The Massachusetts Wage Act applies to the payment of commissions when the amount of commission “has been definitely determined and has become due and payable.” Commission disputes are fairly common in Massachusetts. Although it used to be a hotly contested point, the Massachusetts courts (most recently, the Appeals Court in Okerman v. VA Software Corp.
) have made it very clear that the Wage Act applies to all employment commissions as long as they meet the requirements of bring are "due and payable" and "definitely determined."
As the Supreme Judicial Court stated in the case of in Wiedmann v. The Bradford Group, Inc., 444 Mass. 698 (2005), a commission payment is definitely determined when it can be calculated arithmetically. This requires that all of the mathematical factors needed to calculate the commission be known or knowable.
All commissions are based on contingencies, usually sales. Companies have the right to define when and under what circumstances commissions will be due and payable. If an employer is smart and careful, they will put this in writing and make sure all of the factors are very clear, including timing of payment. If an employer is silent on commission terms, its actions, practices and course of dealing between the employer and employee (and sometimes other employees) will taken into account and used to determine what the "deal" was with respect to commissions.
The term “commission” is commonly understood to refer to compensation owed to those in the business of selling goods, services, or real estate, set typically as a percentage of the sales price. See, e.g., Webster's New Universal Unabridged Dictionary 364 (2d ed. 1983) (defining “commission” as “[a] percentage of the money taken in on sales, given as pay to a salesclerk or agent, usually in addition to salary or wages”). The compensation at issue here was of a different sort, a share of the overall profits generated by the development efforts. Whatever the precise boundary of the term “commission” as used in the Wage Act, we agree with the trial judge's conclusion that any money owed Suominen under such a profit-sharing arrangement was not a “commission” covered by the statute.
Suominen v. Goodman Indus. Equities Management Group, LLC, 78 Mass.App.Ct. 723, 738 (2011)
Bonuses that are tied to definable metrics based on sales are also sometimes subject to the Wage Act.
However, this is a hot-button issue right now in Massachusetts, with the
federal court sometimes construing the Supreme Judicial Court's Weems decision to mean that bonuses with any discretionary elements are not covered by the Wage Act.
Another hot-button issues is what happens when an employee is terminated
or resigns before a commission (or bonus) is paid but after all or most of
the factors that give rise to the commission (or bonus) have happened.
This depends on the facts, but has been some good case law on this point
recently, notably McAleer v. Prudential Insurance Company of America. We have
handled several of these cases. Feel
free to contact us about your situation.
Related Blog Post:
Bonuses and Commissions under the Wage Act
Related Blog Post:
Are Bonuses Wages in Massachusetts?