1547-99-ES Isomeric Inc., Applicant v. Colin Hutsell and Ministry of Labour, Responding Parties.
Employment Practices Branch File No. 34001587
BEFORE: Patrick Kelly, Vice-Chair.
APPEARANCES: Richard Payne and Dean Edwards appearing on behalf of the applicant; Colin Hutsell appearing on his own behalf; Karen Northey appearing on behalf of the Ministry of Labour.
DECISION OF THE BOARD; May 15, 2000
1The style of cause is hereby amended to reflect the correct name of the applicant as noted in the appearance sheet: "Isomeric Inc.".
2This is an application filed pursuant to section 68 of the Employment Standards Act, R.S.O. 1990 c.E-14, as amended ("the Act") requesting a review of Order to Pay No. 48812 of an Employment Standards Officer ("the Officer") who determined that Mr. Hutsell, one of the responding parties in this matter, was entitled to wages and vacation pay for the nine week period of his employment with Isomeric Inc. based on a calculation using the minimum wage of $6.85 per hour, multiplied on a 36-hour work week.
3The hearing in this matter took place on March 22, 2000. Mr. Hutsell was not represented by legal counsel, and accordingly I advised him that, while entitled to represent himself, this was a legal proceeding which would affect the interests, rights and obligations of the parties, and that he bore the risk of participating without legal counsel.
4The applicant, Isomeric Inc. ("Isomeric" or "the company") took the position that Mr. Hutsell was not entitled to any monies because of an agreement between the parties wherein Mr. Hutsell was to be paid a commission only, based on sales generated. No one disputed that such an agreement had been reached between Mr. Hutsell and Isomeric. The Officer who issued the Order to Pay, however, determined that Mr. Hutsell was not exempt from the provisions of the Act's minimum wage protections, because he was not a commissioned salesperson within the meaning of Regulation 325, section 3(1)(h), a finding that Isomeric disputed at the hearing in this matter. Moreover, the Officer determined that to the extent the parties to the employment relationship attempted to contract out of the minimum standards set by the Act, such attempt was null and void, by virtue of section 3(1) of the Act. Counsel for the Ministry of Labour took the position that the Officer was correct in issuing the Order to Pay.
5The applicable provisions of the Act and Regulation 325 are as follows:
- (1) Subject to section 4, no employer, employee, employers' organization or employees' organization shall contract out of or waive an employment standard, and any such contracting out or waiver is null and void.
3.(1) Parts IV, V, VI, VII and VIII of the Act do not apply to a person employed,
(h) as a salesperson, other than a route salesperson, who is entitled to receive all or any part of his or her remuneration as commissions in respect of offers to purchase or sales of goods, wares, merchandise or services and which offers or sales are normally made at a place other than the place of business of the employer; or …
6Isomeric's position with respect to the effect of the agreement of the parties on Mr. Hutsell's compensation arrangements is untenable. Quite simply, if Mr. Hutsell is not exempt from the minimum wage protections of the Act, the agreement of the parties to pay Mr. Hutsell commission only is null and void to the extent the effect of that agreement is that Mr. Hutsell received less than minimum wages during his approximately nine weeks with the company. Everyone agrees that he received absolutely no wages during that time.
7Clearly, section 3(1) of the Act prevents employers and employees from entering into an enforceable transaction the kind of which was reached in the instant case, unless, of course, there is some exemption elsewhere in the Act or the Regulations passed pursuant to the Act. Consequently the success of Isomeric's application rests solely on whether or not section 3(1)(h) of Regulation 325 exempts Mr. Hutsell from the wage protection provisions of the Act. That is a matter of a finding of the facts.
8Isomeric is a search firm, operating at a single location in Toronto, Ontario. It attempts to place people in the information technology industry with employers looking for individuals with those skills. Typically the way Isomeric does this is by recruiting information technology experts ("applicants") who are looking for employment. Once the company has found a marketable applicant, it then contacts a wide range of employers to determine if they are looking for individuals with skills similar to that of the applicant. If any employer expresses interest, then arrangements are made for the employer to interview the applicant at the employer's place of business, without the participation of Isomeric. Sometimes Isomeric refers to the employer several applicants, a short list of the best people the company can find at any given time. Either way, if at the end of the day the employer wishes to hire an applicant referred by Isomeric, an offer of employment is forwarded to Isomeric's office in Toronto, and Isomeric arranges to obtain the applicant's signature of acceptance. When that is done, Isomeric remits the executed offer of employment to the employer, together with an invoice.
9It is at this point that the employer's obligation to pay Isomeric crystallizes. In fact, short of a completed offer and acceptance of employment, Isomeric receives no remuneration from the employer. (Isomeric receives nothing from the applicant regardless of whether the sale is completed or not.). The agreement between Isomeric and the employer, sometimes written, sometimes oral is that once an applicant is offered and accepts employment, Isomeric gets paid. Upon completion of the transaction, Isomeric collects a fee from the employer, which represents a percentage of the applicant's starting annual salary/wage. That percentage ranges from 15 to 25 per cent.
10Isomeric uses its own employees to do both the recruiting work and the contact with the employers. These employees are called consultants. Isomeric employed about eighteen such consultants, in addition to two or three administrative support employees, at the time of Mr. Hutsell's employment. These consultants either recruit applicants, or they look for employers who require employees with information technology expertise, but not both functions. When Isomeric collects its fee from the employer, it remunerates two consultants: the one who finds the applicant, and the one who finds the applicant an employer. Mr. Hutsell was the latter type of consultant.
11The remuneration for all the consultants is based on one principle: the completion of transactions. Consultants are not entitled to any remuneration until a transaction is completed. Sometimes the company will advance to the consultant his or her share of the fee before the company actually receives it from the employer. But the point is, nothing is payable until an employer offers, and an applicant accepts employment.
12Apparently, some of the consultants are quite successful in generating income. Some earn as much as $200,000.00 annually. Many can expect to earn at least $50,000.00 a year.
13Isomeric's premises consist of a reception area, three private offices, a vacant office that is used by the consultants to hold meetings, and a large "bullpen" area where office equipment, a telephone, filing cabinets and a personal computer containing the company's data base are housed. The consultants have free reign of the bullpen. Although there was some dispute as to the amount of face-to-face contact with employers and applicants at these premises, I find that there might have been some, but that for the most part, contact between consultants and their respective clients was via telephone. As a practical matter, Isomeric's 4000 square foot premises simply could not accommodate a steady flow of its hundreds of employer clients and thousands of applicants.
14Mr. Hutsell came to Isomeric with skills in the selling of automobiles. He knew little of the computer industry. He had no experience in the employee search business. Nevertheless, Isomeric thought he would make a competent consultant on the basis of his sales skills and training in information technology provided by Isomeric. Typically, Isomeric looks for one or the other of sales skill or computer knowledge when it is considering the hire of consultants.
15Mr. Hutsell began employment with Isomeric on December 7, 1998. He understood that his income depended solely on completing transactions with prospective employers, and that he would, as promised, receive training from Isomeric to enable him to do just that. As it turned out, however, the relationship was neither to his nor to the company's benefit, as Mr. Hutsell was unable to complete any sales. On February 17, 1999, some nine weeks later, Mr. Hutsell's employment with Isomeric came to an end.
16Mr. Hutsell's activities during that nine-week period are critical to the determination of this case. There is no dispute he received some training by the principals of Isomeric within the first ten days of his employment. It was also undisputed that most new consultants do not realize any income until about sixty days following the start date, because as the company admitted, there is a fairly lengthy "learning curve" during which the new consultant must learn to develop contacts and gain an understanding of the business. In response to his counsel, the company's president, Dean Edwards, described Mr. Hutsell's work ethic as "medium". I take this to mean that Mr. Hutsell made reasonable, but not remarkable effort on the job. With respect to the training given to Mr. Hutsell, Mr. Edwards stated that he and his partner "spent time" with Mr. Hutsell explaining technology and helping him prepare a telephone script that could be used in making contact with prospective employers. Mr. Edwards stated that the first three days of training were taken up with basic technology, and the rest was "ongoing". Apparently during that period, Mr. Hutsell would have become aware of Isomeric's own computer data base containing names of current and prospective employers and applicants.
17Mr. Hutsell's evidence is that for the nine weeks of his employment he routinely arrived at work at around 8:30 a.m. each weekday, and was on the phone in the bullpen by 9:00 a.m. each day making calls to employers. He said he made between 50 and 75 such calls a day (which accords with Mr. Edwards testimony concerning the average number of calls the consultants make on a daily basis), and that his work day typically ended at 4:30 or 4:45, with an intervening lunch period of 30 to 45 minutes. Almost all of his work was done at Isomeric's premises, although he testified that he made some evening phone calls from his home, and, on one occasion, visited an employer from whom he had received a "job order", which is an indication by an employer that it would like to have applicants referred from Isomeric for a job opening. Apparently, Mr. Hutsell obtained several such job orders, but was never fortunate to see any of them become final transactions for which he would have obtained remuneration.
18Mr. Edwards testified that the consultants are free to come and go from the company's premises as they please. The expectation is that they will telephone or otherwise contact clients, and there is no requirement that the consultant be situated at Isomeric's premises for that purpose. Asked in cross-examination whether the consultants generally put in a regular work day, Mr. Edwards stated that it depended on the individual, and that some of Isomeric's consultants never do. He admitted, however, that new consultants are much more likely to work a regular work day, and further that they are likely to spend most of their time at the company's office in carrying out and learning their tasks. He was not able to say how much time Mr. Hutsell actually spent at the company's office, but he offered no evidence that contradicted Mr. Hutsell's assertion that he spent almost all of his 36 weekly working hours at the company's premises.
Decision
19I was not referred by any of the parties to any cases or decisions that might assist in determining the issues in this matter.
20While it may be that in the ordinary course, a new consultant of the company eventually makes sales of the company's services at a place other than the company's place of business, the reality is that for a period of time the new consultant is much more likely to complete transactions while working out of the company's office. It will be recalled that the company's evidence was that it would take about sixty days from the commencement of employment to receive any remuneration because of the time necessary for a new consultant to learn the job. It was also the company's evidence that new consultants would spend most of their time at Isomeric's office. It did not contest Mr. Hutsell's testimony that he spent almost 100% of his entire period of employment at Isomeric's premises.
21Counsel for the applicant attempted to characterize the typical telephone transaction as one that involves the making of a decision by an employer at the employer's premises. That argument conveniently overlooks the fact that Mr. Hutsell, the representative of one half of the transacting parties, was situated at the company's office, and that had he closed any of his potential sales, he would most likely have been situated at his desk at the office at the time. There was no reason given by counsel as to why, in such a situation, the Board should conclude that the transaction actually concludes at a place other than Isomeric's place of business. In Mr. Hutsell's circumstances, had he been able to bring an employer and applicant together, the focal point for the completion of the documentation binding the employer to the applicant in an employment contract would have been Isomeric's office. It would have been Isomeric's office where the faxed offer of employment would be received by Mr. Hutsell, and it would have been from Isomeric's office that an invoice would issue to the employer, upon acceptance of the offer by the applicant.
22There may be situations where new consultants immediately generate sales, and do so off-site. This was not one of those instances. Had Mr. Hutsell made any sales as a new consultant, I find that they normally would have occurred while he was at Isomeric's premises. The exemption found in section 3(1)(h) of Regulation 325 appears to be based on the notion that employees who are not subject to the usual controls of the employer in terms of reporting for duty, or, for that matter, actually performing work cannot expect a guarantee of statutory minimum wages. But the evidence in this case suggests that the expectation was that new consultants would work mostly out of the company's office, and establishes that Mr. Hutsell in fact did work almost exclusively there. That may well have changed had the period of employment been longer, and it may be that the other consultants currently employed by the company complete their transactions away from Isomeric's office. However, during Mr. Hutsell's employment he was reporting for duty daily and he was performing work for the company.
23I find that the exemption in section 3(1)(h) of Regulation 325 is not applicable in this case. Mr. Hutsell was entitled to minimum wages, based upon a
36-hour work week, pursuant to the Act, and to vacation pay calculated on the amount of the minimum wages.
DISPOSITION
24The Board makes the following orders and directions:
(i) that of the total amount of $2,539.00 held by the Director in trust, in relation to this matter, the wages be disbursed as follows:
to be paid to the Employee $2,308.18
(ii) that the administration fee
as set out in the Order to
Pay be retained by the
Government of Ontario
Consolidated Revenue Fund $ 230.82
(iii) interest, if any, on the amount held
by the Director in trust is to be distributed
pro rata on the amounts referred to in
subparagraphs (i) and (ii) above;
(iv) the application is dismissed.
"Patrick Kelly"
for the Board