Commissioned Salespeople in Massachusetts Are Owed Overtime Pay
While many employers have never paid overtime or Sunday premium pay to inside commissioned salespeople, the Massachusetts Supreme Court (in May 2019) has ruled Massachusetts State Overtime Law requires employers to pay additional compensation for overtime and Sunday work to commissioned sales employees.
Inside salespersons in all types of businesses are impacted by this ruling, including those working for furniture stores, automobile dealerships and telemarketing firms. It is now clear that under MA labor law they are entitled to receive overtime or Sunday premium pay in addition to their regular pay and commissions or draws (i.e., advances on commissions).
The case involved employees paid on commission who earned commissions or draws that exceeded the state minimum wage for the regular workweek and earned enough in commissions to also exceed one and one half times the minimum wage for hours over forty and for work on Sunday. The court decided that employers could not satisfy the pay requirements under Massachusetts’ overtime law and Sunday pay law in this scenario by “retroactively” applying commissions already earned in order to satisfy pay requirements. Instead, commission-only retail sales employees are entitled to overtime and Sunday pay entirely separate from and on top of their previous earnings in a given week.
The Massachusetts Supreme Court found that state law clearly prohibits employers from “retroactively reallocat[ing] and credit[ing] payments made to fulfill one set of wage obligations against separate and independent obligations.” and “that the overtime statute requires separate and additional overtime compensation to be provided to a one hundred percent commission employee regardless of whether that employee receives a recoverable draw or commissions that equal or exceed one and one-half times the minimum wage for any hours worked beyond forty.”
In determining what rate must be paid to commissioned salesmen, the court held that, because the “regular rate” excludes commissions, draws and Sunday premium pay, the overtime and/or Sunday rate must be at least 1.5 times the Massachusetts’ minimum wage, which for employees paid entirely by commission means that “[t]he overtime rate is thus one and one-half times the minimum wage.”
While section 7(i) of the federal Fair Labor Standards Act provides an exemption from the overtime requirements, retail salespersons paid at least half their total earnings in commission are exempt from the FLSA’s overtime requirements.
What Do I Do If I’m being Cheated Out of Overtime Pay?
If you work as a commissioned salesperson in Massachusetts and are not being paid additional compensation for overtime and Sunday work, or if you just aren’t sure that your overtime pay is being compensated correctly, contact us for a free and confidential review of your specific situation, and to see how much you may be owed in back pay.