BOP Newsletter Summer 2022 – Tidbits

BOP NEWSLETTER • Summer 2022

Salary Pay to Avoid Overtime: Does it Work?
by Rebecca Boartfield
BEA Illustrations-Tidbits

Massachusetts: Late Paid Vacation Leave of $9,0000.00 Becomes an Award of Over $100,000.00

On April 4, 2022, the Supreme Judicial Court of Massachusetts (SJC) issued a decision that should shock employers in Massachusetts. In Reuter v. City of Methuen, the SJC held that all violations of Massachusetts’ Wage Act, even those remedied by the employer prior to the employee filing suit, entitle the aggrieved employees to recover three times the total amount of unpaid wages as liquidated damages. 

Back story: Ms. Reuter was terminated from her job on March 7, 2013 after being convicted of larceny. Upon separation, Ms. Reuter was entitled to approximately $9,000 in accrued but unused paid vacation leave. Three weeks after her termination, the City of Methuen paid her for her vacation time. Over a year later, the City of Methuen paid Ms. Reuter an additional $185.42, which represented three times the interest that had accrued on her vacation time from the date of her termination to payment three weeks later. Ms. Reuter then filed a suit against the City of Methuen in which she argued that she was entitled to three times the total amount of unpaid wages as liquidated damages, not just three times the lost interest. 

The SJC decision: the SJC rejected the notion that the liquidated damages provision included in the Wage Act can be interpreted as requiring the trebling of only lost interest, as opposed to the trebling of the total amount of unpaid (or late paid) wages. Further, the SJC held that the City of Methuen was now obligated to pay these liquidated damages regardless of its intent in not originally paying Ms. Reuter on time. In other words, the SJC clearly expressed its view that there is no “good faith exception” to qualify or to reduce the liquidated damages otherwise available under the Wage Act. 

As it currently stands, the City of Methuen faces the very real possibility of a final award of over $100,000, which includes a requirement to pay Ms. Reuter’s roughly $75,000 in attorney fees (to say nothing of the City’s own attorneys’ fees and costs). According to the SJC: “[t]he Legislature’s command is clear: if you choose to terminate an employee you must be prepared to pay him or her in full when you do so.”

Texas Supreme Court Clarifies Standard for Payment of Commissions When an Employment Agreement is Silent

On May 20, 2022, in Perthuis v. Baylor Miraca Genetics Laboratories, LLC, the Supreme Court of Texas clarified the standard to be applied when an employee is discharged from employment and is owed commission on sales made prior to termination. 

Back story: Thomas Brandon Perthuis was vice president of sales and marketing for Baylor Miraca Genetics Laboratories. The signed, two-page employment agreement provided the following: “Your commission will be 3.5% of your net sales.” The agreement contained no other explanation concerning the commission arrangement. In January 2017, Perthuis completed negotiations on an amendment to a sales contract with a prominent client, making the contract the largest of its kind in the company’s history. The company terminated Perthuis’s employment on January 23, 2017. The next day, the client signed the contract amendment that Perthuis had negotiated. The company did not pay Perthuis any commission on the amended contract. Perthuis sued, seeking payment of the unpaid commissions from the contract.

The Texas Supreme Court decision: in a reversal of the appellate court’s decision, the Texas Supreme Court held that in the absence of specific language delineating the terms of payment in a commission agreement, the “procuring-cause doctrine” controls. Under this standard, an employee will be entitled to a commission on sales, even after his or her employment is terminated, if the employee is the proximate and but-for cause of the specific sales.

The Supreme Court of Texas’s decision provides clarity concerning situations where an employment agreement is not clear as to when a commission is earned or whether it will be paid after the termination of employment. One lesson from this decision for Texas employers concerns the importance of clearly articulating in an agreement with a commissioned employee when a commission will or will not be paid (e.g., commissions will be paid only if the employee is still employed at the time of scheduled payment).