Fischer Cosmetics Corp. v. Manon Labrie and Ministry of Labour

1671-00-ES Fischer Cosmetics Corp., Applicant v. Manon Labrie and Ministry of Labour, Responding Parties.

Employment Practices Branch File No. 22022756

BEFORE: Pamela Chapman, Vice-Chair.

APPEARANCES: Loretta Fischer for the applicant; Manon Labrie appearing on her own behalf; Karen Northey for the Ministry of Labour.

DECISION OF THE BOARD; September 17, 2001

1This is an application for review of the decision of an Employment Standards Officer, pursuant to section 68 of the Employment Standards Act as amended by the Economic Development and Workplace Democracy Act, 1998, S.O. 1998, c.8 ("the ESA").

2The responding party ("the employee") filed a claim with the Ministry of Labour seeking the payment of unpaid wages, vacation pay, termination pay and reimbursement for the deduction of unauthorized amounts from her pay by the applicant ("the employer" or "Fischer"). The officer appointed to investigate the claim concluded, having regard to the information provided by the applicant and by the employer, that there had been a frustration of contract and the employee was therefore not entitled to termination pay, but did order the payment of unpaid wages and vacation pay, and reimbursement for unauthorized deductions. She therefore issued Order to Pay #55708, dated August 17, 2000, requiring the employer to pay to the employee $2,312.91. The employer asks the Board to rescind or amend the Order to Pay.

3At the hearing held in this matter the applicant and employer had an opportunity to give oral testimony and to introduce into evidence various documents, as well as to make submissions concerning the application for review. Having regard to the evidence and to those submissions, the following is my decision.

THE FACTS

4The dispute in this matter is essentially one of quantum, as the parties disagree on the basis on which the employee was being compensated by the employer and the effect this has on the amounts owed.

5Manon Labrie began to work at Fischer's the Spa Upstairs, operated by Fischer Cosmetics Corporation, on November 15, 1997, as an esthetician.

6Beginning with the payroll in October 1998 the employer began to pay Labrie on the basis of a straight 45% commission on the services she provided, together with a 3% commission on her sales of products. This arrangement was confirmed by an undated letter which the employee acknowledged she had received. The letter indicated that the October payroll would be based on September commissions.

7The employer testified that she calculated how much pay to provide to Labrie in October by totalling her services and sales for the month of September and applying the appropriate commission rate. Both employer and employee testified that the computer at the workplace was able to produce a monthly total for each employee in each category, and there was no dispute that these "tapes" were accurate. Indeed, employees could access their totals in order to see how they were doing at any point in the month.

8Applying this formula, the employee received in October 1998 $1,751.49 in commission on services, and $49.91 in commission on sales, which was 45% and 3% respectively of her total services and sales in the month of September. During the month of September she was paid $1,570.50 in wages, and $29.24 as the commission on her sales. The amount for services was based on an hourly wage, while the sales amount reflected her sales during the month of August 1998.

9Manon Labrie was terminated from employment at the spa when she offered her resignation on June 4, 2000, in order to start her own business. She had at that time been paid no monies on account of her services and sales for the month of May 2000, or for the first four days of June.

10The employer calculated the amount it asserts would have been payable for wages in June by pro-rating the commission amounts payable in June based on service in May by the number of days she actually worked in June. It is undisputed that 45% of the total services provided by Labrie in May amounts to $3,180.36, and that the 3% commission on sales for that month would be $12.63. The employer took the amount of $3,180.36 and multiplied it by four days out of 22 working days in the month of June, to generate the amount of $450.54 which it claims is the amount of wages owed to the employee at termination. It adds to that amount the $12.63 in sales commission, and accrued vacation pay in the amount of $411.31, for a gross amount owed of $1,004.48 (net total after deductions $877.02).

11There was some dispute about whether the employee had actually received a cheque for that amount, but it was clearly established at the hearing that she had not.

12The employee also worked for four days in June, and it is undisputed that 45% commission on the services provided by her for that period would have been $761.70, while a 3% commission on her sales would have been $4.44.

13The employer also claims, however, that the employee owes $479.49 for products she took with her when she left, and that it should also be permitted to deduct from these amounts $945.00 for commissions she was paid in advance for electrolysis packages which were not completed at the time of her resignation. The employee disputes these amounts, but has provided a written authorization for the deduction of $185.36 in commissions paid in advance for services which she admits were not performed.

THE DECISION

14The employee's claim for unpaid wages is based upon the agreement with the employer that she would be paid 45% commission on services performed, and 3% commission on sales. Labrie notes that she in fact performed services for the employer's operation in both May and June, as well as making sales, and that she is therefore entitled to be paid the agreed upon percentages of those amounts.

15The employer takes the position that the employee was paid wages in each month she worked for the company, except for the four days in June. It agrees that she is owed money for those days, and that the amount owed must be calculated with reference to her services and sales in May 2000, but claims the amount owed should be prorated to reflect the fact that she only worked four days out of 22 working days in the month. To pay the employee the full commission amounts for May and June, would, the employer asserts, amount to a windfall for the employee.

16The employer characterizes the compensation system it adopted in October 1998 as an agreement that employees would be paid wages in each month, for that month, but that the amount of wages payable would be calculated based upon the volume of services provided in the previous month. A better way to characterize the commission system is as an agreement to pay straight commission employees one month in arrears, which was necessary given the need to calculate month end totals. This appears to have always been the system with respect to the commission on sales, which Labrie received beginning her second month of work, and which was always calculated based upon sales in the preceding month.

17However, Labrie was paid an hourly wage in September 1998, which effectively means that she was paid twice for her work during that month if we consider her pay in October to be delayed compensation for the services provided in September (which is indisputably the basis upon which the monies paid to her in October were calculated).

18By way of contrast, she was not advanced any commission on sales before the end of the first month in which she actually made sales; in November 1997 when she began work she was paid no sales commission but only a straight wages amount calculated on an hourly rate.

19In order to calculate the amount owed to the employee given the practice of paying in arrears, the Employment Standards Officer did a month to month reconciliation of the amounts owed as a result of the 45% commission on services performed in each month, against the amounts actually received that month, beginning in May 1999. The employer objects to that approach as the Officer adopted an arbitrary starting point for the reconciliation.

20A more complete reconciliation would take into account the full period during which the employee was receiving straight commission, beginning in October 1998, but based on services performed in September 1998. As noted above, this change essentially resulted in her being paid twice for the month of September 1998, with the monies paid within that month constituting an advance on the commissions she was earning and which were paid out in October. Having carefully reviewed all of the payroll information provided, I have concluded that the appropriate way to reconcile amounts owed and paid during the period is to deduct the advance received in September against the amounts actually earned by Labrie beginning that month and continuing until her last day of work on June 4, 2000.

21This approach results in the following calculation:

COMMISSION ON SERVICES (45%) PAYABLE:

May 2000 $3,180.36

June 2000 $ 761.70

$3,942.06

Deduct: advance received

September 1998 $1,570.50

TOTAL $2,371.56

22The employee is also owed sales commission for the months of May and June 2000. There was no advance received against sales, as this commission was always paid one month in arrears, so no deduction against these amounts is appropriate. These amounts must therefore be added to the total of unpaid wages:

BALANCE $2,371.56

COMMISSION ON SALES (3%) PAYABLE:

May 2000 $ 12.63

June 2000 $ 4.44

TOTAL $2,388.63

23As noted above, there is also a dispute over amounts the employer claims are owed by the employee, which it seeks to deduct from these unpaid wages. Section 14(1)(c) of Regulation 325 under the ESA clearly prohibits such deductions or set off against wages unless permitted by statute, court order, or by written authorization of the employee. The employee has provided a written authorization for the deduction of $185.63 from unpaid wages, but disputes the employer's claim for a greater amount. There is no evidence that written authorization was ever provided for the additional deductions sought by the employer, and in those circumstances I have no jurisdiction to set off the amounts claimed against the amounts owed by the employer. Should the employer's claim have some basis, it will have to be pursued in another forum. The authorized deduction results in the following adjustment to the amount owed for unpaid wages:

BALANCE $2,388.63

Deduction authorized

in writing $ 185.63

TOTAL $2,203.00

24The employee is also owed accrued vacation pay, and vacation pay on the above amounts. The employer had acknowledged that the amount of $411.31 was owed in accrued vacation pay, which included vacation pay on the $580.54 in service commission and $12.63 in sales commission which it asserted were owed in the month of June 2000. That amount must be adjusted to reflect the increase in the amount of unpaid wages I have calculated as owing, resulting in the following calculation:

BALANCE $2,203.00

Accrued vacation pay $ 411.31

Additional vacation pay $ 64.39

($2,203.00 - $593.17 = $1,609.83 X 4% =$64.39)

TOTAL $2,678.70

25I have carefully reviewed the large number of payroll documents and calculations provided to me by the parties, and I am satisfied that the above calculations accurately reflect the amounts owed by the employer as unpaid wages and vacation pay at the time of the employee's termination in June 2000.

DISPOSITION

26The Application for Review is allowed in part and the Order to Pay is amended as follows. I hereby order:

(i) that the wages paid to the "Director in trust" in relation to this matter be disbursed as follows:

To be paid to the Employer $ 0.00

To be paid to the Employee $ 2,312.91

that the administrative fee as $ 231.29 set out in the Order to Pay be retained by the Government of Ontario Consolidated Revenue Fund

Total amount held by the Director: $2,544.20

(ii) interest earned on the monies held in trust in this matter is to be paid to the above parties in proportion to the amounts paid out.

27The employer is further ordered to pay to the employee the amount of $365.79, which is the difference between the amount calculated by the Employment Standards Officer as payable in unpaid wages and vacation pay and contained in Order to Pay #55708, and the amount actually payable as calculated above.

"Pamela Chapman"

for the Board