3064-99-ES Joseph Laforest, Applicant v. Infinium Software Inc. and Ministry of Labour, Responding Parties.
Employment Practices Branch File No. 43001091
BEFORE: M. A. Nairn, Vice-Chair.
APPEARANCES: Joseph Laforest appeared on his own behalf; Bruce Sevigny appeared on behalf of Infinium Software Inc.; Karima Chatur appeared on behalf of the Ministry of Labour.
DECISION OF THE BOARD; October 20, 2000
This is an application for review brought pursuant to section 67 of the Employment Standards Act the (“ESA”). The applicant is seeking an order for the payment of commission. The total amount claimed is almost $40,000.00. However, by virtue of section 65(1.3) of the ESA any claim for unpaid wages is limited to a claim of $10,000.00.
I heard the parties’ evidence. The Employment Standards Officer denied the claim on the basis of the terms of a contract. The applicant was entirely forthright in his evidence. He acknowledged signing that document and two preceding documents containing the same or very similar clause regarding the payment of commissions on termination from employment. The background facts were not seriously in dispute.
The applicant was an account executive. The employer is a computer software company. The applicant was hired in January 1996. He was responsible for generating sales of the company’s software products. A few weeks after commencing employment he was provided with a copy of an account executive compensation plan. That document, which he signed, set out the terms of his compensation package. It provided for a base salary rate and detailed provisions respecting both the timing and the basis for the payment of commissions. The applicant had little negotiating power and accepted the terms. Each year the employer provided such a document outlining the compensation package for the coming year. In his tenure with the employer, the applicant signed three such documents.
Each of those documents stipulated as follows:
All commissions on softtware and service agreements accrue and are paid on a “cash receipts basis”, i.e. commissions are paid by the first day of each month based on cash receipts in connection with the related agreement during the second preceding month. It is the responsibility of the Account Executive to assist in the collection of cash on each agreement. If your employment terminates for any reason whatsoever, no commissions shall be payable to you under any circumstances for payments not received by Infinium Software before or on the date of termination or for payments which are received on or prior to such date but which are subject to a contingency. Accordingly, commissions based on payments received by Infinium Software on or prior to the date of termination will be paid to you in full by the first day of the second month after the date of termination, in accordance with the terms and conditions of this Compensation Plan.
Above his signature on the document are the words, “I acknowledge and accept the terms and conditions of this Compensation Plan”.
In or about February 1998 the applicant concluded the work necessary to finalize a contract with North York General Hospital. The hospital had not yet been invoiced for the contract, but it appears that the only outstanding issue was the receipt of the monies from the hospital and there seemed little dispute that collection would not be an issue. The applicant’s commission for that contract would have been in the range of close to $40,000.00.
The applicant however resigned his employment on or about March 6, 1998. The hospital had not yet paid the contract and the employer took the position that commission was not payable pursuant to the terms of the document signed by the applicant. It appears that initially some $10,000.00 was paid to the applicant in respect of a portion of that account and another, but from June 1998 the employer made clear its position that it did not believe the applicant was entitled to any further commission payments.
Over the course of the applicant’s 26 months of employment with this employer, he earned approximately $800,000.00 in salary and commissions. Roughly 80% of that amount would have been paid as commission in accordance with the terms of the compensation plan.
The applicant’s position is that he is entitled to the commission on this contract as he had performed all of the work necessary for its completion. The only thing remaining was to receive the funds from the hospital. His argument is essentially an equitable claim. He asserted that he had little or no negotiating power in accepting or rejecting any of the terms of the compensation plan and therefore does not see it as a contract of employment. He likens the analogy of a tradesperson, having built 30 houses. Should one refuse to pay for the 30th house because money was made on the first 29, the tradesperson would have recourse to ensure payment for that last house. He also analogized to the leasing of an income property, where the terms of the lease could be anything, but if they conflicted with provisions of the law, those terms would be rendered null and void. In the applicant’s view, he had completed all the work, therefore he ought to be entitled to be paid for it.
Although initially taking no position, in submissions it was the position of the Ministry of Labour that the commission was earned as all the work necessary had been completed. The Ministry argued that because the commission was earned it became wages and were therefore payable. The term of the compensation package providing for when the commission became payable was rendered void, as it was an attempt to contract out of a minimum standard.
The employer relied on the terms of the compensation package and asserted that it must be found to be the relevant contract of employment as there was no evidence of terms of any other contract. Further, that the applicant could not accept the benefit of that plan and at the same time, chose to reject only those portions that worked to his disadvantage. No case law was provided by any party.
I am satisfied that this matter may be determined on basic principles of contract law. It may well be the case that the applicant had little or no bargaining power over the terms of the Compensation Plan. That would not be uncommon for the vast majority of workers who negotiate terms of employment on their own behalf. However, the applicant did accept the terms of the Compensation Plan during his employment and received the considerable benefit of those terms. There is no evidence of any other contract of employment. There is no other basis on which the applicant was entitled to the commission payments or the base salary that he received. He was aware throughout his employment of the specific term regarding commissions on termination. While he was apparently an excellent employee and made money for the employer, the employer is entitled to rely on the agreement entered into.
Even accepting the Ministry’s assertion that the commission was earned, there is nothing to support the Ministry’s argument that the commission was therefore payable at the time of the applicant’s termination from employment. “Wages” in section 1 of the ESA specifically refers to amounts “payable by an employer” …“under the terms of a contract”. The applicant chose to resign his employment at that particular time. He was aware of the provision. Had he waited a few weeks, he may well have received his commission for this work.
This is not a situation where an employer is seeking to take inappropriate advantage of an unsuspecting employee. There is no evidence for example that the applicant requested a copy of the Compensation Plan, or was refused a copy, when considering the offer to accept employment, notwithstanding that it is referred to as part of the letter outlining the offer of employment. While the applicant’s feelings are genuine, they are, in this case, misguided. One cannot draw easy or clear analogies to either house builders or landlords. This is a contract of employment, not a commercial contract for goods and services rendered. Nor are any of these contracts governed by the same legislation. Leases prepared by landlords are subject to various legislation seeking to protect the interests of tenants. A commercial construction contract is subject to legislation regarding liens in addition to the application of contract law. The applicant is in effect seeking to have it both ways. He has quite successfully accepted the benefit of the terms of the Compensation Plan, even in the face of payment on a “cash receipt basis”. However that contract also places a particular limit on those benefits in the event of termination from employment.
Based on all of the above, it is my finding that the contract of employment between the applicant and the responding employer contained a term that limited the payment of commission, and particularly so in the event of termination. Commission was not payable until such time as the underlying contract was paid to the employer. There is no dispute that in this case, no such payment had been made as of the date of the applicant’s termination from employment. Therefore, in the circumstances, no commission on that contract was payable to the applicant.
This application for review is therefore dismissed.
“M. A. Nairn”
for the Board