11/16/2010 – Payment of Commissions to Non-Employee Sales Reps

By Timothy K. Cutler

Hidden in the general laws of Massachusetts are provisions that permit outside sales representatives not only to recover unpaid commissions, but also treble damages and attorneys’ fees.  Although not technically a wage and hour claim (wage and hours claims concern employees), the law has the same financial consequences (treble damages/attorneys fees) that a wage and hour claim filed with the Office of the Attorney General. The distinction here is that commissions are owed to outside sales representative who is an independent contractor and not an employee.

A sales representative is defined as follows:

“[A] person other than an employee, who contracts with a principal to solicit wholesale orders in the commonwealth and who is compensated, in whole or  in part, by commission but shall not include one who places orders or purchases exclusively for  is own account for resale.”

The principal, who is the person or entity that is to pay the commission, is defined as:

“[A] person who manufactures, produces, imports or distributes a product for wholesale; contracts to solicit orders for such product, and compensates individuals who solicit wholesale orders in whole or in part, by commission.”

A principal who willfully or knowingly fails to pay commissions to a sales representative can be held liable for treble damages and attorneys’ fees. This liability/exposure cannot be waived by way of contract or agreement.