Exemptions for salespeople

“So attention must be paid” - Death of a Salesman, Act 1, Part 8

Employment standards legislation provides a basic level of protection for employees who may not otherwise be able to obtain this on their own. This legislation is intended to be remedial and broad, covering as many job categories as possible. As a result, nearly anyone who has dealt with the law around employment begins to take certain things for granted.

Prominent among these is that there are some inflexible rules which apply to every employee, by virtue of employment standards legislation. A minimum wage, regulated hours of work, and paid vacation all seem to be guaranteed in some form for every employee.

This is especially the case for dealing with an employment matter in Ontario: the Employment Standards Act, 2000 (ESA) holds the field in nearly every matter. Many professionals are exempted from coverage under various parts of the ESA on the basis that these individuals, as professionals, can advocate for themselves and do not require the protection of a statute. It is really only the vulnerable parties (which is to say, the majority of employees) who need coverage.  

It is therefore easy, when reviewing an individual’s situation, whether for purposes of an employment contract or assessing entitlements on dismissal, to fall into the trap of assuming that because the individual is not a professional, they are covered by the ESA. For that reason, it is surprising to many to learn that one of the most vulnerable roles in society, that of a salesperson, working the road, for commission, is exempt from nearly every aspect of the ESA.

ESA exemptions

The trope of the downtrodden traveling salesperson is ubiquitous in entertainment: Willy Loman, Shelley Levine, or Gil Gunderson. Despite this, the ESA specifically exempts a commission-based salesperson who works away from their place of business from nearly all protection. 

Section 2(1)(h) of Ontario Regulation 285/01 provides that:

“Parts VII, VIII, IX, X and XI 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 that,

(i) relate to goods and services, and

(ii) are normally made away from the employer’s place of business.”
This means that an individual who falls under this exemption has no coverage under the ESA for hours of work and eating periods, overtime pay, a minimum wage, public holidays, or even vacation with pay. Essentially, an individual whose job is to travel from place to place towards selling items for their employer receives almost no protection under the law — and effectively has to rely on their employer’s largesse to receive anything that another employee would expect to receive by default.

The lack of a minimum wage despite working for commission makes this role stand out. Other sales roles with a commission-based compensation structure, such as in the automotive industry, mandate for the employer to ensure that the employee receives at least minimum wage for their efforts.  

Given the sheer cost savings for classifying an employee as a traveling salesperson, it is unsurprising that the matter has been litigated. The subsection of the Ontario Regulation which sets out this exemption omits a “route salesperson” from being addressed by this exemption — but omits a definition of the term. Courts and tribunals have had to step in to fill the gap.

Notable decisions

The Ontario Labour Relations Board has held that the dividing line between a “route” and normal salesperson is the degree of control that the employer holds over the salesperson’s activities, noting that the lesser the degree of employer control and the greater the degree of employee entrepreneurial initiative, the more likely the subject person is a salesperson and not a route salesperson (see Jean Marie VanGrootel v Advance Beauty Supply Limited, 2016 CanLII 17209 (ON LRB) at para. 14).

The board explicitly notes that assessment is not intended as a mathematical calculation, and like many things in the law, is a fact-based assessment to determine where an individual’s terms of employment places them between salesperson and route salesperson.   

Another point of contention can be the length of time that an individual spends away from the employer’s facility towards making sales. The regulation exempts an employee who “normally” makes sales away from the employer’s place of business. The Court of Appeal for Ontario has weighed in on what “normally” means in this context, confirming that a sales employee who regularly spent 20 per cent of his time away from the employer’s place of business did not fall under this exemption (see Evangelista v. Number 7 Sales Limited, 2008 ONCA 599 at para. 35).

Conclusion and takeaways

The ESA provides broad coverage and a basic, minimum standard that nearly every employee can expect to receive. While these may seem like negligible amounts, their absence makes understanding their importance all the more straightforward. An exempt employee under the ESA may represent a significant cost savings for their employer, both in terms of actual monies expended and savings in administrative costs. 

That being said, categorizing an employee is not a thing to be done lightly. An employer who breaches the ESA at any point during the employee’s employment, including miscategorizing the employee as exempt, risks an ESA complaint — the penalty for which can include an order to pay unpaid, outstanding amounts, and a fine as a penalty on top of this.

Given the risks involved, before categorizing someone as a traveling salesperson, it is worth considering all the factors involved: how often are they in fact out of the office, and who tells them where to go for their sales?

Always be closing? Maybe. But always be cautious? Absolutely.