Canadian Employment Law Today

Canadian HR Reporter, 2021 "success fees." There was also a bonus pool into which all members of the sales team contrib- uted and from which he received payment each quarter based on his percentage of the pool's fee-generating activities. In 2017, Kraft identified a potential merger and acquisition deal with a company called Ar - zon. After more than a year of negotiation and planning, Firepower reached an agreement and entered into a contract with Arzon in late 2018. With the deal done, all sales work was complet - ed. It was the largest transaction in which Kraft had been involved since he had joined Firepow- er, so it would be his largest commission. Dismissed before deals closed In 2019, Kraft worked on another transaction with a company called Schure Sports. He com- pleted his work by early 2020. However, in early March 2020, Firepower terminated his employ- ment without cause. The Schure Sports transac- tion hadn't yet closed and Firepower still hadn't received any money from the Arzon transaction. As part of the termination, Firepower pro- posed that, in addition to paying him his salary in lieu of notice, it would pay any commissions that arose on Kraft's pending deals, including the Arzon one, as long as they closed within five months of his termination. Kraft felt the five- month timeline was arbitrary and didn't like it. The Arzon deal closed in September 2020, six months after Kraft's termination, so Firepower didn't pay him any commission, despite earn - ing more than $1.3 million on the transaction. The Schure deal still had yet to close. Kraft sued for wrongful dismissal, claiming he was entitled to 10 months' salary and ben- efits in lieu of notice plus commissions on the Arzon and Schure Sports deals. He also argued that his dismissal occurred right at the begin- ning of the COVID-19 pandemic, which im- pacted his ability to find new employment — it took him 13 months to find new employment, during which time he applied to more than 70 jobs — and should be taken into account in his reasonable notice entitlement. Firepower argued Kraft was no longer an em - ployee at the time it received any money from the Arzon deal and it had yet to see anything from the Schure Sports deal, so Kraft shouldn't receive any commissions from them. It also said that Kraft was dismissed before there was any emergency orders issued in Ontario and the economic shutdown had not yet started in the province. The court found that Kraft was "mid-career" and, although his tenure with Firepower wasn't particularly long at five-and-a-half years, he was "a well-qualified salesperson whose job required some specialized knowledge of the investment banking industry." This reduced the spectrum of similar employment. Uncertainty in job market The court disagreed with Firepower on whether the pandemic-related economic uncertainty should be part of the consideration, as the tim - ing of the emergency order in Ontario wasn't relevant — the pandemic and economic shut- down was already happening by the time the order was issued. In addition, it was the uncer- tainty in the economy and the job market that followed that should be factored in, said the court. "A global pandemic does not just emerge on the day of the government's emergency decree," said the court. The court determined that for someone with Kraft's age, experience, and time on the job, the average notice period was around nine months. However, it was also clear that the pandemic im - pacted Kraft's ability to find new employment, so the court added one month to his reasonable notice entitlement. The court noted that it had been established in the jurisprudence that "in the absence of an express contractual term to the contrary, there is an implied term of the employment relation - ship requiring an employer to pay a terminated employee his or her commission for sales ef- fected but not yet concluded prior to termina- tion, regardless of when the transaction closes." In addition, commissions were earned "when a salesperson has substantially performed his or her duties in connection with the sale, despite the fact that the time for actually paying the commission has not yet arrived by the date of termination." The court also pointed to the Ontario Em - ployment Standards Act, 2000, which considers commissions to be part of wages and therefore must be paid during the statutory notice period. Even an employment agreement that tries to exclude commissions during the notice period would be unenforceable, the court said. As a re - sult, it ruled that Firepower should pay Kraft his commission on the Arzon deal, as the company received fees from it during the reasonable no- tice period. However, the court denied Kraft any com- mission on the Schure Sports deal if and when it closed, as his notice period was over and his entitlement to wages "does not go on forever." A decision on damages should be final so the employer and employee weren't "tied to each other indefinitely," the court said. The court also found Kraft was entitled to his percentage share of the quarterly bonus pool for the time he worked plus the notice period, as it would have been paid to him had he contin - ued working during the notice period. The court pegged the calculation to be made with Kraft's average compensation for the 2018 and 2019 bonus pools. Firepower was ordered to pay Kraft 10 months' base salary and benefits in lieu of no - tice, his share of the bonus pool during the no- tice period, and his commission from the Arzon transaction. For more information, see: • Kraft v. Firepower Financial Corp., 2021 ONSC 4962 (Ont. S.C.J.). 6 | | September 8, 2021 September 8, 2021 « from FIRED WORKER on page 1 Uncertainty in economy and job market a factor in notice entitlement Cases and Trends Cases and Trends business purposes entirely unrelated to the leave, there is no breach of the employee's rights. For example, if an entire classification of employees is being abolished or an entire de - partment is being closed permanently. In those circumstances, it is easier to justify terminating an employee on medical leave. In determining whether an employee on leave should be terminated, consider: • Employers should clearly outline and vet the criteria by which they are selecting indi - viduals for termination during a restructur- ing to ensure that it is objective and consid- ers potential human rights implications. • Employers should ensure that they carefully and accurately document their decision-making process when terminating an employee on leave. • Employers should ensure that the em - ployee is paid the appropriate amount of payment in lieu of notice (statutory and/ or contractual notice or common law, as applicable), or severance, as no working notice period can occur while the employee is on leave. • Employers should also consider whether terminating an employee on medical leave will impact that employee's benefits. If so, employers should assess the associated risk. Ultimately, employers are entitled to reor - ganize their businesses and, pending no other motives, this supersedes the employee's right to be reinstated after the conclusion of their leave. The termination should be entirely un- related to the employee's medical leave or dis- ability; and that employee should be paid the proper amount of pay in lieu of notice. Tim Mitchell practises management-side labour and employment law at McLennan Ross in Cal- gary. He can be reached at (403) 303-1791 or tmitchell@mross.com. This article was co- written with Michelle Tremblay, a Student-at- Law with McLennan Ross in Calgary. « from ASK AN EXPERT on page 2 Business purposes

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