On appeal from Superior Court of New Jersey, Law Division, Camden County, Docket No. L-1280-00.
Before Judges Skillman, Wells and Fisher.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 9, 2003
The question presented by this appeal is whether an employee has a viable cause of action against an employer for reducing his compensation by changing the method of calculating sales commissions without prior notice. We conclude that defendant employer may be liable for a violation of the Wage Payment Law, N.J.S.A. 34:11-4.1 to -4.14, breach of contract and common-law fraud for unilaterally reducing the commissions paid to its sales representatives without prior notice.
Defendant is a distributor of office supplies with regional headquarters in Whippany. Defendant employed plaintiff as a sales representative in New Castle, Delaware, from August 1996 until February 2000. During the first two years of his employment, plaintiff was paid a flat salary, but beginning in August 1998 he was compensated solely on a commission basis. The terms of plaintiff's employment were never memorialized in a written contract.
Plaintiff's commissions were determined on the basis of defendant's"gross profits." According to plaintiff, at the commencement of his employment as a commission sales representative, defendant calculated its"gross profits" on the basis of the"actual costs" of the products he sold. However, sometime in the spring of 1999, without prior notice to plaintiff or its other sales representatives, defendant changed its method of calculating commissions by adding a"load" factor to its actual costs, which reflected an assumed cost for overhead. Plaintiff did not become aware of this change until he received his commission check and accompanying statement sometime after the change went into effect. According to plaintiff, this change resulted in a significant decrease in the commissions paid to him and the other sales representatives. Plaintiff subsequently terminated his employment with defendant and brought this action.
Plaintiff's complaint asserted claims for a violation of the Wage Payment Law, breach of contract, common law fraud, violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -109, conversion, unjust enrichment, and a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), N.J.S.A. 2C:41-1 to -6.2. At an early stage of the litigation, the trial court granted defendant's motion to dismiss plaintiff's CFA and RICO claims. After substantial discovery,*fn1 defendant filed a motion for a summary judgment dismissing plaintiff's remaining claims. The trial court granted the motion and entered an order dismissing plaintiff's complaint. The order also provided that plaintiff was"disqualified from acting as class representative."
On appeal, plaintiff challenges the dismissal of all counts of his complaint. We reverse the dismissal of plaintiff's Wage Payment Law, breach of contract and common law fraud claims and the ruling that plaintiff is disqualified from acting as class representative. We affirm the dismissal of plaintiff's other claims.
The section of the Wage Payment Law relevant to plaintiff's claim is N.J.S.A. 34:11-4.6(b), which provides in pertinent part that"[e]very employer shall... [n]otify his employees of any changes in the pay rates... prior to the time of such changes." N.J.S.A. 34:11-4.1(c) defines the"wages" subject to this provision as including"direct monetary compensation for labor or services rendered by an employee, where the amount is determined on a... commission basis."*fn2 Consequently, the Wage Payment Law requires an employer to give advance notice to any employee paid on a commission basis of any change in the method by which his or her commissions are calculated.
Defendant argues that it complied with the Wage Payment Law by providing plaintiff with a written"commission schedule" which set forth a sliding scale of commission rates based on the"gross profit" on the sale of particular items. However, the evidence presented on defendant's motion for summary judgment indicates that when defendant first employed plaintiff on a commission basis, it construed"gross profit" to mean the difference between the actual cost and sales price of its products, but it subsequently redefined the term to mean the difference between the"loaded" cost and sales price, thus reducing plaintiff's commissions. Consequently, defendant was required to notify plaintiff and its other sales representatives of this"change in the pay rate" before putting it into effect. N.J.S.A. 34:11-4.6(b).
Furthermore, plaintiff may maintain a private cause of action for this alleged violation of the Wage Payment Law. N.J.S.A. 34:11-4.7 provides in relevant part:
It shall be unlawful for any employer to enter into or make any agreement with any employee for the payment of wages of any such employee otherwise than as provided in this act.... [E]ach and every employee with whom any agreement in violation of this section shall be made by any such employer, or the agent or agents thereof, shall have a right of civil action against any such ...