The Massachusetts Supreme Judicial Court has ruled that commission-based employees must be paid overtime and Sunday premium pay rates.
The plaintiffs in the case were Massachusetts employees of a national mattress store chain who were paid on commission with a daily draw of $125. The store’s attorneys argued that, on balance, the overall weekly wages earned by the salespeople exceeded the amount they would be paid under the overtime and Sunday wage premium (one and one-half times regular wages).
But the court concluded that draws and commissions cannot be retroactively allocated as hourly and overtime wages and Sunday pay even if these draws and commissions “equaled or exceeded the minimum wage for the employees’ first forty hours of work and one and one-half times the minimum wage for all hours worked over forty hours or on Sunday;” and that “the employees are entitled to separate and additional payments of one and one-half times the minimum wage for every hour the employees worked over forty hours or on Sunday.”
The ruling stated that the state’s wage and hour laws do not allow employers to “retroactively reallocate and credit payments made to fulfill one set of wage obligations against separate and independent obligations,” thus disallowing the store’s calculation that the employees’ effective hourly rate was at least the minimum wage for straight time and at least one and one-half times the minimum wage for overtime and Sunday hours worked.
This decision is likely to have a significant impact on overtime cases across multiple industries. Indeed, the Massachusetts Association of Automobile Dealers, the majority of whose members pay salespeople on commission, submitted an amicus curiae brief on behalf of the defendant at this trial, an indication of how seriously this issue may affect employee compensation.
If you pay some or all of your employees by commission and have questions about how to adjust payroll to comply with this ruling please contact us at (781) 407-0300.