Yes! I am entitled to commissions on termination of employment
If I lose my job, what happens to the commissions on the jobs I’m working on…do they have to pay me some of that?
It only makes sense that employees who receive commissions be entitled to damages for the loss of opportunity to earn this variable compensation when their employment is terminated.
The issue of entitlement to commission or bonus payments following termination of employment was addressed in Dimmer v. MMV Financial Inc. where the court awarded the employee $144,733.08 in damages.
Not everyone has a full salary, Donald Dimmer earned half of his compensation from commissions. As in many jobs these monies were not earned “regularly” over the calendar year. Forty (40%) per cent of business was booked (and therefore commissions owed) during the last quarter of the calendar year.
When Mr. Dimmer was wrongfully dismissed in the first quarter of 2010 the Employer argued no commissions were owed as he had not yet confirmed any deals. Believing this to be unfair Mr. Dimmer brought his claim for payment of commission to Justice Moore.
It is always difficult to assess future income loss in situations where the level of sales are uncertain. This is compounded when the commissions earned in prior years follows an irregular and unpredictable pattern.
Decision makers generally embrace the concept of predicting the future from historical averaging. It is the least unfair calculation method to both the employer and the employee and, in the absence of factual or expert opinion evidence as to the level of income that would have been achieved by the employee during the period of reasonable notice, the most reasonable approach is to use an average.
In Mr. Dimmer’s case, where there were extended absences and long periods without commission earnings, an historical averaging approach wasn’t really fair. The Court found the more appropriate way to address commission entitlement during the notice period was to calculate bonus on a quarterly basis with a “fairness factor” to reflect Mr. Dimmer’s zero level of variable earnings in several quarters.
Employers should be cautious when terminating an employee who receives significant compensation by way of commission, bonus, or other variable pay. Remember - Employees are entitled to damages for the loss of opportunity to earn commission income. While mathematics is important the ultimate calculation must be fair.
