A recent decision from a federal court in Massachusetts reinforces the narrow scope of the Massachusetts Wage Act as it applies to incentive pay. In Noreke v. Gideon Taylor Consulting, LLC, decided August 14, the court concluded that incentive payments based on division-wide profits were not “commissions” under the Act, even though the payments were non-discretionary and calculated using a fixed formula.
Plaintiff Holger Noreke, who was Managing Director of one of his employer’s divisions, received a base salary plus incentive payments under a so-called “commission plan.” The plan provided for payments to Mr. Noreke based on the net income of his division and set specific thresholds that automatically triggered periodic payments to him depending on the division’s profitability.
Mr. Noreke’s employment was terminated and he sued, alleging that expenses had been misallocated to reduce the division’s apparent net income, which in turn reduced his payouts under the plan. He asserted a number of claims, including a claim under the Massachusetts Wage Act, on the theory that these amounts were unpaid “commissions” and that he was therefore entitled to treble damages and attorneys’ fees.
The court disagreed. Although the company had labeled the payments as “commissions,” the court noted that the characterization was not dispositive. Looking to the substance of the arrangement, the court described a consistent line of cases holding that the Wage Act definition of “wages” does not...
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