In a case of first impression, the Massachusetts Supreme Judicial Court has found that, under Massachusetts law, retail and inside sales employees, paid entirely on a commission or draw basis, are entitled to separate and additional pay for overtime hours worked and premium pay for work on Sundays. See Sullivan v. Sleepy’s LLC, No. SJC-12542 (Mass. May 8, 2019).In Sullivan, the plaintiff-employees worked as salespeople at retail mattress stores operated by the defendant-employers, and were paid a “100% commission” basis and received a $125 daily draw (advance) regardless of how many hours per week they worked.  Occasionally, the employees worked more than forty hours in a week or on Sunday.  On these occasions, the employers did not pay the employees any additional compensation beyond the recoverable daily draw and any commissions.  However, the employees’ compensation always equaled or exceeded the minimum wage for their first 40 hours of work per week, and likewise exceeded or equaled 1.5 times the hours they worked over forty hours and for all Sunday hours.  The latter is required under state overtime and Sunday pay law.

The employees brought a lawsuit alleging that their employers’ payment policies violated the Wage Act, as well as overtime and Sunday pay statutes. The employers challenged the lawsuit alleging that the employees had received all compensation to  which they were entitled  and were further offset by other compensation that they had received.

The Court examined state overtime and Sunday pay statutes, regulations, Department of Labor Standards’ opinion letters, public policy, and a series of SJC cases before deciding that Massachusetts law requires separate and additional overtime compensation to be paid to a 100% commission employee regardless of whether that employee receives a recoverable draw or commissions that equal or exceed 1.5 times the employee’s regular rate for any hours worked beyond forty or worked on Sunday. In determining the rate that must be paid for purposes of calculating overtime pay, the SJC held that overtime and Sunday pay should be “one and one-half times the minimum wage for one hundred percent commission employees.”

Final Takeaway

The decision will significantly affect retail establishments that pay employees on a commission basis. Employers should immediately review their compensation policies and practices to ensure that their commission plans take into account the requirements of this case. The SJC did not indicate whether it intended its decision to apply retroactively.  While thatis certainly a possibility, we will continue to monitor the issue as it could potentially result in significant exposure for Massachusetts employers with 100% commission paid employees.  As always, please contact Murtha’s employment team if you have any questions about the Sleepy’s decision, how it may affect your company’s pay practices, or any other wage and hour issue.

 

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Photo of Matthew K. Curtin Matthew K. Curtin

Matthew Curtin is a Partner in the Litigation Department, the Chair of the Privacy and Cybersecurity Practice Group and a member of the Labor and Employment Practice Group.

In Matthew’s cybersecurity practice, he advises clients on compliance with state, federal and international privacy…

Matthew Curtin is a Partner in the Litigation Department, the Chair of the Privacy and Cybersecurity Practice Group and a member of the Labor and Employment Practice Group.

In Matthew’s cybersecurity practice, he advises clients on compliance with state, federal and international privacy laws including the Health Insurance Portability and Accountability Act (HIPAA) and the General Data Protection Regulation (GDPR). Matthew is particularly interested in advising his clients concerning employment privacy matters. Matthew is a member of the International Association of Privacy Professionals.

In Matthew’s labor and employment practice, he has successfully represented employers of all sizes concerning a wide variety of claims before state and federal courts, the National Labor Relations Board, the Connecticut State Board of Mediation and Arbitration, the Connecticut State Board of Labor Relations, the Connecticut Commission on Human Rights and Opportunities, and other various administrative agencies.

Matthew has substantial experience with collective bargaining negotiations, labor arbitrations, and labor relations. He regularly counsels senior management and human resources professionals concerning employment contracts, employment policies, hiring and termination procedures, workplace investigations, and harassment and discrimination avoidance.

Matthew has significant experience representing businesses in litigation concerning trade secret theft, unfair competition, and breach of non-competition and non-solicitation agreements.

Photo of Chelsea K. Choi Chelsea K. Choi

Chelsea K. Choi is a member of the Firm’s Labor and Employment  Practice Group. She represents employers on a variety of matters including hiring, evaluation, discipline, layoff, and termination of employees.

Prior to joining Murtha Cullina, Chelsea was an associate and law clerk

Chelsea K. Choi is a member of the Firm’s Labor and Employment  Practice Group. She represents employers on a variety of matters including hiring, evaluation, discipline, layoff, and termination of employees.

Prior to joining Murtha Cullina, Chelsea was an associate and law clerk at prominent law firms in Hartford, CT and Springfield, MA. While in law school, she served as a Note Editor of The Western New England Law Review at Western New England School of Law. Chelsea received her B.A., cum laude, from Syracuse University, where she was a team member and co-captain of the Syracuse University Cheerleading Program.