Commissions — Ontario Employment Law

In Ontario, commissions are a common form of performance-based pay, particularly in sales roles. Unlike a fixed salary, commissions are variable and tied directly to specific outcomes, such as closing a deal or hitting a sales target. Legally, commissions are considered 'wages' under Ontario's Employment Standards Act, 2000 (ESA). This classification is crucial because it means they are subject to the same protections as regular salary, including rules around timely payment and deductions.

The most frequent legal disputes over commissions arise when an employment relationship ends. A common question is: are you entitled to commissions after you've been terminated? The general principle under common law is that during a period of reasonable notice for a without-cause dismissal, an employee is entitled to all the compensation they would have earned had they continued working. This includes the commissions they likely would have generated during that notice period. Many employers try to limit this obligation through clauses in employment contracts or commission plans that state commissions are only payable to 'actively employed' staff. However, courts often scrutinize this language very carefully. For such a clause to be enforceable, it must be exceptionally clear and unambiguous in its intent to remove an employee's common law right to damages for lost commissions during the notice period. Any ambiguity is typically resolved in the employee's favour. The specifics of your commission plan and employment agreement are paramount in these situations, as they dictate when a commission is truly 'earned' and payable. Because these agreements can be complex and the financial stakes high, understanding your specific rights often requires a detailed review of your documents and the circumstances of your departure.