Commission-Only Inside Salespersons are Entitled to Overtime and Sunday Pay Under Massachusetts Law

Adhering to the “plain and ordinary” language of the state’s overtime statute and related regulations, the Massachusetts Supreme Judicial Court held this week that inside sales employees paid on a 100% commission basis ARE additionally entitled to pay for overtime hours worked and premium pay for work on Sundays. Sullivan v. Sleepy’s LLC, 2019 Mass. LEXIS 244 (Mass. May 8, 2019).

Sleepy’s is a retail mattress chain. Plaintiffs are former Sleepy’s salespersons. The plaintiffs were paid a $125 daily draw (advance) regardless of how many hours per week they worked, as well as commissions in excess of their draws. The plaintiffs’ compensation equaled or exceeded the state minimum wage for their first 40 hours of work per week, and equaled or exceeded 1.5 times the state minimum wage for all hours worked in excess of 40 per week and for all Sunday hours worked.

The plaintiffs argued in the case that they were also entitled to pay for overtime and Sunday work hours.  Sleepy’s argued that it had no obligation to pay its commissioned employees for such time.

The SJC had to consider whether commission-only inside sales employees were entitled to overtime pay or Sunday premium pay and, if so, at what rate.

The SJC ruled that inside sales employees paid on a 100% commission-only basis ARE entitled to overtime and Sunday premium pay.  Massachusetts law requires employers pay employees who work in excess of 40 hours per week at a rate of at least 1.5 times the employee’s “regular rate.”  The overtime statute further provides that retail employees who work on a Sunday or certain holidays are entitled to pay for all such hours at 1.5 times their regular rate.

Under Massachusetts law, however, the regular rate explicitly excludes commissions, draws on commissions and Sunday premium pay. Because of this language, some employers believed that commission-only employees were not entitled to these forms of compensation.

But the Supreme Judicial Court nonetheless noted that state law prohibits employers from “retroactively reallocat[ing] and credit[ing] payments made to fulfill one set of wage obligations against separate and independent obligations.” The Court concluded “that the overtime statute requires separate and additional overtime compensation to be provided to a one hundred percent commission employee regardless of whether that employee receives a recoverable draw or commissions that equal or exceed one and one-half times the minimum wage for any hours worked beyond forty.”

The Supreme Judicial Court held that, because the regular rate excludes commissions, draws and Sunday premium pay, the overtime and/or Sunday rate must be at least 1.5 times the state minimum wage (currently $12.00/hour).

This decision will have an impact on retail employers and other businesses in Massachusetts that employ commission-only inside salespersons. Massachusetts employers who employ such individuals should make sure that their compensation and work-hour policies comply with the Sleepy’s decision.

 

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