Naidu v. Hare Motors Ltd. Date:, 2013 BCPC 165

Citation: Naidu v. Hare Motors Ltd. Date: 20130627 2013 BCPC 0165 File No: 72993 Registry: Surrey IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: VIJAYA SUNDRAM NAIDU CLAIMANT AND: HARE MOTORS LTD. DEFENDANT RULING ON APPLICATION OF THE HONOURABLE JUDGE K. D. SKILNICK Appearing in person: V. S. Naidu Appearing for the Defendant: A. S. Hare Place of Hearing: Surrey , B.C. Date of Hearing: June 19, 2013 Date of Judgment: June 27, 2013

Introduction [ 1 ] The Claimant Vijaya Sundram Naidu has commenced this action against the Defendant Hare Motors Ltd. for vacation pay owing for the years 2006 to 2012, when the Claimant worked for the Defendant as a commissioned salesperson. The Defendant has paid some of the amount claimed, but is refusing to pay the remainder because it takes the position that vacation pay was incorporated into its commission structure.

The Claimant asserts that this is unlawful and argues that the Employment Standards Act of British Columbia forbids this practice. [ 2 ] The parties agree that the facts are not in dispute in this case and the issue can be decided on this court’s ruling as to which party is correct in the

interpretation of the law. This court is permitted to avoid the expenditure of trial resources in this matter under rule 7(14)(

b) of the Small Claims Rules, which allows a judge to “decide on any issues that do not require evidence” and subsection (

l) which allows for a judge to “make any other order for the just, speedy and inexpensive resolution of the claim.” Accordingly, following is a

summary of the admitted facts, of the applicable law, and of the application of the law to those facts. Agreed Facts [ 3 ] The parties agree that the Claimant was a commissioned salesperson for the Defendant from September 8, 2004 until August 31, 2012. The Defendant does not take issue with the income tax records produced by the Claimant which show that, while he was a salesperson for the Defendant, he had total earnings of $218,263. Vacation pay owing on this amount is calculated at a rate of 4% for the years 2006 to 2009 and 6% for the years 2010 to 2012.

Based on those rates, the total amount claimed owing by the Claimant as unpaid vacation pay adds up to $10,232.52. The Defendant has paid $2,556 of this amount without admission of liability, as well as a further sum of $92.58, and these payments reduce the claim to $7,769.10. [ 4 ] The parties also agree that the Claimant signed an agreement with the Defendant in which it was agreed that “vehicles that are sold with a gross profit that is commissionable is paid at the commission rate... which includes holiday pay ” (emphasis added).

The Defendant argues that it has already paid the Claimant all the vacation pay he was owed because it was factored into his commission structure. Applicable Law and Analysis [ 5 ] The obligations of employers regarding vacation pay are set out in

Part 7 of the Employment Standards Act .

Section 57 requires an employer to give employees an annual vacation of at least two weeks after twelve consecutive months of employment and three weeks after five years of consecutive employment. [ 6 ]

Section 58 of the Act reads as follows: Vacation pay 58

(1) An employer must pay an employee the following amount of vacation pay: (

a) after 5 calendar days of employment, at least 4% of the employee's total wages during the year of employment entitling the employee to the vacation pay; (

b) after 5 consecutive years of employment, at least 6% of the employee's total wages during the year of employment entitling the employee to the vacation pay.

(2) Vacation pay must be paid to an employee (

a) at least 7 days before the beginning of the employee's annual vacation, or (

b) on the employee's scheduled paydays, if (

i) agreed in writing by the employer and the employee, or (ii) provided by the collective agreement.

(3) Any vacation pay an employee is entitled to when the employment terminates must be paid to the employee at the time set by

section 18 for paying wages. [ 7 ]

Section 4 of the Act provides that this is a minimum requirement for an employer. It also provides that any agreement to waive the requirement to pay vacation pay “has no effect.” What this means is that an employee can not make a contract with his employer waiving the employee’s right to vacation pay. [ 8 ] The Defendant says that its agreement with the Claimant wasn’t an agreement asking him to waive his vacation pay. To the contrary, in the agreement the Defendant was expressly agreeing to pay vacation pay, but was including that amount as part of the commission payable.

There are two problems with this argument. Firstly, the contract doesn’t specify what portion of the commission was vacation pay and therefore there is no way of knowing what rate of vacation pay is actually being paid to the employee and if that rate meets the minimum requirements of the Employment Standards Act .

[9] Secondly, the rate of commission should have increased after five years because the amount of vacation pay was required bylaw to increase. But in the contact made between the parties, no increase in the rate of commission is set out for year five. What thismeans is that at the end of year five, either the Claimant’s commission dropped by the amount of the increase in his vacation pay, or hewasn’t being given any increase in his vacation pay. [10] The argument which the Defendant is making was rejected by the Supreme Court of British Columbia in Atlas Travel ServiceLtd. v.

Director of Employment Standards In that case, that Plaintiff had an agreement with its employees that read:“Payment for vacation, which is included in your commission earnings, is as prescribed by the Employment Standards Act of BritishColumbia.” Mr. Justice Braidwood held that this provision was void. He wrote (on pages 5-6): “The argument fails on a logical basis. By the Employment Standards Act, s.36 (1)(b) [now s. 58(1)(b)] after five years of employment,an employee shall be entitled to three weeks of vacation.

By the contract the travel agents signed with Atlas Travel, after two years ofemployment, an employee would be entitled to three weeks of vacation. Assuming a base commission of 50 per cent, the EmploymentStandards Act provides for 2 per cent vacation pay per week. Therefore, with 2 weeks of vacation, the employee is receiving 46 per centcommission. With 3 weeks of vacation, that commission drops down to 44 per cent.

This is an absurd result, for an employee’s ‘totalwages’ ought not to decline with seniority in order to fund a statutory obligation which rests with the employer. “The Employment Standards Act sets up a scheme whereby an employer is obligated to pay an employee something in addition to theirwages for annual vacations and general holidays. Section 37(1) states that the annual vacation pay shall be calculated on the employee’stotal wages.

Therefore, the appellant’s attempt to have the employee’s commission include their vacation and holiday pay does notcomply with the Employment Standards Act.” [11] This is the same situation as in this case. The contract is an effort by the Defendant to have the Claimant pay for the Defendantemployer’s obligation to pay vacation pay by a reduction in the Claimant’s commission.

Section 4 of the Employment Standards Actprohibits this. Accordingly, this portion of the contract has no effect and is unenforceable against the Claimant. [12] The Defendant argues that if it is obligated to pay vacation pay, the claim should be limited to two years, based on advice givento him by the Employment Standards Branch. What this is likely referring to is

section 124 of the Employment Standards Act, whichprohibits the commencement of a prosecution under the Act more than two years after an alleged offence has been committed. Thislimitation does not apply to a civil claim. Under the Limitation Act as it existed when this claim was commenced on November 22, 2012,this claim was commenced in time, and is not restricted to two years. The Claimant is entitled to sue for all of the vacation pay owing tohim.

Order [13] For the foregoing reasons, the Claimant will have judgement against the Defendant for the sum of $7,769.10, along with hiscosts in the amount of $186.00 for a total of $7,955.10. Dated at the City of Abbotsford, in the Province of British Columbia, this 27th day of June, 2013. ___________________________________ The Honourable Judge K. D. Skilnick