Commission Payment Plans for Massachusetts Employees and Employers

Determining if your commission payment plan complies with Massachusetts law for Employees in Pittsfield, Worcester, Springfield, Fall River, Lowell, New Bedford, and the Cape.  

Under the right circumstances, a commission payment plan can work well for both the employer and the employee. Legally, however, commission payment plans are only appropriate if they comply with the Massachusetts Wage Act’s requirements regarding payment of overtime and minimum wage. According to the Wage Act, the determination as to whether a payment plan amounts to a wage violation depends on whether the commissioned employee is an inside or outside salesperson.

Outside sales employees are ones who do not make daily reports to the office or plant of their employer and who do not physically go to the employer’s site on a daily basis. If you make daily trips to the employment site, you cannot be properly considered an outside sales employee.  Employees who are properly classified as outside salespeople are exempt from the minimum wage and overtime requirements of the Massachusetts Wage Act and the Fair Labor Standards Act.

Inside sales employees are ones who do make daily reports or trips to the office or plant of their employer. These employees physically visit the worksite on a daily basis. Employees that are actually inside salespeople are entitled to the minimum wage and overtime protections of the Massachusetts Wage Act and the Fair Labor Standard Act, meaning they must be paid at least minimum wage for the first 40 hours of work in a workweek and overtime for each hour worked over 40 in a workweek.

For example, Employee A works for a solar company as a salesperson. Employee A starts each day with a morning huddle at his employer’s office during which he, his supervisors, and his fellow salespeople discuss leads and sales techniques. Employee A spends the remaining 90% of his workday in the field, knocking on doors, trying to sell. In this situation, Employee A is an inside salesperson because he visits the worksite on a daily basis. As such, Employee A’s employer would violate the Massachusetts Wage Act if it paid him on a purely commission basis because Employee A is entitled to minimum wage and overtime as an inside salesperson.  

On the other hand, say Employee A begins his day at home, receives a list of sales leads via email, and heads straight from home to those houses to sell.  That salesperson, because he does not make daily trips to office, is treated as an outside sales person and is not entitled to minimum wage or overtime protections.  

Are you a resident of Pittsfield, Springfield, Worcester, Lowell, Fall River, New Bedford or the Cape?  Are you wondering if your commission plan complies with Massachusetts law or if you are being paid the commissions you are owed?  Contact Steffans Legal today for a free consultation.