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CHESTO MEANS BUSINESS

Mass. retailers get potential boost from Senate in fight over commission-based overtime pay

Obscure rider in Senate budget was prompted by a 2019 Supreme Judicial Court ruling

Some retailers that pay based on commissions are watching the State House closely for signs that a Senate provision that could limit their legal liability will survive House-Senate negotiations.Elise Amendola/Associated Press/File 2019

Tucked into the state Senate’s budget bill is a small but potentially valuable prize for furniture sellers, auto dealers, and other retailers whose salespeople work on commission.

With its approval in May of an arcane budget rider, the Senate waded into a string of legal battles over back pay for overtime. The brief provision, if accepted by House budget negotiators, would be a boon to many retailers by sharply reducing what they would pay if found liable for compensating sales reps incorrectly.

The Senate made the issue a sticking point for budget negotiations, because its language on overtime is not mentioned in the House version of the spending plan. The start of the state’s new fiscal year came and went on Thursday without a budget agreement — a typical missed deadline for Beacon Hill. But what’s not so typical for the Democratic-run Senate is legislation that favors businesses over workers.

One on side: retailers and their representatives who view the Senate language as a fair compromise, one that ensures companies are not penalized with triple damages for simply relying on guidance they say they received from state labor officials over the years. On the other side: lawyers, lawmakers, and union reps who say the measure would undermine a worker-friendly court decision.

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The Senate’s language would only affect pay practices that predated a state Supreme Judicial Court ruling in May 2019 against mattress seller Sleepy’s. Before the Sleepy’s decision, furniture stores, car dealers, and others often paid sales staff fully with commissions. When these commissions fell short of what was owed for overtime and higher-rate Sunday hours, employers would often use draws from future commissions to cover the difference.

The retailers argue that they received guidance from the state Department of Labor Standards saying this was OK. But in the Sleepy’s ruling, the SJC ruled that employers need to pay for overtime and Sunday hours separately from commissions or advances on future commissions to meet minimum wage rules.

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The SJC decision upended the way most commission-based retailers did business in Massachusetts by forcing them to rely more heavily on hourly pay and less on commissions. That shift hurt some high-performing salespeople. And the ruling was a factor in prompting some auto dealers to close on Sundays.

The ruling also sparked more than 100 lawsuits — most pursued as class actions — as labor attorneys hunted for workers who could be owed up to three years in back pay as allowed by the Sleepy’s ruling. Complicating matters for employers: state law allows for triple damages in wage and labor cases. (The Senate’s budget rider would limit retailers’ legal exposure in Sleepy’s cases to the amount of back pay owed.)

Most have chosen to settle by now. But certainly not everyone.

The holdouts include big businesses such as Jordan’s Furniture and the Herb Chambers auto group. The Jordan’s chain was in Middlesex Superior Court last Tuesday — virtually, still — arguing its compensation practices have complied with state laws and no back pay should be owed. The lawyers at Fair Work PC who represent two former Jordan’s salespeople in the case say the Berkshire Hathaway-owned furniture retailer, which has lobbied on Beacon Hill for legislation to limit liabilities in Sleepy’s cases, is intentionally refusing to settle, dragging the case out until that triple-damages threat is gone. (Fair Work attorney Brant Casavant estimates at least a dozen other Sleepy’s cases are still pending.) A spokeswoman for Jordan’s declined to comment.

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Meanwhile, Chambers is still fighting with lawyers who seek class-action status for commissioned-based employees on the repair and service side. The sticking point appears to be whether the plaintiff in question, Sakiroh Tran, can represent a class of employees across the dealership network or just the parts and service associates who work with her at the BMW dealership in Boston. Lawyers for the plaintiff argue that all Herb Chambers stores roll up to one parent company, even if they’re set up as separate corporations. One of those attorneys, David Goldberg, says at least 200 employees across the 50-plus dealerships could be affected.

This fight has dragged on in Suffolk Superior Court even though Herb Chambers was one of the first to make a deal, agreeing in 2019 to pay more than $20 million to thousands of current and former car salespeople (and their lawyers). Spokesman George Regan said his client disagreed with the Sleepy’s decision but settled those cases quickly because he values his employees and wanted to move past the litigation. The Tran case, Regan said, is factually and legally different from the settled cases.

The Senate’s contentious measure to end triple damages for Sleepy’s cases prompted a flurry of last-minute lobbying. Representative Dave Rogers lined up about 40 House colleagues to sign a June 25 letter to House-Senate negotiators, urging them to drop the clause. The threat of a triple-damages penalty, Rogers argues, has spurred employers to pay unpaid wages. Rogers and his colleagues say the Senate language favors wealthy business owners while shortchanging employees. In an interview, Rogers said attempting to pass this through a budget amendment is “a backdoor way to make the law.”

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Last week, the Massachusetts State Automobile Dealers Association fired back with its own letter to House-Senate conferees. Robert O’Koniewski, executive vice president with the trade group, said the Senate language is not a “get out of jail free” card for employers, because they could still be found liable for all wages due, even while avoiding the triple damages if they show they relied on state guidance. He said he hopes lawmakers will fix this problem that the SJC created. O’Koniewski also took issue with the description in the House letter of employers as deep-pocketed corporations, saying most are mom-and-pop businesses trying to do right by their workers and communities.

Now, it’s up to leaders in the House and Senate to choose the right approach — as if they don’t have enough to sort out with an overdue $48 billion state budget. An SJC ruling is often the final word on legal matters. Not this time.


Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.