Massachusetts employees who earn sales commissions may have a right to recover those commissions even after the end of their employment despite company policies to the contrary, according to the recent 2017 case of Israel v. Voya Institutional Plan Services, LLC.
The Massachusetts Wage Act applies when wages, including commissions generated by salespersons, are considered earned. Sales commissions are considered earned when they are due and payable. The figure that is due and payable must be ascertainable with specificity and definitely determined. Special contracts, agreement terms, personnel policies and employment manuals that circumvent application of the Wage Act are unenforceable according to both the express language of the Wage Act and public policy. An employee who is not timely paid earned wages may be entitled to sue for three times the amount of withheld wages, interest, plus mandatory recovery of reasonable attorneys’ fees. The Wage act is a powerful financial deterrent to prevent employers from improperly withholding earned wages and commissions.
Massachusetts Courts have not definitively ruled on whether policies that prohibit the payment of commissions after an employee’s separation are indeed special contracts that violate the Wage Act. The Israel case involved a sales representative who was compensated in part with commissions based on sales. The employer, Voya Institutional Plan Services’ (“Voya”), maintained a commission plan that entitled certain employees to commissions roughly three months after the company received payment on a sale. The plan also contained a provision indicating that an employee who resigned would not be entitled to commissions following resignation.
Israel resigned his employment in lieu of being terminated. At the time of his resignation, he had roughly $30,000.00 in completed sales commissions in the pipeline – which had not been paid exclusively because of the delay between accrual and payment date. The employer refused to pay the commissions on account of its resignation policy.
The court in Israel ruled that Voya and Israel’s commissions contract could improperly avoid the Wage Act’s requirement that commissioned wages be timely paid once the commission sums were definitely determined. Since the commissions had been definitely determined before the end of Israel’s employment, the commissions were due and payable regardless of the employer’s policies or those contract terms suggesting otherwise. Voya’s adherence to its commission policy in order to deny payment of commissions to Israel was found to violate the Massachusetts Wage Act.
The Israel court determined that the Wage Act trumped an employer’s policy prohibiting the payment of post separation commissions. As such, Massachusetts employers and commissioned employees must be attentive to the timely payment of definitely determined sales commissions even after separation in order to comply with the strict requirements of the Massachusetts Wage Act. Should you have any questions on the developments regarding the Massachusetts Wage Act of or any other employment or civil rights matters, please feel free to contact Bennett & Belfort P.C.