Employer held to the words it wrote
Her hiring letter indicated that she would receive a salary of $40,000.00 per year and 60% of all commissions earned by her over the first $3,333.00 in commissions per month. On reading the hiring letter, it is clear that the base salary was meant to compensate her for the first $3,333.00 of commissions she earned in a month so she had to exceed that threshold to get any extra money. Daniela accepted the job. By a year later she realized that the employer was rolling forward her monthly deficit. That meant that if Daniela only earned $3,000.00 commission in one month then she had to earn that extra $333.00, $3,666.00 in total, the next month in order to earn any monies over and above her salary. But the one page hiring letter said nothing about rolling forward her deficit. All it said was “commissions paid monthly once sales surpass business written generating $3,333.00”. Three years later, at the age of 61, Daniela was terminated. The employer offered her 3 months pay in lieu of notice. Danielle rejected that offer and brought a law suit for 12 months pay in lieu of notice and the commissions she would have earned if the employer had not carried forward her cumulative deficit contrary to her Employment Contract. The judge said that given Daniela’s age and the increased difficulty involved in her finding new employment that she should have been given 6 months notice even though she was only in a sales position for 3 years.
Terminated employees have an obligation to look for reasonable alternative employment to mitigate their damages. Daniela did not do any job search for 4 months. She told the judge that she was too emotionally distraught over the shock of being terminated to do anything sooner. The judge said that in the absence of medical documentation with respect to some sort of incapacity that was too long to wait. He reduced her notice period to 4 months, one month more than the employer offered in the first place.
In Ontario, there is a 2 year limitation period for almost any claim one can make in the courts. A few days after Daniela’s termination her lawyer issued a Notice of Action and served it on the employer. The judge decided that any claim Daniela had for unpaid commissions could only start 2 years before that Notice of Action was issued. There was lots of evidence put before the judge by the employer about why the rolling forward of any deficit in production made sense. For instance, it protects the employer from unscrupulous sales people who would delay confirming new policies so that the commissions under one month would exceed the threshold even though they had previously been running a deficit. The judge agreed that that made sense but noted that the issue was not the good business reasons for the policy. The issue was what was written in Daniela’s hiring letter/contract. The employer drafted the letter and no mention of the rolling deficit was made.
The employer then argued that Daniela had agreed to the breech of the contract, if that’s what it was, by continuing to work for the employer after she knew how the commissions were actually being calculated. The judge said that Daniela had not condoned a breech of the contract. The issue was simply that the parties disagreed on how the contract should be interpreted and he had now decided. Daniela was awarded unpaid commissions calculated without the rolling deficit for basically the last 2 years of her employment.
Daniela had a lucky day in court. The judge could have as easily decided that she had condoned and accepted the method of commission calculation. The point for employers, however, is to be extremely careful about what you put in writing about compensation. He who writes it usually ends up wearing it.
