News + Insights from the Legal Team at Zalkind Duncan & Bernstein

Supreme Judicial Court Hears Argument on the Interaction Between Commissions and Overtime Pay Requirements

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This month, the Supreme Judicial Court heard argument in Sutton v. Jordan’s Furniture. This case addresses questions about how commission-based pay plans can be structured to comply with the Wage Act, Overtime, and now-repealed Sunday Pay laws. 

The Statutes and Past Interpretation 

Massachusetts’ overtime statute requires employers to pay employees time and a half for hours worked in excess of forty hours in a work week. Until it was repealed this year, the Sunday Pay statute similarly required a higher rate of pay for hours worked on Sundays. The Massachusetts Wage Act sets out requirements for payment of wages, including promptness, and extends that protection to commissions, which are treated as wages when the commission amount is “definitely determined” and “due and payable.” The Wage Act also prohibits special contracts designed to evade the Wage Act’s requirements. 

In 2019, the Supreme Judicial Court decided Sullivan v. Sleepy’s, concluding that retail salespeople who are paid entirely in commissions or draws (advances on commissions) are entitled to additional overtime and Sunday pay – specifically, they are entitled to overtime and Sunday pay rates times the minimum wage for hours worked over forty hours. The SJC also decided that payments for overtime and Sunday pay needed to be separate from and additional to commissions, as opposed to changing the draw after the fact to apply to overtime and Sunday pay. 

From Sleepy’s to Jordan’s 

The Jordan’s case turns on whether the pay plan in that case complied with the “separate and additional” requirement set out in Sleepy’s. In Sleepy’s, the employer provided its employees with a recoverable draw (essentially, a loan from the company against future commissions) of $125 per day, plus any sales commissions in excess of the draw, and did not track its employees’ overtime and Sunday hours. In Jordan’s, the employer tracked its employees’ premium hours, and paid the premium overtime and Sunday pay using a draw, or a loan against later payment.  

Though the portions of the briefs that specifically quote from the payment plan are redacted, the unredacted portions and lawyers at oral arguments stated that the amount timely paid to employees for premium hours was a draw against future commissions. Jordan’s argues that because the amounts for premium pay were timely paid and calculated as a separate line item, they satisfied the separate and additional requirement of Sleepy’s. The plaintiffs argue that because the plan is structured so that the premium pay is deducted from earned commissions, it violates the statutory requirements as set out in Sleepy’s. The Attorney General submitted an amicus brief in support of the plaintiffs, laying out the problematic portions of Jordan’s pay plan and noting that the pay plan, “if permitted, would undermine the purposes of overtime and Sunday premium pay statutes, and harm Massachusetts employees.” 

Retroactivity 

The case also addresses whether Sleepy’s should apply retroactively, meaning that employers who failed to comply with the overtime, Sunday pay, and “separate and additional” requirement before Sleepy’s was decided are liable to their employees for damages arising from the noncompliance. Jordan’s argues that Sleepy’s was an unforeseeable new rule that departed from agency interpretations of the wage statutes set out in advisory letters, and so should not be applied retroactively. The plaintiffs argue that Sleepy’s was not a departure from settled law. As the Massachusetts Employment Lawyers’ Association pointed out in its amicus brief in support of the plaintiffs, decisions that interpret statutes merely announce the meaning of the statute since the date it came into effect and are therefore retroactive. The parties’ briefs focused on the analysis required to determine retroactivity of decisional laws.  

The SJC’s decision in this case will delineate what legal protections apply to commission-based employees. Commission-based employees are often compensated in part with draws advanced against future commissions; as the Court set out in Sleepy’s, commission-based employees are still due the full benefit of the overtime and wage protection statutes, no matter their pay structure. The SJC should ensure those protections remain in place even for employees under plans like the one at issue in Jordan’s, whose overtime hours—or Sunday hours prior to this year—are tracked separately but still subtracted from their commissions. 

If you have been deprived of earned wages or workplace protections, contact our employment attorneys at (617) 742-6020. 

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