Case shows commission-based employees not exempt from right to earn minimum wage
By Jeffrey R. Smith
Minimum wage has been a bit of a battleground lately. Proponents for a hike in the wage argue that there is too much of a gap between the poorest and the wealthy, and the cost of living is increasing — so a higher minimum wage gives low-income people more spending power, which helps the economy.
Opponents argue that a higher minimum wage cripples employers with increased costs and leads to job cuts or businesses going under.
The minimum wage differs across various Canadian jurisdictions, often reflecting the different costs of living in the regions. Right now, Saskatchewan has the lowest minimum wage at $11.06 per hour, while Alberta boasts the highest at $15. The federal rate matches that of the province where the work is performed.
A few jurisdictions make differentiations between students or inexperienced workers and regular workers, or have lower rates for liquor servers in recognition that paycheques in those occupations are augmented by tips — in Ontario, it’s $12.20 versus $14 for general workers and in B.C. it’s $12.70 versus $13.85 for general workers, as a couple of examples.
While minimum wage is fine and good for regular employees, what about employees who only earn a portion of their compensation through regular pay while receiving a good chunk or all of their pay through commissions, which can be irregular and depend on what they do during a particular period?
New Brunswick case
A recent New Brunswick case involving an automobile sales consultant raised the issue. The employee was paid a token amount every two-week pay period, along with a small advance on commission sales. When the employee was dismissed without cause, she filed a complaint for unpaid wages. An employment standards officer calculated how much the minimum wage would be over the employee’s two-week pay period and determined the employee was paid more than $2,000 less over six months of employment than what she would have earned from the minimum wage, based on her hours worked.
The New Brunswick Labour and Employment Board quashed the decision, but two levels of courts disagreed and reinstated the original decision. The province’s Court of Appeal noted that “automobile sales people paid by commission are employees entitled to receive at least the minimum wage for their hours worked.”
The courts also found that commissions don’t have to be paid during a particular pay period, but employees must still receive at least the equivalent of minimum wage during any pay period — the amount paid to the employee divided by the employment standard maximum non-overtime hours of work for the pay period. See J. Clark & Son, Limited v. New Brunswick, 2019 NBCA 31 (N.B. C.A.).
It’s an interesting case for employers with commission-based employees. Commissions can be irregular and vary both in amount and when they are paid, so it’s an issue to keep an eye on — especially if there are circumstances where there’s a delay in the commission being paid.
If an employee is working, she must be paid some amount during the pay period in which the work is being performed, regardless of whether a commission is coming later. So, it might be a good idea for employers to offer some form of base pay or advances on commissions rather than strict commissions.
The case above was in New Brunswick, so it remains to be seen if similar issues crop up in other jurisdictions. But given the furor over minimum wage in recent times, employers across Canada should keep on top of how and when commission-based employees are being paid.
If not, a lull in payments could lead to a minimum wage violation.