No Trip, No Commission: Massachusetts Court Reinforces That a Commission Not Yet Due Is Not Payable – and Not Protected by the Wage Act

Unlike hourly or salaried wages, commissions are a creature of contract. The Vactioneer court stated its holding plainly: Because the commissions of a travel planner were contingent upon the commencement of the reserved trip prior to her termination, the travel planner could not recover commissions on trips that had been sold but not yet taken as of that date. This decision offers clear guidance on when contingent commissions become wages protected by the Massachusetts Wage Act or due pursuant to a commission agreement.

Ford v. Vacationeer, LLC, et al.

The plaintiff, a travel planner engaged by a travel agency under an independent contractor agreement, sought to recover $134,000 in unpaid and projected commissions for trips she had booked but which customers had not yet completed at the time of her termination. Under the terms of her contract, the plaintiff was entitled to a percentage of commissions received by the agency from travel vendors. The agency only received commissions after customers completed their trips. Upon termination, the agency paid the plaintiff commissions for trips completed as of her termination date.

The court, relying on both the language of the commission contract and the Wage Act, found that commissions for trips not yet completed were not “definitely determined” or “due and payable” at the time of termination. Because the trips were subject to cancellation after the plaintiff’s termination, the agency was not unconditionally entitled to the commission, and neither was the plaintiff. The court cited Gallant v. Boston Executive Search Assocs., which held that commissions contingent on future events, such as the completion of an event or the absence of cancellation, are not unconditionally earned and not yet wages under the Wage Act until those contingencies are satisfied. For these same reasons, any claim by the plaintiff for breach of contract also failed. On that basis, the judge granted summary judgment to the employer, ruling that the only sums recoverable were commissions the agency had already earned and received before the termination date.

Key Takeaways

• Commissions are not “due and payable” under the Wage Act until all contractual contingencies, such as trip completion, are satisfied.

• Commissions are not “due and payable” under the Wage Act until they are arithmetically determinable.

• Commissions definitely determinable, which have satisfied all contingencies in a commission agreement, are due and payable as wages upon termination.

• The timing and conditions for commission payments should be clearly defined in commission agreements and offer letters.

Commission agreements are contracts. Employers have control over how much, when, and on what terms commissions are earned, but only if they draft the commission agreement to state such. This ruling is an important reminder for employers in commission-based industries to review their commission agreements and confirm that the language accurately reflects the intended terms.

The Labor, Employment & OSHA attorneys at ArentFox Schiff continue to monitor updates regarding the Wage Act. For questions, please contact one of the authors or the ArentFox Schiff attorney who usually handles your matters.