Overtime Pay for Inside Sales Work?

Are inside salespersons who are paid 100% commission, entitled to overtime pay and Sunday Pay.  In short, yes.

On May 8, 2019, the Massachusetts Supreme Judicial Court (“SJC”) issued guidance for all employees in Massachusetts who are inside salespersons and receive payment on a 100% commission basis.  In Sullivan v. Sleepy’s. LLC., 482 Mass. 227 (2019), the Court was asked to answer 3 questions.

First, the Court was asked if an employee’s commissions and draws may be credited against overtime wages.   The employer argued that they complied with the requirements of the Overtime Statute because they provided their employees with draws and commissions that equaled or exceeded 1 * the minimum wage * the number of hours worked up to 40, plus 1.5 * the minimum wage * the numbers worked in excess of 40 hours.  The SJC, however, held that such retroactive allocation is impermissible and that an additional overtime payment was owed.  They reached this conclusion because, “[i]f employers could undertake such retroactive allocation of payments, they would similarly lack incentive to comply with the wage and overtime statutes in the first place.”

Second, the Court was asked to determine what the regular rate of pay was for purposes of computing any additional overtime payments.  The Court held that “the overtime rate is…one and one-half times the minimum wage for one hundred percent commission employees.”

Finally, the Court was asked if these same employees would be entitled to a separate payment for Sunday pay.  The Sunday Pay Statute provides that “[a]ny store or shop…which employs more than a total of seven persons, including the proprietor…shall compensate all employees engaged in the work performed on Sunday…at a rate not less than one and one-half times the employee’s regular rate.”  Attributing a similar purpose to the Overtime Statute and the Sunday Pay Statute, the SJC held that a 100% commissioned inside salesperson should receive payment for hours worked on a Sunday at a rate of one and one half times the minimum wage.

If you are inside salesperson who was paid on a 100% commission basis and worked more than 40 hours a week or on Sundays, you may be entitled to additional compensation.   Please contact us for legal advice.