Boston Employment Lawyer Blog

Employees who receive commissions based on their work performance may face difficulty in securing payments from employers in this tough economy. Under certain circumstances, however, legal recourse exists to secure payment from unscrupulous employers who attempt to cut corners by depriving employees of legally earned commissions.

The Massachusetts Wage Act, namely M.G.L. c. 149, §148, explicitly defines the term "wages" to equal "commissions" where certain parameters are satisfied:

This section shall apply ... to the payment of 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 ....

Where commissions are "due and payable" and "definitely determined," the caselaw in Massachusetts makes clear that the Wage Act applies to highly paid executives, and not just hourly workers. In Wiedmann v. Bradford Group, Inc., the Supreme Judicial Court upheld a claim of pay to a professional who had earned an irregular commission which had been held, by the trial court, to have been unprotected. Thereafter, the Massachusetts Appeals Court in Okerman v. VA Software Corp. followed the Wiedmann decision, and explicitly held it was reversible error to dismiss wage claims of highly paid executives claiming irregular, contingent commissions, above and beyond a “healthy” base salary. The Appeals Court further opined that to exclude the recovery of such commissions would "vitiate the entire paragraph in the Wage Act addressing commissions,” and render the commissions paragraph meaningless.

It is illegal for an employer to in any way penalize an employee who attempts to recover unpaid commissions. The Supreme Judicial Court in Smith v. Winter Place, LLC has interpreted this provision to cover internal complaints: “Complaint made to an employer (or a manger of the employer) by an employee who reasonably believes that the wages he or she has been paid violate such laws readily qualifies as" protected conduct.

When seeking to recover unpaid commissions, its important to determine first whether the commissions can be construed as "wages" under the Massachusetts Wage Act, and second to ensure that you are protected from retaliation.

The Fair Labor Standards Act (FLSA) requires employers to pay their employees overtime pay for all hours over 40 hours per workweek. Employees who work overtime hours must be paid at a rate not less than time and one-half their regular rates of pay.

Employers can avoid paying overtime only in limited circumstances. For example, managers and supervisors may qualify for the executive exemption if they: (1) manage at least two direct reports, (2) possess the authority to hire and fire employees, or whose input into such matters carries weight, and (3) regularly exercise discretion about how to carry out their job duties.

Unfortunately, to increase profits, some employers may classify an employee as exempt from overtime, even though the worker's duties and responsibilities do not warrant such an exemption. To illustrate such a scenario, lets look at the TV sitcom, The Office. Specifically, as the the self-proclaimed Assistant Regional Manager, would
Dwight Schrute satisfy the executive exemption? The answer is obvious: Dwight would not meet the executive exemption because, despite his title, he has no direct reports; no authority to hire or fire employees; and spends the majority of his time selling Dunder Mifflin's paper products, not managing employees.

On a much larger scale, a similar question recently arose in a lawsuit against the New York grocery store chain, Gristedes. In Torres v. Gristedes, Judge Paul A. Crotty of the Federal District Court in Manhattan found that Gristedes violated federal and state laws by misclassifying department heads and so-called co-managers as exempt from overtime

[T]he overwhelming weight of the evidence suggests ... that the class members were not salaried executives or administrators within the contemplation of the FLSA. Instead, ... Gristede’s co-managers and department managers received a regular paycheck that was tied automatically to the amount of hours they worked during the pay period.

The decision affects approximately 400 current and former Gristedes' managers who, collectively, may be owed as much as $25 million. In reaching such a successful result, the plaintiff's relied on well-known economist, Dr. Stephen A. Schneider of Nathan Associates, Inc., who provided statistical analysis regarding the gross underpayments made by Gristedes.

To read more about the settlement, please visit the New York Times article entitled, Judge Rules That Gristede’s Broke Law on Overtime Pay.

Wage and hour violations will be taken seriously in Massachusetts. Bill S.1059 proposed that treble damages must be awarded to plaintiffs who prevail in wage and hour lawsuits. On April 14, 2008, the bill was enacted into law. The new law essentially reverses the Supreme Judicial Court's ruling in Wiedmann v. The Bradford Group, Inc., which held that treble damages should only be awarded where the employer’s conduct was “outrageous, because of [its] evil motive or [its] reckless indifference to the rights of others.”

S.1059's enactment followed an interesting course. The Massachusetts Legislature initially submitted the bill to Governor Deval Patrick in February 2008. Governor Patrick returned the bill without signature and urged that certain exceptions be provided, which the Legislature rejected. Governor Patrick ultimately declined to veto S.1059.

The new law states that employees who prevail in court “shall be awarded triple damages, as liquidated damages, for any loss of wages and other benefits.” The treble damages provision applies to a host of wage and hour violations:

• Payment of wages, including commissions and vacation pay
• Overtime pay for nonexempt employees
• Minimum wages
• Improper deductions
• Misclassification of employees as independent contractors
• Tip pool sharing
• Retaliation for asserting wage complaints

To read more about mandatory treble damages in Massachusetts, please visit Forbes' article entitled, Massachusetts Passes Bill Restoring Triple Damages for Non-Payment of Wages.