The Wage Act in Massachusetts: Wages and Allowable Deductions
The Wage Act in Massachusetts requires timely payment of wages and commissions. The Massachusetts Wage Act imposes strict liability and penalties for untimely payment of wages, and Massachusetts courts have generally construed the Act liberally. Some common issues under the Wage Act are what are considered wages, and what are lawful deductions from wages or commissions. An employment attorney can provide more detailed advice about your situation.
“Wages”
Regular hourly or salaried compensation are “wages” under the Massachusetts Wage Act. Generally, commissions are also “wages” under the Wage Act, but discretionary bonuses are not. In Suominen v. Goodman Indus. Equities Management Group, LLC, 78 Mass.App.Ct. 723 (2011), the Massachusetts Appeals Court held that promised split fees from real estate development deals were not commissions, and should not be treated as wages under the Wage Act. The court explained that "commissions" are commonly understood to refer to compensation owed to those in the business of sales. The compensation in that case was more like profit sharing than commissions, and therefore not subject to the Wage Act. More recently, a Massachusetts Superior Court held that incentive payments calculated according to the overall revenues of the enterprise but contingent upon the employee meeting revenue metrics were commissions subject to the Wage Act. See Feygina v. Hallmark Health Sys., Inc.,MICV2011-03449.
Allowable Deductions payment of wages in Massachusetts
Under the Wage Act, “No person shall by a special contract with an employee or by any other means exempt himself from [the requirement to pay wages].” The Massachusetts Attorney General has interpreted this to preclude deductions from wages that are not valid legal set-offs. The Massachusetts Supreme Judicial Court has agreed, and held that “chargeback” deductions meant to pay for employee-caused damages were unlawful. Camara v. Attorney Gen., 458 Mass. 756 (2011). A valid set-off under the Wage Act “implicitly involve[s] some form of due process through the court system, or occur at an employee's direction and in the employee's interests.
It is less clear how the prohibition against deductions applies to deductions from commissions. The portion of the statute applying the Wage Act to commissions states that it is applicable: “…when the amount of such commissions, less allowable or authorized deductions, has been definitely determined and has become due…” M.G.L. ch. 149, § 148. A New York court has concluded that certain deductions from commissions were permissible. Pachter v. Bernard Hodes Grp., Inc., 10 N.Y.3d 609, 618 (2008). Importantly, the New York statute did not include the Massachusetts Wage Act reference to “allowable or authorized” deductions from commissions. Given the broad protections of the Wage Act, deductions from commissions such as those in the Pachter case could be held unlawful in Massachusetts.