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Commission Pay in Ontario: Laws for Commission-Based Employees
Many employees in sales, real estate, finance, and other industries are paid partly or entirely through commissions. While commission-based pay structures are common, they can also lead to disputes, especially when an employee leaves a job or is terminated.
In Ontario, commissions are generally considered wages under the Employment Standards Act (ESA). This means employees are legally entitled to be paid commissions they have earned.
This article explains:
- whether commission-only jobs are legal in Ontario
- how commission agreements work
- what happens to commissions after termination or resignation
what to do if your employer refuses to pay your commissions
If you believe your employer has failed to pay commissions you earned, you may wish to speak with an employment lawyer in Ontario to understand your rights.
Commission Dispute at Work?
You may have legal options
Call 1-800-771-7882
Speak with an employment lawyerAre Commissions Considered Wages in Ontario?
Yes. Under Ontario’s Employment Standards Act, commissions are considered wages.
This means that once commissions are earned, the employer must generally:
- pay them in full
- pay them on the employee’s regular payday
- follow the same legal rules that apply to other wages
Employers cannot simply refuse to pay commissions because an employee resigns or is terminated.
In many disputes, the key legal issue is whether the commission was earned before the employment relationship ended.
Are Commission-Only Jobs Legal in Ontario?
Commission-only jobs can be legal in Ontario, but they must still comply with employment standards laws.
In most cases:
- employees must still receive at least the minimum wage over the applicable pay period
- employers must comply with vacation pay and other ESA requirements
- the commission structure must be clearly defined in an employment or commission agreement
If a compensation structure effectively results in employees earning less than minimum wage, the arrangement may violate Ontario employment standards.
What Should Be in a Commission Agreement?
A well-written commission agreement should clearly define how commissions are earned and paid.
Important provisions typically include:
- how commissions are calculated
- when commissions are considered earned
- when commissions are paid
- whether commissions continue during the termination notice period
- what happens to commissions after resignation or termination
Ambiguous commission agreements often lead to disputes.
Courts in Ontario may interpret unclear language in favour of the employee, particularly where compensation terms are poorly drafted.
Unpaid Commissions After Termination
Disputes about commissions frequently arise after employment ends.
When an employee is terminated, employers must still comply with the Employment Standards Act and common law obligations.
In many cases, employees may be entitled to:
- commissions earned before termination
- commissions that would have been earned during the reasonable notice period
Ontario courts have repeatedly confirmed that employees may be entitled to compensation for lost commissions during the notice period.
Unpaid Commissions After Resignation
Commission disputes can also occur when an employee resigns.
Whether commissions remain payable after resignation often depends on:
- the terms of the commission agreement
- whether the commission was earned before the resignation
- whether the contract clearly limits post-resignation commissions
If the agreement is unclear, courts may still find that the employee is entitled to payment for commissions they earned.
Common Employer Mistakes with Commission Pay
Employers sometimes make errors when handling commission structures.
Common mistakes include:
- refusing to pay commissions after termination
- relying on unclear or unenforceable commission clauses
- changing commission structures without employee consent
- delaying commission payments
- failing to provide written commission agreements
These issues can sometimes lead to claims for wrongful dismissal or unpaid wages.
What Happens to Commissions During the Notice Period?
When an employee is terminated without cause, they may be entitled to reasonable notice or severance pay.
During this notice period, employees may also be entitled to:
- base salary
- bonuses
- commissions that would have been earned
If an employer attempts to cut off commission payments immediately upon termination, the clause allowing this may be unenforceable.
What To Do If Your Employer Refuses To Pay Your Commission
If you believe you are owed commissions, consider taking these steps.
1. Gather documentation
Keep copies of:
- commission agreements
- pay statements
- employment contracts
- sales records
- communications with your employer
2. Review the commission agreement
The agreement may determine when commissions are earned and payable.
However, not all contractual provisions are enforceable under Ontario law.
3. Seek legal advice
An employment lawyer can review your agreement and determine whether you may have a claim for unpaid commissions or wrongful dismissal.
FAQs About Commission Pay in Ontario
Yes. Under Ontario’s Employment Standards Act, commissions are generally considered wages. Once earned, they must be paid in accordance with wage payment rules.
Commission-only roles may be legal, but employers must still comply with minimum wage requirements and other employment standards protections.
Employees may still be entitled to commissions earned before termination and, in some cases, commissions that would have been earned during the reasonable notice period.
In some situations, employers attempt to deny commissions after resignation. Whether this is lawful depends on the commission agreement and when the commission was earned.
Significant changes to compensation, including commission structures, may raise legal issues and could potentially lead to a constructive dismissal claim.
Key Takeaway: Commission Pay Disputes in Ontario
Commission-based employees have important legal protections under Ontario employment law.
Employers must generally pay commissions that employees have earned, and disputes often arise when compensation terms are unclear or employment ends.
Understanding how commission agreements work, and how the law treats commissions, can help employees protect the compensation they earned.
Contact Achkar Law
If your employer has refused to pay commissions you earned, or if you have questions about your commission agreement, legal advice may help clarify your options.
At Achkar Law, our employment lawyers advise employees on commission disputes, wrongful dismissal claims, and employment contract issues.
Call toll-free: 1-800-771-7882 to speak with an employment lawyer or request a confidential consultation.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©