Last week, the Ontario Court of Appeal released its decision in Brown v. Canadian Imperial Bank of Commerce, upholding the Divisional Court’s decision affirming the dismissal of a certification motion in a proposed “misclassification” overtime class action (previously blogged about in the spring and fall of 2013). The appeal decision is of particular interest as “misclassification” overtime class actions (i.e. class actions alleging that an employer has misclassified employees and managers to avoid overtime pay obligations) were thought, by many observers, to have already been dealt a fatal blow by the Court in its prior decision in McCracken v. Canadian National Railway Company, but a recent certification decision had raised questions about whether that was right.

In Rosen v. BMO Nesbitt Burns, Justice Belobaba certified a “misclassification” class action despite the decision in McCracken and the Divisional Court decision in Brown. The Brown decision was therefore a welcomed opportunity to set the record straight.

Background

The Divisional Court, relying on McCracken, upheld Justice Strathy’s denial of certification of a proposed class proceeding against CIBC and CIBC World Markets for allegedly misclassifying various employees in a manner that made them ineligible for overtime pay. The Divisional Court concluded that “the issue of eligibility for overtime for the proposed class members could only be determined on an individual basis,” meaning that the Plaintiffs had failed to demonstrate the existence of a common issue as it relates to eligibility for overtime pay. The Divisional Court found no commonality despite efforts by class counsel to alter the scope of the class to exclude any workers exercising supervisory and managerial responsibilities over other employees, as these workers would not be eligible for overtime but might otherwise be captured by the class definition.

The Divisional Court indicated that the “plaintiff’s evidence must establish some basis in fact to find that the job functions and duties of class members are sufficiently similar that the misclassification element of the claim… could be resolved without considering the individual circumstances of class members.” The Divisional Court further confirmed that the class failed to prove any basis in fact to show that the proposed class members’ job functions (even using the amended definition advanced by counsel) were sufficiently similar that eligibility could be decided on a class-wide basis.

Following the Divisional Court’s decision, Justice Belobaba rendered his decision in Rosen presenting the Court of Appeal with the opportunity to clarify and reconcile the reasoning in Brown and Rosen,

For a detailed history, please visit our prior blog posts regarding the Divisional Court’s decision and the Court of Appeal’s decision to grant leave to appeal.

The Decision

The Court of Appeal upheld the Divisional Court’s decision and stayed the course on the existing law governing “misclassification” class actions. The Court expressly affirmed that: (a) McCracken remains the controlling authority; and (b) Rosen does not alter the legal landscape described in McCracken.

Before addressing the case before it, the Court took a moment to identify four principles governing the common issue analysis. The Court, after reviewing prior jurisprudence, stated:

I take four principles as germane to the arguments advanced on this appeal:

  • The proposed common issue must be a substantial ingredient of each class member’s claim and its resolution must be necessary to the resolution of that claim.
  • A common issue need not dispose of the litigation and can address only limited aspect of the liability question. It is sufficient if the issue is common to all claims and its resolution will advance the litigation for or against the class.
  • Success for one member of the class must mean success for all. All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent. The answer to the question raised by the common issue must be capable of extrapolation to each member of the class.
  • A common issue cannot be dependent upon individual findings of fact that have to be made with respect to each claimant.

The Court, revisiting McCracken, then explained that the issue of eligibility for overtime pay could only be certified as a common issue under s. 5(1)(c) of the Class Proceedings Act “if the evidence on the motion demonstrated that the alleged misclassification of the employees as managers/supervisors could be resolved commonly for all employees in the proposed class.” The Court found that McCracken “emphasized that the question of commonality had to be determined based on the evidence adduced on the certification motion and depended on whether the “similarity of job duties performed by class members provides the fundamental element of commonality””

The issue under s. 5(1)(c) of the CPA, in the Court’s view, is not the question of job similarities at large, but whether the evidence shows that job functions and duties of proposed class members relevant to their eligibility for overtime pay are “sufficiently similar across the proposed class to permit determination of eligibility without addressing the individual circumstances of the proposed class members.”

The Court stopped short of concluding that misclassification claims are incapable of certification outright, but the decision will clearly make it hard to advance such claims successfully.  The Court stated:

Clearly, the outcome of most common issue inquiries under s. 5(1)(c) will be evidence-driven. There is no rule that misclassification claims are automatically incapable of raising common issues, just as there is no rule that other kinds of overtime pay claims will inevitably raise common issues.  However, the evidence led by the employer in McCracken is similar in important ways to the evidence led by the [Respondent].  In both cases, the evidence showed a wide variability in the autonomy, duties and responsibilities of employees having the same job title or classification.  The evidence in both cases revealed the same lack of “core commonality” in the functions and duties of those employees included in the proposed class.

To demonstrate that the commonality issue was evidence-driven, the Court reviewed the decision in Rosen and stressed that in that case the certification judge had been satisfied that the evidence adduced at the certification motion revealed that eligibility could be dealt with as a common issue. The Court held that Rosen was of no assistance to the Appellants and “read the motion judge in Rosen as viewing the case before him as somewhat exceptional.”  The evidence before the Court in Brown, on the other hand, did not meet the threshold contemplated by the principles in McCracken, justifying the dismissal of the class members’ motion.

Although the Appellants also argued that the Divisional Court erred in failing to certify any other common issues, the Court of Appeal was of the view that all other common issues were either incapable of significantly advancing the litigation or dependant on whether or not eligibility could be dealt with as a common issue.

Significance

If it was not clear before, the Court of Appeal has confirmed again that misclassification overtime class actions will be difficult to certify.  Certification will require plaintiffs to provide a cogent and compelling evidentiary record demonstrating sufficient similarities across class members’ job functions/duties, such that the court can have confidence that the issue of eligibility can be dealt with fairly as a common issue. Cases which meet this threshold are likely going to be exceptional given the variability of job duties and responsibilities that can exist among individual employees that even share formal titles/roles, especially in large organizations.  The decision in Brown suggests that courts should recognize this reality.

Both the actual principles cited and the general tone of the Court’s decision suggest  certification in such cases will be a rarity. Employers should nevertheless assume more misclassification overtime class actions will be pursued while class counsel consider creative opportunities to suggest an “exceptional” case.

The Court’s decision may also have broader implications outside of the misclassification context in light of the Court’s rigorous analysis of the evidence put forth on the issue of commonality. In particular, Brown makes clear that while certification is a threshold analysis, the courts on certification nevertheless have an important duty to consider the evidence carefully, including where evidence may overlap with issues going to the merits of the claim. Further, the four principles identified by the Court as being germane to the common issue analysis will surely be of interest to litigants both inside and outside of the misclassification context.

Case Information

Brown v. Canadian Imperial Bank of Commerce, 2014 ONCA 677

Docket: 57730

Date of Decision: October 6, 2014