An employee recently sued his employer, claiming the company failed to pay him the commission he was owed and fired him for complaining about it. The court dismissed the claim about unpaid wages but allowed the employee’s retaliation claim to continue. The case shows that even if an employee’s wage complaint isn’t strong enough to win, the employee might still have a valid claim if they believe they were punished for raising the issue.

A sales employee brought the case in the federal District Court in Massachusetts, claiming his employer terminated him for seeking payment of a commission he believed was owed. A New Jersey-based software company hired the employee as a Regional Sales Manager in December 2021. At the time of hire, the employee signed an at-will employment agreement setting out the employee’s base compensation and eligibility for several different types of commission. The agreement included the following provision about the employees’ eligibility for an annual commission:

In addition, you will be eligible to receive a targeted annual commission of $155,000 (U.S. Dollar One Hundred Fifty-Five Thousand) upon achieving revenue goals and objectives set by the Company in its sole discretion, subject to the conditions of a commission plan with the Company.

The commission plan signed by the employee in March of 2022 capped commissions on individual deals at $250,000, subject to management discretion.  Despite the cap, the employee was paid $500,000 in commission in 2022 for securing a lucrative deal for the Company.  The employee notified his managers twice in February and March of 2023 that he believed he was also owed the $155,000 targeted annual commission, bringing his 2022 commission up to $655,000.

On March 29, 2023, the employee was terminated due to a restructuring, only a few weeks after being named the company’s “#1 Sales Representative.” Other less successful sales representatives were not affected by the restructuring.

The employee brought claims under the Massachusetts Wage Act: one for the unpaid commission and another for violation of the retaliation provision, alleging that his termination was retaliation for asking to be paid the commission. He also brought breach of contract claims and various other claims related to the non-payment of the commission.

The Court’s Decision

• Non-Payment of Commission: The court ruled that the company didn’t violate the Wage Act because the commission was not guaranteed. Since the company had the right to decide whether or not to pay the commission, it wasn’t considered “due and payable” as per the law, so the claim for unpaid wages was dismissed.
• Retaliation: The court allowed the retaliation claim to move forward. The employee’s firing soon after he raised concerns about his commission suggested that his complaint could have played a role in the decision to terminate him. This ruling means that even though the court dismissed the wage claim, the employee could still have a case for retaliation.

HR Tips

• Take all employee complaints seriously – The split decision reached in this case demonstrates the importance of taking employee complaints seriously.  Even though the court found that the unpaid wage claim was without merit, the employee’s termination soon after making a complaint supported his claim of retaliation.
• Be careful of retaliation – One of the biggest lessons from this case is the importance of avoiding retaliation. Retaliation happens when an employee is punished for complaining or reporting something, like unpaid wages. Even if an employee’s complaint isn’t ultimately successful, terminating them for raising the issue can lead to legal trouble. Always ensure that terminations or other actions are based on legitimate reasons unrelated to the employee’s complaint.

For More Information

This fact sheet offers more detailed information about what happens when a company is found liable for retaliation by the wage and hour law.

If AIM members have questions about wage payments or any other HR matter, they may contact the AIM Helpline at 800-470-6277 or helpline@aimnet.org.

AIM HR Solutions offers various training programs to help employers navigate workplace issues. Check out our training catalog to find the right course for your team.