Labor & Employment Law Daily Under Massachusetts Wage Act, saleswoman deprived of commission gets treble what she was owed
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Wednesday, February 19, 2020

Under Massachusetts Wage Act, saleswoman deprived of commission gets treble what she was owed

By Ronald Miller, J.D.

Although the employee’s commission never became due and payable pursuant to the true-up policy during her employment, it was, nevertheless, a “lost wage” under the Wage Act subject to trebling.

A jury’s finding that an employer unlawfully failed to pay an employee the full amount of a commission that she earned—and terminated her when she complained about it, causing her to loss an additional commission—was supported by the evidence, ruled the Massachusetts Supreme Judicial Court. The state high court concluded that the commission that would have been due to the employee under the employer’s true-up policy had she not been terminated was a “lost wage” that must be trebled under the Wage Act. Finding that the employer’s retaliation against the employee by terminating her employment had the effect of depriving her of her right to be paid a commission under its true-up policy, the high court concluded that the entire amount of the unpaid commission must be trebled under the statute (Parker v. EnerNOC, Inc., February 12, 2020, Budd, K.).

Commission policy. The employee marketed to prospective clients the employer’s energy-related services that help businesses improve their energy efficiency. She earned an annual base salary in addition to commissions on the sales she made. The contract between the parties included a “termination for convenience” clause under which both parties had a one-time option to terminate the contract within 30 days following the first anniversary of the effective date of the contract. Under the employer’s sales commission policy, a commission payment on a contract that contained a termination clause would be paid on the guaranteed portion of the contract—the first full year of the contract. An additional commission payment would be made based on the entire value of the contract as long as it survived past the opt-out date. However, a salesperson’s eligibility for “any further commissions” would cease upon the date of termination of employment “for any reason.”

Stiffed on commission, fired. On March 20, 2016, the employer entered into a deal with a client, negotiated by the employee, worth $20 million over five years. On April 1, 2016, the employer fired the employee after she complained about not receiving her full commission on the guaranteed portion of the contract. The employer later paid her $100,222.61 as commission on the guaranteed portion of the contract. The employee, however, alleged that she was owed a greater commission on the contract for the guaranteed period, and a separate commission under the employer’s true-up policy. She filed suit alleging Wage Act violations and breach of contract, among other claims.

Jury verdict. In May 2018, the jury returned a verdict against the employer, finding liability for breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of the Wage Act. The jury specifically found that a contract existed between the parties and that the employer had an obligation to pay commissions under the true-up policy. It awarded the employee $25,063.34 (the difference between what she was owed and what she was paid on the guaranteed portion of the contract) and another $349,098.48 as the amount owed under the true-up policy. For the retaliation claim, the jury awarded the employee $40,000 for emotional distress and $240,000 in punitive damages.

The trial court denied the employer’s motion for judgment notwithstanding the verdict or, in the alternative, remittitur. Pursuant to G. L. c. 149, §150, the judge trebled the $25,063.34, but he did not treble the $349,098.48 owed under the true-up policy.

Sufficient evidence. On appeal, the employer first challenged the trial court’s denial of its motion for judgment notwithstanding the verdict, arguing that there was insufficient evidence that it had an actual true-up policy, but even if it did, it had no obligation to make an additional commission payment to the employee. However, the Massachusetts high court, granting direct appellate review, observed that multiple witnesses, including a senior executive, testified that the employer did indeed have such a policy.

Additional evidence included internal email messages referencing the policy. Further, the employee testified that she understood the express terms of the sales commission policy to include the true-up commission in the form of a second commission when the remainder of the contract became a “guaranteed term” on the expiration of the client’s opt-out period. Accordingly, the evidence was sufficient for the jury to find that the employee was entitled to a true-up commission on the contract.

Wage Act damages. The Wage Act requires that commissions are to be paid when two conditions are met: (1) the amount of the commission “has been definitely determined”; and (2) the commission “has become due and payable.” To ensure that the requirements of the Wage Act are met, the statute prohibits employers from retaliating against employees who assert their rights.

In this case, the jury found that the employer violated the Wage Act in two ways: (1) by failing to pay the employee the additional amount due her under the sales commission policy, and (2) by retaliating against her by terminating her employment after she complained that she had not been paid her full commission. While the jury awarded her $25,063.34 under the sales commission policy and another $349,098.48 under the true-up policy, the trial judge only trebled the unpaid amount owed under the sales commission policy, concluding that the unpaid commission amount under the true-up policy was not due and payable at the time of her termination, so could not be considered a lost wage.

Lost wage. However, although the employee’s commission never became due and payable pursuant to the true-up policy during her employment, it was nevertheless a “lost wage” under the Wage Act subject to trebling, the high court concluded. “Wages” for purposes of the Wage Act encompass commissions when the amount of the commission has been definitely determined and has become due and payable. Commissions that are not yet due to be paid may nonetheless constitute lost wages if the employer’s violations of the Act prevent payment of those commissions.

Retaliation. Moreover, the Wage Act separately prohibits retaliation against an employee for seeking to enforce his or her rights. The retaliation had the effect of depriving the employee of her right to be paid a commission under the true-up policy. But for the employer’s retaliatory actions, the employee would have received the commission due under the true-up policy. Wages lost as a result of retaliation are trebled under the Wage Act, G. L. c. 149, §§148A, 150.

Moreover, this outcome was not affected by the employer’s policy that requires continuous employment. Here, the true-up policy, in conjunction with the employer’s retaliatory termination of the employee, made it impossible for her to fulfill the only unmet contingency required to collect the true-up commission. On these facts, the employer’s policy was unenforceable under the Wage Act. Accordingly, the entire amount of the unpaid commission must be trebled under the statute.

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