Are Commissioned Employees Entitled To Overtime Pay?

Discussions surrounding the topic of commission can frequently cause confusion amongst employees. While an employee may understand that they receive a commission, it may remain unclear as to how their compensation structure works and what it means for them. 

Commission can be understood as an additional compensation that an employee earns based on their job performance and is often dependent on hitting some type of goal. Employees paid by commission often incorrectly assume they are not entitled to overtime pay.

In RBC Insurance Agency Ltd v Ali, the Ontario Labour Review Board established that commissioned employees are entitled to overtime pay.

EMPLOYEE MAKES A CLAIM FOR UNPAID OVERTIME 

Mr. Ali was employed by RBC Insurance Agency as a Property and Casualty Insurance Advisor. He made significant commissions, which he accrued by working long hours. He was a top earner and top advisor.

Mr. Ali claimed unpaid overtime to an Employment Standards Officer. The Officer found Mr. Ali was entitled to payment for the overtime he had worked. The Officer determined the amount of unpaid overtime was $164,885.34 and issued an Order of Payment under the Employment Standards Act for money owed to Mr. Ali.

RBC Insurance Agency Ltd. argued Mr. Ali was not owed overtime pay and appealed the finding of the Employment Standards Office to the Ontario Labour Review Board.

OVERTIME PAY IN ONTARIO

The Employment Standards Act typically entitles employees in Ontario 1.5 times their regular rate for every hour worked past 44 hours a week. With that being said, any work performed after 44 hours is considered overtime. The rate used to calculate overtime entitlement can include commissions.

An employee is entitled to overtime pay if their employer has “suffered or permitted” overtime work. Even if the employer has an established overtime policy that requires employees to receive pre-approval for overtime work, the employer could still owe overtime pay if the employer allowed the overtime to be worked. In other words, if the employer knows or ought to know that overtime work has been done and did nothing to stop it, the employer could be required to pay out overtime to the employee.

EMPLOYER KNEW (OR SHOULD HAVE KNOWN) EMPLOYEE WAS WORKING OVERTIME

In the case of Mr. Ali, his managers should have known he was working overtime. Mr. Ali argued his overtime was “suffered or permitted” because the employer could have anticipated that the work was being done and did nothing to prevent it. Mr. Ali had evidence to show he was never seen without his laptop and consistently worked 12-hour days. 

The Board agreed – even though the employee never told his managers he was working over 44 hours a week, they ought to have known based on his performance levels. The employee did much of his work in a recordable way, such as on the phone. He used his phone logs to substantiate his overtime claim. This evidence was sufficient to prove he worked significant hours, surpassing 44 hours a week.

The Board concluded the employer ought to have been aware that the employee was working this overtime because:

1. The employee could work remotely as the result of a company-provided computer and VPN access
2. Nothing was preventing him from working these hours
3. The compensation plan for Mr. Ali incentivized overtime work because of the additional commissions made during overtime hours
4. Employees were permitted to work the hours of their choosing
5. There was no policy or documents that prohibited overtime work
6. The employer had no routine or procedures to review employee working time, including overtime

HOW THE BOARD CALCULATED OVERTIME

Mr. Ali inadvertently received some compensation for his overtime hours because he would accrue associated commissions for his work during that time. 

The Board determined Mr. Ali’s overtime rate to be 1.5 times his regular rate for commissions during the first 44 hours of his workweek. Based on this, the Board concluded that Mr. Ali was owed $40,269.70 in unpaid overtime.

The Board found that while he did indeed work overtime based on the records he provided, Mr. Ali could not accurately quantify the overtime. The Board conducted its own analysis and concluded a reasonable estimation of Mr. Ali’s total working hours, based on what was “more probable than not”. Based on the evidence, the Board found that he worked 52 hours per week or 8 hours of overtime.

REMINDER FOR EMPLOYERS

Employees who work over 44 hours a week in Ontario are generally entitled to overtime. This applies even where there is no direct evidence that the employer knows the extra work is taking place. The only consideration is whether the employer ought to have known the overtime was occurring and if they took steps to prevent it.

Even if it is communicated to employees that they are not entitled to overtime pay, they may still be entitled to compensation for overtime. 

CONTACT THE EMPLOYMENT LAWYERS AT SULTAN LAWYERS FOR ADVICE ON OVERTIME PAY

We encourage you to contact Toronto employment lawyers, Sultan Lawyers, for a flat-rate consultation to learn about your rights as an employee or your obligations as an employer concerning overtime pay for commissioned employees. Please contact us by telephone at 416-214-5111 or here.