In the Ontario Court of Appeal’s decision in the recent case of Dumbrell v. Regional Group of Companies, the court essentially confirmed that if employment agreements do not specifically limit commissions or bonuses to projects which are completed at the time of notice of termination, employees may be given the benefit of collecting them through the notice period and sometimes even thereafter. In this particular case, the court found that the Plaintiff, Dumbrell, was contractually entitled to 50% of the profits of Ottawa-based Regional Group of Companies ("Regional") on a particular commercial real estate contract, even though the profits were earned well after the employment relationship was at an end.
Dumbrell was hired to investigate and bring forward to Regional potential large-scale commercial real estate projects in Ottawa. Dumbrell was compensated by commission only; however, his commissions had the potential to be very large, as they were based on 50% of the profits earned and received by Regional as a result of Dumbrell’s direct involvement with commercial projects. He was hired for six months, with an additional six month term on mutual agreement of the parties.
Dumbrell spent most of his initial term plus the next six months pursuing a downtown Ottawa property which was being used for parking, but was zoned for office space and which, in Dumbrell’s view, was perfect for development. As part of his efforts, he assembled information about the property, some of which was highly confidential. On the basis of that work, Regional put in several offers for the property, none of which were successful.
Approximately one year after starting to work for Regional, Dumbrell resigned to go into business for himself because he hadn’t yet earned any income from Regional. Shortly after he left, Regional took advantage of Dumbrell’s work product and confidential information to make a further offer on the property. This time around, the offer was accepted. When Regional failed to provide Dumbrell with 50% of its profits on the contract, he commenced litigation.
The court found that there was nothing in the wording of the contract that limited Dumbrell’s remuneration to projects that were completed and closed at the date of termination of his contract. It also found that a reasonable person would have appreciated that it was anticipated that the sorts of projects Dumbrell would bring in might not be completed within the relatively short contractual period. Dumbrell ultimately came away with significant compensation for his work, even though the deal wasn’t closed until after he left.
Although the facts in this case are quite unique, it is an important case because it demonstrates that Canadian courts tend to assist employees in their legal disputes in cases where employers are unfair and/or the underlying employment agreements are not clearly drafted. In short, if an employer does not wish to pay an employee for a job completed after he or she has left active employment (e.g., no payment of commissions unless the employee is still actively employed when the sales are booked, accounted for and paid), the employer must make sure that there is a clear statement to that effect in the underlying employment agreement, commission plan or incentive plan. Further, it goes without saying that all such agreements need to be properly implemented in exchange for due consideration.
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