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Furniture Chain Runs Afoul of Wage Act with Commissioned Employees

Posted on April 14, 2024

The Massachusetts Supreme Judicial Court (SJC) ruled in 2019 that commissioned sales employees have a right to premium pay for work on Sundays and for overtime when their hours exceed 40 in a week.  The SJC recently revisited this ruling, finding that a furniture store’s complex compensation plan effectively violated the Massachusetts Wage Act by denying its salesforce “separate and additional” payment for overtime and hours worked on Sundays.

The case is important if a portion of your workforce is fully commissioned salespeople.

Employees of a well- known furniture chain filed a class action lawsuit against the employer for violations of the Wage Act’s overtime provision (M.G.L. ch. 151A, § 1A) and the Sunday pay statute (M.G.L. ch. 136, § 6(50)), from 2016 through 2019.  All were fully commissioned salespeople who had worked overtime or on Sundays during this period.  Note that Sunday premium pay was phased out between 2019 and 2023 and is no longer required.

The compensation plan provided that commissioned salespeople could take a weekly draw in an amount equal to their hours worked at minimum wage, and 1.5 times the minimum wage for overtime and Sunday hours.   A negative balance resulted when an employee’s commission for a particular week did not exceed the total draw for that week.  The negative balance was then deducted from future commissions. A deduction of a negative draw balance in the future paycheck could not bring the pay lower than the amount of the employee’s weekly draw.

The court’s opinion set out several fictitious examples to illustrate how this method does not satisfy Massachusetts law requirements.  In the first example, an employee worked 40 hours in one week, including 10 on Sunday, with a base pay of $10/hour.  He was paid $300 for the first 30 hours, and $150 for the premium Sunday pay, allowing him a draw of $450.   He earned $400 in commissions for the same week, so his negative draw balance was $50 ($400 commissions – $450 total draw).  The following week he worked 40 hours at the base rate (no overtime or Sunday pay) and earned $400 in commissions.  The company then subtracted the negative balance from the earlier week, leaving him with $350 pay for that week.  So, he earned a total of $800 for the two weeks, meaning that the Sunday work had no impact on his pay for the two weeks.

The SJC affirmed a lower court’s grant of summary judgment to the class of plaintiffs, finding that the compensation plan did not provide “separate and additional” payment for the Sunday and overtime hours. While the calculation of the draw did account for overtime and Sunday pay, the employer’s method of subtracting the difference between the commission earned and the draw from future commissions negated the premium pay. An issue related to attorneys’ fees was also reviewed by the SJC and the court remanded that issue to the Superior Court to recalculate the award of attorneys’ fees.

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