Mr C tendered his resignation. This resignation came prior to the end of the sale target dates and Mr C had not reached the targets which entitled him to his commission.
After Mr C left the company, he sought to have his final pay and holiday pay given to him. However, the company informed Mr C that they were exercising an option in Mr C’s Individual Employment Agreement to deduct the commission they had paid in advance (and which had not been earned) from the money that they owed him. The company went on to tell Mr C that they expected the remainder of the commission paid in advance to be paid back to them.
Eventually the matter ended up in the ERA.
The company argued that the money advanced by way of commission was only based on the premise that the sales targets would be met and as the targets were not met they were legally entitled to the money back.
In response to this, Mr C argued that it was “morally unfair” for the company to require him to pay back the advanced commission. Further, he argued that it was industry and/or market practice that no advanced commission would have to be repaid.
The ERA found in favour of the company. Although it may seem “unfair “to require Mr C to pay the commission back, the company had every right in law to require this. Mr C’s Individual Employment Agreement allowed commission payment on the premise that targets would be met. The agreement clearly set out that if the targets were not met then the company would have the right to be repaid the advances.
Two valuable lessons come out of this decision.
Number one - An employment opportunity may not always be as good as it seems. The money that Mr C received on a monthly basis was very generous. However, the money he received had not all yet been earned and, after paying a substantial amount back to the company, the deal which he signed up to was not as good as it may have seemed.
Number two - there is a distinction between what is “fair” and what is “legal”. I have repeatedly told employers that have to should treat their employees with the utmost good faith. However, where an employer has a legal right, they can enforce this right regardless of the fairness to the employee. In this case the Individual Employment Agreement was clear and in those circumstances the ERA will always hold in favour of the person who seeks to rely upon the Agreement. (Another reason why I keep telling employers to make sure they have up do date Employment Agreements.)
