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Terminating Employee to Avoid Hefty Commission Amounts to a $1 Million Mistake

By April 30, 2020No Comments

Francoise Parker marketed energy services for EnerNOC, Inc., for which she was paid a base salary and commissions. The Massachusetts Supreme Judicial Court has held that EnerNOC’s decision to withhold more nearly $350,000 in commissions because Ms. Parker was no longer employed by the Company subjected the Company to treble damages. In short, EnerNOC could not evade the Massachusetts Wage Act by terminating Ms. Parker to avoid paying her commissions.

In 2016, Ms. Parker negotiated a contract for EnerNOC that was the largest in the company’s history, worth more than $20 million.

Under EnerNOC’s commission policy, Ms. Parker was entitled to a commission to be paid on the first year value of the contract. Additionally, under EnerNOC’s “true-up” policy, an additional commission payment would be made based on the full value of the contract, if neither side opted out of the contract at the one-year mark. EnerNOC’s written policy made commissions contingent on an employee’s employment, regardless of the reason for an employee’s separation.

After EnerNOC secured its lucrative contract, Ms. Parker complained to management because the company failed to pay her full commission on the one-year guaranteed portion of the contract. EnerNOC then terminated her employment.

Because she was no longer its employee, EnerNOC also declined to pay Ms. Parker the “true up” portion of her commission a year later, even though neither side opted out of the contract and it was locked in for four additional years.  That “true up” commission payment was worth nearly $350,000.

At trial, the Jury found that the company failed to pay $25,000 in commissions that were owed to Ms. Parker as of her termination date, as well as the $350,000 in “true up” commissions that she would have received if EnerNOC had not unlawfully fired her.  Under the Massachusetts Wage Act, prevailing plaintiffs are entitled to collect treble (three times) the amount of any unpaid wages.  The trial judge awarded Ms. Parker three times the pre-termination commissions, but he did not award multiple damages on the “true up” commissions because they were not actually “due and payable” when she was terminated.

According to the Supreme Judicial Court, that decision was wrong.  The SJC held that commissions are “wages” under the Wage Act and should be trebled, even if they become due after the employee’s termination, when the employer’s decision to fire the employee is itself a violation of the Wage Act.  In Ms. Parker’s case, the Jury had found that EnerNOC fired her as retaliation for her complaint about unfair pay and to avoid having to pay her the “true up” commission.

The SJC also ruled that continued employment can be a valid contingency to be eligible for commissions but that “such a contingency cannot be relied upon by an employer to create circumstances under which the contingency goes unfulfilled in order to deny a commission that otherwise would be due and payable to an employee.”  Since EnerNOC’s motivation for firing Ms. Parker was to keep her from collecting this commission, it could not hide behind a requirement that individuals must be active employees in order to receive commissions.

In Ms. Parker’s case, the SJC ruled that she was entitled to three times the amount of the “true up” commission – over $1 million.  This decision clarifies the scope of employers’ potential liability for retaliating against employees who complain about their pay, since future commissions that would become due and payable but for the retaliation are subject to automatic trebling.