3938-98-ES Bert Perbi, Applicant v. Topline Financial Services and Ministry of Labour, Responding Parties.
BEFORE: Caroline Rowan, Vice-Chair.
APPEARANCES: Bert Perbi appearing on his own behalf; no one appearing for Topline Financial Services; Frank Camilleri and Heidi Ann Lazar-Meyn for the Ministry of Labour.
DECISION OF THE BOARD; February 4, 2000
This is an application for review of an Employment Standards Officer’s decision, brought by the applicant, Bert Perbi, pursuant to section 68 of the Employment Standards Act (the “ESA”).
The applicant had originally filed a claim with the Ministry of Labour on January 27, 1997 against Topline Financial Services (the “company”). The Employment Standards Officer appointed to investigate his claim found that the applicant was self-employed and therefore that he was not entitled to the protection of the ESA. The Officer therefore refused to issue an Order to Pay. The applicant has applied for review of the Employment Standards Officer’s decision.
A hearing in this matter was scheduled for Thursday, January 20, 2000, at 9:30 a.m. At that time, no one had appeared for the company, the responding party in this application. The Board waited the normal thirty minutes and then convened at 10:00 a.m. to hear the request of the applicant to allow his claim for outstanding wages owing to him from the company.
Facts
The applicant worked for the company as a financial consultant from July 1995 to December 1996. The position of financial consultant involved arranging either personal or business loans for clients in need of financing. The company charged clients a fee for this service. The applicant earned a percentage of this fee as commissions. When he first started working for the company as a financial consultant in July 1995, the company agreed to pay him a twenty (20) percent commission, representing twenty (20) percent of the fee charged by the company to the client.
The applicant described his duties as involving attending at the company offices between 9:00 a.m. and 6:00 p.m. from Monday to Friday and between 10:00 a.m. to 3:00 p.m. (later revised to 11:00 a.m. to 3:00 p.m.) on Saturday. During these hours, the applicant said that he was responsible for answering calls from prospective clients, inviting them into the office, and taking applications for loans from them. He also indicated that his duties involved preparing all documentation needed to obtain monies from the bank and ensuring that clients signed a contract with the company agreeing to pay the company’s fee for this service.
The applicant states that the company provided him with an office, including a phone and later a computer, in order to perform his duties. He states that Mr. Scarlett, the company president, controlled the manner in which he did his work in every respect. This included the requirement that the applicant adhere to the hours of work specified above, that he attend at company staff meetings every Monday and that he engage in certain promotional activities as directed. The applicant indicates that he was not able to work elsewhere at the same time, because he was required to work six days a week for the company. The applicant therefore did not earn income from any other sources during the period of a year and a half when he worked as a financial consultant for the company.
The applicant indicates that the terms and conditions of his arrangement with the company were unilaterally and substantially changed in or about October 1995. At this time, the applicant states that Mr. Scarlett provided him with a letter advising that his commission payment would be reduced from twenty (20) percent to ten (10) percent effective immediately. Since the applicant had taken some time to build up a client base, this change occurred at a time when he had only just started to make any money from commissions.
Although the applicant did not respond to this letter of October 1995, he said that this was not because he had specifically accepted it. However, because he did not want to lose the benefit of his work building up a client base in the period from July 1995 to October 1995, he continued to work under these revised conditions until December 1996. The applicant was paid only ten (10) percent commission on fees charged to clients during the period from October 1995 to December 1996.
A further change to the applicant’s terms and conditions occurred in or around June 1996. At this time, Mr. Scarlett advised the applicant that he would now be required to pay GST on the commission payment that the applicant received from the company effective immediately. This change was made retroactive with the result that GST was charged for commission payments previously received by him. The applicant states that he did not, however, pay the full amount of the GST that the company’s accountant showed on the company books as owing. He did, however, pay the company a total of $360.00 on account of GST without objection or complaint. The applicant indicates that the amount charged to him for GST makes little sense, since if he was an independent contractor, as alleged by the company, he would charge the company GST, not the other way around.
The final proposed changes to the terms of his arrangement with the company were announced in or around December 1996. At this time, Mr. Scarlett advised the applicant that, effective January 1997, the company would begin charging him $100.00 a month rent for the office space. At around the same time, Mr. Scarlett also proposed to pay the applicant a set amount of $50.00 for each business plan, rather than ten (10) percent commission on the fee charged by the company for this service. The applicant told Mr. Scarlett that he would give him his decision about whether he would work under the revised arrangement in January 1997. Shortly thereafter in December 1996, the applicant advised Mr. Scarlett of his decision to quit working for the company, as a result of these further changes.
On January 27, 1997, the applicant filed a claim with the Ministry of Labour for outstanding wages owing to him from the company. At the hearing in this matter, the applicant claimed that the company owed him the following:
(1) payment of the difference between the ten (10) percent commission payment received during the period from October 1995 until December 1996 and the twenty (20) percent commission owing pursuant to the original terms of his contract of employment;
(2) reimbursement of the $360.00 paid on account of GST;
(3) payment of $500.00 representing monies owing in June 1996, for which the company gave him a NSF cheque for that amount at that time;
(4) payment of $1,000.00 representing a twenty (20) percent commission payment in respect of a business plan prepared by him, due in December 1996, and for which the company received a fee of $5,000.
These claims total $18,750.72, the majority of which relates to the claim set out in paragraph (1) above for the additional ten (10) percent commission alleged to be owing on fees generated after October 1995.
Decision
The first issue to be determined is whether the applicant was an employee of the company. If the applicant was not an “employee” of the company within the meaning of the ESA, then he would not be entitled to the protections offered by the statute and the Board would have no jurisdiction to order the company to pay the applicant for debts owing.
The definition of the terms “employee” and “employer” are set out in section 1 of the ESA as follows:
"employee" includes a person who,
(a) performs any work for or supplies any services to an employer for wages,
(b) does homework for an employer, or
(c) receives any instruction or training in the activity, business, work, trade, occupation or profession of the employer,
and includes a person who was an employee;
"employer" includes,
(a) any owner, proprietor, manager, superintendent, overseer, receiver or trustee of any activity, business, work, trade, occupation, profession, project or undertaking who has control or direction of, or is directly or indirectly responsible for, the employment of a person therein, and
(b) any associated or related corporations, individuals, firms, syndicates or associations treated as one employer under section 12, where any one has control or direction of, or is directly or indirectly responsible for, the employment of a person therein,
and includes a person who was an employer.
In determining whether or not an individual is an employee under this section, adjudicators under the ESA have frequently applied the fourfold test set out in the Montreal Locomotive Works, 1946 CanLII 353 (UK JCPC), [1947] 1 D.L.R. 161 at p. 169 decision: ownership of tools; chance of profit; risk of loss; and the element of control.
In the circumstances of the present case, it was the applicant’s undisputed evidence that Mr. Scarlett, the president of the company, exercised complete control over the manner in which the applicant performed his duties, including marketing strategies and other promotional activities designed to increase business. The applicant’s undisputed evidence was that he was also required to perform his duties during set business hours and to attend staff meetings just like the company’s office employees.
In addition, the company provided the applicant with the “tools” necessary to perform his duties as a financial consultant. The applicant had an office, a telephone, a computer as well as office staff employed by the company at his disposal to field calls for him. With respect to the applicant’s remuneration during the relevant period, the Board finds that the applicant’s commission arrangement was similar to that of a commissioned sales representative, who earns money for sales but is not responsible for the overhead costs of the office. Although the applicant was referred to as a self-employed consultant by the company, this factor alone is not determinative. Having regard to the applicant’s undisputed evidence, the Board concludes that the applicant was an employee within the meaning of the ESA. The applicant is therefore entitled to make a claim under the ESA for unpaid wages owing to him from the company.
The next issue to be determined is whether or not the company has breached section 7 of the Act by failing to pay the applicant the monies owing to him under his contract of employment. Section 7 of the ESA reads as follows:
(1) An employer shall pay to an employee, in cash or by cheque, all wages to which an employee is entitled under,
(a) an employment standard; or
(b) a right, benefit, term or condition of employment under a contract of employment, oral or written, express or implied, that prevails over an employment standard.
(2) All wages shall be paid at the workplace of the employee, or at a place agreed upon by the employer and the employee.
(3) All wages due and owing to an employee shall be paid by an employer on the regular pay day of the employee as established by the practice of the employer.
(4) If an employee is entitled to a payment upon termination of employment, the employer shall make the payment to the employee not later than seven days after the termination.
- If the employer has breached its obligation to pay the applicant the monies owing to him under his contract of employment, the Board must then consider whether or not the applicant’s claim for these monies is timely having regard to the provisions of section 82.3 of the Act. Pursuant to section 82.3 (1) of the Act, there is a limitation on the recovery of money. Section 82.3 reads as follows:
82.3 (1) In a prosecution or proceeding under the Act, no person is entitled to recover money that became due to the person more than six months before the date on which the facts upon which the prosecution or proceeding is based first come to the knowledge of the Director.
(2) Despite subsection (1), if a person's entitlement under the Act comes to the knowledge of an employment standards officer when he or she is investigating the complaint of another person, the first person is entitled to recover money that became due to the first person not more than six months before the date on which the second person's complaint is filed.
(3) In a prosecution for a failure to pay wages to the Director in trust as required by an order, the person is entitled to recover all money due under the order despite subsection (1).
(4) A person may recover money that became due before the date determined under subsection (1),
(a) if the money became due to the person not more than one year before that date;
(b) if, in the same prosecution or proceeding, the person is entitled to recover money that became due not more than six months before that date; and
(c) if the money referred to in clauses (a) and (b) became due to the person by virtue of the same provision of the Act or the same provision of the contract of employment.
(5) For the purposes of this section, money shall be deemed to have become due on the following date:
In the case of a failure to pay termination pay to the Director under subsection 57 (21), the date on which, had the required payment been made, the employee would have been deemed under clause 57 (21) (b) to have abandoned the right to be recalled.
In the case of a failure to pay severance pay to the Director under subsection 58 (12), the date on which, had the required payment been made, the employee would have been deemed under clause 58 (12) (b) to have abandoned the right to be recalled.
(6) If the facts upon which a proceeding or prosecution is based first come to the knowledge of the Director within 60 days after the day on which this section comes into force, the person may recover money that became due more than six months before the date determined under subsection (1) or (2),
(a) if the money became due to the person not more than two years before the date determined under subsection (1) or (2); and
(b) if it became due before the day on which this section comes into force.
The facts upon which the prosecution or proceeding is based, in this case, first came to the knowledge of the Director on the date the applicant filed his claim with the Ministry of Labour on January 27, 1997. According to subparagraph (1) of this provision, the recovery of monies is therefore generally limited to monies due to the applicant in the six months prior to that date, unless the exceptions set out in subparagraphs (2) to (4) of this section apply to the monies claimed by the applicant.
The Board will now turn to a consideration of the applicant’s claim for outstanding wages. In order to assess whether or not the amounts claimed by the applicant represent “wages” owing to him pursuant to his contract of employment, it is first necessary to determine what the terms of the applicant’s employment contract were at the relevant time. Based on the applicant’s undisputed evidence, there is no doubt that his original contract of employment was for payment of twenty (20) per cent commission on all fees charged by the company. However, in or about October 1995, the employer unilaterally altered that arrangement when it announced a reduction to ten (10) percent commission. This represented a fifty percent reduction to his remuneration from the company and would clearly have amounted to a constructive dismissal had the applicant asserted it at that time.
The applicant, however, continued to work for a lengthy period of over a year thereafter under the revised terms and conditions without objection. Although the applicant did not specifically agree to the change, there is no evidence that he ever objected to the revised terms. While the applicant’s decision to continue to work under the revised conditions without objection for a period of over a year is perhaps understandable, the Board nonetheless finds that the applicant’s conduct amounts to acquiescence in the revised terms and conditions of his employment. Where an employee consents to a change in his or her remuneration by continuing to work beyond a reasonable trial period, he or she will generally be said to have condoned the change and will thereby be bound by a fresh contract. (See, for example, Gray v. Electrolux Canada (No. 1) (1986) 1986 CanLII 4874 (MB QB), 45 Man. R. (2d) 82 at p. 87 (Q.B.) and Langley v. G.H. Wood & Wyant Inc. (1998), 1998 CanLII 2105 (NS SC), 34 C.C. E.L. (2d) 13 (S.C.). In all of the circumstances, the Board therefore finds that the terms of the contract had therefore changed such that he could no longer be said to be entitled to the full twenty (20) percent commission payment.
Similarly, the Board finds that the applicant acquiesced in, or condoned, the revision to his arrangement with the company in June 1996 which required him to pay $360.00 in respect of GST. He did so by continuing to work without complaint for over half a year after this requirement was announced in June 1996. For all of these reasons, his claim for the amounts representing the difference between ten (10) and twenty (20) percent commission in the period from October 1995 to December 1996 and for reimbursement of the $360.00 paid to the company in respect of GST is denied.
As noted above, the remaining claims are for the amount of $500.00 owing as a result of the NSF cheque provided to the applicant in June 1996 and the $1,000.00 commission payment due and owing in December 1996. Based on the applicant’s undisputed evidence, the Board finds that the company owes the applicant the amount of $500.00 and that this amount was due and owing in June 1996 when the company gave him an NSF cheque for that amount. The Board, however, finds that the amount owing in June 1996 as a result of the NSF cheque falls outside of the six month restriction on recovery set out in section 82.3 (1) of the ESA. As none of the exceptions to that restriction set out in the remaining subparagraphs of that section apply, the claim for this amount is also denied.
With respect to the applicant’s claim for outstanding commissions owing in December 1996 for preparing a business plan, the Board finds, on the evidence before it, that the applicant was, at that time, entitled to commission on all fees charged by the company relating to his work under the applicant’s contract of employment at a rate of ten (10) percent, rather than twenty (20) percent. Although Mr. Scarlett proposed in December 1996 to revise the arrangement again such that the applicant would receive only $50.00 for each business plan, that was not the terms of the applicant’s employment at that time. The applicant never accepted that revision to his contract and ultimately decided to quit because of the changes proposed in December 1996. The Board therefore finds that the applicant is entitled to $500.00, representing outstanding commissions owing at a rate of ten (10) percent. The Board further finds that this commission payment became due to the applicant in December 1996 and therefore falls within the six-month period referred to in section 82.3(1) of the ESA. The applicant is therefore entitled to recover the amount of $500.00 commission relating to work performed preparing a business plan.
The Board therefore orders that the responding party, Topline Financial Services, to pay forthwith to the applicant the sum of $500.00, plus interest thereon at the
prescribed rate under the Courts of Justice Act calculated from January 27, 1997 to the date of payment.
“Caroline Rowan”
for the Board