Treble Ahead? SJC Opinion Offers Damages Caution for Massachusetts Employers With Commissioned Employees
On February 12, 2020, the Massachusetts Supreme Judicial Court (SJC) issued an opinion with significant implications for Massachusetts employers with commissioned employees. In Parker v. EnerNOC, Inc. (SJC-12703), the SJC held that (1) unpaid commissions lost as a result of retaliation are subject to trebling under the Massachusetts Payment of Wages Act (Wage Act); and (2) an employer cannot rely on a requirement of continuous employment as a contingency to pay commissions due, at least when the employer itself creates circumstances that prevent the employee from meeting the continued employment contingency.
In March 2016, the plaintiff, Francoise Parker, a salesperson employed by defendant EnerNOC, Inc., negotiated a deal “worth $20 million over five years—the largest contract in EnerNOC’s history.” The negotiated contract included a “‘termination for convenience’” clause that allowed either party to the contract to terminate the contract within 30 days following the first anniversary of the contract’s effective date.
EnerNOC’s sales commission policy provided that commissions on the guaranteed portion of the contract (the first full year of the contract) would be paid immediately. EnerNOC also employed a “‘true-up’” policy, which allowed for an additional commission payment based on the entire value of the contract as long as the contract survived past the termination for convenience opt-out date. However, EnerNOC’s sales commission policy also stated that a salesperson’s eligibility for “any further commissions” would cease upon the date that any employee was terminated “for any reason.” (Emphasis added.)
EnerNOC discharged Parker roughly a month after she complained about not having received her full commission on the guaranteed portion of the contract. Following the termination of her employment, EnerNOC paid her approximately $100,000 as commission on the guaranteed portion of the contract. Several months after her discharge, Parker filed a lawsuit in Massachusetts state court. Among several other claims, she alleged that in violation of the Wage Act EnerNOC had failed to pay her commissions and had retaliated against her. As part of her damages, Parker alleged that she was owed more than what she was paid on the guaranteed portion of the contract and also that she was owed an additional separate commission under EnerNOC’s true-up policy.
In May 2018, a jury returned a verdict against EnerNOC. The jury awarded Parker approximately $25,000 as an additional commission on the guaranteed portion of the contract on which she claimed she had been underpaid. The trial court trebled this amount pursuant to the Wage Act. The jury also awarded her nearly $350,000 as the amount of commissions owed under the true-up policy. The trial court declined to treble the nearly $350,000 she had been awarded, reasoning that this amount could not be considered “wages” at the time of the termination of her employment because it was not yet “due and payable.”
Parker appealed, arguing (among other things) that the amount awarded to her under the true-up policy should have also been trebled.
The SJC’s Analysis
In analyzing whether the state court trial judge had erred in failing to treble the jury’s award under the true-up policy, the SJC noted that commissions must be paid under the Wage Act when two conditions are met: (1) when the amount of the commission “‘has been definitely determined’” and (2) the commission “‘has become due and payable.’” The SJC also noted that the Wage Act prohibits employers from retaliating against employees who assert their rights under the law.
The SJC concluded that in these circumstances, the nearly $350,000 award should have been trebled. It reasoned that although commissions are deemed “wages” when they are “definitely determined” and “due and payable,” commissions that do not meet these criteria are not necessarily excluded as wages under the Wage Act. Rather, the SJC concluded that the failure to pay commissions when they have been “definitely determined” and are “due and payable” is merely one way to violate the Wage Act. Further, the SJC explained that prior decisions did not contemplate whether unpaid commissions constitute “lost wages” resulting from retaliation. Accordingly, the court held that “commissions that are not yet due to be paid may nonetheless constitute lost wages if the employer’s violations of the act prevent payment of those commissions.”
Notably, the SJC rejected EnerNOC’s argument that its policy of requiring continuous employment through the opt-out period precluded Parker’s ability to earn a commission based on the true-up policy. The SJC took pains to note that it was not suggesting that continued employment was per se an inappropriate condition to the earning of a commission. The court, however, concluded that because EnerNOC had discharged Parker for a retaliatory reason in violation of the Wage Act, EnerNOC could not enforce the policy because it precluded her from fulfilling the continuous employment contingency.
Potential Implications for Employers
In reaching this decision, the SJC referenced the Wage Act’s purpose “to protect employees and their right to wages.” The EnerNOC case emphasizes Massachusetts courts’ continued focus on protecting what they deem earned employee wages, even though other states might not take such an employee-friendly viewpoint. In light of the SJC’s trebling of unpaid wages for claims under the Wage Act in this decision, employers with commission-earning employees may want to note that policies requiring continuous employment as a contingency for earning commissions may not always be enforced by courts in Massachusetts. The decision also may serve as a reminder of the kind of action that could be argued to be retaliatory against a commissioned employee, when that employee has a potential significant commission payment in the offing.