Commissions As Wages For Terminated Employees

Employees who work on a commission basis often question whether they are entitled to receive commissions upon the termination of their employment.  Massachusetts law provides that an employee who is terminated from employment involuntarily must be paid in full on the day of his or her discharge.  These wages would include earned base salary, accrued vacation pay and any commissions that have been “definitely determined” and have become “due and payable” to the employee.  Employers often make the mistake of thinking that they have until the next pay period to direct deposit any wages owed to an employee who is fired, but this is not the case in Massachusetts.

Disputes often arise between companies and their employees who work on a commission basis,  because commission plans and schedules are unclear as to when the commissions were due and payable and how they will be calculated.  The Massachusetts Wage Act applies to commissions that have been “definitely determined” and are “due and payable.”  Whether the commission must be paid depends upon the terms of the commission plan and/or schedule and the facts in the particular situation.  Employers who withold commissions to employees that have been definitely determined and are due and payable as of the date of the termination risk substantial penalties for withholding commissions.  Massachusetts law now provides for mandatory “treble” or triple damages for wage act violations.  This would triple the amount of commissions owed.   The court may also award the employee attorney’s fees and costs.   Violations of the Wage Act can be very costly for companies.

If you have a question about any of the information in this post, contact Boston, Massachusetts labor and employment lawyer Maura Greene at 617-936-1580 for a free consultation.