BOSTON (CN) — Massachusetts has some of the most pro-worker overtime rules in the country, and the state Supreme Court appeared poised to expand them even further at oral argument Wednesday.
The court held in 2019 that retail salespeople who are paid straight commission must be paid overtime separately and on top of their regular commission payments; an employer can’t get off the hook just because the commissions end up amounting to more than the hourly minimum wage plus overtime — as is the case under the federal Fair Labor Standards Act.
In this case, a popular Boston-area furniture retailer called Jordan’s attempted to sidestep this rule. Instead of retroactively allocating commissions, it tracked salespeople’s hours and paid them minimum wage plus overtime as a current “draw” which it later subtracted from commissions they earned.
But a class action on behalf of 250 salespeople claimed that the end result was exactly the same and resulted in a $9.7 million judgment.
“Jordan’s cleverly implemented a system where an employee was limited to sales earnings but Jordan’s cannibalized those earnings” for overtime, plaintiffs’ attorney Brant Casavant told the court. “It’s form over substance … . Jordan’s separately itemized things on paychecks but the harm is still the same.”
“So an employee who worked overtime and an employee who didn’t work overtime would get the exact same pay?” asked Justice Scott Kafker.
“Exactly,” answered Casavant, an attorney with Fair Work PC in Boston.
“So if I work overtime but I don’t sell anything, I owe money back,” Kafker mused. He described Jordan’s system as “the more you work, the more you owe.”
Jordan’s is a New England institution whose gravel-voiced spokesman, Eliot Tatelman, is ubiquitous in the region’s radio and TV advertising. Jordan’s stores have featured restaurants, IMAX theaters, ropes courses, a trapeze school, a theme ride produced by George Lucas, seasonal “enchanted villages” and large replicas of Boston landmarks constructed entirely out of jelly beans. The business was purchased in 1999 by Warren Buffett’s company Berkshire Hathaway.
Justice Dalila Argaez Wendlandt asked Jordan’s lawyer, Julie Brennan of Manchel & Brennan in Norwood, Massachusetts, how her position furthered the goals of the overtime statute. Rather than answering, Brennan said that only 3% of the award in this case was for overtime and the rest was for a related violation of the state’s “blue laws” that required extra pay for working on Sundays. That rule was repealed at the beginning of 2023.
“I’m not sure how much the 97% argument resonates with me,” said Justice David Lowy. “There’s a lot of money in this case. You’re talking about 3% of a really lot of money. Three percent of a lot is a lot.”
Brennan argued that there was no private right of action under the blue laws, but Wendlandt attacked that position with numerous and often dismissive questions.
Brennan also claimed that the state attorney general had issued guidance that supported her position.
“The attorney general’s brief in this case says the opposite,” Kafker pointed out.
A separate issue in the case was a challenge to the trial judge’s award for attorneys fees, and Kafker told Brennan that “I think you have a better argument” on that point, suggesting that her argument on the overtime issue was weak.
The court’s 2019 decision, in a case involving the Sleepy’s mattress company, now known as Mattress Firm, appears to be unusual nationally because many states have rules similar to the Fair Labor Standards Act, said Boston attorney Philip Gordon, who chairs Massachusetts Employment Lawyers Association's legislative committee.
“Many states don’t even have their own wage-and-hour laws,” Gordon noted in an interview. “They just follow the FLSA.”
The one bright spot for Jordan’s occurred following a complex discussion of draws and commissions when Justice Frank Gaziano asked if all of the confusion showed that the Sleepy’s rule shouldn’t be applied retroactively. Brennan picked up on this idea and called the case “an unforeshadowed new rule.”
Casavant responded: “Jordan’s shouldn’t get a pass for having violated the laws for several years,” including those prior to 2019. “There are a lot of things in the law that aren’t clear but this court routinely applies its statutory cases retroactively.”
Casavant noted that one test for retrospective application is whether applying a rule prospectively would create an unfair burden. “Jordan’s has never provided a single iota of evidence that paying its employees for their work is a burden,” he said. “This is a million-dollar company owned by a billion-dollar conglomerate that has been fighting this case quixotically.”
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