There is one employer practice that we regularly see and it impacts employees who are paid on commission.
Let us paint a picture:
At the start of the year, your employer moved your on-target sales commissions to something well below what you earned last year and the year before. Your supervisor said not to worry. But now we’re in a recession, sales are way down, and the employer decides to let you go.
In Ontario, your termination pay is calculated by reference to your earnings at the time of termination. This means that even though we know the recession will end, sales will increase, and business that you earned the company will close later in the year, your employer will try to pay you a lesser commission for the business you earned upon your termination.
For employees, this feels very much like the employer has scooped their sales without paying the commissions in full or in part.
It is this type of employer practice that leads employees to seek legal advice on termination more than any other.
Courts will almost always start with an analysis of bonuses and commissions paid over the preceding three years of employment and so should employers. Courts will also consider how much in bonus and commissions earned had yet to be paid at the time of termination.
Our advice to employers: Consider the commissions paid over the preceding three years of employment as well as commissions and bonuses earned but not yet paid when calculating your termination pay offer and avoid costly litigation fees.
Employees, if you fear that your business is artificially reducing your commissions, don’t settle. Get excellent advice.