Executive argues she never agreed to new payment policy, seeks $61,000 in unpaid commissions after resignation
Ontario’s Superior Court of Justice recently dealt with a matter involving unpaid commissions and the modification of employment agreements.
The case centred on whether an employer could unilaterally change commission structures despite explicit contractual protections that had been carefully negotiated to prevent such modifications.
The worker argued that her employment agreement specifically protected her from commission policy changes for three years unless she provided written consent.
She maintained that she never agreed to be bound by a new commission policy implemented by her employer, believing it only applied to other sales team members.
When the employer attempted to deny her commission payments after she resigned, citing the new policy, she pursued legal action to recover what she believed were legitimately earned commissions.
Negotiated employment commission protection terms
The worker had been employed by the technology company from November 2020 to September 2022. She had previously held senior sales positions with various companies, including roles as vice president of sales.
She was successfully employed elsewhere when an executive recruiting firm approached her about opportunities with the employer.
The worker was concerned about leaving her secure position without guarantees about her compensation structure. She worried about investing considerable time and effort in developing a sales pipeline only to discover the commission structure had changed.
This concern led to extensive negotiations about the duration of commission protection with the company’s chief executive officer.
The employer initially offered protection against commission changes for two years in a formal offer dated 23 October 2020.
However, the worker had been requesting no changes to her compensation package for three years. After further communications, a revised offer was sent on 29 October 2020. The revised offer included language stating:
“Commission shall be calculated based upon the company’s official commission policy outlined in Schedule A. [The employer] agrees not to change the current policy for a period of 3 years for [the worker] unless [the worker] consents.”
The revised offer also contained modification language stating: “This Agreement contains the full and complete understandings of the parties and supersedes all prior oral or written, express or implied understandings or agreements. It may only be modified in writing signed by [the worker] and [the employer’s] senior management.”
Modified commission policies without written consent
Beginning in late 2020 and into early 2021, the worker and the chief executive officer were engaged in discussions about the commission structure for the employer.
These discussions ultimately resulted in what became known as the 2021 Commission Policy. However, a critical factual agreement emerged during litigation regarding the employer’s approach to implementing this new policy.
The court records specifically noted that the employer “made no express written request to [the worker] for her to consent to amend the terms of her employment agreement and be bound by the 2021 Commission Policy and did not expressly ask her to consent to amend the terms of her employment agreement.”
This admission proved significant in the court’s analysis of whether the worker had agreed to policy changes.
The employer argued that the worker had either expressly or by implication agreed to the 2021 Commission Policy when she accepted payments made to her in 2021 related to client accounts.
The employer’s position was that by accepting these payments, she approved the 2021 Commission Policy and thus became bound by it. The worker maintained she never agreed the new policy would apply to her, believing it only affected other sales team members.
Her position was that she did not object to the changes reflected in the 2021 Commission Policy because she had nothing to object to, as the terms were never intended to apply to her.
Commission calculations under competing policy frameworks
Two significant commission payments occurred in 2021 that became central to the employer’s argument for implied consent. The first involved a retail client whose agreement was renewed effective 1 August 2021.
A factual dispute existed about when this client account was assigned to the worker - the employer claimed June 2021 (before renewal), whilst the worker maintained August 2021 (after renewal).
On 27 August 2021, the chief executive officer emailed the worker stating: “I know you will do a great job with them and I also wanted to recognise all the work you are doing to develop your territory.”
Attached to this email was a commission statement for the client account, which showed the worker was paid a commission in connection with the 2021 renewal.
The worker was paid approximately $33,000 based on 2% of the contract renewal amount. This payment was inconsistent with the 2020 Commission Policy, but the worker never protested the amount.
The worker’s position was that this payment was not a commission payment because she had not been the effective cause of the sale and had only been assigned the account after the renewal. She argued the payment was made by the chief executive officer effectively as a bonus to recognise the work she was doing to develop her territory.
The second payment related to another client, who became a customer as a result of work done by the worker. On 24 September 2021, this client and the employer entered into a contract. The worker was paid approximately $7,000 for this deal. The amount paid was inconsistent with the 2020 Commission Policy, and the worker never protested this amount either.
Written consent requirements for commission modifications
The court’s analysis began with the circumstances surrounding the worker’s employment. The worker had been gainfully employed with another corporation when introduced to the employment opportunity. There was no indication she was seeking to move from her former secure position.
The court noted: “It makes logical sense that [the worker], prior to moving from a secure position of employment to employment with [the employer], would want an agreement that could not be changed for three years unless all parties agreed to any changes in writing.”
The evidence supported this conclusion, given the negotiations between the parties. The worker was presented with an agreement that had a two-year term but made clear she was not willing to sign an agreement with anything less than a three-year term.
The court found: “The evidence establishes that during the period of negotiation [the worker] was involved in negotiating her own agreement as well as providing input as it relates to the commission policy for other employees.”
The court determined that Schedule A to the employment agreement was an integral part of the total employment contract and could only be varied with the written consent of the worker. The court then examined whether the worker had expressly or by implication agreed to a change in the employment agreement after it was signed.
The employment agreement provided that any waiver or amendment was not binding unless executed in writing. The court noted: “There is nothing in the evidence that [the worker] ever waived in writing the terms of the employment agreement.”
Post-resignation commission entitlement
On 22 August 2022, the worker contacted her immediate supervisor to advise that she intended to leave her employment. The supervisor advised that the employer only required two weeks’ notice and requested written notice of her resignation. On 23 August 2022, the worker submitted her formal written resignation, confirming her employment would end on 2 September 2022.
Prior to her resignation, the worker had been instrumental in securing two significant contracts. On 30 July 2022, the retail client agreed to renew its contract with the employer for $1,380,707.00 USD. The employer prepared an invoice for this deal dated 1 August 2022.
On 31 August 2022, the other client signed a one-year contract with the employer for $75,000.00 USD. The employer prepared an invoice for this deal dated 1 September 2022.
It was an agreed fact that the worker was the effective cause of both deals. The mathematical calculation for the commissions was not in dispute. For the first deal at 4% the amount potentially owed to the worker was $55,228.28 USD.
For the second deal the mathematical calculation at 8% of $75,000 USD was $6,000 USD. The employer argued that when the worker delivered her resignation letter, she was no longer eligible to receive commissions. However, the court applied the 2020 Sales Commission policy which provided that workers “should be employed by the Company at the time of disbursement to be eligible for commissions.”
Court’s analysis of commission contract interpretation
The court ruled that the worker never agreed to be bound by the 2021 Commission Policy. The court stated: “I accept the evidence of [the worker] that she never had actual knowledge that the change in the commission structure now argued by [the employer] would in fact apply to her.” The court applied established legal principles requiring evidence that the worker was aware of the full implications of changes before implied consent could be established.
The court found: “A review of the email correspondence between [the worker] and [the chief executive officer] is far from establishing that the 2021 commission payment structure was to apply to her.” The court concluded:
“I accept the evidence of [the worker] that her sole belief was that the new commission structure would apply to her sales team and not to her. There was no reason for [the worker] to dispute what would appear to be an apparent breach of contract because she was never aware that there was in fact a breach to dispute.”
Regarding the commission payments after resignation, the court noted: “The first invoice to [the retail client] was delivered by [the employer] on August 6, 2022. The first invoice was delivered to [the other client] on September 1, 2022. [The worker] was still an employee of [the employer] on August 6 and September 1, 2022.”
The court found the language about “time of disbursement” was ambiguous and should be resolved against the employer as the drafter. The court stated: “Fairness dictates in the absence of clear language in Schedule A precluding entitlement, that [the worker] be paid for the commissions earned on [both] deals.” The court awarded the worker $61,228.28 USD plus pre-judgment interest and encouraged the parties to resolve the issue of costs through written submissions.
