LEGAL ALERT: SJC Decision Changes Overtime Requirements for 100% Commission Sales Employees

On May 8th, the Supreme Judicial Court issued their decision in the case of Laurita Sullivan v Sleepy’s LLC regarding the applicability of the Massachusetts overtime premium and retail Sunday/Holiday premium requirements on 100% commission salespeople.  Contradicting over 15 years of guidance from the Department of Labor Standards, the SJC held that 100% commission employees are entitled to receive additional and separate compensation for hours worked over 40 in a work week and for work performed on Sunday’s and certain holidays.  The decision prohibits the retroactive allocation of draws and commissions to satisfy overtime and Sunday premium requirements—even if the draws and commissions equal or exceed wages otherwise owed under these requirements.

As the state law excludes draws and commissions from factoring in to an employee’s regular rate of pay, which serves as the basis for calculating overtime and Sunday/holiday premiums, the court also established the state’s minimum wage as the minimum regular rate of pay for 100% commission employees when calculating premium obligations.  

While the SJC remained silent as to the retroactive application of their ruling on past practices, the MA Wage and Hour laws allow claims to be brought within three years of the alleged violation and also allow for treble damages and attorney’s fees.  In the short time since the decision was handed down, a number of retailers have already been served with class action lawsuits seeking damages under this new interpretation of the MA laws. 

In an effort to determine your potential exposure to liability under this decision, RAM suggests that members conduct a self-audit of their payroll for the past three years.  Members should then consider providing separate and additional compensation to commission employees identified as having worked overtime, Sundays, and required holidays during that time in an amount equal to 1.5 times the minimum wage for all such hours.  Members are also strongly urged to revisit and revise their current practices and make corresponding changes to their employee handbooks to ensure compliance going forward.  Considerations should include implementation of a strict time keeping policies, limiting commission employees to 40 hour work weeks, and changing you compensation structure to layer commissions over a base wage equivalent to the minimum wage for hours 1-40 and 1.5 times the minimum wage for overtime and retail premium hours. The self-audit and policy changes should be undertaken in consultation with independent legal counsel.  

RAM has already been in contact with the Baker Administration and Legislature in an effort to make them aware of the significant economic impact of this decision and to request relief.  On this front, RAM is in the process of scheduling a meeting with the Executive Office of Labor and Workforce Development which oversees the department responsible for the guidance that led retailers to believe they were complying with the law.   

If you haven’t done so already please complete a brief survey regarding your use of 100% commission sales people to help us better understand the scope of this problem within our membership.

Lastly, members interested in learning more about the SJC decision and what steps your business should be taking to ensure compliance with this new interpretation of the MA Wage and Hour laws are invited to participate in a webinar hosted by Josh Nadreau, an employment attorney at Fisher & Phillips, LLC on Wednesday, June 26th at 10:00am.  To register for the webinar please follow this link:

Members with further questions may contact RAM General Counsel, Ryan Kearney, at 617-523-1900 or via email at [email protected].