Blog Post

Claims for unpaid wages, commissions, overtime

Commissions, bonuses, incentive compensation, profit sharing, and the Massachusetts Wage Act

The Massachusetts Wage Act requires prompt payment of earned wages.  An employer’s failure to pay earned wages triggers mandatory triple damages.  The term “wages” means wages which the employee has “earned”, and not monies that are discretionary or contingent. Thus, bonuses which are discretionary are not considered wages under this law.

Commissions that are based upon arithmetically calculable amounts fall under the Wage Act.  A commission includes compensation owed to those in the business of selling goods, services or real estate. Their commission is typically set as a percentage of the sales price.  So, for example, a sales person whose compensation plan promises him or her 2% of the amount of goods or services sold can pursue a claim under the Wage Act for unpaid commissions.  Likewise, where an employee’s incentive compensation is pegged to the amount of revenue that the employee’s own work generates for the company each year, an employer’s failure to pay the incentive compensation violates the Wage Act.  Where an employee is promised both a base salary and additional compensation based on the amount of revenues she generates for the employer, those additional payments are commissions under the Wage Act.

In Roma v. Raito, Inc., the U.S. District Court in Boston rejected a plaintiff’s Wage Act claim based upon the employer’s failure to pay an agreed upon share of the overall profits generated by the employee’s business development efforts.  The Court distinguished this profit sharing arrangement from commissions earned by the employee’s individual efforts.  Since the compensation agreement only called for a share of the profits and not a percentage of a sales price, the Court ruled that the unpaid profit amounts were not commissions under the Wage Act.

Pamela A. Smith
Law Office of Pamela A. Smith
233 Needham Street, Suite 540
Newton, MA 02464


Blog Archives