Terminated Employees May Still Be Owed Commissions

Terminated Employees May Still Be Owed Commissions

In an effort to avoid their obligations under the Massachusetts Wage Act (“Wage Act”), many employers now condition the payment of commission on continued employment.  Sometimes those same employers the fire employees to avoid the commissions because the employee was not working when the commission came due.  This may no longer work.

The Wage Act is applicable to commissions ‘when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due and payable to such employee.’   In order to be ‘definitely determined,’ a commission must be ‘arithmetically determinable.  In order to be ‘due and payable,’ any contingencies relating to the entitlement to the commission must have occurred.’  Importantly, the Wage Act also, prohibits employers from entering into a ‘special contract’ with an employee to exempt the employee from the protections of the act.

While many lower courts have been asked to determine whether these commission agreements that condition payment of commissions on continued employment violate the special contract provision of the Wage Act, the Supreme Judicial Court (“SJC”) has recently issued some guidance to employers.

On February 12, 2020, the SJC issued a ruling in Parker v. EnerNOC, Inc., 484 Mass. 128 (2020).  In this case the court was asked to determine whether the Defendant’s “true-up” commission policy, whereby the salesperson would receive an additional commission once the contract survived past the opt-out date only if he/she was still employed with the company, was legal.  The SJC ruled that “although the plaintiff’s commission never became due and payable pursuant to the true-up policy during her employment, it is, nevertheless a ‘lost wage’ under the act subject to trebling.”  The court made this ruling because, “[a] policy that conditions payment on continued employment cannot relieve an employer from the obligation of paying a commission where the employer terminates its employee in retaliation for complaining about wage violations in the first place.”

If your commission plan is conditioned on continued employment and you have been terminated or are contemplating changing jobs, please contact us for legal advice.

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