Locke Lord QuickStudy: Are Commissioned Sales Employees Entitled to Overtime Compensation?

In request for an opinion with potentially significant impacts for every Massachusetts employer who pays commissions to employees, Judge Richard G. Stearns of the United States District Court for the District of Massachusetts recently certified these two questions for a determination by the Supreme Judicial Court of Massachusetts (SJC):

1. If a 100% commission inside sales employee works more than forty hours in a given work week, is the employee entitled to any additional compensation specifically for overtime hours worked when the employee’s total compensation (through draws and commissions) for that workweek is equal to or greater than 1.5 times the employee’s regular rate or at least 1.5 times the minimum wage for all hours worked over the 40 hours in a workweek? If additional compensation is due, what is the employee’s regular rate for purposes of calculating overtime pay?
2. If a 100% commission inside sales employee works on a Sunday in a given workweek, is the employee entitled to any additional compensation for Sunday premium pay when the employee’s total compensation (through draws and commissions) for the workweek compensates the employee in an amount equal to or greater than 1.5 times the employee’s regular rate or at least 1.5 times the minimum wage for all Sunday hours worked? If additional compensation is due, what is the employee’s regular rate for purposes of Sunday premium pay?

Obviously, for employers of 100% commission sales employees, the stakes are high. Should the SJC opine under either scenario: “Yes, such employees are due additional compensation,” the potential liability hit is enormous. Moreover, employers will need to review their compensation plans. It also is possible that the SJC’s opinion will be expressed in such a way as to impact other commissioned sales employees. The bet here is that the SJC will answer “No” to each scenario, but time will tell. In the meantime, employers of commissioned inside employees need to pay close attention to what the SJC decides.