Guidance on Role and Compensation Amendment

[monique.chiotti@interfaceware.com]

#94756

Forum: Private

Hi there,

We have an employee currently working as an Account Manager. Under the terms of her employment agreement, she is entitled to a base salary, bonuses, and commissions. We are considering providing her with an amendment letter to reflect a new job title and responsibilities. However, the new role would no longer include the responsibility of bringing in new business, so we are looking to remove her commission structure.

If we were to offer a salary increase as a replacement for the commissions, would this mitigate the risk of a constructive dismissal claim?

Additionally, could you recommend the best course of action to handle this transition fairly and transparently to avoid any potential misunderstandings or legal issues?

Thank you,
Monique

[Haley O’Halloran]

#94757

Providing a salary increase in place of the commission structure is a reasonable approach to mitigate the risk of a constructive dismissal claim, but it is not a guarantee.

The risk can be mitigated by:
-Ensuring that the salary increase is substantial enough to compensate for the loss of commission earnings (this will depend on how much the employee typically earns through commissions, and how critical the commission component is to their overall compensation).
-Having clear, open communication about the changes and their rationale. It’s critical to explain that the role change reflects a shift in duties, and that you want to reward her accordingly in her new position.

However, to ensure fairness and transparency, and to avoid misunderstandings or legal issues, we highly recommend you seek legal counsel to avoid any issues or miscommunications. Document any changes you intend to make clearly and present this both to the employee and to your legal aid. Make sure all terms are mutually agreed upon and reinstate that this is a strategic company decision, not a penalty.

If the employee relies heavily on commission earnings, you might want to consider offering a gradual transition or a temporary bonus structure to soften the loss of commissions while she adjusts to the new role.

Ultimately, you should consult with an employment lawyer to review the amendment letter and the terms of the change to ensure that they are in compliance with applicable employment laws and reduce the risk of any claims. They can also provide advice on whether any specific steps should be taken to protect the company in the event of potential disputes.

Thank you for your question and best of luck!

-HRInsider Staff

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