On January 30, 2015, the Ontario Superior Court of Justice certified a class action against Canada Cartage for unpaid overtime in Baroch v. Canada Cartage. This action is being brought on behalf of a group of approximately 7,800 former and current employees that worked at Canada Cartage between March 1, 2006 and the date of certification and were entitled to receive overtime compensation pursuant to the Canada Labour Code and its regulations (Proposed Class). This case serves as a warning for all employers to check that they have appropriate overtime policies and practices.
The representative plaintiff alleges that Canada Cartage, a federally-regulated employer that is subject to the Canada Labour Code and its regulations, as a matter of practice or policy:
- only paid overtime if an applicable 60-hour threshold was exceeded;
- had no written overtime policy, no directives for its human resources staff, and no centralized record-keeping system;
- made overtime eligibility determinations on a case-by-case basis in disregard of applicable law; and
- when Canada Cartage was directed by federal labour authorities to comply with the prescribed overtime thresholds, it unilaterally reduced the hourly wage in the affected area so it would appear that the required overtime was being paid when it was not.
THE CERTIFICATION DECISION
To be certified as a class action, among other requirements, a proposed class action must raise an issue of fact or law that is common to all class members. Most of the Court’s reasons were devoted to this requirement.
The Court rejected Canada Cartage’s argument that this is a “misclassification” case, where plaintiffs allege that they were wrongly classified as ineligible for overtime. The Court noted that if the issue were “simply misclassification and the determination of overtime eligibility, the action would not be certified as a class proceeding” and “would collapse just as it did” in the recent Ontario Court of Appeal decisions in McCracken v. Canadian National Railway (McCracken) and Brown v. Canadian Imperial Bank of Commerce (Brown ).
Instead, the Court found that the Proposed Class had been predefined to presume overtime eligibility, unlike in McCracken and Brown. That being the case, the Court found that eligibility determinations and individual assessments are not at issue. Similar to Fresco v. Canadian Imperial Bank of Commerce, the plaintiff in this case focused attention on a policy or practice that is alleged to be “systemic” and thus common to all of the class members.
The Court rooted its decision to certify the claims as a class action on two well-established propositions: a plaintiff is entitled to frame and advance the case in a way most amenable for determination on a class-wide basis; and merits- based arguments are irrelevant on certification.
The Court ultimately certified nine common issues. One issue is whether it is a term of the employment contracts that the Proposed Class would be paid for overtime in a manner that complied with law. Another issue is whether Canada Cartage had a policy or practice of avoiding or disregarding federal law obligations to pay overtime in accordance with contractual entitlements.
The Court noted that almost all of the parties’ submissions were directed to the latter issue. In deciding to certify the latter issue as a common issue, the Court listed a number of points it considered in finding “some basis in fact” that Canada Cartage had a policy or practice of avoiding or disregarding its overtime obligations, including:
- Canada Cartage had no written overtime policy during the applicable period;
- no Canada Cartage document existed that employees could consult to learn how their overtime entitlement would be established;
- Canada Cartage never issued any written directives to managers, supervisors or the payroll department about how to apply the various overtime rules and thresholds;
- a senior human resources director admitted that mixed employment rules were “quite a grey area” for her; and
- the vice-president of human resources stated that Canada Cartage did not coordinate or standardize its payroll process in order to determine what overtime thresholds applied and the determinations varied from “employee to employee, location to location”.
The Other Requirements for Certification
The Court noted that Canada Cartage, other than raising a “minor objection” that the Court dismissed, agreed that the only real dispute was commonality, whether there were common issues. Accordingly, the Court held that the other four requirements for class action certification were satisfied, as follows:
- causes of action in breach of contract, negligence, and unjust enrichment are viable;
- there is an identifiable class of two or more persons;
- class action is a preferable procedure to resolve the common issues; and
- the representative plaintiff is suitable, with a workable litigation plan and no conflict of interest..
WARNING TO EMPLOYERS
It is expected that Canada Cartage will seek leave to appeal this decision. Nevertheless, this decision highlights the value of employers having carefully-crafted overtime policies and appropriate overtime practices. Although such policies and practices may not preclude having to defend an overtime class action, the dangers for employers of not having such policies and practices will almost inevitably outweigh having such policies and practices.