I Am An Independent Contractor Sales Representative in New Jersey. Am I Entitled To My Unpaid Commissions?

This article discusses these issues:

• In New Jersey, when a principal does not pay, to an independent contractor sales representative, the commissions that the sales representative has earned, what are the sales representative’s rights?
• How do unpaid commissions disputes arise?
• What is an independent contractor sales representative?

Yes. As an independent contractor sales representative in New Jersey, you are entitled to your unpaid commissions.

A commission is compensation accruing to a sales representative for payment by a principal, earned through the last day on which services were performed by the sales representative, the rate of which is expressed as a percentage of the dollar amount of orders or sales or as a specified amount per order or per sale. These wages are commissions regardless of whether the salesperson sells goods, wares, merchandise, services, insurance, or anything else (except for real estate or securities).

In New Jersey, When a Principal Does Not Pay, To An Independent Contractor Sales Representative, The Commissions That The Sales Representative Has Earned, What Are The Sales Representative’s Rights?

In New Jersey, if an independent contractor sales representative wins a lawsuit for unpaid or underpaid commissions, he or she is entitled not only to the amount of unpaid or underpaid commissions, but also to additional damages equal to 300% of the unpaid or underpaid commissions, interest at the statutory interest rate, and reasonable attorney’s fees and court costs.

In other words, in New Jersey, if an independent contractor sales representative wins a lawsuit for unpaid or underpaid commissions, he or she is entitled to quadruple damages, interest, and reasonable attorney’s fees and court costs.

There is a six-year statute of limitations for an independent contractor sales representative to recover unpaid commissions in New Jersey.

In New Jersey, when a contract between a principal and an independent contractor sales representative to solicit orders is terminated, the unpaid commissions and other compensation earned as a result of the representative relationship are due and payable within 30 days after the date the contract is terminated or within 30 days after the date commissions are due, whichever is later.

An independent contractor sales representative is entitled to receive commissions on goods ordered up to and including the last day of the contract even if accepted by the principal, and delivered, and paid for after the end of the agreement. The commissions are due and payable within 30 days after payment would have been due under the contract if the contract had not been terminated.

The earned commissions and other compensation must be paid to the independent contractor sales representative at the usual place of payment unless the sales representative asks that the commission be sent to him or her through the mail. If the commissions are sent to the sales representative by mail, the earned commissions and other compensation are considered to have been paid as of the date of their postmark.

A provision in any contract between an independent contractor sales representative any principal purporting to waive any of the sales representative’s above-mentioned rights, whether by express waiver or by a provision stipulating that the contract is subject to the laws of another state, is void and unenforceable.

If The Principal Is Not Located In New Jersey, Can An Independent Contractor Sales Representative Who Solicits Orders In New Jersey Still Sue The Principal In A New Jersey Court?

Yes. The courts of the State of New Jersey exercise jurisdiction over nonresident principals. A principal who is not a resident of New Jersey who contracts with an independent contractor sales representative solicit orders in New Jersey is deemed to be doing business in New Jersey for purposes of the exercise of personal jurisdiction.

How Do Unpaid Commissions Disputes Arise?

In my experience, there are several frequent reasons that unpaid commissions disputes occur.

The most common reason is that the independent contractor sales representative originates a sale and the sale has not been wholly consummated at the time that the sales representative is fired. A dispute arises, between the principal and the sales representative, as to whether the commission was earned at the time of the termination. Usually, the principal claims that the commission was not earned and thus is not payable upon termination of the working relationship. The sales representative maintains that the commission was earned.

Principals also often miscompute commissions earned under contractual formulas. Principals may argue, without justification, that the terms and conditions of the commission agreement give them broad discretion to deviate downward from the agreement’s formula for computing the sales representative’s commissions. These grounds for withholding or underpaying commissions are unlawful.

What Is An Independent Contractor Sales Representative?

An independent contractor sales representative is an independent sales company or other person, other than an employee, who contracts with a principal to solicit orders and who is compensated, in whole or in part, by commissions.

The following categories of persons are not independent contractor sales representatives in New Jersey:

• Persons who place orders or purchases exclusively for their own account for resale;
• Real estate agents;
• Securities brokers.

In turn, a principal is a person, including a person who lacks a permanent or fixed place of business in the State of New Jersey, who (i) manufactures, produces, imports or distributes a product or offers a service, (ii) contracts with an independent contractor sales representative to solicit orders for the product or service, and (iii) compensates those independent contractor sales representatives who solicit orders, in whole or in part, by commissions.

Independent contractor sales representatives are usually hired by manufacturers, distributors and importers to solicit orders for their products from potential customers in selected territories in exchange for a sales commission.

As a sales representative, you have probably spent many months or years building up a customer base in your designated territory. Similarly, you have likely incurred substantial up-front sales and marketing expenses that may include travel, lodging, entertainment, and trade show expenses with the goal of generating a stream of future commission income.

As an independent contractor sales representative, you are vulnerable if your principal abruptly terminates your relationship and/or fails to pay all commissions owed to you.

State Statutes Protecting The Rights Of Independent Contractor Sales Representatives

To solve these problems, starting in the 1980s and 1990s, thirty-five of the fifty states (and Puerto Rico) enacted statutes to protect the rights of independent contractor sales representatives.

These state statutes frequently:

• Require the sales representative agreement to be in writing;
• Compel the principal to give a copy of the written agreement to the sales representative.
• Require the principal to pay the independent contractor sales representative for all commissions owed promptly following termination or otherwise incur liability for money damages, attorneys’ fees, and court costs.
• Strictly constrain the circumstances under which the principal may cancel, or decline to renew, a sales representative agreement (for instance, by requiring the manufacturer to have “good cause” for cancellation); and/or
• Prohibit the principal from enforcing terms (such as choice of law provisions or exclusive forum provisions) in the sales representative agreement that would, as a practical matter, compel the sales representative to waive his or her statutory protections.

New Jersey is one of the 35 states that statutorily guard independent contractor sales representatives’ rights. New Jersey’s statute protecting independent contractor sales representatives’ rights is called the New Jersey Sales Representatives Rights Act (the “NJSRRA”).

If you are an executive, a professional, a commissioned salesperson, or an independent contractor sales representative in the New York City metro area and you believe you’ve been denied commissions, bonuses, salary, or other compensation that you’ve earned, call New York City Unpaid Commissions Attorney David S. Rich today.