Would I get paid my commission if I left the company?

| October 11th, 2017 | 1 Comment »

Question:  If I leave this company in around a month, would I still get paid my commissions from the deal I just won over the next 3 years? I’ve been working for a company for around 3 years, I have been made a better offer at another company and thinking about quitting my job and joining this new company.  I have around $400,000.00 in commissions from a large job I just landed that will be paid out upon monies received over the next 3 years from now.

Answer: This is an excellent question.  Many employees wonder – what happens if I leave my job right before I am supposed to get my bonus?  Is there any way to get the bonus?  The answer is maybe.  It will depend on the specific facts of your case, and whether there are any written documents that address your commissions or bonus payments (e.g. an employment contract, an Annual Incentive Plan, etc.)  Other important considerations will include:

  • Whether you are leaving the company of your own accord (as opposed to having your employment terminated),
  • How your commissions or bonus payments are earned or calculated (have you already earned the bonus?  does the company use a specific formula, or is the whole payment subject to discretion?), and
  • Are there any documents which address what happens to your bonus or commissions if your employment ends?

One of our lawyers can review your situation and let you know if, and how, you can claim your commission payments even AFTER you have left the company.  You do not necessarily have to forfeit your bonus or commissions just because you get a new job before it is paid.

Are you entitled to bonus pay that would have been earned during your notice period in the case of wrongful dismissal?

| March 6th, 2017 | No Comments »

A notice period is required by an employer seeking to terminate an employee. Employers can either provide the employee with notice or pay that would have been earned had the employee worked throughout the notice period. When an employee is terminated without a notice or pay in lieu, this is a wrongful termination and a breach of the employment contract. The remedy is damages paid by the employer in the amount equal to the compensation that would have been earned by the employee during the reasonable notice period that is owed.

What about bonuses that would have been owed to the employee, but require the employee to be “actively employed” at the time the bonus is to be paid? A clause that requires ‘active employment’ during the time of payment does not apply in the case of wrongful dismissal. This was affirmed in the case of Paquette vs. TeraGo Networks Inc. (2016). Employees are generally entitled to bonuses that would have been paid during the notice period, regardless of whether or not the employee was actively working during the time. This is especially the case when bonus pay is essential to overall compensation (i.e. a significant proportion).

To gain a better understanding, it helps to review the Paquette (employee) vs. TeraGo Inc. case. Paquette was under an employment contract that required him to be “actively employed” at the time the bonus was to be paid. The bonus here was set to be paid every February for the previous year’s work. The judgement by the Superior Court of Justice awarded Paquette 17 months of damages for only base-salary and benefits. Paquette appealed this decision, arguing that he is also entitled to bonuses that would have been received had he actually worked for the duration of the notice time (17 months). The Court of Appeals (Ontario) awarded Paquette the bonus pay as well. Simply put, the notice pay is meant to place an employee in a similar position had there been no breach in the employment contract. Here, if Paquette was not wrongful dismissed, he would have collected his bonus at each payment date (February 2015 and 2016). In other words, Paquette had the right to work but was prevented from doing so as a result of the employer’s breach. For the year that Paquette did not work (2016), the bonus was calculated by taking the average of the previous years’ bonus payment.

If you are an employee that receives bonuses as an essential part of compensations (ie. a significant portion), then a clause requiring you to be employed at the time of bonus pay may leave you vulnerable if wrongfully dismissed. Employees in this situation are encouraged to seek legal advice to ensure you are fairly compensated for damages and are fully aware of your workplace rights.

Can a Non-Payment of a Bonus Trigger Constructive Dismissal?

| February 24th, 2017 | No Comments »

In the case of bonus pay, would a disagreement over the entitlement, and subsequently a non-payment, be enough for an employee to claim constructive dismissal? When an employer changes an essential term of an employment contract without the consent of the employee, this is a unilateral change and would warrant a constructive dismissal claim. This means that the employee had no reasonable alternative but to walk away from the job. This requires a fundamental change to the terms of employment such as pay and responsibilities. The remedy sought would be damages in the form of ‘notice pay’.

This, of course, is circumstantial. Important factors include the amount of the bonus in question. If the bonus makes up a large proportion of the employee’s pay and is guaranteed, then a failure of payment would more likely result in a successful constructive dismissal claim. Alternatively, if the bonus was a small amount with no other alteration to the employment contract, a constructive dismissal claim will unlikely be successful. A 2016 Ontario Superior Court case of Chapman vs GPM Investment Management (the company) deals with exactly this.

In this case, Chapman was the CEO and President of GPM. Chapman felt he was entitled to a bonus of 10% of profits made off the sale of an asset (property) for which GMP was involved. GPM disagreed over this 10% bonus because they claimed the gains made did not fall under the definition of ‘profit’ as defined in the employment contract. Chapman quit and claimed constructive dismissal in addition to payment for the 10% bonus he felt was owed. The Ontario Superior Court found that Chapman was entitled to this bonus, however, the failure to make this payment was not enough to trigger constructive dismissal.

The reasons the court did not find this to be constructive dismissal was due to a few reasons: the bonus was not much compared to Chapman’s overall compensation, the terms of the employment contract (the bonus structure) were not altered, and the employer intended to continue  honouring the employment contract in the future. The disagreement was also over a particular type of asset that the employer was never going to deal with again, thus making this a one-time isolated event. Overall, the circumstances here did not fundamentally change the conditions of employment, and therefore did not amount to a constructive dismissal. In addition, the employer here gave Chapman options to peacefully resolve the issue.

If there is a concern over an issue regarding the payment of a bonus, it is important to attain legal advice. The issue may involve a disagreement over the interpretation of an employment clause, which requires a wholesome approach – it is often not enough to only consider the clause in question. For both employers and employees, it is advisable to seek legal assistance in determining the appropriate remedies.