Court Award of 3X Wage Damages to Former Employee is a Warning for Employers

In a decision that sounds a warning to employers, the Massachusetts Court of Appeals recently
concluded that triple damages under the Wage Act may be awardable even to former
employees. Though the case’s particulars are important to the Court’s rationale, the decision
will likely have ramifications well beyond them, in an array of circumstances that could arise for
many Massachusetts employers.

The case involved an employee who negotiated a large contract under which she earned a
substantial commission to be paid out over time. After the employee complained that her initial
commission payment was about $25,000 too low, she was fired. Her employer thereafter
refused to make a second, far larger payment on grounds that the employee did not satisfy a
continuing employment requirement under the commission plan. The jury found for the
employee, awarding her both the underpayment and an additional $349,000 due for part two
of her commission. After the trial judge refused to triple this sum under the Wage Act, the
Court of Appeals reversed because the employer, it found, made it impossible for its employee
to satisfy the commission’s requirements.

“The retaliation, which took the form of terminating the plaintiff, had the effect of depriving
the plaintiff of her right to be paid a commission under the true-up policy….A policy that
conditions payment on continued employment cannot relieve an employer from the obligation
of paying a commission where the employer terminates its employee in retaliation for
complaining about wage violations in the first place. On these facts, the policy is therefore
unenforceable under the Wage Act,” the Court found.

Despite its overt references to retaliation, the case is a warning to all employers for at least
three reasons. First, it awards penalties and legal fees in a case where a commission was not
due and payable during employment despite the fact that the Wage Act applies on its face only
to employees. Second, it does not explicitly hold that retaliation is a condition to post-
employment Wage Act penalties, and the principle involved may apply in other situations
where employment ends before a commission becomes due and payable. And third, even if
retaliation later becomes a lynchpin to post-employment penalty awards, lawyers and their
clients will often have little trouble characterizing terminations as retaliatory in a multitude of
conceivable situations.

Employers should now review their commission policies and carefully consider the
circumstances under which payments are withheld to former employees. Under this now
guiding case precedent, making a wrong move will expose them to triple damages and legal fee
reimbursements. Win or lose cases in dispute, employers will face their own expensive and
time-consuming lawsuit defense costs they may be wise to avoid.