on wage claims is in connection with unpaid sales commissions. There are no specific laws that require employers to handle commissions in a particular way. Rather, the cases (or case law) that provide guidance on commission issues are simply a matter of contract law.
In most cases, there are no individual employment contracts for each sales representative. Instead, there is either a written commission policy that applies to all salespeople, or there is a consistent custom or practice as to when employees are entitled to commissions and how those commissions are calculated.
The most common issues involve either changes to commission policies or employees’ entitlement to commission when their employment is terminated. Employers are not allowed to change commission policies retroactively. They must give notice to employees before changing the policy. Upon termination, the commissions to which the departing employee is entitled depend on the individual agreement with the employee, the corporate policy or the company’s custom.
The key issue upon termination is when the employee becomes entitled to a commission. In some companies, it is when the purchase order is entered; in other companies, it is when the customer is invoiced. Many companies only pay the commission after the customer pays the invoice. Whatever the methods, an employee who is leaving is entitled only to those commissions that were earned before leaving. Whether the commission was earned is based on whether the required event, such as entry of purchase order, invoice to customer or payment by customer, occurred before termination.
Sometimes employers improperly classify employees as “exempt” (or “salaried”) to avoid paying them overtime. But the law provides specific guidance as to who is entitled to overtime pay regardless of what individual employers call them or how they are classified. Employees whose actual job duties do not fit into one of the exemptions created under federal or New Jersey law are entitled to 1½ times their regular hourly wage for hours worked in excess of 40 in one week.
Both the federal Fair Labor Standards Act and the New Jersey State Wage and Hour Law exempt executive, administrative, professional and outside sales employees. Federal law also exempts certain information technology employees. Both laws provide specific guidance to determine whether employees fit the definition of any of those exemptions.
Federal and New Jersey laws require employees working on public construction projects to be paid prevailing wages, which are set by the Department of Labor. The term “prevailing wage” refers to hourly wages, benefits and overtime pay. Employees working on public construction projects are entitled to be paid prevailing wages regardless of whether they are working directly for the general contractor or for a subcontractor.
The amount of wages required to be paid to employees subject to prevailing wage laws is determined on a state-by-state, and sometimes, county-by-county basis. The amount depends upon the job classification of the employee and sometimes, more specifically, upon the actual work being performed by the employee.
If you are being or have been denied overtime pay, commissions or prevailing wages, call New Jersey’s wage and hour attorneys at Lenzo & Reis, LLC, in Morristown, at (973) 845-9922. Our lawyers have helped employees obtain multimillion-dollar settlements and verdicts for their employment law claims. Please complete our convenient form if you would rather get in touch with us online.