Navigating Commission-Based Compensation: Understanding Deductions Under Massachusetts Law
Wage Deductions and Commission-Based EmployeesWhen it comes to hourly or salaried employees, deductions from paychecks are generally well-defined by law. However, the landscape shifts when it comes to commission-based compensation in Massachusetts. Let's delve into the nuances of deductions in commission policies, exploring the legal gray areas and potential pitfalls for both employers and employees.
Understanding Deductions in Commission-Based CompensationCommission-based earnings, treated as wages under Massachusetts law, fall under the same regulatory umbrella as traditional hourly or salaried wages. The critical question arises when certain commission policies factor in deductions for costs that might not be permissible in the case of an employee receiving an hourly wage or salary.
The Massachusetts legal landscape lacks a definitive stance on whether specific deductions within commission policies are lawful or simply inherent in the commission calculation. Employers argue for the flexibility to design commission policies that suit their unique needs, determining both earned amounts and the criteria triggering compensation. Examining Deductible CostsCommon examples of costs deducted from commissions include deductions for product costs in industries like hair salons, or expenses for sales people in other industries related to customer acquisition through uniforms and gear. The controversy lies in whether these deductions align with the purpose of anti-wage deduction rules – preventing employers from transferring their operational costs onto employees.
The Legal DebateThe Massachusetts legal landscape lacks a definitive stance on whether specific deductions within commission policies are lawful or simply inherent in the commission calculation.
The Employer’s Side: Flexibility in Crafting Commission Policies and Right to OffsetEmployers assert their right to design unique commission policies, arguing that the latitude extends to determining both earnings and the criteria triggering compensation. This perspective emphasizes the need for flexibility in tailoring commission structures to meet the specific demands of their industry and business model.
Employers further contend that the inherent variability in commission-based roles warrants the ability to calculate commissions with any offset they deem appropriate. This argument hinges on the notion that such flexibility is essential for businesses to adapt commission structures to their operational realities. |
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The Employee’s Side: Protection Against Unlawful Deductions for Operational Costs
On the contrary, employees argue that certain deductions within commission policies overstep legal boundaries, resembling costs that shouldn't be borne by employees. Items such as the cost of product in a hair salon or expenses tied to customer acquisition and branding through uniforms and gear are as examples.
It is also worth noting that, if the purpose of rules against wage deductions is to prevent employers from shifting operational costs onto employees, then commission-based employees should be no more susceptible to such deductions than their hourly counterparts.
It is also worth noting that, if the purpose of rules against wage deductions is to prevent employers from shifting operational costs onto employees, then commission-based employees should be no more susceptible to such deductions than their hourly counterparts.
Importance of Commission Policy Language
In the absence of a clear legal guideline, the language of a commission policy becomes pivotal. A distinction exists between policies stating a net commission is earned after applying offsets and those directly deducting offsets from a paycheck. The specificity in how a commission policy is articulated can significantly impact its legality and fairness.
Employee Rights and Legal Counsel
For employees grappling with commission policies incorporating offsets, seeking legal advice is prudent. Consulting with an employment attorney can provide clarity on rights and potential recourse, ensuring that commission structures align with legal standards.
Employer Best Practices
Employers seeking to mitigate employment law risks might consider setting commissions slightly lower to account for overhead, avoiding specific offsets to commission payments. Striking a balance between fair compensation and legal compliance is paramount in designing commission structures.
Conclusion
In navigating the intricate landscape of commission-based compensation and deductions in Massachusetts, understanding the legal nuances is key. Whether you're an employee seeking clarity on your rights or an employer aiming to minimize legal risks, thoughtful consideration of commission policies is essential.
Meet Our Employment Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as a Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, and helped thousands of clients on both the employee and employer side with issues relating to wage and hour laws, including overtime pay, late or unpaid wages or commissions, employee misclassification, and retaliation against employees asserting rights under the wage and hour laws.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped clients with wage and hour disputes, including employee misclassification, late or unpaid wages or commissions, retaliation under the Wage Act, and advice to both employees and employers about wage and hour law compliance.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna has helped clients assess their rights under the wage and hour laws, including employee misclassification, untimely payment of final wages, late or unpaid commissions, retaliation, and advice to small business owners about wage and hour law compliance.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients with wage and hour claims, including late or unpaid commissions, retaliation, employee misclassification, and overtime, and litigated these claims in state and federal courts. He also advises employers about employment policies and wage and hour compliance.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped clients with multiple wage and hour issues, including retaliation, misclassification, and late or unpaid wages or commissions, and litigated these claims in state and federal courts.
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Empower your understanding of commission policies with our comprehensive insights. Whether you're an employer seeking legal compliance or an employee navigating commission structures, we provide guidance to strike a fair balance. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
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