Since 2007 there have been five significant overtime class action cases in Canada.  Two of these cases have been labelled “off-the-clock” cases — cases in which employees allege they were expected to work overtime without being paid for it.  Both off-the-clock class actions were eventually certified.  One of those cases has now settled.

The remaining three overtime class actions are “misclassification” cases in which employees allege that their employer misclassified them as exempt from statutory overtime entitlements.  Courts have been more reluctant to certify the misclassification cases because, in a majority of those cases, the proposed plaintiff class has not been sufficiently similar to justify a class action proceeding.

The Ontario Court of Appeal’s recent decision in Brown v. Canadian Imperial Bank of Commerce confirms the prevailing view that employers are most vulnerable to issues that arise when their employees’ hours are not properly monitored, recorded, enforced or compensated.  Employers continue to be liable to individual employees for misclassifying them as “overtime exempt”, but it is less likely that such misclassifications will give rise to the added liability that is associated with a class action.

Background

Employees from the Canadian Imperial Bank of Commerce (“CIBC”) sought to bring a class action against CIBC for unpaid overtime pay. The group of employees in issue before the Court of Appeal included Investment Advisors (“IAs”) and Associate Investment Advisors (“AIAs”). Employees with managerial or supervisory experience over other AIAs had originally been included in the proposed class but were no longer included in the proposed class at this time.

The proposed plaintiffs argued that they worked well in excess of 44 hours of week and that it was understood that IAs and AIAs did not work standard 8-hour work days, but that CIBC never made them aware of their potential right to overtime pay before 2006.

After 2006, CIBC introduced a comprehensive overtime policy in all of its Canadian branches. The policy stated that employees in Level 7 positions and individuals with management functions were generally exempt from overtime, and that employees performing jobs classified as Levels 1 to 6 were generally eligible for overtime, unless they performed management functions. All of the employees in the proposed class were classified as Level 6 or higher.

The Decision

In order for the action to proceed, the employees had to demonstrate that they had an issue in common. To establish this, the employees had to demonstrate that their functions, responsibilities, and duties were sufficiently similar such that the Court could determine whether the entire group was eligible or ineligible for overtime pay, without having to analyze the specific circumstances of individual employees.

Although the employees emphasized the fact that CIBC’s overtime policy differentiated between employee levels, the Court found that Level 6 employees were only “generally” eligible for overtime pay. The Court further found that eligibility for overtime pay was based on an individual assessment of an employee’s functions, duties, and responsibilities, rather than merely his or her level or title within the company. As there was no way for the Court to determine whether all of the individuals within the proposed class of plaintiffs were or were not eligible for overtime pay as a group, the Court could not certify the proposed class.

Implications

Employers are most vulnerable to an overtime class action when the hours of overtime-eligible employees are not properly monitored, recorded, enforced or compensated.  To limit this liability, employers should focus on the following:

  • Implement a system of carefully recording employee hours, including hours that are not scheduled but nevertheless worked.
  • If an employee works overtime, then they must be provided with overtime pay, regardless of whether it was pre-scheduled by the employer.
  • It is the employer’s responsibility to ensure employees do not work off-the-clock.  If an employee continues to work overtime after being instructed not to do so, then the employee should be progressively disciplined and eventually dismissed.
  • If there is any question as to whether a class of employees is entitled to statutory overtime pay, an employment lawyer should be consulted.

Many thanks to Jennifer Bernardo for her assistance in drafting this blog.