Court Win: Employee Doesn’t Have to Repay $33,000 in Commission Draws

Samfiru Tumarkin LLP has secured an important Ontario court victory for an employee whose former employer demanded that he repay nearly $33,000 in commission draws after leaving the company.

In 2250898 Ontario Inc. v. Pepe, the Ontario Divisional Court overturned an earlier judgment against our client and dismissed his former employer’s claim for $32,983.08.

The decision provides an important reminder for employees who receive commission pay: a “draw against commission” does not automatically become a debt that you must repay to your employer if your employment ends.

The successful appeal was handled by David Vaughan and Kevin Hamilton of Samfiru Tumarkin LLP.

The Employer Initially Won Its Claim

The dispute first went before Ontario’s Small Claims Court, where the employer was successful.

The court found that the commission draws were advances that Pepe had to repay and ordered him to pay his former employer $32,983.08.

Pepe appealed that decision with the help of Samfiru Tumarkin LLP.

Our Lawyers Got The $32,983 Judgment Overturned

The Ontario Divisional Court agreed with our client’s position, allowed the appeal and dismissed the employer’s claim entirely.

The court rejected the idea that a draw against commission should automatically be treated as a loan that an employee must repay.

Whether an employee has to repay commission draws depends on what the employer and employee actually agreed to.

Do Employees Have To Pay Back Commission Draws?

Not automatically. Whether an employee has to repay a draw against commissions depends on the wording of their employment agreement.

The Divisional Court explained that commission draws can generally operate in two different ways.

A recoverable draw

A recoverable draw can require an employee to repay a shortfall if the commissions they earn do not cover the money advanced to them.

However, the employment agreement must support that repayment obligation.

A non-recoverable draw

A non-recoverable draw can effectively provide an employee with a guaranteed minimum level of compensation.

If the employee’s commissions do not cover the draw, the employer absorbs the shortfall instead of requiring the employee to repay it from their own money.

In Pepe’s case, the employer had drafted the agreement, but it did not clearly require him to repay a commission shortfall from his own funds.

An employer can’t impose that kind of repayment obligation after the fact.

SEE ALSO
• Commission Pay in Canada: Employee Rights
• Employment Contracts in Ontario

Why This Decision Matters For Employees

• A commission draw is not automatically a loan. Your employer can’t simply assume that every dollar not covered by commissions must be repaid.
• The wording of your employment agreement matters. It should clearly explain whether a draw is recoverable and what happens if your employment ends.
• Your employer can’t create a repayment obligation after the fact. If the agreement doesn’t require repayment from your own funds, your employer can’t simply add that requirement when you leave.

When Should You Contact An Employment Lawyer?

Speak with an employment lawyer in Ontario if your employer says you must repay commission draws, is deducting money from your final pay, or your commission agreement is unclear about what you owe.

Do not assume that you owe the money simply because your employer says you do. The wording of your contract and Ontario employment law can produce a very different result.

Most commission and compensation disputes can be resolved without a lengthy court case. But when an employer refuses to do what is right and litigation becomes necessary, results like 2250898 Ontario Inc. v. Pepe demonstrate the experience our lawyers bring to court.

If your employer is demanding repayment of commission draws or withholding commissions you believe you’re owed, contact David Vaughan, Kevin Hamilton or another member of the employment law team at Samfiru Tumarkin LLP.