Massachusetts Court Analyzes Whether the Massachusetts Wage Act Applies to Commissions to be Paid Post-Termination on Multi-Year Agreements

The Massachusetts Wage Act aggressively protects employee commissions. It doesn’t protect bonuses at all, but it’s very protective of commissions. (Click here to learn more about the differences between bonuses and commissions). In January 2020, a Massachusetts court was asked to analyze whether the Wage Act applies to commissions that were due to be paid after the salesperson’s employment ends. Not surprisingly, the court said ‘maybe’, but its reasoning was insightful. The case name is: Rist v. Reputation Institute, Inc., 19-cv-11448 (D. Mass. January 17, 2020).

DOES MASSACHUSETTS LAW REQUIRE MY EMPLOYER TO PAY COMMISSIONS UNDER MULTI-YEAR AGREEMENTS?

Again, maybe.

Stephan Rist was a salesman for the Reputation Institute (“RI”) who was entitled to “receive a sales commission for all sales that he drives.” RI was required to pay sales commissions to Mr. Rist when they are earned (booking is accounted for and cash is received) consistent with RI company payroll practices.”

While employed by RI, Mr. Rist generated several multi-year agreements. Under these agreements, the client was not billed for, and did not pay, the entire contract value up front but rather scheduled billings and payments in installments over the course of several years. Under this plan, Mr. Rist would get a portion of his commission payment when RI received an installment payment, at which point there would be no further work to be done by Mr. Rist, even where a customer paid in multi-year installments.

In September 2017, RI terminated Mr. Rist without cause, while he was waiting on full commission for approximately 22 deals, some of which were being billed on an installment basis, including those for which he had already received a partial commission. RI stopped making commission payments to Mr. Rist in connection with installment payments it received after Mr. Rist’s termination. Mr. Rist sued under the Massachusetts Wage Act. According to Mr. Rist, the fact that payment may be received after his employment ended, doesn’t mean that the condition that payment be received was not satisfied. RI moved to dismiss.

The Court sided with Mr. Rist, noting that there were unanswered questions as to whether the commissions at issue were “definitely determined” and “due and payable.” Those questions included whether Mr. Rist had ‘earned’ the commission before his employment ended, whether any further work was required by Mr. Rist to service the multi-year agreements during their term, and whether he ‘drove’ the sale as it relates to renewals of multi-year agreements. Read the order here.

Steffans Legal has successfully represented numerous Massachusetts employees in unpaid commission claims. If you believe you are owed commissions call an experienced Massachusetts employment attorney today for a free consultation.