Commissions can be settled later but all employees who are not strictly on commission must be paid at least the equivalent of the weekly minimum wage
The recent New Brunswick Court of Appeal decision J. Clark & Son, Limited v. New Brunswick provides guidance on to whom the minimum wage applies in the province and how it should be paid to employees who are paid a commission. The Court of Appeal decision was rendered on April 11, 2019, following changes to the province’s Minimum Wage Regulation – Employment Standards Act, NB Reg 2019-2, which came into force on April 1, 2019.
The matter originated from a complaint made by an automobile sales consultant, formerly employed by J. Clark & Son Limited.The employee (RRB) received a weekly compensation of $350, which consisted of $150 in base pay, $200 as an advance for her commission sales and a $57.69 car allowance. She was paid bi-weekly. J. Clark & Son Limited’s longstanding practice was to settle all commissions on a monthly basis.
RRB was terminated without cause and filed a complaint with the New Brunswick Employment Standards Branch against her employer the same day. RRB’s complaint related to minimum wage, minimum wage overtime and pay in lieu of notice. RRB did not assign any amounts to her claims but she claimed that her pay rate was $350 bi-weekly, her work week averaged 54 hours a week and she worked 5-6 days a week.
RRB’s complaint was investigated pursuant to the New Brunswick Employment Standards Act, (the act). The investigating officer recommended that the Deputy Director issue an order that J. Clark & Son Limited pay RRB unpaid wages amounting to $2,195.93 and for payment in lieu of notice of termination in the amount of $1,258.59.
The officer calculated the owed minimum wage amount on a weekly basis and later converted that to a bi-weekly period to match the employer’s payroll records.
The employer disputed the order and the matter was referred to the Labour and Employment Board, which vacated the Deputy Director’s order and dismissed the employee’s complaint.
The employee sought judicial review of the board’s decision. The application judge quashed the board’s decision, finding it unreasonable and remitted the matter back to the board to determine any minimum wage and vacation pay due to the employee for each pay period.
The application judge confirmed that the Minimum Wage Regulation applies to every employee and employer in New Brunswick, unless otherwise provided in the act or any regulation made under the act.
The issue of what interval of time should be used to calculate the minimum wage owed to an employee was also reviewed by the application judge who noted that different intervals could lead to different results of minimum wage owed:
"Looking at the employee’s earnings in their entirety over her six months of employment, the board concluded that her total earnings for that period exceeded the minimum hourly wage by $270.26. If calculated for each two week pay period the investigator determined that over the six months she was paid a cumulative total of $2,195.93 less than minimum wage. If her hours and benefits had been calculated every week, the investigator suggested that the amount owing to the employee 'would be higher by approximately $5,000.'"
The application judge concluded that the concept of minimum wage is to be calculated and paid “during a pay period” and the b oard erred in not determining the pay period applicable to the employee. He reasoned that the act requires employers to keep accurate employee records that should include the hours an employee works and the gross earnings for each pay period. The application judge reasoned that one of the obvious purposes for the requirement is to make it easy to verify that the minimum wage is being paid in each pay period. Further justification for the use of the pay period was found in the language of s. 7 of the Minimum Wage Regulation, which specifies “pay period” and does not use wording such as “while employed by the employer” or “during the last six months.”
The application judge clarified that s. 34(5) of the act authorizes an employer to continue an existing practice of settling its commissions or other wage payments at another time than the pay period, however it did not purport to exempt the employer from the requirement to pay the minimum wage to its employee in each pay period.
The employer appealed the application judge’s decision. While awaiting a hearing before the Court of Appeal, the matter was remitted to and heard by the board. The Board determined the applicable pay period to be on a monthly basis and ordered the Director of Employment Standards to investigate further the calculation of minimum wage using the determined interval of time.
Court of Appeal
The Court of Appeal agreed with the application judge’s finding that the board’s preliminary decision was unreasonable and that automobile sales people paid by commission are employees entitled to receive at least the minimum wage for their hours worked.
The Court of Appeal stated that the application judge’s decision on the issue of determining the minimum wage due to RRB for each pay period was appropriate.
Recent changes to the legislation
The Minimum Wage Regulation was previously silent on how the minimum wage should be calculated. For example, the 2016 Minimum Wage Regulation read “The minimum wage for employees whose hours of work per week are unverifiable and who are not strictly employed on a commission basis is $468.60 per week.”
Effective April 1, 2019 the Minimum Wage Regulation was amended to include the following at s. 8:
"The minimum wage for employees whose hours of work per week are unverifiable and who are not strictly employed on a commission basis shall be calculated on a weekly basis by multiplying the minimum wage by 44." [Emphasis added]
Section 8 requires the minimum wage to be calculated on a weekly basis for a certain class of employees. This section has yet to be tested, however the amendment offers instruction on how and for what time interval the minimum wage should be calculated.
As the application judge’s decision highlighted, the difference between calculating the minimum wage on a weekly or bi-weekly basis can result in large discrepancies for minimum wages owed.
What are the effects?
Following the rendering of the Court of Appeal decision and the changes to the Minimum Wage Regulation, employers are required to pay all employees at least the minimum wage for the hours worked during the pay period. If an employee’s weekly hours are unverifiable and the employee is not strictly employed on a commission basis, the weekly minimum wage paid must be at least $506. These changes could have implications for employers which do not currently pay employees a base pay of less than minimum wage or less than $506 weekly (if hours of work are unverifiable) while the employees earned commissions that are paid outside of the designated pay period.
For more information see:
J. Clark & Son, Limited v. New Brunswick, 2019 NBCA 31 (N.B. C.A.).
Laura Boyd is an associate with Cox & Palmer in Saint John, practicing employment and labour law, administrative law, health law, and commercial litigation. She can be reached at (506) 633-2795 or email@example.com.