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I was fired right before my bonus/ commission was due. Don't they still owe it to me?

March 28, 2017

It's possible. These cases theoretically implicate a couple of different laws and doctrines, including breach of contract, the Massachusetts Wage Act, and the covenant of good faith and fair dealing.

 

I will provide an overview of these three separate bodies of law and give some examples of how they come into play in this situation based on cases that have already been litigated.

 

These cases, like most employment cases, are highly fact-specific, however. Thus, you will need to go over the specifics of your situation with an employment lawyer for a more definite answer based on your circumstances.

 

Breach of Contract

 

The first thing to look at in this situation is any language that sets out the bonus or commission entitlement. A court interprets a contract "according to its plain terms," Den Norske Bank AS v. First Nat'l Bank of Bos. , 75 F.3d 49, 52 (1st Cir. 1996). Words that are plain and free from ambiguity must be construed “in their usual and ordinary sense.” Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998).

 

In one federal court case applying Massachusetts law where the employee sued for breach of contract, where the contract provided that the annual bonus "shall be payable within 60 days following the end of the calendar year to which it relates”; the employee must be "employed by the Company on the date on which the Annual Bonus is paid"; and where the employee left on January 8, the court nevertheless concluded that the employee stated a claim for breach of contract because the employer could have issued its bonus payments before the employee left the company. Obourn v. American Well Corp, 115 F. Supp. 3d 301 (D. Conn. 2015). 

 

As the Obourn case makes clear, the exact language setting out the bonus entitlement and the dates of all relevant events are key. Bring your documents to an employment lawyer for her to review and see what might be there.

 

The Massachusetts Wage Act

 

The Wage Act applies to compensation such as a bonus or commissions earned on top of a base salary to the extent it is "definitely determined" and "due and payable." M.G.L. c. 149, § 148; Okerman v. VA Software Corp., 69 Mass. App. Ct. 771, 776-779 (2007).

 

Bonuses or commissions are due and payable when “any contingencies relating to their entitlement have occurred.” Sterling Research, Inc. v. Pietrobono, 2005 WL 3116758, at *11 (D.Mass. Nov. 21, 2005).

 

One federal court determined that where an employee earned his commissions during a period of "indisputably active employment" and the company had "not provided any justification to find that [his subsequent termination] preclude[d] commissions from becoming due and payable," the employee could sustain a claim under the Massachusetts Wage Act. McAleer v. Prudential Ins. Co. of America, 928 F.Supp.2d 280, 290 (D. Mass. 2013).


A Wage Act claim is significant. Where an employee prevails, the Wage Act requires an automatic award of three times the unpaid wages, as well as payment of the employee’s attorney’s fees and costs. M.G.L. c. 149, § 150. Moreover, corporate presidents and treasurers are personally liable for violations of the Wage Act. M.G.L. c. 149, § 148.

 

The Wage Act is a powerful lever for employees. But, again, it requires a thorough analysis of the facts to determine if it applies. Get thee to an employment lawyer for help.

 

Good Faith and Fair Dealing


Based on even the general wording of your question, you may very well have a claim for breach of the covenant of good faith and fair dealing. 

 

A "covenant"? What does that mean exactly? 

 

Massachusetts law implies in every contract a covenant of good faith and fair dealing. Ayash v. Dana-Farber Cancer Inst., 443 Mass. 367 (2005). This just means you have to act fairly and in good faith when entering or carrying out a contract.

 

If you don't, you can be liable for breaching the covenant even without ever breaching any express term of the underlying contract. See Fortune v. Nat'l Cash Register Co. , 373 Mass. 96 (1977).


So, for example, courts have routinely held that terminating employees on the eve of a compensation deadline serves as a basis for finding a lack of good faith and fair dealing: 

 

  • Aggarwal v. Nexabit Networks, Inc., 2001 WL 34032503 (Mass. Super. 2001)(allowing employee to maintain claim for breach of covenant of good faith and fair dealing where "the employee has provided past services for virtually the entire scheduled period and is terminated right before the shares which he fairly earned and legitimately expected are due to vest”);

  • Harrison v. NetCentric Corp., 433 Mass. 465 (2001) ("an employer is accountable to a discharged employee for unpaid compensation if the employee were terminated in bad faith and the compensation is clearly connected to work already performed");

  • RLM Assocs., Inc. v. Carter Mfg. Corp., 356 Mass. 718 (1969) (where the termination of the contract happened on the cusp of a large transaction requiring payment of commissions, the existence of such a motive would permit an inference that the termination was in bad faith).

 

An alternate way to show lack of good faith is by showing that the employee was terminated without good cause in order to deprive him of the bonus/commissions:

 

  • Krause v. UPS Supply Chain Solutions, Inc., 2009 WL 3578601, at *14 (D.Mass. Oct. 28, 2009) (plaintiff may state a claim for breach of the implied covenant of good faith and fair dealing based on improper refusal to pay commissions where the plaintiff sought to prove that her termination was "without good cause" by showing discrimination);

  • Gram v. Liberty Mut. Ins. Co., 384 Mass. 659 (1981) (plaintiff was entitled "to recover identifiable, reasonably anticipated future compensation, based on his past services, that he lost because of his discharge without cause").

 

A termination timed right before a bonus or commission payment is due is, at the very least, suspicious. To the extent the bonus/commission has been earned based on work already performed, courts have often been sympathetic, and you may very well have a claim for breach of the covenant of good faith and fair dealing.

 

So, get your documents together, including any job offer letter, employment contract, compensation plan and/or bonus/commission structure, and contact me for a review.

 

Doorways Employment Law is a virtual employment law practice, leveraging the power of technology to connect with clients in the most efficient, convenient and cost-effective way possible. It specializes in employment law counseling, strategic advice and representation to individuals and businesses across Massachusetts, including with nonpayment of bonuses and commissions. Contact Doorways Employment Law for an employment law consultation.

 

 

 

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