The Massachusetts Supreme Judicial Court (SJC) will hear arguments this week in a furniture store’s challenge to a 2019 SJC ruling that required employers to pay overtime to sales employees who work more than 40 hours a week.

The 2019 decision, known as the Sleepy’s case, affected employers of inside salespeople whose compensation was fully commission-based.  But the court’s opinion was silent as to whether the decision should apply retroactively. It also left open other questions about how to comply with the Massachusetts overtime law (M.G.L. c. 151A, § 1A) for commissioned inside salespeople.

The Sleepy’s decision has led to a flood of non-payment-of-wage claims by sales employees, in part because the retroactivity of the decision was unclear.

The Sleepy’s compensation plan at issue was created based on several opinion letters from the Massachusetts Department of Labor Standard issued in 2003 and 2009, which appeared to indicate that no overtime or premium Sunday pay was required for commission-only salespeople.  The SJC noted in Sleepy’s that the opinion letters were “not a model of clarity,” but did not set out guidelines for a compensation plan that would comply with its ruling, leaving employers of commission-only salespeople unsure of how to comply.

The new case is an appeal of a successful class action suit brought in Superior Court by the furniture store’s employees seeking to apply the Sleepy’s decision retroactively to overtime and Sunday hours pre-dating the ruling.  The employees won their case in a lower court, and the employer now appeals to the SJC for answers to the following questions:

1. In calculating the amount of a retail sales employee’s weekly commission, may the employer subtract hourly wage payments from the same week in which the commission was earned, where the employer (like [the furniture store employer] and unlike Sleepy’s) separately, and in addition to commissions: tracks all employee hours worked; makes a separate payment of the minimum hourly wage for all hours worked up to 40 in a workweek; and makes a separate payment of statutory premium pay for all hours worked over 40 and on Sundays?
2. Does Sleepy’s apply retroactively?
3. Is 454 CMR § 27.03(3), on which the Sleepy’s holding partially rests, unconstitutional?
4. Do employees have a private right of action for alleged violations of the Sunday premium pay provision of the Massachusetts Blue Laws?

Question number one seeks approval of the furniture store’s current commission plan. While the wording of this question is confusing, the furniture store’s brief indicates that the employer in this case used a different formula than that in Sleepy’s, in that it tracked all hours and received “separate and additional pay” for overtime and Sunday hours.

The third question challenges the constitutionality of the overtime regulation under the 14^th Amendment of the US Constitution and Article 10 of the Massachusetts Declaration of Rights on the basis that it is impermissibly vague, conflicts with the overtime statute (M.G.L. c. 151A, § 1A), and exceeds the regulatory authority granted in the overtime statute.

Note that Sunday premium pay was phased out at the beginning of 2023, so question number four relates to past Sunday premium pay.  The question of overtime for hours over 40 in a week is still relevant for employers.

Retail businesses, particularly those with commission-only compensation plans, are eager for some clarification from the SJC.  A ruling is anticipated this winter or in the spring.

If AIM members with questions about commissions or other compensation may call the AIM HR Helpline at 800-470-6627.