Retail Salespeople Paid on Commission Are Entitled to Overtime and Sunday Pay, Massachusetts SJC Says

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Proskauer - Law and the Workplace

On May 8, 2019, Massachusetts’ highest court held that retail salespersons who are paid entirely on a commission or draw basis, may nevertheless be entitled to additional overtime or pay for work on Sundays. The Supreme Judicial Court considered these questions in Sullivan v. Sleepy’s LLC, SJC-12542. The narrow questions the Court considered were whether employers could satisfy rate of pay requirements under Massachusetts’ overtime law and Sunday pay law – requiring that employees be compensated at one and a half times their rate in each instance – when employees’ commissions or draws otherwise equaled or exceeded minimum wage for the first forty hours worked, and also equaled or exceeded one and one-half times minimum wage for hours worked over forty, or hours worked on Sundays. In other words, the scenario the Court examined was: if an employee paid on commission earned above minimum wage during the regular workweek and earned one and one half times the minimum wage for hours over forty and for work on Sunday, whether an employer satisfied the Commonwealth’s pay requirements.

In both instances, the SJC answered that an employee is entitled to one and one-half times the minimum wage, and an employer cannot “retroactively” marshal commissions already earned in order to satisfy pay requirements. Instead, commission-only retail sales employees are entitled to overtime and Sunday pay entirely separate from and on top of their previous earnings in a given week. In coming to this conclusion, the SJC analyzed the text of the laws themselves, but also looked at public policy underlying the laws. With respect to overtime, for example, the SJC noted that the overtime pay requirement is in place so as to minimize the hours a single employee has to work and encourage the employment of more persons during a regular workweek. Similarly, the statute mandating premium pay for Sunday work encourages employers to be judicious when asking employees to give up their weekends. For these reasons and others stated in the decision, the SJC decided that allowing retroactive application of commissions already earned would undermine the policy purposes of the wages statutes.

The SJC was also tasked with determining what such an employee’s “regular rate of pay” would be for purposes of calculating one and a half times the regular rate of pay. The SJC held that overtime and Sunday pay should be one and a half times the prevailing minimum wage in the Commonwealth.

The decision creates a significant difference between Massachusetts and federal law. Under Section 7(i) of the Fair Labor Standards Act, retail salespersons paid at least half their total earnings in commission are exempt from the FLSA’s overtime requirements. Employers will no longer be able to rely on that exemption for their Massachusetts employees. Instead, retail salespeople in Massachusetts must receive one and one half times the minimum wage for hours worked in a workweek over forty and for hours worked on Sundays. Employers employing such persons are encouraged to reach out to counsel regarding their compliance with this decision.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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