NJ Inadvertently Eliminates Overtime Exemption for Commissioned “Inside Sales” Positions

The New Jersey Department of Labor and Workforce Development recently amended its wage and hour regulations in order to conform its overtime exemptions with the federal “white collar” exemptions provided in the Fair Labor Standards Act. The new amended regulation reads: “Except as set forth in (b) below, [addressing government employees] the provisions of 29 CFR Part 541 are adopted herein by reference.”

The “white collar” exemptions provided for in 29 CFR Part 541 include the administrative, executive, professional, and outside sales exemptions. Although the applicable New Jersey statute does not contain a commissioned sales exemption (sometimes known as the “inside sales” exemption) similar to the FLSA Section 7(i), the old New Jersey regulations had defined “administrative” employees as including “an employee whose primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commissions and a total compensation of not less than $400.00 per week.” Since federal “white collar” exemptions do not contain similar coverage for inside sales employees and New Jersey has not adopted Section 7(i) of the FLSA, the new amendment effectively eliminated New Jersey’s sales commissioned exemption.

A representative from the New Jersey Wage and Hour Commission confirmed that the elimination of the commissioned “inside sales” exemption was inadvertent and the Commission is doing everything it can to expediently fix the problem. However, because reversing the error will require public notice and comment rulemaking, the exemption for commissioned inside sales employees may be unavailable for six months or more.

While it is unlikely that the New Jersey Department of Labor will begin citing employers for misclassifying commissioned sales employees as exempt, New Jersey employers will still face the real and immediate risk of private class action lawsuits. Accordingly, employers should quickly assess whether any of its employees have been affected by this legislative mistake.