Two Recent Decisions Provide Solace to Massachusetts Employers

In the Press · February 1, 2008

Two recent decisions of the United States Court of Appeals for the First Circuit should give local employers solace.  In Bohne v. Computer Associates International, Inc., the United States Court of Appeals for the First Circuit ruled on February 1, 2008 that it is permissible for an employer to implement a plan which denies commissions to salespeople whose employment was terminated, when payment for the sales upon which the commissions were to be calculated is received more than thirty days after termination. 

Bohne was a salesman for CA, who asserted that CA had violated the covenant of good faith and fair dealing by not paying him commissions on sales paid more than thirty days after his employment ended.  The Court of Appeals rejected this argument, reasoning that the covenant of good faith and fair dealing, which is incorporated by law into every Massachusetts contract, is inapplicable.   

The Bohne case is noteworthy, because lawyers for salespeople often contend that their clients are due commissions regardless of when the customer pays its bill.  Situations are numerous where employers’ commission plans provide provisions analogous to those in CA’s plan.  Subject to the following caveat, the Court of Appeals’ decision shelters those plans from the common contention that they violate the covenant of good faith and fair dealing.   

Caveat:  The First Circuit’s decision left open the possibility that such a claim might succeed if the employee were terminated without "good cause," noting that in such a case, Massachusetts requires employers to pay compensation related to the employee’s past services, even if not yet contractually due.  Accordingly, employers should still proceed cautiously in considering payments due upon termination to employees who are paid on a commission basis.  

In Franceschi v. United States Department of Veteran Affairs, the Court of Appeals ruled on January 30, 2008 that an employee complaining of retaliation may not pursue his claim unless he has properly registered his underlying charge of discrimination with the Equal Employment Opportunity Commission.  Generally, employees have been permitted to drag into court a claim of retaliation, provided that it related to a charge of discrimination validly registered with an appropriate administrative body.  That principle remains unchanged.   

It had not been determined, however, whether an employee could litigate such a claim absent having perfected the underlying discrimination charge with the federal EEOC (in Massachusetts, the parallel state agency is the Massachusetts Commission Against Discrimination).  The First Circuit has now limited that right, determining that unless an employee has properly asserted his underlying claim of discrimination administratively, he may not sue for retaliation.