Expense Reduction Analysts International Canada Inc. v. Angeli Anand and Ministry of Labour
Employment Practices Branch File No. 43002865
BEFORE: John Morgan Lewis, Vice‑Chair.
APPEARANCES: Ross Pinkerton, Anil Nanda, Vernon Robinson, James McMahon for the applicant; Angeli Anand on her own behalf; Judie Im and Karen Northey for the Ministry of Labour.
DECISION OF THE BOARD; August 16, 2001
1This is an application to review Order to Pay No.55166 issued by an Employment Standards Officer pursuant to section 68 of the Employment Standards Act, 1990 R.S.O. 1990, c. E.14, as amended (the “Act”).
2The Employment Standards Officer held that the applicant, Expense Reduction Analysts International Canada Inc. (the “employer”) breached sections 7 and 30 of the Act by failing to pay outstanding commissions and vacation pay to the claimant, Ms. Angeli Anand. A hearing was conducted on July 26, 2001. The facts are largely not in dispute although the parties seek the Board to draw different inferences and conclusions based on those facts. Many of the issues placed before the Board were not relevant to the determination of this application and are not referred to in the decision.
3The employer is a consulting firm that identifies and recommends cost saving initiatives to its clients. In the event that a client accepts the recommendations, the employer assists the client to implement the cast saving initiative. During the eighteen-month post-implementation period, the employer monitors and verifies the actual savings achieved. The employer’s fees are based on a percentage (typically 50%) of the savings achieved by the client during the eighteen-month period. No other fees are payable. The entire process from the initiation and contact with the client to the collecting of fees can take approximately two years.
4Mr. Ross Pinkerton is the President of the employer and described the three key stages of the sales process. The first stage is to get a potential client to sign the standard agreement which does nothing more than permit the employer to review the client’s expenditures in a specific area of operation. The agreement sets out the process to be followed and the fees to be paid to the employer on savings realized upon the successful acceptance and implementation of the recommendations. There is no obligation on the client at this stage (or indeed at any stage in the process) to accept any recommendation put forward by the employer. Once the agreement is signed, analysts review the expenditure information and identify cost saving recommendations. The second stage of the sales process is to convince the client to accept the recommendation put forward by the analyst. The third stage of the sales process is to convince the client to implement the recommendations. This can prove to be rather difficult even if significant savings have been identified. Many organizations are resistant to change and the recommendations which are to be implemented may be met with hostility by those within the organization who feel threatened by them. It is only after the recommendations have been implemented and savings have been realized that the employer is entitled to be paid for its services. The sales functions were the responsibility of the Sales Executive or those contracted by the employer in a similar position.
5Ms. Anand was initially hired by the employer on April 6, 1999 in the position of Vice President. This position was intended to be focused on sales with some administrative duties to be performed. It became apparent to the parties that Ms. Anand was increasingly performing more administrative/clerical duties to which she was not particularly well-suited nor happy to be performing. On June 26, 1999 Ms. Anand was offered the new position of Sales Executive. Although she never signed an employment contract that was drafted by the employer, she commenced her new duties soon after receiving the offer. As Sales Executive, Ms. Anand’s sole focus was on sales. The proposed compensation package reflected that fact, as her salary was greatly reduced, but she now had the opportunity of earning commission based on the fees generated by the employer. For various reasons which need not be set out in this decision, Ms. Anand became dissatisfied with her job and tendered her resignation to the employer on August 11, 1999 to be effective on August 30, 1999. Her last day of work with the employer turned out to be on August 20, 1999 due to a falling out with the employer.
6During her tenure as Sales Executive, Ms. Anand was able to secure 4 contracts with clients. The employer was successful in implementing recommendations on 2 of the contracts which generated fees. There was no dispute that the employer received fees on the 2 contracts in the amount of $9,771.91 as of the date Ms. Anand filed her claim. It was also not disputed that Ms. Anand’s commission was based on 15% of fees received by the employer. Ms. Anand therefore claims that she is entitled to commission in the amount of $1,465.79 as well as vacation pay which brings her total entitlement to $1,524.42.
7Ms. Anand asserts that she is entitled to her commission on all fees received by the employer with respect to those contracts which she had executed. She maintains that once the contracts were signed she became entitled to commission. Ms. Anand admitted that she performed no other duties with respect to those contracts and in particular did not seek to obtain client approval for the recommendations nor did she play any role in the implementation of the recommendations.
8The Board disagrees with the claimant’s assertion. Ms. Anand is not entitled to any commission on the 2 contracts which were entered into prior to her departure from the employer. The signing of the contracts was nothing more than opportunity for the employer. The clients were under no obligation to pay any fees to the employer at this preliminary stage. The sales process is long and involved and requires the sales executive to meet with clients to obtain their approval for the proposed recommendations, and then to agree to implement the recommendations. The Board finds that Ms. Anand’s contribution in securing the 2 contracts was too remote, preliminary and minimal to confer entitlement to commissions arising from the fees ultimately received by the employer in relation to the 2 contracts.
Disposition
9Order to Pay No. 55166 is hereby rescinded. The Director is directed to return the monies held in trust, including the administrative fee, and any interest accrued, to the employer, as soon as practical.
“John Morgan Lewis”
for the Board