November 27, 2002 by Israel Foulon LLP
Question: How do you calculate the pay in lieu of notice that a dismissed employee is entitled to when his earnings are commission-based?
Answer: Under the common law, an employee whose employment has been terminated is entitled to receive whatever commissions he would have earned during the reasonable notice period. But determining exactly how this amount should be calculated can be tough. Often a good indication of what the employee would have earned had he worked out the notice period is the employee’s earnings from previous years.
Of course, other factors will also be taken into account such as if the employee’s commissions have recently been declining or if there has been a reduction in the amount of business the company has been doing, which would have resulted in the employee receiving fewer commissions.
It will be up to the employee to prove the amount of commissions being claimed by establishing that there is a “reasonable chance” or a “real possibility” the employee would have earned the amount in question had he worked during the notice period.
Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@qtw38575.mywhc.ca. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today