4 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP commission plan solely because the plan requires a waiting period before payment, are wages that must be paid upon termination.10 When an employer has a plan that governs the payment of commissions and the plan sets forth contingencies required to earn commissions, courts will apply the terms of that plan.11 In the absence of a plan or agreement governing the payment of commissions, however, courts have generally held that an employee earns the commission and it becomes due and payable when they close the sale, even if there is a delay in actual payment on the sale.12 There has been much litigation over the enforceability of various provisions typically found in commission plans. For example, while commission plans often contain a provision requiring employment at the time of payout, such provisions are not enforceable in Massachusetts if the employee has done everything else required to earn a commission.13 On the other hand, Massachusetts courts have found “windfall provisions” – provisions granting the employer discretion to adjust commissions paid on specifically-defined large deals – to be enforceable.14 Given the intricacies of the payment of commissions under Massachusetts law, employers should carefully review incentive plans for compliance. 3. Vacation Pay Neither Massachusetts nor federal law requires employers to provide paid vacation benefits to employees. When employers do provide paid vacation, however, it must be treated as a wage under the Wage Act.15 The Massachusetts Attorney General’s Fair Labor Division issued an advisory on vacation policies that sets forth its interpretation of the law relevant to vacation pay.16 The Attorney General’s interpretation of the Wage Act, as stated in that advisory, has been treated 10 Israel, 2017 WL 1026416, at *7. 11 McAleer, 928 F. Supp. 2d at 287 (“When a compensation plan specifically sets out the contingencies an employee must meet to earn a commission, courts apply the terms of the plan.”); see also Klauber, 80 F.4th at 12 (“Under Massachusetts law, employers and employees may agree to contingencies that must be satisfied before commission payments become due and payable such that they qualify as protected earnings for Wage Act purposes.”). 12 McAleer, 928 F. Supp. 2d at 287. 13 Israel, 2017 WL 1026416, at *7 (“commissions that [plaintiff] earned during his final months of employment” were wages under the Wage Act where the plaintiff “did the work to earn the commissions prior to his resignation, and the fact that it may have taken [the employer] a few months to make a final calculation as to the exact amount of the commissions [wa]s not sufficient to take them outside the scope of the Wage Act.”); Feygina, 2013 WL 3776929, at *2, 5 (holding that commissions earned prior to termination of employment were protected by the Wage Act even though they were not calculable until several months later). 14 Klauber, 80 F.4th at 12 (enforcing reconciliation provision of commission plan that included review of commissions paid on “exceptional transaction”); Green v. D2L Ltd., No. 1:20-CV-10241-IT, 2023 WL 6050290, *8 (D. Mass. Sept. 15, 2023) (finding no violation of Wage Act where employer modified commission pursuant to terms of windfall provision); Daly v. T-Mobile USA, Inc., 93 Mass. App. Ct. 1123 (2018) (enforcing windfall provision); Vonachen v. Computer Assocs. Int’l, Inc., 524 F. Supp. 2d 129, 136 (D. Mass. 2007) (same). 15 M.G.L. ch. 149, § 148; Elec. Data Sys. Corp. v. Attorney Gen., 454 Mass. 63, 67 (2009) (“EDSC II”); Hahnfeldt v. Newman, 94 Mass. App. Ct. 1120 (2019) (“vacation pay due under an agreement is specifically included in the definition of wages pursuant to G. L. c. 149, § 148”); Massachusetts v. Morash, 490 U.S. 107, 110 (1989); Massachusetts Attorney General Advisory 99/1. 16 Massachusetts Attorney General Advisory 99/1; see also Souto v. Sovereign Realty Assocs., Ltd., Civ. No. 0501281, 2007 WL 4708921, *3 (Mass. Super. Dec. 14, 2007).
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