Page 5 - White Paper- Wage and Hour Laws

Commissions are considered “wages” under the Wage Act, but bonuses are

not. This can create some confusion, as different employers use different words

for elements of their compensation plans. In general, if an incentive payment is

based on an employee’s own contribution to revenue (the most common example

involves amounts paid based on sales made by the employee), it is a commission,

regardless of what it is called within the company. If, however, the incentive

payment is based on something else (performance evaluations, or a share of the

company’s overall profits or revenues), it is a bonus, not a commission, and not

subject to the Wage Act. What this means is that an employee can enforce a right

to earned commissions under the Wage Act, which includes triple damages and

attorneys’ fees. An employee may be able to enforce a right to certain kinds of

bonuses under a contract theory (for example, if a bonus is not discretionary but

something the employer has made a binding agreement to pay), but would not be

able to invoke the additional liability provisions of the Wage Act (in other words,

they could recover the amount of the promised bonus, but not triple damages or

attorneys’ fees).

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