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How sales commissions can result in disputes over vacation pay


April 24, 2019   by Greg Meckbach


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If you employ commissioned sales people, how are you calculating their vacation pay?

Calculating employees’ vacation pay can be an issue for any company whose sales staff earn both a base salary and commission, Toronto employment lawyer Andrew Monkhouse, managing partner and owner of Monkhouse Law, said in an interview.

Monkhouse Law announced Tuesday it is asking a court to certify an $80-million class action lawsuit in Ontario against RBC Insurance Agency Ltd. and Aviva General Insurance Company, with Kubir Singh as a representative plaintiff.

Aviva Canada acquired RBC General Insurance from the Royal Bank of Canada in 2016.

“Because this matter is before the courts, it wouldn’t be appropriate for us to comment publicly,” an Aviva Canada spokesperson told Canadian Underwriter Wednesday.

The statement of claim alleges that Singh received vacation and public holiday pay “solely on his base salary and not on his total compensation.” None of the allegations contained in Singh’s statement of claim have been proven in court.

The proposed class-action lawsuit alleges that some property and casualty insurance advisors who were working on commission at RBC received public holiday and vacation pay solely on their base salary.

“Whatever you made last year, this year your vacation pay has to be equal to at least 4% or 6% of what you made last year,” as Monkhouse explained the issue in an interview.

As a purely hypothetical example (unrelated to the Aviva action), suppose a worker makes $52,000 a year in salary, plus $48,000 in commissions.

“If you made $100,000 last year, not including vacation pay, then this year, your vacation pay has to be at least $4,000 or $6,000, depending on how many years of seniority you have,” Monkhouse said in an interview.

Section 35.2 of the Ontario Employment Standards Act states:

“An employer shall pay vacation pay to an employee who is entitled to vacation under section 33 or 34, equal to at least,

(a) 4 per cent of the wages, excluding vacation pay, that the employee earned during the period for which the vacation is given, if the employee’s period of employment is less than five years; or

(b) 6 per cent of the wages, excluding vacation pay, that the employee earned during the period for which the vacation is given, if the employee’s period of employment is five years or more.”

On its website, the Ontario government say the gross “wages” on which vacation pay is calculated include regular earnings, including commissions. It also includes bonuses and gifts that are non-discretionary or are related to hours of work, overtime pay, public holiday pay, termination pay and allowances for room and board.

All Canadian provinces and territories have vacation pay entitlements similar to what Ontario requires in its Employment Standards Act, said Monkhouse.

In the specific legal action against RBC and Aviva, according to the statement of claim, Singh started working for RBC Insurance as an advisor in 2016. His last day was in April 2019. His salary was $35,000. On top of that, he would earn commission based on his ability to sell home, auto and travel insurance.

Monkhouse Law is proposing that the class of plaintiffs include all commissioned employees of RBC Insurance Agency Ltd. and Aviva General Insurance Company, and their predecessors or successors within Ontario, who allege that they have been paid for vacation and public holiday pay on their base salary and not total compensation and who are not exempt from such payments.

Monkhouse said the statement of claim has been served. As of Tuesday, he had not yet received a statement of defence, although the company is still within the time limits allowed for filing a defence with the court. Monkhouse reported he has been in contact with lawyers for RBC.

 

 

 


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2 Comments » for How sales commissions can result in disputes over vacation pay
  1. Paul says:

    Gee and my employer deducts for bathroom breaks!
    Why because they can, employment law is complex because employers have bought our goverment!

  2. Kate says:

    I would like to comment on this “On its website, the Ontario government say the gross “wages” on which vacation pay is calculated include regular earnings, including commissions.”
    It talks about the case when the vacation pay is calculated and paid with each pay check. However, there is an alternative and maybe more common practice that employees are given an actual paid week of vacation. I want to ask then, how do you calculate the payment for this week (or two)? Following the same logic I have to pay the same amount as the employee would earn with the commission? It doesn’t sound right to me, sounds ridiculous. Can Someone explain to me the purpose of the commission? Where do the employer gets the profit to pay this commission if the employee is at the beach tanning and doesn’t make any sales?

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