Are Employers Required to Provide a Minimum Wage to Commissioned Salespeople?
An Employer Must Meet the Minimum Pay Requirements As Statutorily Prescribed Within the Employment Standards Act, 2000. The Basis For Calculating Minimum Pay Includes the Requirement That Employees Earning Commissions or Other Variable Income Must Receive the Minimum. Additionally, Changes In Duties May Legally Require a Raise.
A Helpful Guide For How to Determine Employer Obligations and Employee Rights Regarding Minimum Pay and Fair Wages
In Ontario, generally, an employer is statutorily required to provide a minimum hourly wage that is prescribed and adjusted regularly. Upon failure to to do so, an employer may be subjected to prosecution resulting in fines and penalties or civil litigation brought by an employee seeking compensation for shortfall amounts, or even both.
As per the Employment Standards Act, 2000, S.O. 2000, Chapter 41 governs many aspects of the employer and employee relationship, including many issues related to wages including minimum pay requirements. The minimum pay requirements, including exceptions, among other things, are described within section 23, section 23.0.1, and 23.1 of the Employment Standards Act, 2000 which says:
23 (1) An employer shall pay employees at least the minimum wage.
Room or board
(2) If an employer provides room or board to an employee, the prescribed amount with respect to room or board shall be deemed to have been paid by the employer to the employee as wages.
(3) Compliance with this Part shall be determined on a pay period basis.
(4) Without restricting the generality of subsection (3), if the minimum wage applicable with respect to an employee is expressed as an hourly rate, the employer shall not be considered to have complied with this Part unless,
(a) when the amount of regular wages paid to the employee in the pay period is divided by the number of hours he or she worked in the pay period, other than hours for which the employee was entitled to receive overtime pay or premium pay, the quotient is at least equal to the minimum wage; and
(b) when the amount of overtime pay and premium pay paid to the employee in the pay period is divided by the number of hours worked in the pay period for which the employee was entitled to receive overtime pay or premium pay, the quotient is at least equal to one and one half times the minimum wage.
Change to minimum wage during pay period
23.0.1 If the minimum wage rate applicable to an employee changes during a pay period, the calculations required by subsection 23 (4) shall be performed as if the pay period were two separate pay periods, the first consisting of the part falling before the day on which the change takes effect and the second consisting of the part falling on and after the day on which the change takes effect.
Determination of minimum wage
23.1 (1) The minimum wage is the following:
1. On or after January 1, 2018 but before October 1, 2020, the amount set out below for the following classes of employees:
i. For employees who are students under 18 years of age, if the student’s weekly hours do not exceed 28 hours or if the student is employed during a school holiday, $13.15 per hour.
ii. For employees who, as a regular part of their employment, serve liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act and who regularly receive tips or other gratuities from their work, $12.20 per hour.
iii. For the services of hunting and fishing guides, $70.00 for less than five consecutive hours in a day and $140 for five or more hours in a day, whether or not the hours are consecutive.
iv. For employees who are homeworkers, $15.40 per hour.
v. For any other employees not listed in subparagraphs i to iv, $14.00 per hour.
3. From October 1, 2020 onwards, the amount determined under subsection (4).
(a) subsection (1) does not apply; and
(b) the minimum wage for the class is the minimum wage prescribed for it.
(3) If a class of employees and a minimum wage for the class are prescribed under subsection (2), subsections (4) to (6) apply as if the class and the minimum wage were a class and a minimum wage under subsection (1).
(4) On October 1 of each year starting in 2020, the minimum wage that applied to a class of employees immediately before October 1 shall be adjusted as follows:
Previous wage × (Index A/Index B) = Adjusted wage
“Previous wage” is the minimum wage that applied immediately before October 1 of the year,
“Index A” is the Consumer Price Index for the previous calendar year,
“Index B” is the Consumer Price Index for the calendar year immediately preceding the calendar year mentioned in the description of “Index A”, and
“Adjusted wage” is the new minimum wage.
(5) If the adjustment required by subsection (4) would result in an amount that is not a multiple of 5 cents, the amount shall be rounded up or down to the nearest amount that is a multiple of 5 cents.
Exception where decrease
Publication of minimum wage
(7) The Minister shall, not later than April 1 of every year after 2019, publish on a website of the Government of Ontario the minimum wages that are to apply starting on October 1 of that year.
(9) If, after the Minister publishes the minimum wages that are to apply starting on October 1 of a year, a minimum wage is prescribed under subsection (2) for a prescribed class of employees, the Minister shall promptly publish the new wage that will apply to that class starting on October 1 of the applicable year as a result of the wage having been prescribed.
(12) In this section,
“Consumer Price Index” means the Consumer Price Index for Ontario (all items) published by Statistics Canada under the Statistics Act (Canada).
Furthermore, an employer is statutorily required to pay at least the minimum wage despite employment agreements that state wage terms are based on commissions or other potentially variable compensation. This was stated by the court in the matter of Acumen Insurance Group Inc v. Penner, 2013 CanLII 49493 where it was said:
In the work entitled Employment Law in Canada 2nd Edition (Christie/England/Cotter), at page 202, the authors addressed the issue of minimum wages which are applicable in this particular case:
“Every province in Canada has minimum wage legislation. The statutes commonly prohibit the employee from contracting out of his or her entitlement to the minimum wage and, typically, they permit parties to negotiate mover favourable contractual arrangements for the employee. The minimum wage therefore, represents an irreducible floor. Indeed, some provinces make it an offence for the employee to accept less than the minimum wage or to directly or indirectly return to his employer any part of his wage so as to undercut the floor.
In any case, where an unpaid employee is able to prove that he/she provided labour and to prove the hours worked, he/she should be able to recover minimum wages…
The minimum wage legislation applies to all employees, regardless of how their wages are calculated, whether by time, piece, commission or otherwise…”
Change of Duties
In addition to minimum wage laws, the common law, meaning judge made decisions rather than statute law passed as legislation by the government, sometimes requires that a raise be provided to an employee hired to perform certain duties for a certain level of pay but is thereafter assigned greater duties. The common law may require the employer to pay on the basis of quantum meruit, meaning what the job was truly worth. This principle was stated by the Court of Appeal within the case of Nicholson v. St. Denis et al., 1975 CanLII 393 wherein it was stated:
It is difficult to rationalize all of the authorities on restitution and it would serve no useful purpose to make that attempt. It can be said, however, that in almost all of the cases the facts established that there was a special relationship between the parties, frequently contractual at the outset, which relationship would have made it unjust for the defendant to retain the benefit conferred on him by the plaintiff -- a benefit, be it said, that was not conferred "officiously". This relationship in turn is usually, but not always, marked by two characteristics, firstly, knowledge of the benefit on the part of the defendant, and secondly, either an express or implied request by the defendant for the benefit, or acquiescence in its performance.
Technically, when an employer unilaterally changes significant duties, the change constitutes as a breach of the existing employment agreement or what is commonly referred to as a constructive dismissal. However, per the principle in Nicholson, and each case situation would differ, it is quite possible, perhaps likely, that where the changes are imposed and an employee initiates constructive dismissal proceedings after working under the conditions of imposed unilateral changes, the employee would be entitled to the quantum meruit for the additional duties performed.
Employers are required to meet minimum wage requirements for employees. The minimum wage requirement includes employees under commission agreements or other variable compensation arrangements. Furthermore, where an employer changes the duties of an employee, a raise may be required.