Justice Belobaba of the Ontario Superior Court certified a class action brought by investment advisors with BMO Nesbitt Burns Inc. for unpaid overtime

On August 20, 2013, Justice Belobaba of the Ontario Superior Court certified a class action brought by investment advisors with BMO Nesbitt Burns Inc. (“Nesbitt”) for unpaid overtime (Rosen v BMO Nesbitt Burns Inc., 2013 ONSC 2144).

The allegation raised in the action is that Nesbitt wrongly excluded investment advisors from its overtime policy. Plaintiffs asserted that Investment advisors were excluded from the overtime policy because their compensation was commissioned based.

Nesbitt did not assert a defence that commissioned earnings are not eligible for overtime pay. Instead, Nesbitt relied on two applicable exemptions under the Employment Standards Act (“ESA”) for:

  • Those exercising a managerial role in the management of a book of business; and/or
  • The potential, given the incentive base compensation structure central to the industry’s compensation arrangements, and, on the evidence, valued by its Investment Advisors, to earn a substantially greater income, in a flexible and independent work environment, than would be the case in salaried employment.

This action against Nesbitt follows three other overtime cases in the banking sector. The court characterized the first two cases, Fulawka1 and Fresco2, as “off the clock” cases where the plaintiffs said they were eligible for overtime but the overtime was not recognized or paid  by the employer. The third case is Brown v CanadianImperial Bank of Commerce3 which was a “mis- classification” case in which the plaintiffs alleged they were wrongly classified as being ineligible for overtime. Fulawka and Fresco were certified. Brown was not.

Justice Belobaba agreed with the parties that Brown, which involved investment advisors and analysts who worked for CIBC World Markets, was relevant.

In Brown, Justice Strathy had refused to certify the class action because he was not satisfied that there was a sufficient commonality or similarity in job functions amongst the class. The proposed class in Brown included investment advisors, who were branch managers, and team leaders, who supervised other investment advisors, associate investment advisors or sales assistants. The key question in Brown — whether or not a person had managerial responsibilities — could not be determined as a common issue.

When Brown was appealed to the Divisional Court, the plaintiffs had revised the class definition to exclude the branch managers and team leaders. However, the Divisional Court was still not satisfied that the many factors to consider in determining whether a person is performing managerial or supervisory functions could be resolved on a common issue basis. The determination of this issue for any individual would have to take into account the employee’s authority, autonomy, level of responsibility, and degree of control over his or her work and work hours. Nesbitt asserted that Brown was determinative in this matter.

Justice Belobaba distinguished this class action from that in Brown. Most of the discussion in the decision revolved around whether there was a certifiable common issue. To be certified, a proposed class action must raise an issue of fact or law that is raised by the claims of all class members. Justice Belobaba rejected Nesbitt’s argument that individual determinations would be necessary to decide whether the managerial and greater benefit exemptions apply.

On the managerial exemption, Justice Belobaba noted that unlike in Brown, all of the investment advisors involved in management or supervisory work had been excluded from the class definition. Justice Belobaba concluded that those that remain are the stand-alone, sole practitioner, investment advisors. They appear, based on the evidence, to have the same or very similar job functions. In doing so, Justice Belobaba found that there was a basis in fact for the plaintiff’s allegation that if there were any “managerial” functions performed, they were performed by all of the investment advisors  in the class.

On the greater benefit exemption, Justice Belobaba accepted the plaintiffs’ argument that the greater benefit can be determined by looking at “the face” of the employment contract itself. In this case, the plaintiffs argued that the core elements in every class member’s employment agreement were essentially the same. Nesbitt’s argument was that the greater benefit analysis should take into account individual assessments of each investment advisor’s employment.

In his decision, Justice Belobaba also concluded that Nesbitt’s policy argument that investment advisors should be excluded from the overtime pay because their commission- based remuneration is “not consistent” with overtime compensation and would have a detrimental effect on the financial services industry at large is an issue that applies equally to class members and can be tried as a common issue among them.

Justice Belobaba declined to certify aggregate damages as a common issue, preferring to leave this to the trial judge. He stated that an individual damage assessment may still be required even if the common issues are resolved in favour of the class members. This conclusion is similar to that reached by the Court of Appeal in Fulawka.

As for any future overtime cases that may be brought in reliance on the ESA, Justice Belobaba wrote that class actions proceedings in overtime-claim cases will “generally  be more effective than individual claims under the ESA, where there are strict time-limits and caps on recovery.” He also observed that a class proceeding provides class members with a less expensive and more efficient litigation vehicle and the advantage of anonymity, which in turn avoids employees’ fear of reprisals.