The Sales Representatives Rights Act
I come from a family of independent sales representatives, so this statute holds a special place in my heart. If you are an independent sales person who works on commission, you know the feeling of vulnerability that comes with waiting for a commission check from your principal. How many times have you heard of reps whose commissions have not been paid or have been reduced because the principal terminated the contract or changed the rules of the compensation game in mid-stream?
Although it’s not well known, the New Jersey Sales Representative Rights Act, N.J.S.A. 2A:61A-1, et seq., may be able to help you, even if you think that the amount you’re owed is too small to justify hiring an attorney. You may not have to write it off. Here’s why.
The Act defines a “sales representative” as “an independent sales company or other person” who is compensated at least in part by commissions.
The Act requires that sales reps be paid all earned compensation, including commissions, by the later of 30 days after their contracts were terminated, or 30 days after their commissions were due. If payment is not made, the representative has a claim for payment of the commission due, plus exemplary (punitive) damages of three times the amount owed, plus reasonable attorney’s fees and costs of litigation. As an example, a claim for an unpaid $5,000 commission could yield a recovery of (a) the $5,000, plus (b) exemplary damages of $15,000, for a total of $20,000. In addition, the principal would have to pay reasonable attorney’s fees and court costs, which could cover all or most of the rep’s legal expenses.
It does not matter that the principal may not be in New Jersey. Out-of-state principals are deemed to have consented to personal jurisdiction in the courts of New Jersey, so they can be sued here. Even better, it is against public policy for the representative to contract away rights under the Act.
There are a few qualifications:
- The representative must be truly independent of the principal. Employees are not covered.
- Some specified jobs are not covered, such as real estate agents and securities brokers.
- Just as the principal can be liable to the rep for attorneys’ fees and costs, the reverse is also true if the rep files a frivolous litigation against the principal. So it is important that the rep act carefully so as not to shoot him/herself in the foot.
There may be other legal remedies available for sales representatives. For instance, what happens if you have a contract that entitles you to a bonus but your contract is terminated before the bonus is paid? If the contract is written it contains an implied covenant of good faith and fair dealing. If the contract is terminated solely to avoid paying a bonus that was fairly earned, in court you may be able to force the bonus to be paid.
In short, if you are an independent representative (including a company) owed commissions from a client, we would be happy to discuss your situation to see if you have a potential claim with which we can help you.