Profit-Sharing Arrangement Not a “Wage” Under the Massachusetts Wage Act

Vinay Mehra (“Mehra”), former President of Boston Globe Media Partners, LLC (the “Globe”), brought a lawsuit against the Globe asserting claims to recover monies he claimed were owed to him after he was terminated by the Globe. Count I of Mehra’s complaint was a claim for violation of the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150 (the “Wage Act”). Mehra sought to recover his “rightful wages in the form of a commission for 2020,” plus treble damages and attorney’s fees under the Wage Act. The Globe filed a Motion to Dismiss Count I on the basis that Mehra’s incentive compensation based on a percentage of the Globe’s profits in 2020 was not a “commission” pursuant to the Wage Act.

Mehra was hired by the Globe in 2017 in the role of President. Mehra’s compensation included “5% of the Globe’s profits beyond $5 million” for the third calendar year of his tenure and thereafter (the “Profit-Share”). Payment was not conditioned on Mehra’s continued employment when the payment was calculated or became due. Mehra claimed the Globe became highly profitable by 2019 and that the Globe tried to negotiate a lower Profit-Share for Mehra, which he refused. Ultimately, the Globe paid him his full 2019 commission of over $1.4 million.

In February 2020, the Globe presented Mehra with a further revised compensation plan, which he again refused. On June 30, 2020, the Globe terminated Mehra. Mehra claimed that the Globe’s profits in the first half of 2020 exceeded $10 million. After the Globe’s 2020 profits were finalized, Mehra demanded his incentive compensation based on a percentage of the Globe’s profits in 2020.

In the lawsuit, Mehra alleged that the Profit-Share was “a non-discretionary payment, definitively determined in amount, not dependent on any contingencies, and conclusively owed and due,” pursuant to the Wage Act. The Globe argued that the Profit-Share was not a “commission” pursuant to the Wage Act. The Wage Act requires that an employer expeditiously pay a terminated employee his full wages and similar compensation pursuant to the terms of the Wage Act (usually on the date of termination). The statute applies to a commission when it has been definitely determined and is due and payable to such employee. If an employee is entitled to recover wages under the Wage Act, he is also generally entitled to recover treble damages and attorney’s fees that are not recoverable under a standard breach of contract theory.

Massachusetts courts have previously held that a “commission” is “compensation owed to those in the business of selling goods, services, or real estate, set typically as a percentage of the sales price.” In this scenario, the Superior Court held that the Globe’s profit was not a “commission” subject to the Wage Act. The Superior Court ruled that where the profit-sharing agreement is tied to overall profits (as opposed to revenue entirely dependent on the employee), it is not a commission. As a result, the Superior Court dismissed Count I of Mehra’s complaint for violation of the Wage Act.

Mehra filed for interlocutory appeal of the Superior Court’s order dismissing Count I of his complaint. A single justice of the Appeal’s Court declined to act on the application for relief, discerning no clear error of law in the Superior Court’s decision. The appeal was denied.

The Wage Act is a technical statute that can have grave consequences for employers who violate it. It is highly recommended that employers consult with experienced employment counsel prior to taking any adverse action against an employee.