CITATION: Kinch v. Dufferin Communications Inc. c.o.b. as Evanov Radio Group, 2015 ONSC 6610
DIVISIONAL COURT FILE NO.: 184/15 DATE: 20151023
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
LEITCH, SANDERSON AND SACHS JJ.
BETWEEN:
KAREN KINCH
Plaintiff
(Appellant)
– and –
DUFFERIN COMMUNICATIONS INC. carrying on business as EVANOV RADIO GROUP
Defendant
(Respondent)
Kevin W. Fisher and Reshma P. Kishnani, for the Plaintiff (Appellant)
Judy Joo, for the Defendant (Respondent)
HEARD at Toronto: October 23, 2015
SACHS J. (ORALLY)
Background
[1] The appellant, Ms. Karen Kinch, appeals an order of Whitaker J. dated March 19, 2015, dismissing her claim against Dufferin Communications Inc. (“ERG”).
[2] This dispute concerns entitlement to vacation pay pursuant to the provisions of the Canada Labour Code, R.S.C. 1985, c. L-2 (“CLC”).
[3] Ms. Kinch was employed by ERG as a commissioned sales representative from 2002 until 2012, although the claim only relates to the period from 2006 to 2012. Her wages were commission payments. After the appellant left ERG she brought an action against it to receive vacation pay of $35,396.02 pursuant to the CLC.
[4] There is no dispute in relation to the quantum of the appellant’s claim if one accepts, as the motion judge did, that the appellant’s employment with ERG commenced in 2002.
[5] The motion judge dismissed Ms. Kinch’s claim against ERG and awarded fixed costs in the amount of $20,000, in favour of ERG.
[6] Ms. Kinch appeals the dismissal of her claim and requests that summary judgment be granted against ERG in the amount of $35,396.02 plus her costs.
The Motion Judge’s Decision
[7] At paragraph 3 of his decision the motion judge acknowledged that:
Pursuant to the provisions of the CLC, employers who fall within the federal jurisdiction are obliged to pay employees vacation pay, calculated on an employee’s annual income, in the amount of 4% or 6%, after six years of employment with that employer. Vacation pay is to be paid to an employee in addition to receiving vacation time.
[8] He then went on to identify that the issue that he had to decide was, “whether there is an enforceable agreement between the parties which as the Defendant concedes means that vacation pay may be drawn off of commission sales or for that matter – any form of wage.”
[9] In this case there was an employment agreement that provided the following with respect to vacation pay:
You will be paid commission at a rate set out in Schedule B (Commissions). This amount includes statutory amounts for vacation/holiday pay as well as statutory pay.
[10] With respect to this contract, the motion judge found, at para. 7, that:
There is nothing in the CLC which would indicate that the employer is precluded from agreeing with the employee that vacation pay is appropriately payable out of commission wages.
[11] In the motion judge’s view, since the appellant’s compensation consisted of income from commission sales, the “compliance with the CLC must mean that payment of vacation will come from the employee’s sales. If the parties wished to come to another arrangement, it was open to them to do that as long as the formula for payment is 4% or 6% of the total yearly compensation.” (Motion Judge’s Decision, para. 8).
[12] Having found that there was nothing inappropriate about an arrangement whereby the employer’s obligation to pay vacation pay is satisfied by “taking the vacation pay out of the collective commission sales”, the motion judge dismissed the appellant’s action.
Standard of Review
[13] There is no issue that the standard of review is to grant deference to the court of first instance and to only interfere if there is a palpable and overriding error of fact or an error of law. In this appeal, it is asserted by the appellant that the motion judge erred in law in finding that ERG complied with its obligation to provide payment of vacation pay pursuant to the CLC.
Analysis
[14] The motion judge seems to have concluded that the provisions of the employment agreement in question did comply with the provisions of the CLC because there is nothing in the CLC that prohibits arrangements whereby vacation pay is paid out of commissions. With respect, this does not answer the question that the motion judge had to answer as, even if such an arrangement was or is permissible, it is still necessary to examine whether a particular arrangement that is structured in this way does comply with the provisions of the CLC.
[15] In considering this question it is important to remember the following:
(1) The provisions of the CLC with respect to vacation pay are mandatory and apply notwithstanding any contract to the contrary. Thus, the parties cannot contract out of the vacation pay entitlement under the CLC.
(2) By virtue of Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, the Supreme Court of Canada has made it clear that the purpose of the CLC is to protect employees and to encourage employers to meet their minimum obligations under the CLC. In this regard the Supreme Court of Canada explicitly recognized that non-unionized employees do not have the bargaining power or the information necessary to achieve more favourable contract provisions with their employers.
[16] Thus, an employer who seeks to satisfy its obligations to pay vacation pay by taking that pay out of commission sales must, at a minimum, demonstrate that the employee is aware of her vacation pay entitlements under the CLC and, that by agreeing to such an arrangement, she is receiving a benefit that is either equal to or greater than those entitlements.
[17] In this case, there is no evidence that either of these minimum requirements were met. In fact, to the extent that it exists, the evidence is to the contrary. First, neither at the time the contract was entered into nor since that time has the employer provided any evidence to show that the appellant’s commission rates were adjusted upwards to reflect the fact that they were now going to include vacation pay. In fact, the employer’s records do not demonstrate that they did any vacation pay calculations. There are no deductions shown on the appellant’s pay slips or commission statements (except for one anomaly at the end of her employment once the employer was aware that there was an issue) and there are no amounts shown for vacation pay on the appellant’s T-4 slips.
[18] As the motion judge found, the appellant was an employee with ERG as of 2002. Therefore, under the provisions of the CLC the appellant was entitled to increased vacation pay entitlement of 6% as of 2008. There is no evidence that any adjustment was ever made to the appellant’s commission entitlement to reflect this increased vacation pay entitlement. Absent such evidence, the position of the respondent involves accepting that the provisions of the CLC are satisfied if an employer pays an employee a reduced amount of commission because more of their commissions are being counted towards vacation pay.
[19] This is similar to the situation presented to the British Columbia Supreme Court in Atlas Travel Services Ltd. v. Director of Employment Standards, 1994 CarswellBC 506, where the Court, at para. 9, used the word “absurd” to describe such a result.
[20] In his reasons the motion judge did advert to the decision of the Canada Labour Relations Board in Latham v. Brown & Morrissey Trucking, 2006 CarswellNat 6710, where a referee discussed whether it was ever appropriate to “roll” vacation pay into base pay, in that case, an hourly rate. In the end, the referee found that while it might be possible, if it were to happen, certain basic guidelines must be followed. None of those guidelines were followed in this case.
[21] For these reasons, we find that the motion judge did commit an error in law when he found that ERG complied with its obligations to provide vacation pay to the appellant pursuant to the CLC.
[22] Turning next to the issue of whether any part of the appellant’s claim for vacation pay is statute barred by the Limitations Act, 2002, c. 24, Sch. B, this issue was not addressed by the motion judge. However, we agree with the appellant’s submission that the language of s.188 of the CLC indicates that all outstanding vacation pay owing to the employee for any of the years of employment must be paid within thirty days of her last day of employment.
[23] Thus, ERG was obligated to pay Mr. Kinch her outstanding vacation pay by November 5, 2012. Ms. Kinch commenced her claim less than two years after she left her employment at ERG. Accordingly, her claim is not statute barred.
Conclusion
[24] For these reasons, we would allow the appeal, set aside the decision of the motion judge, both on the merits and with respect to costs, and grant judgment in favour of the appellant in the amount of $35,396.02.
[25] In view of this result there is no need to deal with the appellant’s costs appeal as the appellant is now entitled to her costs of that motion.
LEITCH J.
COSTS
[26] I have endorsed the Appeal Book, “For reasons delivered by Sachs J., the appeal is allowed and summary judgment is granted against the defendant in the amount of $35,396.02 plus pre-judgment interest at 2% plus $15,000 in costs all inclusive. Costs of the appeal are agreed in the amount of $10,000 awarded to the appellant.”
___________________________ SACHS J.
LEITCH J.
SANDERSON J.
Date of Reasons for Judgment: October 23, 2015
Date of Release: November 9, 2015
CITATION: Kinch v. Dufferin Communications Inc. c.o.b. as Evanov Radio Group, 2015 ONSC 6610
DIVISIONAL COURT FILE NO.: 184/15 DATE: 20151023
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
LEITCH, SANDERSON AND SACHS JJ.
BETWEEN:
KAREN KINCH
Plaintiff
(Appellant)
– and –
DUFFERIN COMMUNICATIONS INC. carrying on business as EVANOV RADIO GROUP
Defendant
(Respondent)
ORAL REASONS FOR JUDGMENT
SACHS J.
Date of Reasons for Judgment: October 23, 2015
Date of Release: November 9, 2015