THE QUESTION
My employer wants to change my pay structure to base pay plus commission, instead of a regular monthly salary. Based on my sales history, and the scope of my work, this will result in a significant decrease in my pay. I believe the company is trying to cut costs. What are my rights here? Is there any way I can retain my original pay structure?
THE FIRST ANSWER
Sophie Purnell, founder and employment and human-rights lawyer, Purnell Employment Law, Calgary
You have the right to decline the new pay structure and claim constructive dismissal. If you reject the new pay structure, you must communicate to your employer that the new pay structure will result in a significant decrease in your pay and that you want to retain your original pay structure.
If your employer refuses to keep you on the original pay structure, they may terminate your employment without cause and, in that case, they must provide you with sufficient notice or pay in lieu of notice under the law. If your employer refuses to keep you on the original pay structure but they do not terminate the employment relationship, you might be able to claim constructive dismissal.
Constructive dismissal means that the employer has made a substantial change to a fundamental term of your employment (in your case your pay structure) such that it forces you to have to quit and find a new job. Whether there has been a significant change to a fundamental term of your employment and when to claim constructive dismissal may be something you want to discuss with a lawyer before you leave your employment. If you claim constructive dismissal, the employer may take the position that you resigned and are not entitled to severance. It is, therefore, important that you obtain legal advice about whether this new pay structure substantially alters a fundamental term of your employment.
If you voice your objections about the new pay structure to your employer but you continue to work under the new pay arrangement, you will be considered to have accepted the reduced pay.
THE SECOND ANSWER
Ryan Edmonds, principal lawyer, Ryan Edmonds Workplace Counsel, Toronto
Imposing a lesser pay structure is a delicate exercise in which both employers and employees have rights.
Agreeing to provide a salary in exchange for labour is a “fundamental” term of the employment contract (note: a contract can be written or unwritten). When an employer tries to replace a fundamental term with something inferior, an employee can refuse and claim a breach of contract, which terminates the employment relationship and provides a right to severance pay.
An employer does have strategies available to it, though. It can:
- Terminate the current contract with proper notice and rehire on the desired terms. Usually, the employee is required to work out any termination pay that would otherwise be owed.
- Negotiate a compromise, such as agreeing to maintain the current pay structure for a period of time until the change takes effect.
- Give notice of the change equivalent to what would be owed on termination. If the employee does not protest, the new terms will take hold.
Thus, the reader can retain their current salary, but only for a limited period of time because the employer can always terminate the existing contract with proper notice and then rehire on the new commission structure. The amount of notice required is a question for another day, but roughly one month per year of service is a fair starting point.
The reader should try negotiating a compromise with their employer, but given that individual circumstances will vary, they should first speak to an employment lawyer.
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