Are Commissions Wages?
Yes, if they are earned by the employee as a result of his or her contribution to revenue. For example, a sales person who is paid a percentage of each sale is receiving a commission. Incentive payments that are triggered by performance evaluations or overall profitability are bonuses, not commissions, and not subject to the Wage Act. The Wage Act (the Massachusetts wage and hour law) applies to commissions as soon as they are earned. When a commission is earned can vary according to the company's policy- for example, the policy can provide that a commission is earned when a customer signs a contract, when an invoice is sent to a new customer, or when the company is paid.
Earned Sick Time
Under the Massachusetts earned sick time law, all employees earn 1 hour of sick time for every 30 hours worked, up to 40 hours per year. The time begins to accrue immediately, but an employer can limit its use until 90 days after the start of employment. It’s not just sick time: time under this law can also be used for attending routine medical appointments or taking a child or immediate family member to medical appointments. Unlike vacation, earned sick time does not have to be paid out to the employee at termination. The law also prohibits retaliation against an employee for using any of the time accrued under this law.
Why You Need to Care About Wage and Hour Laws
For all that employers worry about the Big Problem- an employee who has to be terminated and is angry and files a lawsuit- the truth is that where most small businesses get into the most avoidable trouble is with wage and hour laws. The bad news is that if you break these rules, and employee sues and wins, both you personally and your business will be liable for two to three times their actual damages, and for paying their legal fees and costs. The good news is that if you know the rules, they are really not hard to follow, and you could save yourself a good deal of money, time and aggravation. Need to know more? Order our Free Report on Wage and Hour Laws.
Payment on Termination
If an employee is fired, he or she must be paid on that same day for all amounts earned prior to the termination (including any commissions earned prior to termination), as well as for any vacation time the employee has accrued but not used. If the employee resigns voluntarily, these amounts must all be paid in the next scheduled payroll. We have seen many employers make mistakes with the final paycheck, and turn an otherwise completely lawful termination into a lawsuit.
Timely Payment of Wages
The Massachusetts Wage Act requires that all employees be paid within six days of the end of the payroll period, in order to be timely under the Wage Act. Most employees have to be paid weekly or bi-weekly, though there is are limited categories of employees who may be paid monthly if they agree. This time period varies from state to state, and this requirement is often overlooked by out of state businesses with Massachusetts employees.
Any employee who is not exempt from federal and state overtime laws must be paid at 1.5 times their regular rate for any hours worked in a single week over 40. Overtime is calculated on a per-week basis, not based on the payroll period. Who is exempt from overtime? Only employees who (i) are paid on a salary basis; and (ii) perform "non-exempt duties." Both of these tests are more complex than many people realize, and it is worth consulting an employment lawyer if you are in doubt.
Deductions from Wages
With some very limited exceptions (i.e., withholding for taxes or health or other benefit premiums, deductions pursuant to an order of garnishment, and other similar deductions) it is unlawful for an employer to deduct money from an employee's paycheck. Even if the employee legitimately owes your business money for something, you need to be very careful about taking it out of a paycheck, because an unlawful deduction may also be a Wage Act violation, with the attendant triple damages and liability for attorneys' fees. Generally speaking, any time you are considering taking any deductions beyond the standard tax and insurance deductions, you should consult an employment lawyer.