New Jersey Legislature Permits Treble Damages for Failing to Pay Sales Commissions within 30 Days of Termination

Employment Law: As part of the 2008 Legislative Session, the New Jersey legislature passed, and Governor Corzine signed, a law which provides treble damages (triple the amount of actual damages) for sales representatives who are not paid earned sales commissions within thirty (30) days of termination of their services.

Under the law, a “sales representative” is defined as “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 commission.” Thus, the penalties imposed by the bill do not apply to individual sales representatives providing services pursuant to an employment contract, but rather apply to those representatives providing services on an independent contractor basis. Moreover, a person who places orders or purchases goods exclusively for his own account for resale will not be deemed to be a “sales representative” for purposes of the bill.

In light of the obligations imposed by this law, individuals and business entities should be aware that they may be subject to increased damages if they retain sales representatives on an independent contractor basis and fail to timely pay those individuals’ commissions. In addition to timely payments during the course of the agreement, the principal would be required to pay all commissions earned by the representative within thirty (30) days of the termination of the agreement for any reason.

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