Draws Against Commissions Paid to Employee Ruled Not Recoverable

A Federal Court judge has dismissed an employer’s attempt to recover draws paid against commissions to an employee because the contract failed to specify that they were recoverable.

United States District Court, District of Massachusetts

SUMMARY: (court decision – opens in PDF)

“Both parties agree that a May 7, 2021 offer letter from Defendants to Plaintiff operated as an employment contract. … That letter stated that Plaintiff was ‘eligible to receive a draw against commissions [] in [the] amount of $105,000,’ but it did not specify whether the draw would be recoverable by Defendants if Plaintiff failed to earn commissions. …

Here, the employment contract is ambiguous about the central question, whether the payments from Defendants to Plaintiff are recoverable by Defendants. Therefore, extrinsic evidence may be considered to resolve this ambiguity as a matter of law. Considering that (1) Plaintiff was paid $6,500 on a bi-weekly basis, (2) he received pay stubs that classified his pay as ‘salaried,’ and (3) Defendants drafted the contract, the court concludes that the draw against commissions that Defendants paid to Plaintiff is not recoverable by Defendants. …

“Additionally, Defendants did not sufficiently assert their counterclaims for breach of contract, unjust enrichment, and conversion for the non-recoverable draw against commissions, because the claims are dependent on an allegation that Plaintiff ‘failed to work diligently.’ … Defendants also failed to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b) for negligent misrepresentation and fraudulent misrepresentation. …”



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