Recent Overtime Class Actions and Best Practices to Manage Your Risk
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The document presents a webinar discussing the risks of overtime class actions in Canada, highlighting recent court cases involving major banks and railways. It outlines Canada Labour Code and Employment Standards Act requirements, emphasizing the importance of clear overtime policies, proper record-keeping, and managing employee expectations. Best practices for mitigating overtime liability are provided, including training managers, reviewing policies, and understanding exemptions across various jurisdictions.
Recent Overtime Class Actions and Best Practices to Manage Your Risk
- 1. RECENT OVERTIME CLASS ACTIONS AND BEST PRACTICES TO MANAGE YOUR RISK Webinar presented by: Anneli LeGault Blair McCreadie anneli.legault@fmc‐law.com blair.mccreadie@fmc‐law.com September 27, 2012
- 2. Overview of Presentation •Risk of Overtime Class Actions •Overview of Recent Trilogy of Judgments from Ontario Court of Appeal – Fulawka v. Bank of Nova Scotia; Fresco v. CIBC; McCracken v. CN Railway Company •Canada Labour Code requirements •Employment Standards Act, 2000 requirements •Approaches to Manage your Overtime Liability 2
- 3. Class Actions • Class actions allow a large group of individuals with common claims to initiate a single lawsuit against the defendant, instead of hundreds or thousands of similar claims • Designed to provide increased access to justice and greater efficiency in the courts • Quebec (1978), Ontario (1992) • All other provinces (except PEI) have now passed class proceedings legislation 3
- 4. Class Action Process • The action must be certified as a class proceeding by the courts – e.g. CIBC and BNS overtime actions • Plaintiffs must prove commonality – i.e. claims raise common issues • Plaintiffs must also prove that the class action is the “preferred procedure” • There must be a representative plaintiff 4
- 5. Class Actions in Employment • Retirees – e.g. reduction of retiree health benefits • Wrongful dismissal ‐ common issues may include binding effect of employer’s termination policy; entitlement to damages for loss of benefits; requires individual damage assessments • Difficult to certify a constructive dismissal as a class action – e.g. Allstate Insurance – 100 sales agents resigned over a new compensation model – individual findings required for each employee including review of each employment agreement – not certified • Employment Standards claims – have not always been certified – partly because ESA has quick and cost‐effective complaints resolution procedure and class proceeding may not always be the preferred procedure • Discrimination claims to date have not generally been certified in Canada and the human rights legislation process has applied 5
- 6. Ont. C.A. – Trilogy of Judgments • CIBC ‐ June 2007 ‐ $600M class action lawsuit filed on behalf of 31,000 customer service employees working in over 1,000 retail branches • Bank of Nova Scotia – December 2007 ‐ $350M class action lawsuit filed on behalf of 5,000 front‐line staff (personal banking officer, senior personal banking officer, financial advisor and account manager small business) • CN Railway – March 2008 ‐ $300M class action lawsuit filed on behalf of 1,500 current and former front‐line supervisors who allege that they were misclassified to avoid triggering overtime pay 6
- 7. Ont. C.A. – Trilogy of Judgments • Lower courts had certified overtime class actions against the Bank of Nova Scotia and CN Railway, but had refused to certify the overtime class action against CIBC • Ontario Court of Appeal was only dealing with the “first level” issue of whether or not overtime claims should proceed by way of class action • No decision has been made as to whether any of these three organizations are liable to the claimant employees for unpaid overtime • All three decisions relate to federally‐regulated entities under the Canada Labour Code 7
- 8. Ont. C.A. – Trilogy of Judgments • Decisions in all three cases released on June 26, 2012 • Ont. C.A. certified the overtime class actions against CIBC and Bank of Nova Scotia by finding sufficient commonality among the members of proposed class • But, overtime class action dismissed against CN Railway because each claim could only be resolved by considering individual circumstances of class members • Two distinct theories of overtime liability: CIBC/Bank of Nova Scotia vs. CN Railway 8
- 9. Ont. C.A. – Trilogy of Judgments CIBC and Bank of Nova Scotia Overtime Class Actions • Claim for liability based on alleged breach of contractual and statutory obligations to pay class members for overtime work that they are routinely required or permitted to perform • Overtime policies required pre‐approval from manager in order to be compensated for overtime work, which allegedly created barriers to claiming overtime 9
- 10. Ont. C.A. – Trilogy of Judgments CIBC and Bank of Nova Scotia Overtime Class Actions • Also alleged that employer failed: – to implement proper record keeping systems for overtime hours worked – to put in place a system to monitor and prevent employees from working overtime hours for which employer did not intend to compensate them • The common issues relating to the overtime policy established the requisite degree of commonality among members of the proposed class 10
- 11. Ont. C.A. – Trilogy of Judgments From the CIBC decision: …. The terms and conditions in CIBC’s overtime policies governing overtime compensation, and the accompanying standard forms that class members submit when requesting such compensation, apply to all class members regardless of their own particular job responsibilities or job titles. To the extent that the policies and record‐keeping systems of CIBC are alleged to fall short of CIBC’s duties to class members, or to constitute a breach of class members’ contracts of employment, these elements of liability can be determined on a class‐wide basis and do not depend on individual findings of fact. 11
- 12. Ont. C.A. – Trilogy of Judgments Dismissal of Class Action as against CN Railway • Claim based on alleged misclassification of front‐line supervisors as managerial employees • To proceed as class action, Court found that Plaintiff had to establish sufficiently similar job functions and duties of class members • In fact, Ont. C.A. found wide disparity in job functions among proposed class members, depending on their job title, work location, size of workplace, and reporting relationship 12
- 13. Ont. C.A. – Trilogy of Judgments Dismissal of Class Action as against CN Railway • Given disparities, Court found that a judge could not determine whether a “front line supervisor” was managerial or non‐managerial without resorting to evidence of individual employees • Not sufficient commonality among class members to permit the class action to proceed 13
- 14. Overview of CLC Requirements • Standard hours are defined as 8 hours per day, 40 hours per week • Overtime pay of 1.5 times “regular rate” owing for all hours work in excess of standard hours • Hours of work may also be averaged over a period of 2 or more consecutive weeks • In such a case, overtime applies after exceeding the standard hours in the averaging period 14
- 15. Overview of CLC Requirements • Modified work schedules are also permitted • These include compressed work weeks and flexible hours of work • For example, employees may be scheduled to work 10 hours per day, 4 days a week • Trade union agreement is required, or in a non‐union work setting, the modified work schedule (or cancellation of the modified work schedule) must be approved by at least 70% of the affected employees • Employer must post a notice of a new schedule, its modification or its cancellation for at least 30 days before it comes into effect • Overtime is paid after the approved daily or weekly hours (e.g. 4 days of 10 hours each, overtime is payable after 10 hours in a day and 40 hours in a week) 15
- 16. Overview of CLC Requirements • Records must be kept for at least 36 months of hours worked each day and all amounts paid for overtime Exemptions from Overtime Requirements: • Managers • Superintendents • Employees who exercise management functions • Members of the following professions: architectural, dental, engineering, legal, medical 16
- 17. Overview of ESA Requirements • Overtime pay of 1.5 times “regular rate” owing for all hours worked in excess of 44 in a week • No daily threshold • Calculation of “regular rate” = total salary earned divided by number of non‐overtime hours per work week • With consent, employer may provide 1.5 hours of paid time off in lieu for each overtime hour worked within 3 months of being earned (or within 12 months with employee consent) 17
- 18. Overview of ESA Requirements • Hours of work may also be averaged over a period of two or more consecutive weeks for purpose of determining entitlement to overtime pay • Requires written agreement with employee • Employer must have received approval for overtime averaging from Director of Employment Standards 18
- 19. Overview of ESA Requirements • ESA requires employers to record the number of hours worked by eligible employees in excess of regular work week, and the number of hours in excess of eight (8) hours each day (or in excess of the employee’s regular work day) • Records must be retained for three years after the day or week to which the information relates • Proper employer records are critical to mounting a successful defence to claim for unpaid overtime • If employer has not kept proper records, ESO may make a determination based on best available evidence (including records kept by the employee) 19
- 20. Overview of ESA Requirements • Don’t forget to check your pay stubs! • If employer records “regular weekly hours” on pay stub (or in an employment contract), MOL may order payment for non‐ overtime extra hours worked by employees in excess of those regular weekly hours • Some payroll providers will automatically pre‐populate the hours of work box with “regular hours” of 37.5 or 40 hours per week 20
- 21. Overview of ESA Requirements • Note – use of “regular hours” may result in additional liability for non‐overtime hours worked (up to 44 hours/week) 21
- 22. Overtime Exemptions under ESA • Because of remedial nature of ESA, exemptions to overtime eligibility are construed narrowly – Certain professionals (e.g. “qualified practitioners” of law, architecture, medicine, public accounting, professional engineering, etc.) – Also includes “students in training” for these professions – Many industry‐specific exemptions 22
- 23. Overtime Exemptions under ESA • Managers and supervisors: work is supervisory or managerial in character and who may perform non‐ supervisory or non‐managerial work on an irregular or exceptional basis • Supervisory or managerial in character? – Exercises discretion and independent judgment – Degree of authority, judgment, discretion or decision‐ making power – Title and position relative to other employees 23
- 24. Overtime Exemptions under ESA • Supervisory or managerial in character? – Exercises financial controls or sets budgets – Degree of access to confidential financial information – Review job description and the tasks typically performed by employee, including determining wage rates, hiring/firing of employees, providing supervision or direction to other staff • Non‐supervisory or non‐managerial tasks may only be performed on an “exceptional” or “irregular” basis 24
- 25. Overtime Exemptions under ESA • Information technology professionals: – Employee who is “…primarily engaged in the investigation, analysis, design, development, implementation, operation or management of information systems based on computer and related technologies through the objective application of specialized knowledge and professional judgment” – Primary job duties must relate to information systems or computer systems – Must possess specialized knowledge and exercise professional judgment in IT matters 25
- 26. Approaches to Manage Overtime Liability • Review and Update your Overtime Policy – Reduce employee discretion around overtime hours by requiring authorization and approval of overtime – Review policy and any related forms to confirm that they provide a mechanism to approve overtime after the fact – Ensure that policy is clearly communicated in writing to affected employees – Note: while an employer cannot refuse to pay overtime worked because it was “not authorized”, you can impose discipline for failing to comply with policy 26
- 27. Approaches to Manage Overtime Liability • Review and Update your Overtime Policy – Update your policy to address potential areas of “off the clock” work, i.e., set clear expectations around checking and responding to email when off‐duty – Think about overtime liability when implementing remote work arrangements, or issuing other devices that may promote off‐hours work (i.e. iPads, BlackBerrys, other PDAs) – Regularly assess and balance employee workload – Ensure that policy is consistently followed and enforced 27
- 28. Approaches to Manage Overtime Liability • Set Clear Guidelines for Overtime Approval – Overtime policy should include clear written guidelines on how to seek prior authorization for overtime – Do not state that unauthorized overtime will not be paid – Review policy and related forms to ensure that they clearly provide mechanism for an employee to seek approval after the fact where warranted – Also include mechanism for individual assessment in other emergency or unforeseen circumstances – Ensure that managers and supervisors understand the approval procedure, and are held accountable for it 28
- 29. Approaches to Manage Overtime Liability • Review Template Offers and Agreements – When reviewing overtime policy, also update your template offer letters and employment agreements regarding hours of work – Avoid use of “regular hours of work” language in employment documents and on pay stubs – This may create an obligation for the employer to pay straight time for hours worked in excess of the “regular hours of work” threshold – Ensure that threshold for overtime pay is consistent with statutory obligations 29
- 30. Approaches to Manage Overtime Liability • Check Exemptions Carefully, and Know the Rules – There is no general exemption for salaried, white collar or “professional” employees – Overtime exemptions vary in each jurisdiction, so carefully review the regulations that relate to your workforce – Resist the temptation to be over‐reaching around specific exemptions (i.e. managers/supervisors, IT professionals) – Titles and pay are not determinative; you may need to revise job responsibilities 30
- 31. Approaches to Manage Overtime Liability • Keep Proper Records of Hours Worked – Comply with the record‐keeping obligations required under applicable law – Employers must have a complete and accurate record of actual hours worked; if the employer did not keep proper records then the “records” kept by employee may simply be accepted – Give employees an opportunity to sign off on actual hours worked 31
- 32. Approaches to Manage Overtime Liability • Train your Managers and Supervisors – Overtime liability will be triggered where an employer requires or permits work to be done – Ensure that managers set clear expectations around checking and responding to email after hours or working remotely on evenings/weekends – Managers should be monitoring the work that employees are doing, and properly balance workload – An employee cannot waive or contract out of overtime entitlements, even if they agree – Avoid informal arrangements to provide increased compensation, or bonuses, for additional hours worked 32
- 33. Approaches to Manage Overtime Liability • Use Paid Time Off in Lieu – In appropriate circumstances and with employee agreement, paid time off in lieu can be provided as an alternative of overtime pay – Paid time off in lieu can be attractive to employees who are focused on quality of life or work‐life balance issues – May be implemented in conjunction with existing employer programs (i.e. summer hours, office closures around holidays, etc.) – Remember – 1.5 hours of paid time off in lieu must be provided for each overtime hour worked 33
- 34. Approaches to Manage Overtime Liability • Use Averaging Agreements – If an employee’s hours generally vary from week to week, consider use of overtime averaging agreement – Averaging agreements give employers scheduling flexibility by revising threshold for overtime (i.e. 80/88 hours in two‐week period, 160/176 hours in four‐week period, etc.) – Employee must agree in writing (either as a stand‐alone agreement, or in original offer of employment) – Comply with statutory requirements around notice, required approvals, etc. 34
- 35. Approaches to Manage Overtime Liability • Be aware of the Rules in Different Provinces – Be aware of the different jurisdictions. If the employees are in different provinces, remember that some provinces have daily overtime thresholds in addition to weekly overtime thresholds, and some jurisdictions do not permit the use of time in lieu – In addition, the excluded positions vary from province to province 35
- 36. Want Updates? Check out FMC Law Blogs for HR Professionals… Occupational Health & Safety: www.occupationalhealthandsafetylaw.com Human Resources Law: www.employmentandlabour.com
- 38. Questions? Anneli LeGault Blair McCreadie (416) 863‐4450 (416) 863‐4532 E‐mail: anneli.legault@fmc‐law.com blair.mccreadie@fmc‐law.com