The recent outcome of the Sullivan v. Sleepy’s LLC et al. civil case, and the Massachusetts Supreme Judicial Court’s (SJC’s) interpretation of the Mass General Laws has clarified how employers are required to pay commissioned retail employees.
On May 8, 2019, the SJC issued a unanimous opinion that, under Massachusetts law, salespeople who are paid solely on draws and commissions are entitled to separate and additional overtime and Sunday pay. Prior to the SJC’s decision, retailers had been hanging their hat on two opinion letters issued by the Massachusetts Department of Labor Standards (DLS) over ten years ago that suggested employers did not need to make separate and additional overtime and Sunday payments to 100% commission employees, provided that the employees receive an amount equal to at least 1.5 times the minimum wage for all overtime and Sunday hours worked.
The SJC’s decision has marked the end of paying non-exempt, retail employees on a commission-only basis in Massachusetts. State law entitles these employees to separate and additional overtime payments, beyond draws and commissions, of at least 1.5 times the Massachusetts minimum wage (currently at $12.00/hour); and premium pay for Sunday work, also equal to no less than 1.5 times the minimum wage. The court also explained that employers are barred from retro-actively repurposing, or renaming, draw and commission payments as overtime or Sunday payments.
The SJC’s decision is already impacting Massachusetts retailers and other companies that pay on 100% commission/draw basis. Now that it’s clear that draws and commissions cannot substitute for other wage and hourly entitlements such as overtime and Sunday pay, employers must carefully examine their pay policies to ensure compliance. Additionally, they are now obliged to recalculate and pay the amounts their employees are entitled to in overtime pay before a lawsuit is filed — failure to do so could have a significant financial impact. Under the Massachusetts Wage Act, sales people not paid for the shortfall prior to filing suit are entitled to automatic treble damages plus attorney fees.
For more information regarding the most recent developments in Massachusetts Overtime Statute and the implications it may have on your business, please contact us.