Denial of Bonuses or Commissions in Massachusetts
The Massachusetts Wage Act applies to all “wages.” That isn’t just limited to your salary or your hourly wage. Indeed, it can apply to commissions and bonuses if they are “definitely determined” and “due and payable.” Commissions and bonuses are “definitely determined” when they are arithmetically determinable. That means employers violate the Wage Act when they refuse to pay their employees commissions or bonuses to which they are entitled. Disputes over commissions and bonuses are incredibly common. Most typically they include one of the following issues.
First, disputes over commissions can arise relative to who was the ‘procuring cause’ for the sale that triggered for commission. This tends to occur when a team of salespeople work on a relationship that eventually leads to a sale that triggers a commission or when an employer claims that it, and not the salesperson, ‘made the sale.’ In those situations, a dispute may arise over whether the employee is entitled to the commission. Second, disputes over commissions can arise when an employee is no longer employed when the sale is finalized or when the payment is made. In those situations, employers tend to claim that the commission is not ‘due’ because the employee was not employed when the sale was finalized.
Ideally, a written agreement would exist that would govern an employee’s entitlement to commissions. That agreement should not only address the two situations outlined above, but also the rate at which the commission is to be paid, the frequency by which it is to be paid, and should identify any other conditions on that payment. Keep in mind, however, that the Wage Act’s ‘special contracts’ clause prohibits employers from contracting around the protections of the Wage Act and may render certain conditions in those agreements unenforceable.
Lastly, some employers interfere with the employee’s ability to qualify for commissions by delaying sales or, even worse, terminate an employee in order to avoid having to pay commissions. Employers who terminate an employee in bad faith in order to avoid having to pay a commission or a bonus are likely to have violated Massachusetts common law and the Massachusetts Wage Act.