The Legal Rights of Commission-Based Employees

When it comes to the legal rights of commission-based employees in BC, there are many myths and misconceptions that can obscure the facts. If you are a commission-based employee, it is crucial to understand your rights to ensure that you are always receiving what you are entitled to. On flip side, it is equally important for employers to understand these rights to ensure that their employees are always treated fairly. That is why the employment lawyers at Linley Welwood have compiled some information on the rights of commission-based employees to ensure that both parties have the facts they need.

Learn about 5 of the most common questions about employment contracts.

What is a Commission-Based Employee?

Before discussing the legal rights of commission-based employees, it is important to understand what these employees are defined as. Commission-based employees are workers—typically salespeople—that are paid on a commission or incentive basis. In BC, these employees may be paid entirely by commission or a combination of salary and incentives. It is important to note that certain commission-based employees are excluded from certain types of protection under the Employment Standards Act (ESA). These employees include:

• Individuals that sell or sell a lease arrangement for heavy industrial equipment, agricultural equipment, sailing vessels, or motor vessels. These employees are excluded from the minimum wage, overtime, and statutory holiday requirements of the ESA.
• Individuals that sell or sell a lease arrangement for automobiles, trucks, recreational vehicles, and campers. These employees are excluded from statutory holiday provisions of the ESA. For truck and automobile salespeople, they are excluded from the statutory holiday provisions of the ESA if their employer pays 4% of their gross earnings on every paycheque in place of statutory holiday pay.

The Rights of Commission-Based Employees

Most commission-based employees are entitled to the following rights:

Minimum Wage

Commission-based employees must receive wages at least twice per month. These payments must be equal to their commission earnings or minimum wage, whichever is greater. For example, if a salesperson only makes $1,000 in commission for an 80-hour pay period, this pay will increase to what they would earn working 80 hours at minimum wage.

Vacation Pay

Commission-based employees must take annual vacation and receive annual vacation pay in the same manner as non-commission employees. Their vacation pay must be paid on all commissions earned and must be indicated on each pay statement.

Advances

Some commission-based employees receive an advance on commissions for each pay period. If commissions for the pay period exceed this advance, the employee is entitled to the difference. If the commissions for the pay period are less than the advance amount, the employee is entitled to be paid minimum wage for their hours worked.

Payment Offsets

Commissions earned during one pay period cannot be used to offset earnings during another pay period. For example, if a salesperson earns a commission of $5,000 during a pay period at the start of the month but does not sell anything for the rest of the month, they will earn minimum wage for the second pay period.

Costs of Doing Business

Commission-based sales employees cannot be expected to pay for samples, sales kits, or demonstration products that are used to make a sale. If an employer deducts costs based on these expenses from wages, they can be recovered under the ESA.

To learn more about the legal rights of commission-based sales employees and other areas of employment law, get in touch with the legal professionals at Linley Welwood. We can be reached at 604-850-6640 or through our online contact form and will be happy to answer any questions you may have regarding our services.