Unpaid Internships and Commission-Based Employees

Unpaid internships and commission-based employees are some of the most misunderstood concepts when it comes to the rights of the employees.

With the current uncertain market conditions and financial pressures, some employers may be looking for ways to curtail their payroll to assist their businesses’ financial stability by offering commission-based employment or internship opportunities. At the same time, employees may be more inclined to accept job offers that deviate from the traditional pay structure that they are used to. While unpaid internships may seem like attractive options for some small businesses, the risks that ensues from some of the relationships may outweigh the benefits.

Employers and employees alike should keep in mind the following considerations when offering or accepting an employment opportunity, as some pay structures may be improper and illegal.

Unpaid Internships

An internship is typically a fixed term work position used to gain experience in a specific industry. Interns often do the work of employees and are controlled by the employer, often resembling an employer-employee relationship.

Unpaid internships are illegal per se, unless they fall under certain exceptions outlined within the Employment Standards Act, 2000 (“ESA”)—Ontario employment legislation which protects those considered to be “employees”. If interns do not fall under the specified exceptions outlined by the ESA, then the intern is treated as an employee under the law and is entitled to all the payments and notice periods that a regular employee is entitled to.

Section 3(5) of the ESA exempts people who perform work under a program approved by a secondary school board, a college of applied arts and technology, a private career college, or a university—this includes co-ops, internships, and other experiential learning placements. Under these programs, the intern would receive credit for their program rather than pay.

While the definition of “employee” under section 1(1) of the ESA includes “a person who receives training from a person who is an employer, if the skill in which the person is being trained a skill used by the employer’s employees”—not all trainees are covered, as seen under the Ontario Regulation 285/01 (“Reg 285/01”)

Section 2(1)(e) of the Reg 285/01 exempts professionals and students training to join the specific professions like architecture, law, professional engineering, public accounting, from certain employment standards protection, which opens up the possibility for unpaid placements.

Irrespective of whether the intern is paid, employers are still obligated to comply with applicable legislation, and any contract or agreement is void if it contravenes with the law.

The definition of a “worker” under Ontario’s Occupational Health and Safety Act (“OHSA”), includes interns who perform work under program approved by secondary school board or program approved by a college of applied arts and technology, university, private career college or other post-secondary institution without pay. These interns will be entitled to protections under the OHSA, meaning even if their work is unpaid, they have the same rights as a paid worker under the OHSA, and  employers must maintain the safety of the workplace all the same.

Commission-Based Employees

Commission is a sum paid to an employee for completion of service or sale of goods. Commissions are referred to as “wages” under the ESA, and employers must pay employees when the work for the wages is completed.

Employers must keep track of their employees’ commission sales and their hours. During a time when the employee is making less than minimum wage through their commissions, employers have the obligation to pay the difference to ensure the employee is receiving at least minimum wage for their hours worked. However, if an employee has made more than minimum wage in one pay period, it does not mean that an employer can pay the employee less than minimum wage in the next pay period.

Employees who are paid by commissions are still entitled to vacation pay. Under Section 35.2 of ESA, employees who have worked for less than five years are entitled to a minimum of 4% of their pay paid as vacation pay whereas those who have worked for five years or more are entitled to a minimum of 6% of their pay paid as vacation pay.

To illustrate, the Ontario Superior Court of Justice in Kinch v Dufferin Communications Inc, granted $35,396.02 for unpaid vacation of six years to a commissioned employee.

Contact Us

If you are an employer, planning to take on interns or commissioned employees, or you are an unpaid intern or a commission-based employee—make sure you fully understand your legal rights and obligations. If you are also seeking to know about your options generally, our team of experienced employment lawyers at Achkar Law can help. Contact us by phone at 1-(800)771-7882, or email at [email protected] and we would be happy to assist.

If you are a small or medium size company looking for full-service support, visit our CLO program page for our strategic solutions.

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Disclaimer: This blog is not intended to serve as, or should be construed as legal advice, and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call 1-(800)771-7882, or email [email protected].