Terminated Employee Entitled to Commission He Would Have Earned During Notice Period
In a recent Ontario decision, an employee who had been wrongfully dismissed claimed entitlement to the commission he would have earned during his notice period.
Employee Terminated Without Cause
The employee worked for the employer from October 1996 to February 2013, when he resigned to accept other employment; he was then re-hired by the employer on January 16, 2018, as regional sales manager, earning a base salary of $200,000 per year with commission. In his last year of employment, he earned $91,000 in commission.
The employee was subsequently terminated on September 4, 2018.
The employee commenced an action against the employer for wrongful dismissal. He claimed $133,333, or eight months’ pay in lieu of notice, inclusive of severance pay of $68,923, under Ontario’s Employment Standards Act, 2000 (“ESA”). He also claimed entitlement to commission for his notice period.
Employee and Employer Dispute Commission Payment
The employee claimed entitlement to commission for sales that were “booked and billed” after the employee’s employment was terminated, in the amount of $37,626. The employee was thus claiming entitlement to commission that he would have earned during his eight month notice period. The employee argued that had his employment been properly terminated with working notice of dismissal, he would have been employed at the time the sales had been “booked and billed” and he would have received the commission payments. Additionally, the employee claimed that he had not been aware of the alleged changes to the 2018 sales plan and therefore could not and did not accept this material change to his employment contract. Finally, he argued that the “termination clause” in the 2018 sales plan contracted out of the ESA, contrary to s. 5(1) of the Act, and was therefore void and unenforceable.
The employer submitted that the employee was not entitled to any compensation in excess of his annual base salary. The employer argued that pursuant to the terms of its sales plans, which were part of the employment agreement, the employee was not entitled to the payment of commissions he claimed. The employer’s position was that because the employee has not “earned” the claimed commissions during his employment, he was not entitled to payment of these commissions.
The relevant provision of the 2017 sales plan regarding entitlement to commission stated that:
“In order to be entitled to receive a commission you must be employed by [the employer] at the time the sale has been booked and billed.”
Additionally, the wording of the same provision in the 2018 sales plan had been amended prior to the employee’s termination, to include the following:
“Commissions are not payable in respect of any period of notice, whether contractual, statutory or based upon the common law, following termination of your employment for any reason whatsoever, unless the sale transaction was booked and billed prior to the date of termination of your employment, The date of termination is the date on which your active employment with Information Builders ceases and you are no longer providing services to the company.”
Court Finds in Favour of Employee
At the outset, the court found that the employee had been entitled to a reasonable notice period of eight months.
The court then had to determine whether the terms of the 2017 sales plan unambiguously altered or removed the employee’s common law right to commission payments during the reasonable notice period.
The court first concluded that there was no “clear language to the contrary” in the 2017 sales plan demonstrating that the parties had agreed that limitations on payments set out in the sales plan would apply to an unlawful dismissal.
As a result, the court found that the 2017 sales plan language did not exclude the employee’s right to be paid commission during the notice period.
Turning to the change in language in the 2018 sales plan, the court first accepted the employee’s argument that he had not been aware of the alleged change and therefore did not accept the material change to his employment contract. Additionally, the court found that the employer’s unilateral change had not been supported by consideration. Finally, the court found that the 2018 sales plan prohibited calculation of wages based on the greater benefit of the employee’s commissions, which was contrary to ss. 5(2) and 60 of the ESA.
As a result, the court found that the employee was entitled to be paid for the loss of the opportunity to earn commissions during the eight months reasonable notice period and awarded the damages claimed by the employee.
The Kitchener-Waterloo employment lawyers at Petker Campbell Postnikoff have many years of experience advising non-unionized employees and employers on a variety of workplace issues, including wrongful dismissal. Our team will walk you through the details of your dispute, advise you on your rights, responsibilities and obligations, and help you understand your options. If your dispute cannot be settled through negotiation, we can represent you through mediation and the court process.
We represent clients throughout southern Ontario, including the communities of Cambridge, Guelph, Elmira, Brantford, Fergus, Elora and the surrounding area. Call 519-886-1204 or contact us online for a consultation.