Alert: Massachusetts Supreme Judicial Court Trebles Lost Wages to Protect Against Retaliation

What you need to know

On February 12, 2020, the Massachusetts Supreme Judicial Court held in a case of first impression that the Massachusetts Wage Act warrants trebling of damages when and if it is determined that the employer retaliated against an employee by not paying a wage. Given that the Wage Act imposes treble damages and attorney’s fees on offending employers, employers should consult with counsel before deciding not to pay a commission to an employee or former employee. Further, employers are strongly encouraged to discuss with counsel if an individual engages in protected activity by complaining of Wage Act violations. In such circumstances careful consideration should be given before the employer takes any adverse action such as termination, demotion or issuance of a negative performance review.

Overview of Parker v. EnerNOC, Inc., SJC-12702 (2020):

The plaintiff was employed by EnerNOC. She negotiated a $20 million sales contract for the company. She complained about not receiving her full commission on the guaranteed portion of a contract. The company fired the plaintiff after she complained. As a result of her termination, the plaintiff lost out on an additional commission.

Three aspects of EnerNOC’s commission policies were in play. (1) The sales contract included a “termination for convenience” clause, giving both parties the right to terminate after one year. EnerNOC’s sales commission policy stated that, in contracts with a termination for convenience clause, employees entitled to a commission would be paid on the guaranteed portion of the contract (in this case, after one year). (2) EnerNOC also had a so-called “true-up” policy, which entitled employees to an additional commission based on the entire value of the contract if the contract did last beyond the opt-out date. (3) EnerNOC’s commission policy further stated that salespersons would not be eligible for further commissions if they were terminated for any reason. EnerNOC fired the plaintiff before the opt-out date, but the sales contract did in fact remain in place beyond it.

After her firing, the plaintiff sued for all components of the commissions. The Wage Act provides that an employee who succeeds in an action against the employer is entitled to treble damages for lost wages. The lower court trebled the plaintiff’s damages under the termination for convenience clause, but declined to treble the unearned commission under the true-up policy. The lower court reasoned that this true-up payment was not due and payable on the plaintiff’s last day with EnerNOC. On appeal, however, the SJC awarded the plaintiff treble damages on the true-up commission. The Court ruled that but for EnerNOC’s retaliatory firing of the plaintiff, she would have been employed by EnerNOC and thus she would have been entitled to the true-up bonus. The SJC held that “wages lost as a result of retaliation are trebled under the Wage Act.”

Broad Definition of Wage:

In EnerNOC the SJC has adopted a broad definition of the term “wage.” The Court noted that although the Wage Act does not define the term “wage”, the plain meaning of the word is “a pledge or payment of usually monetary remuneration by an employer especially for labor or services.” The Court found that under this definition, commissions clearly constitute wages.

No Categorical Rule that Commissions Must be “Definitely Determined” and “Due and Payable”:

Prior to EnerNOC, Massachusetts courts had held that commissions constituted wages only when the amount of such commissions was “definitely determined” and “due and payable” to the employee. In EnerNOC, however, the SJC explicitly stated that the latter criteria is not a “categorical rule” Faced with the retaliatory circumstances of plaintiff’s firing, the Court held that commissions that are not due and payable may still constitute lost wages if the employer’s retaliatory action prevented the employee from receiving payment of such commissions.

Employers Cannot Circumvent Commission Payments Under Continued Employment Policy:

The commission policy at issue expressly provided that in order to receive a commission, the worker must be employed at the time the commission becomes payable. The SJC held that this policy was unenforceable under the Wage Act, under the particular circumstances of the case. The Court indicated that employers cannot rely upon such policies to “create circumstances” where an employee is terminated in order to “deny a commission that would be otherwise due and payable to an employee.”