Retail Employers – Don’t Sleep On Your Overtime Obligations

by Adam Shafran

On May 8, 2019, the Massachusetts Supreme Judicial Court issued what will likely be its most important employment-related decision of the year in the matter of Sullivan v. Sleepy’s LLC. In Sleepy’s, a decision that will impact all retail employers in the Commonwealth, the SJC held that retail employers may not use commission payments to offset overtime and Sunday pay obligations, and that such payments must be made to employees in addition to any commission payments made.

More specifically, Sleepy’s, the mattress company, paid its retail sales employees on a 100 percent commission basis with initial draw payments that were subsequently offset by commission payments. The amount of the commission payments the employees received was always greater than or equal to the minimum wage ($11/hr in 2018 and $12/hr in 2019) for the first 40 hours worked, and greater than or equal to 1.5x the minimum wage for all hours over 40 hours worked each week. As a result, Sleepy’s argued that it did not need to make any additional overtime payments to its employees because the commission payments were sufficient to satisfy its minimum wage and overtime obligations.

The SJC rejected this argument and held that the overtime and Sunday premium statutes require additional overtime (or Sunday premium) compensation regardless of whether the commission payments are greater than the employee would be due under the overtime and Sunday premium statutes. The SJC reached this conclusion by looking at the legislative intent behind the overtime and Sunday premium statutes. Specifically, the Court noted that the purpose of the overtime statute was to “reduce the number of hours of work, encourage the employment of more persons and compensate employees for the burden of the long workweek.” As a result of this statutory intent, the Court determined that allowing retail employers to use commission payments to offset overtime or Sunday premium obligations would discourage employers from hiring additional employees, would not reduce the number of hours of work, and would not provide retail employees with additional compensation for a longer workweek.

The impact of this decision is obviously significant. Now, in addition to any commissions a retail employee receives, the employee is also entitled to be paid $18/hr (i.e. the minimum wage of $12/hr x 1.5) for all hours worked over 40 in a workweek and for all hours worked on Sundays.

Rudolph Friedmann attorneys have ample experience crafting wage payment policies to ensure compliance with Massachusetts’ complicated wage laws. If your company’s compensation policies were impacted by the Sleepy’s decision, it is advisable to have them reviewed to ensure they are in compliance with Massachusetts law.