Supreme Judicial Court Holds that Certain Commission Salespersons Must be Paid Overtime and Sunday Premiums Regardless of Their Commission
Massachusetts wage-and-hour laws are difficult to comply with. This is especially the case when it comes to employees paid on a commission basis, especially those paid on a purely 100% commission basis. That’s been the case for a number of years. On May 8, 2019, in the case of Sullivan v. Sleepy’s LLC, the Massachusetts Supreme Judicial Court injected some much needed clarity into this area in a very pro-employee way.
Laurita Sullivan worked as a salesperson at a Sleepy’s retail store from 2014 to 2016. During that time, Ms. Sullivan was paid on a 100% commission basis in the form of a $125 recoverable draw per day and any sales commissions in excess of that draw. In other words, Ms. Sullivan received as daily pay the greater of (1) the $125 recoverable draw or (2) earned commissions in excess of $125.
On at least one occasion Ms. Sullivan worked in excess of 40 hours in a week and worked on at least one Sunday. On these occasions, Ms. Sullivan did not receive any additional compensation for the overtime work or the Sunday work beyond the recoverable daily draw and any commissions. Ms. Sullivan brought suit on behalf of herself and other Sleepy’s employees alleging that Sleepy’s violated the Wage Act and the Overtime Act by not paying her overtime for hours worked over forty in a workweek and by not paying her a Sunday premium when she worked Sunday. Sleepy’s defended its position by arguing that Ms. Sullivan and the other employees had received all compensation to which they were entitled and specifically claimed that the employees’ claims were offset by the commission and draws she’d received. In essence, Sleepy’s argued that it should be able to use the commission and draw payments as a credit toward any obligation to pay the employees overtime or a Sunday premium.
The Supreme Judicial Court rejected that argument, holding that “retroactive allocation of [draws and commissions] is impermissible and that separate and additional overtime is owed.” The Court explicitly stated that this is the case even though the employees at issue had always received compensation that equaled or exceeded one and one-half times the minimum wage for all overtime hours worked. Further, the court decided that these employees should be entitled to overtime at the rate of one and one-half times minimum wage for all hours worked over 40 in a workweek and should be entitled to Sunday pay at the same rate, regardless of the amount of commissions they received during that week.
In so holding, the Court relied upon previous decisions in which it had explained that the purpose of the overtime requirement is to “reduce the number of hours of work, encourage the employment of more persons, and compensate employees for the burden of a long workweek.” Mullaly v. Waste Mgt. of Mass., Inc., 452 Mass 526 (2008). It also relied upon its previous holding that a misclassified independent contractor will be entitled to recover unpaid overtime wages even if the employer introduced evidence that the independent contractor was paid more than he would have been had he been hired as an employee. Somers v. Converged Access, Inc., 454 Mass. 582, 589 (2009). The court further relied on its previous decision that an employer cannot rely upon a gratuitous payment made to an employee at the time of termination as a substitute for that employer’s obligation to pay accrued vacation days at the time of termination. Dixon v. Malden, 464 Mass. 446 (2013).
Sullivan v. Sleepy’s LLC drastically changes the law regarding the payment of commissioned employees. Employees and employers should make themselves aware of these changes and review commission plans and the hours worked by commissioned employees in a workweek to be sure their payment is in compliance with this new ruling.