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What Is a “Valid Set-Off” Under the Massachusetts Wage Act?

February 29, 2012/in Massachusetts Wage Claims>Wage Set-Offs, Wage/by competenow

Unpaid wage law continues to develop in Massachusetts. Most recently, the Supreme Judicial Court (“SJC”) provided extensive guidance on what constitutes a valid deduction from wages–called a “valid set-off” in the law. In Camara v. Attorney General, 458 Mass. 756 (2011), the employer was a garbage collection and recycling company in New Bedford. It found that its drivers would sometimes damage the trucks and/or people’s property in the course of doing their jobs. It designated an employee to investigate incidents involving property damage, and if the accident was deemed to be due to the employee’s fault, gave the employee a choice: accept job discipline or pay the damages via a wage deduction. The Massachusetts Attorney General investigated and issued a citation to the employer. Appeals followed, and the SJC took the case.

The SJC found against the employer and expended some considerable effort to draw lines of what would be permissible as wage set-offs in Massachusetts. The crux of the decision in Camara was that the employer had carte blanche to make a final, unreviewable decision about the employee’s fault and impose either discipline or a wage set-off. The SJC did not find that this set-off was “valid” under the law because of the lack of due process for the employee, which fell far below what a person in the dock for negligence would be afforded. As the court put it, the law “does not support the proposition that such liability may exist solely by virtue of an employer’s pronouncement, without any need for independent determination or adjudication.”

However, some wage set-offs apart from tax deductions, retirement plan contributions, union dues, and judicial wage attachments are valid under Massachusetts law. Some examples cited by the attorney general are:

Where there is proof of an undisputed loan or wage advance from the employer to the employee; a theft of the employer’s property by the employee, as established in an “independent and unbiased proceeding” with due process protections for the employee; or where the employer has obtained a judgment against the employee for the value of the employer’s property.

The SJC went on to say:

We do not understand the Attorney General to be arguing that these are the only types of setoffs that are permissible under § 150; if that is her point, we do not agree with it. There well may be other circumstances — for example as part of a collective bargaining agreement — in which an employer and employee enter into a set-off arrangement that does not involve formal judicial or administrative proceedings but that would be valid because it can be shown that the parties have voluntarily agreed to a set of appropriately independent procedures for determining, in a manner that adequately protects the employee’s interests, both the existence and amount of the debt or obligation owed by the employee to the employer.

The SJC alluded to the fact that the employer’s policy in Camara was very effective, stating: “Between 2003 and 2006, ABC’s costs attributable to damage done to vehicles and personal property has been reduced by seventy-eight per cent.” However, the bottom line is that Massachusetts law holds employee wages sacrosanct, and right or wrong, employers must think twice before getting creative with wage deduction policies.

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Wage Act Statute of Limitations in Massachusetts

January 24, 2012/in Wage/by competenow

The statute of limitations for a claim for unpaid wages is three years. See M.G.L. c. 149, § 150. The statute of limitations for contract claims is six years, so a claim for unpaid wages can be brought after the three-year period but before the expiration of six years. However, because of the Massachusetts Wage Act’s provision for mandatory treble damages and attorneys’ fees, employees are well advised to act to bring their claims quickly. The limitations clock starts ticking upon a “violation”–in other words, on the day you should have been paid the wages but weren’t.

Another important Wage Act timing note: a complaint via the Massachusetts Attorney General is a prerequisite to suit. A Wage Act lawsuit can only be brought after the expiration of 90 days after filing a special complaint with the attorney general or more quickly if the attorney general provides you or your attorney with a private right of action letter. Timing is important in a Wage Act lawsuit because filing a complaint in court locks in your entitlement to three times your unpaid wages. That is because Section 150 provides: “The defendant shall not set up as a defense a payment of wages after the bringing of the complaint. ”

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Are Bonuses Wages in Massachusetts?

January 15, 2012/in Commissions, Wage/by competenow

As I wrote previously, the Massachusetts Appeals Court recently decided the case of Suominen v. Goodman Industrial Equities, 78 Mass. App. Ct. 723 (2011). In Suominen, the plaintiff was a former construction manager of a small real estate development firm and was promised a share of “overall profits generated by the development efforts.” Suominen argued that this was a commission under the Massachusetts Wage Act, M.G.L. c. 149, s. 148. The panel upheld the trial court’s ruling against Suominen on his Wage Act claim. In the view of the panel, Suominen’s incentive compensation was different than a typical commission, which it defined as a “percentage of the money taken in on sales, given as pay to a salesclerk or agent, usually in addition to salary or wages.” The panel called the compensation at issue a “profit-sharing arrangement.” Since many types of compensation could be cast as profit-sharing arrangements, what will this decision mean in future Wage Act cases seeking unpaid bonuses? Should bonuses be considered wages under the Act?

First of all, there are two ways to read the Wage Act, both of which are logically valid but completely different. On the one hand, one can choose to take the reference to “wages” in the Act to be a general way of referring to the compensation of an employee. In this view, the universe of covered wages is vast and the specific types of special compensation (vacation, holiday, and commissions) are listed only as part of a non-inclusive list. It’s reasonable that the legislature may have listed some specific types of pay in order to head off controversies without providing an exhaustive list of what would be considered “wages.” In fact, this is the way that the Superior Court in Juergens v. MicroGroup recently read the Act when it ruled that severance pay–mentioned nowhere in the Act–was covered as wages. And it seems to be the majority view emerging from the case law (at least in the state courts).

The second way to read the Act is to consider “wages” to mean only the salary or hourly pay of employees, and the reference to vacation, holiday, and commissions as limited exemptions to the general rule. What is the better reading of the statute? The text is here if you want to give it a try.

There are a few things worth saying about Suominen. First, courts are sometimes reluctant to allow Wage Act coverage for very highly paid employees. Wage Act coverage enables them to sue for three times their compensation, which, in the view of some courts, is more of a windfall than an appropriate penalty. Often these scenarios can feel more like business deals gone awry than traditional employee-employer relationships. For example, Suominen was seeking more than $1 million in damages from a share of the “promote” of several real estate development deals. What is a “promote”? It goes right to the heart of why Suominen lost.

A promote is a term of art in the real estate development world. It’s a manner of compensating promoters of development projects beyond their return on equity (if they invested cash in the deal) and for their personal services in managing the project. The promote is meant to reward a general partner for his or her entrepreneurial role in a project. A general partner must often bring a Promethean level of effort and resourcefulness to a project to make it succeed, and it makes sense for everybody, including the limited partners, to incentivize this. Moreover, a general partner will often have real skin in the game, like a personal guarantee of project debt or even a mortgage on his home to get the loan for the deal. (By the way, this is a big cause of bankruptcies when a business project fails.)

In this case, Suominen was an employee of the general partner (Goodman), the promoter of several real estate development deals. Goodman, as general partner, had negotiated the right to a promote that was 25 percent of the equity upside after invested equity was paid back and received a 15 percent annualized return on its investment. Since Suominen was a key part of the Goodman enterprise–as construction manager he had a big role in the projects’ success or failure–Goodman agreed to pay him about 23 percent of the promote. It is worth noting that Suominen was making a base salary of $225,000 a year during the latter part of his employment with Goodman.

So, why does this matter? The bottom line is that courts do not think it is fair to give an employee with a high salary and a stake in overall business profits Wage Act coverage for his incentive pay. Thus, Suominen’s Wage Act claims failed. Courts would rather leave employees like Suominen to their breach of contract and promissory estoppel claims, so a little judicial interpretation/activism takes place. However, what would happen if a low-level employee was owed only $1,400 as part of a bonus compensation plan and brought suit? Defense counsel would certainly try to use Suominen to win the case. After all, any bonus plan can ultimately be viewed as a profit-sharing plan.

It is very likely, however, that despite Suominen, a court would rule in favor of the hypothetical employee whose income was tied to regular sales or performance of the company, rather than to a company-level transaction. Bonuses that are tied to sales and related metrics–and not to enterprise-level transactions–are indisputably commissions. The “promote” in Suominen was realized on the sale of a project asset or the refinancing of project-level debt to extract equity appreciation–an entity-level transaction. Apart from scale and the power position of the actors, this is a critical theoretical difference between Suominen and the regular employee entitled to a commission or bonus.

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Bonuses and Commissions under the Wage Act

January 15, 2012/in Commissions, Wage/by competenow

This post was updated on September 2, 2025

Whether a certain type of pay is covered by the Massachusetts Weekly Payment of Wages Act (“Wage Act”) has meaningful consequences. If a category of unpaid compensation is covered by the Wage Act, an employee is entitled to three times the amount of unpaid wages, attorneys’ fees, and costs. Over the last decade, there has been controversy over whether commissions and bonuses are covered under the Wage Act, and Massachusetts courts have issued several rulings both in favor of and against employees on this topic.

In Okerman v. VA Software Corp., 69 Mass. App. Ct. 771 (2007), the panel held that commissions were covered by the Wage Act as long as they were “definitely determined” and “due and payable,” as set forth in the statute’s plain language. The panel further tightened the noose on employers who failed to pay employees’ wages, limiting their ability to be clever with commission calculations. The panel made it clear that the “definitely determined” requirement was satisfied as long as commissions were “arithmetically determinable.”

Notwithstanding this decision, commissions will continue to be a fruitful area of controversy due to the many scenarios that can arise in the context. One such controversy arose when a plaintiff was retaliatorily terminated before being compensated for an earned commission. The SJC held that the plaintiff’s commission was covered as wages under the Wage Act in Parker v. EnerNOC, Inc., 484 Mass. 128 (2020). The SJC reasoned, “although the plaintiff’s commission never became due and payable pursuant to the policy during her employment, it is, nevertheless, a ‘lost wage’ under the act subject to trebling.” This case also clarified that “[w]ages lost as a result of retaliation are trebled under the Wage Act.” Other specific situations dealing with commissions will inevitably continue to arise. Some of these potential cases may hinge on the employer’s intent and surrounding circumstances – and a former employee might have a claim under the implied covenant of good faith and fair dealing. However, such common law claims often lack a critical component: the fee-shifting and multiple damages provisions that make Wage Act claims far more compelling.

As of 2025, Okerman remains good law and has been cited multiple times in the years following its publication, both by the SJC and the 1^st Circuit Court of Appeals. See, Lipsitt v. Plaud, 466 Mass. 240 (2013); Trindade v. Grove Servs., 91 F.4^th 486 (2024).

In the aftermath of the Okerman decision, some employers began reclassifying commissions as bonuses in an effort to avoid the requirements of the Massachusetts Wage Act. In 2011, the Massachusetts Superior Court held in Juergens v. MicroGroup that the Wage Act even covered severance pay. While this interpretation was controversial, it aligned with the broader reading of “wages” adopted in the Supreme Judicial Court’s decision in Wiedmann v. Bradford Group, Inc., 444 Mass. 698 (2000).

However, following Juergens, other lower Massachusetts courts have issued rulings finding that severance pay is not covered by the Wage Act. In Platt v. Traber, 85 Mass. App. Ct. 1114 (2014), the panel held the plaintiff’s severance agreement did not fall under the Wage Act. The Middlesex County Superior Court agreed, echoing prior cases that “[a] plain reading of the statute reveals that the quoted statutory terms refer solely to commissions,” finding that the Wage Act does not cover severance pay when the court dismissed the complaint in Farrell v. Farrell, 29 Mass. L. Rep. 557 (2012).

In the following years, Massachusetts courts hav5348620

e surprisingly shown a willingness to find that bonuses are not covered under the Wage Act. While commissions are explicitly included in the Wage Act coverage, bonus pay is not. As bonus pay is based on definable metrics, it shares much in common with commission compensation. In fact, bonuses are usually tied to sales, often of a business unit or entire company. When this is the case, a bonus is just as arithmetically determinable as a commission, and it constitutes part of the employee’s total expected pay. It would make little sense to treat mathematically calculable incentive pay differently based on the name given to it. However, a Massachusetts Appeals Court in 2011 decided a Wage Act case that has been used by employers to claim that bonus pay is excluded from the Act.

In the case of Suominen v. Goodman Industrial Equities, 78 Mass. App. Ct. 723 (2011), the plaintiff was a former construction manager of a small real estate development entity and was promised a share of “overall profits generated by the development efforts.” The plaintiff argued that this compensation was a commission under the Wage Act. The panel disagreed, stating that it was, in their view, different than a typical sales commission because it was a “profit-sharing arrangement.” Since most bonuses can be cast as profit-sharing arrangements (though varying widely in scale), this decision leaves many questions. It’s important to note, however, that Suominen involved compensation based on an entity-level transaction. Sales commissions and performance bonuses are normally based on the business’ sales and not a sale of the business itself.

I expected defendants would use the Suominen case to avoid Wage Act liability for unpaid bonuses, which has proven to be true. Massachusetts courts have characterized the decision as ruling that bonuses are not wages under the Wage Act. While the courts have continued to find that profit-sharing schemes are not applicable to the Wage Act, Suominen appears to create a minor loophole for commissions to be repackaged as bonuses.

After having more opportunities to address bonuses, the Appeals Court has shown a willingness to find that bonuses, even those with questionable terms, are not covered by the Wage Act. In 2019, the Massachusetts Appeals Court found that an unfulfilled stock agreement was considered a bonus and not wages despite the agreement being tied to performance. O’Connor v. Kadrmas, 96 Mass. App. Ct. 273 (2019). The court found that these were “profit distributions to shareholders;” because of the “highly contingent” and “discretionary” nature, the court determined the stock agreement was not wages. Similarly in 2021, a summary decision by the Appeals Court found that a bonus only granted if the employee met certain working requirements was not wages under the Wage Act. Alfieri v. Merrimack Pharms., 99 Mass. App. Ct. 1119 (2021). Alfieri characterized O’Connor with the finding that a compensation “can be neither discretionary or contingent” to be deemed wages under the Wage Act. This context appears to blur the lines between commissions and bonuses.

While Massachusetts courts have continued to affirm that commissions are deemed wages, the court has signaled that there is more to say on the matter. The SJC said in 2020 that “[in the earlier rule on commissions], we did not announce a categorical rule that commissions that do not meet those conditions are considered not to be wages under the act; instead, the clause provides that the failure to pay commissions when they are definitely determined and due and payable is one way to violate the act.” Parker (2020). In this way, the SJC has made room for further clarification regarding what a wage is under the Wage Act. Hopefully, this indicates the SJC will be willing to expand the definition of wages in years to come.

Timing issues will continue to complicate bonus and commission cases. I expect to see more litigation on the issue of when an employee earns incentive pay.