Worker with manager in job title wanted six months’ notice but got three; job was primarily sales with no subordinates
An Ontario employer must pay a fired employee with 28 months’ service wrongful dismissal damages equal to three months’ pay, plus commission he would have been paid during the notice period, the Ontario Superior Court of Justice has ruled.
Peter Iriotakis, 57, began working for Peninsula Employment Services Limited, a human resources consulting firm in Toronto, in November 2017. His job title was business development manager, although he didn’t have any subordinate employees reporting to him. His job duties involved working from home or on the road selling compliance services to HR and health and safety professionals and organizations, along with developing customer relationships. He had 14 years of sales experience before joining Peninsula, but only two years were related to the type of services Peninsula offered.
Iriotakis received a base salary, but the majority of his compensation came from commissions on the services he sold. He was subject to an employment agreement containing a termination clause that stated that, in the event Iriotakis was terminated for cause, Peninsula was absolved from all liability, including accrued but unpaid wages.
The employment agreement allowed for payment of up to 10 per cent commission of the net value of all new business secured, paid on a monthly basis. However, under Peninsula’s sales, commission and bonus scheme rules, commissions were calculated and paid after nine months because they depended on the payment and cancellation history of the client to whom the sale was made. The rules also stipulated that someone had to be “actively employed” to qualify for any commission or bonus payment and such entitlement “will cease immediately upon termination of your employment.”
The sales, commission and bonus scheme rules were changed in 2019, mostly to clarify some of the language. The new rules stated that there would be “no entitlements upon termination for any reason.” Iriotakis signed the revised rules and acknowledged that he had received and read them.
Peninsula terminated Iriotakis’ employment without cause on March 25, 2020 — 28 months after the company hired him. It paid him four weeks’ worth of his base salary plus benefits but no amount for any commissions. The company felt that he didn’t earn any commissions following his termination, so there was no entitlement for a reasonable notice period.
Iriotakis found another job in October 2020, seven months after Peninsula dismissed him. The base salary was slightly less than what he had earned with Peninsula. He sued Peninsula for wrongful dismissal, claiming he was entitled to common law reasonable notice of at least six months, given his title of business development manager. He also claimed entitlement to commissions for the notice period on sales made prior to the termination of his employment, claiming that the provision preventing entitlements upon termination for any reason in the revised commission rules wasn’t brought to his attention.
Peninsula acknowledged that the termination clause of the employment contract was unenforceable, since it could potentially violate employment standards minimums by denying Iriotakis payment of accrued wages in the event of termination for clause. However, it argued that he was entitled to no more than two to three months of reasonable notice.
The court agreed that the employment contract was unenforceable and Iriotakis was entitled to common law reasonable notice of termination. As a result, the issue was the appropriate period of notice and whether Iriotakis was entitled to any commission payments.
Experience, role not factors for notice entitlement
The court found that Iriotakis’ experience wasn’t a significant factor in determining notice, as it wasn’t specialized — he had a lot of sales experience but only a couple of years in the HR consultancy and compliance industry. In addition, he found another sales job seven months later that was in a different industry again.
The court also found that Iriotakis’ job title of business development manager didn’t reflect the true nature of his job. He had no employees reporting to him and didn’t have the authority to make significant decisions. His main responsibilities were to nurture customer relationships and sell Peninsula’s services. As a result, the character of his employment didn’t boost to his notice entitlement.
However, Iriotakis’ age and the uncertainties of the job market at the time of his termination were factors that pushed the reasonable notice period away from a short period “that his short period of service might otherwise indicate,” said the court.
The court noted that the COVID-19 pandemic likely had some influence over Iriotakis’ job search, but it found that “the impact of the pandemic on the economy in general and on the job market, in particular, was highly speculative and uncertain to both as to degree and to duration at the time Mr. Iriotakis’ employment was terminated.” The court also found that payments that Iriotakis received from the Canada Emergency Response Benefit (CERB) should not be deducted from any damages because CERB wasn’t an entitlement that either the employer or the employee paid into and was significantly lower than the base salary Iriotakis would have earned during the notice period.
The court determined that Iriotakis was entitled to three months’ reasonable notice.
As for Iriotakis’ entitlement to commissions for the notice period, the court found that there was no doubt he read and was aware of the revised 2019 rules, as he signed and acknowledged them. The revision also provided him with enhanced earning opportunities, which was enough consideration for the changes to his terms of employment. However, employment standards legislation requires employers to pay all “earned” wages upon termination — which could include some commissions on sales from before his termination, said the court.
The court found that, given the nine-month period for calculation of commissions, Iriotakis would have earned commissions on sales he made between six and nine months prior to his termination, had he been given three months’ working notice. Therefore, he was entitled to those commissions.
“Having deprived the employee of the notice to which he was entitled, the employer must put the employee in the same position — as far as money can do — as the employee would have been in at the end of the working notice he or she failed to receive,” said the court. “The amount so determined is not commission under the [Peninsula commission rules] per se but damages calculated as the amount of money that [Iriotakis] would have received under the rules but for the breach of contract by the employer.”
Peninsula was ordered to pay Iriotakis the equivalent of three months’ base salary, benefits and accruing commission minus what he had already been paid.
For more information, see:
- Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 (Ont. S.C.J.).