Is it a Constructive Dismissal and How do you handle the commissions?
For 8 years I have been paid a combination of salary plus commission. When the last fiscal year ended, my employer told me that in the future I would not be receiving commission but only straight salary. My salary was increased. A month later, the previous year’s results came in and I realized that I had had a stellar year. While I got paid my salary and commission for the last fiscal year, I realized that if my sales continued the way they were, I would have been far better off with the combination of salary and commission, even though my salary had been increased as a result of the recent change. Have I been constructively dismissed? Is there anything I can short of suing for wrongful dismissal to get this loss of money back?
ANSWER: A constructive dismissal takes place when there is a significant change in the terms of employment without your consent and without reasonable notice. After 8 years as a sales rep, you would probably be entitled to somewhere around 6 months reasonable notice of any significant change.
If your new salary is roughly equivalent to the combined salary and commission you earned last year, there has been no significant change. You have not lost any money. What you have lost is the potential to make even more money this year than last year. Even if you received no notice of this change, it would be tough to make a constructive dismissal case. Your income has not been reduced…the employer has just refused to increase it.
This is similar to a situation in which an employee has been denied a raise. There is no law anywhere requiring that employees get raises. There is a law indicating that dramatic reductions in income without notice are a constructive dismissal. That has not happened to you.
If there had been a dramatic decrease in your pay without notice, you would have had two options: 1) Walk out the door and sue for constructive dismissal, in which case you would receive, at best, 6 months pay in lieu of notice, or, 2) Hand in a letter indicating that you object to the change without notice but that you are staying in your position to mitigate your damages.
The second option is important if you are not going to walk out the door because you will be insuring that your right to sue later for the lost wages is preserved.
Theoretically, you would look for new work and if you found that 9 months later you would leave and then sue for a breach of the contract. You would only be able to sue for the difference between your old pay and your new pay for the 6 months notice that you were entitled to in the first place. After all, if the employer could have made this change without repercussion by telling you that 6 months later your income was dropping, you can’t get more than that. You would have two years from the date your income was reduced to issue your statement of claim.
Alternatively, you could sue your employer while you are still working for them. Suing them for this breach is not just cause for your termination and if they fire you, you would be entitled to reasonable notice.
Few people follow this route. Usually because they didn’t walk out in the first place as they couldn’t afford to be out of work and have an interruption of their income. Secondly, it’s not pleasant to have to look at your boss every morning when you are on opposite ends of a law suit.
As published in The Hamilton Spectator, December 19, 2005