Ontario Civil


Employment

Wages

Employer tried to unilaterally change terms of employee’s commission arrangement

Employer was manufacturer of medical ventilation and resuscitation equipment. Employer hired employee as engineer in 2002. In 2003, employer agreed to allow employee to try to sell employer’s products in Iraq. Employer agreed to pay employee seven-per-cent commission on all “paid for sales” excluding Iraq. Commissions for sales in Iraq were to be determined on “per project basis.” Employee was paid seven-per-cent commission for relatively minor sales in Iraq. Employee never made any sales outside of Iraq. Employer sold about $2.3 million worth of products to Iraq’s Ministry of Health in 2006 but had to pay 34 per cent of this amount to Iraqi agent as fee. Employer removed employee from sales work and paid him only $19,751.56 for commission for this large sale. Employee brought action against employer for payment of further commission. Action allowed. Employee was awarded additional $86,291.64 for commission owing. Employer had tried to unilaterally change terms of employee’s commission arrangement when it knew it would be obtaining its single largest contract ever from Iraq’s Ministry of Health. Parties’ initial contract applied, though due to ambiguities in meaning of “paid for sales” and “per project basis,” use of extrinsic evidence was permitted to resolve ambiguities. Phrase “paid for sales” was taken to mean employer’s gross margin, which was $1,514,902.81 after deducting 34-per-cent fee paid to Iraqi agent. Bank charges were not deducted since they were part of employer’s direct costs. Commission for sales in Iraq were to be at least seven per cent having regard to potential dangers when conducting business in that country. Fact that employer tried to impose lower commission structure on employee supported conclusion that employer knew employee was entitled to at least seven per cent. Employer had also paid employee seven per cent for subsequent minor sales in Iraq. Amount awarded would have been same on quantum meruit basis.

Ali v. O-Two Medical Technologies (Jun. 19, 2015, Ont. S.C.J., LeMay J., File No. CV-09-4189-00) 255 A.C.W.S. (3d) 637.

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