This past May, the Supreme Judicial Court (SJC) did a solid for its federal cousin, the United States District Court (USDC) in Massachusetts. The USDC had been mulling the case of Sullivan v. Sleepy’s, LLC, where commission-only salespeople employed by the mattress retailer alleged that they were owed overtime pay when working more than 40 hours per week, and premium pay for working on Sundays. The retailer obviously took the position that they were not owed such overtime or premium pay, further arguing that because the base pay for their sales force equated to 1.5 times the minimum wage, the overtime law’s requirements would be satisfied. The USDC recognized this was a case of first impression and phoned a friend over at the SJC. Sullivan v. Sleepy’s LLC, 482 Mass. 227 (2019).
The SJC reviewed the case and determined that YES, commission-only employees are entitled to overtime for hours worked more than 40 and YES, they are entitled to premium pay for working Sundays. Because the SJC was writing this decision for the benefit of the USDC, they outlined how this finding should be applied to the real world—100% commission employees MUST be paid their commission for the entire workweek PLUS at least an additional 1.5 times the minimum wage for hours worked more than 40. Because the case at issue was looking at wages from 2014-2016, the findings on Sunday premium pay plus 1.5 times the minimum wage were based on older statutes. Applying the Court’s findings to the current law—100% commission employees MUST be paid their commissions PLUS 1.4 times the minimum wage for Sunday work in 2019, with the multiplier decreasing each year until the premium wage is phased out in 2023.
Sleepy’s argued that their employees, even if they worked overtime, had a base rate of 1.5 times the minimum wage. They contested that they should be allowed to retroactively allocate draws and commissions as hourly wages and overtime pay in order to comply with the premium pay requirements of the overtime statute. The SJC shot down that argument very quickly finding that “employers may not retroactively reallocate and credit payments made to fulfill one set of wage obligations against separate and independent obligations.” The Court noted that if the employers were able to do this, then it would defeat the purpose of the overtime statute—“to reduce the number of hours of work, encourage the employment of more persons, and compensate employees for the burden of a long workweek.”
As this was a case of first impression, the SJC was generous in its outline of the whys and hows of its decision on overtime and premium pay for commission-only employees. That was great for the USDC but it threw a massive curveball to employers of commission-only workers like Sleepy’s who had not been compensating their employees for overtime. Since the SJC’s decision was issued, employers have been learning of these new findings and should be reviewing their payroll.
So why are we blogging about this now? With the dust settling on the SJC’s decision outlining the law in Massachusetts, employers have a duty to ensure that their employees have been compensated fairly and accurately. We strongly urge employers of commission-only employees to review the last three years of their payroll to determine whether any of those employees have worked more than 40 hours in a workweek or on Sundays. If so, the compensation they were paid should be reviewed and if necessary, back pay issued. Remember—the Massachusetts Wage Act allows for aggrieved current and former employees to file suit for unpaid wages and if successful, receive triple damages. If back pay is issued prior to suit being filed, employers can possibly reduce their exposure to triple damages on the interest accrued for the delayed payment instead of the entire payment itself.
If your business has questions regarding how to efficiently review its past and/or current payroll or issue back payment for overtime or premium wages, please contact our office. Our attorneys are available to discuss your options, as well as to assist with updating procedures and documentation.