Governor Baker Proposes Legislation to Address Ruling on Overtime Pay for Commissioned Sales Employees

October 31, 2019

Published in NEHRA News (10/31/2019)

On May 8, 2019, the Massachusetts Supreme Judicial Court ruled in Sullivan, et al. v. Sleepy’s, LLC, et al., 482 Mass. 227 (2019) that sales employees who are paid entirely on commission or commission plus draws are entitled to separate and additional pay for overtime and work performed on Sundays and holidays.  The decision made waves through the business community as many employers with commission-based employees had understood the law to allow them to pay their employees only their commissions so long as an employee’s commissions equaled or exceeded the minimum wage for all hours worked up to forty and one and one half times the minimum wage for all overtime and Sunday and holiday hours.  The result of the Sleepy’s decision has been an onslaught of wage lawsuits and class actions against businesses who were not paying their employees in accordance with the ruling.  These businesses are potentially liable for three years of unpaid overtime, Sunday and holiday wages for commissioned-based employees with the potential for those amounts to be tripled under the Massachusetts Wage Act. 

Not surprisingly, the industries facing the greatest liability as a result of the Sleepy’s decision caught the ear of the Governor, who just proposed legislation to, in his words, “clarify the responsibilities of employers related to overtime for inside sales employees who are paid entirely on commission.”  The proposed legislation is part of a larger appropriations bill that the Governor sent to the Senate and House of Representatives in September.  The bill seeks to amend the state’s wage laws in two significant ways in response to the Sleepy’s case.  First, the bill adds inside salespeople who are paid on commissions to the list of employees who are exempt from overtime pay under state law.  Second, the bill provides a defense to liability for employers who failed to pay overtime, Sunday and holiday pay in addition to commissions if the employer can prove by a preponderance of the evidence that it acted in good faith in conformity with and in reasonable reliance on written guidance from the Department of Labor Standards or a state agency.

The move by Governor Baker is unprecedented – the bill would allow at least some employers to avoid paying wages that the Supreme Judicial Court has determined are due.  It is too early to know the bill’s fate, but even if it does pass, opponents stand ready to challenge it.  Consequently, no business should assume, at least at this time, that it will be able to take advantage of the defense to liability in the bill.  Businesses who have learned as a result of the Sleepy’s decision that they are liable or could be liable for unpaid overtime, Sunday and holiday wages should immediately consult with counsel about how to best minimize their liability and to understand how Governor Baker’s bill might affect them.