Unpaid Commissions — Ontario Employment Law
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About Unpaid Commissions
Sales professionals and dealmakers invest immense time and effort into building client relationships, making the discovery that an employer is refusing to pay earned commissions deeply frustrating. In Ontario, commissions are legally recognized as "wages" under the Employment Standards Act, 2000 (ESA). Because they hold this legal status, employers are strictly prohibited from withholding them, making unauthorized deductions, or imposing arbitrary technicalities to avoid paying what a worker is rightfully owed.
The most frequent catalyst for an unpaid commission dispute is a disagreement over when the money was actually "earned." Employers often point to complex company policies to argue that a commission isn't payable until a client's invoice is settled or a product is delivered. If an employee is terminated or resigns before that specific milestone occurs, the employer might try to pocket the commission. However, under Ontario common law, if you performed the work required to secure the sale during your active employment, you generally have a right to the resulting commission. While termination clauses sometimes attempt to extinguish these rights upon dismissal, Ontario courts scrutinize these clauses heavily and frequently strike them down if they violate minimum ESA standards.
Another significant issue arises from verbal agreements or "handshake deals" regarding commission structures. Without clear, written contracts, employers sometimes suffer from convenient amnesia regarding the agreed-upon percentage or bonus threshold. In these scenarios, courts will rely on contemporaneous evidence—such as emails, CRM logs, and past pay stubs—or apply the legal principle of quantum meruit, which essentially means "what the job is worth," to ensure the employee is fairly compensated for their successful efforts.
Because commission plans are heavily customized and the documentation surrounding them can be fragmented, figuring out exactly what you are legally entitled to recover requires a meticulous review of your specific situation. Engaging an employment lawyer to examine your contract, your sales history, and the timeline of events is the most effective way to determine whether you have a viable claim for missing payments.
Frequently Asked Questions
Are commissions treated the same as basic salary under Ontario law?
Yes. Under the Employment Standards Act (ESA), commissions are legally defined as wages. This means an employer cannot make unauthorized deductions from your commission cheques to cover things like business losses, stolen property, or unpaid client invoices.
My employer fired me right before a major deal closed. Can I still claim that commission?
In most cases, yes. If you were wrongfully dismissed, you are generally entitled to compensation for all wages—including reasonably anticipated commissions—that you would have earned during your reasonable notice period. Even if you were fired with cause, if you already completed the work to secure the sale before termination, the commission is likely still owed.
We only ever agreed to my commission rate verbally. Is there any way to legally enforce this?
A verbal contract is still a contract, though proving its terms is more challenging. An adjudicator or judge will look at indirect evidence (like emails, text messages, or historical payout patterns) and may apply legal principles like quantum meruit to award you fair compensation for the services you provided.
Can my employer change my commission structure without asking me?
No. A fundamental, unilateral change to how you are paid (such as slashing your commission rate or dramatically increasing your sales quotas to avoid payouts) can be grounds for a constructive dismissal claim. You should have a legal professional evaluate the new plan before deciding to quit or accept the changes.
How long do I have to pursue my employer for unpaid commissions?
Under Ontario's Limitations Act, you generally have exactly two years from the date you discovered (or should have discovered) the commission was not going to be paid to file a lawsuit. Missing this deadline usually means losing the right to recover the money.
When should I consult a lawyer about missing commission payouts?
Reach out to legal counsel as soon as your employer formally denies the payout, attempts to force you to sign a new, less favorable commission agreement, or if you plan to resign because you aren't being paid. Getting advice early helps ensure you secure the right evidence before your access to company systems is cut off.
Common Scenarios
- A software sales executive puts months of work into an enterprise software deal, but is laid off without cause three weeks before the client formally signs the contract, prompting the employer to claim the executive forfeited the massive pending commission.
- A real estate broker verbally agrees to a 60/40 commission split with a new agent, but when a multi-million-dollar commercial property closes, they only pay out 30%, claiming the higher rate was contingent on arbitrary targets that hadn't been documented.
- A manufacturing sales representative notices that their employer has been quietly deducting money from their monthly commission statements to cover the cost of a client who went bankrupt and failed to pay their invoice.
- Following widespread company restructuring, a group of commissioned employees is dismissed, leading to a certified class action lawsuit seeking aggregate damages for unpaid commissions earned by the group during their transition periods.
What You Should Know
- Preserve your paperwork by saving personal copies of commission plans, closed deal sheets, and written approvals from management, as contemporaneous evidence is crucial if an agreement was informal.
- Carefully review the 'trigger' language in your employment contract to understand precisely when a commission is considered legally 'earned' (e.g., upon contract signing versus upon final payment).
- Never agree to unauthorized deductions from your commission payouts to cover bad debts or company mistakes, as the ESA explicitly prohibits employers from downloading these business costs onto employees.
- If your employer attempts to retroactively change your commission structure for a deal that has already closed, seek immediate legal clarification before signing any new internal policies or acknowledgments.
Featured Cases
Welton v. United Lands Corporation Limited
2019 ONSC 3623 (CanLII) · 2019-06-28Unpaid Commissions and Technical Audit Work: Court Dismisses Claim
A wrongful dismissal case where the court determined that the plaintiff was not entitled to unpaid commissions or technical audit work compensation based on the lack of enforceable agreements and contemporaneous documentation. The court applied quantum meruit principles and found no reasonable expectation of payment.
Bakshi v Global Credit
2015 ONSC 6842 (CanLII) · 2015-11-13Class Action Employment: Unpaid Commissions and Breach of Contract
A class action was certified for unpaid commissions following layoffs, addressing claims of breach of contract and unjust enrichment. The court granted certification of common issues, including aggregate damages and punitive damages, and fixed costs at $25,000.
Draganjac v. Equity Financial Trust Company
2014 ONSC 5585 (CanLII) · 2014-09-26Wrongful Dismissal and Unpaid Commissions: Court Ruling
A wrongful dismissal case where the court determined that the holding company was not the plaintiff's employer and dismissed the claim. The court also addressed reasonable notice, disability discrimination, and unpaid commissions, granting partial judgment for unpaid commissions.
McMillan v. Selectrucks of Toronto Inc.
2011 ONSC 6128 (CanLII) · 2011-10-14Constructive Dismissal: Resignation Due to Managerial Mistreatment
A constructive dismissal case where the plaintiff resigned due to mistreatment by a manager. The court applied the Farber test and ruled that the plaintiff voluntarily resigned. The case also addressed unpaid commissions, holiday pay, and spoliation of evidence.
Moseley-Williams v. Hansler Industries Ltd.
2008 CanLII 57457 (ON SC) · 2008-11-06Wrongful Dismissal: Commission-Based Employee Awarded Notice and Unpaid Commissions
A wrongful dismissal case involving a plaintiff who worked on a commission basis for over two years and was terminated without notice. The court determined the plaintiff was entitled to reasonable notice, which was reduced to two months due to mitigation. The case also addressed whether the plaintiff's contract was indefinite and whether unpaid commissions were owed under the terms of the agreement.
Fraser v. Holman Exhibits Limited
2008 CanLII 41172 (ON SC) · 2008-08-01Employment Contract Dispute: Summary Judgment Denied Over Unpaid Commissions
A merits decision involving a dispute over unpaid commissions under an employment agreement, where the plaintiff sought summary judgment but it was denied due to unresolved factual disputes and the defendant's set-off claims. The employer alleged breaches of exclusivity and confidentiality, and the court found that these issues required a trial.
309925 Ontario Ltd. v. Tyrrell
1981 CanLII 2895 (ON SC) · 1981-09-23Senior Employee Fiduciary Duty Case: No Breach Found, $6,287.95 Awarded on Counterclaim
A case involving a senior employee who resigned and acquired a business opportunity previously pursued by the plaintiff employer. The court examined whether the employee breached fiduciary duties and whether the plaintiff was entitled to damages for loss of goodwill and commissions. The court found no breach of fiduciary duty and awarded the defendant $6,287.95 on their counterclaim for unpaid commissions.