As readers of our Bulletins may remember (July 2007: Uh Oh Overtime! www.mcmillan.ca/Upload/Publication/Uh-Oh_Overtime_0707.pdf), on June 4, 2007, Dara Fresco launched a $600 million class action against her employer Canadian Imperial Bank of Commerce (“CIBC”) on behalf of former and current front-line customer service employees at CIBC’s retail branches, claiming unpaid overtime from 1993 to 2007 and punitive damages.

On June 18, 2009, CIBC no doubt breathed a sigh of relief. Madam Justice Lax of the Ontario Superior Court dismissed the motion to certify the action as a class proceeding on the basis that CIBC’s overtime policy was valid and the individualized nature of each unpaid overtime claim did not lend itself to a class proceeding, as there were insufficient issues of “commonality” among the members of the class.

Background

Fresco claimed breach of contract and unjust enrichment on behalf of the class of employees based on CIBC’s alleged failure to compensate employees for overtime actually worked. In addition the claim alleged that CIBC’s overtime policy (the “Policy”) resulted in a systemic practice of creating unpaid overtime and was itself unlawful.

Specifically, the employees claimed that the Policy’s pre-approval requirement violated the Canada Labour Code, 1985 (the “Code”). The Policy stipulated that employees must obtain approval in advance for all overtime worked unless there are extenuating circumstances and, where there are extenuating circumstances, approval must be obtained as soon as possible afterwards. If approval is not obtained, the employee will not be compensated for overtime hours worked. In addition to the claims of unpaid overtime, the employees claimed that the Policy’s provision for paid time off at a rate of time and a half in lieu of overtime hours worked was contrary to the Code.

Fresco personally claimed that she worked an average of up to 15 overtime hours per week to complete the basic duties of her employment. She estimated that she was owed approximately $47,200 for unpaid overtime worked between 1999 and 2007.

The Decision

Fresco’s attempt to certify the class was brought under section 5 of the Ontario Class Proceedings Act, 1992 (the “Act”). Commonality is one of five elements that must be present to certify a class action under the Act. To satisfy this criterion each class member’s claim must raise common issues and the resolution of the common issues must be necessary to the resolution of each class member’s claim. In other words, the issues will not be common if their resolution is dependent upon individual findings of fact that must be made for each claimant. In Fresco the Court found that the action was not suitable for a class proceeding as there were insufficient common issues among the employees’ claims. In particular, the employees’ claims for overtime pay give rise to a number of circumstances that require individual resolution. The Court noted at paragraph 66:

“…the individual issues in this case are front and centre and it would be virtually impossible to embark on a trial of the common issues without engaging in an individual examination of the specific circumstances that underline each member’s claim.”

For example, Fresco’s claim depends on whether accommodation given for breast-pumping breaks was properly included as hours worked. Another claim depends on disputed evidence surrounding the length of the individual’s smoke breaks.

In addition Justice Lax reasoned that the Policy’s pre-approval requirement to work overtime is lawful pursuant to the Code. She noted that it is the employer’s “fundamental right” to organize and control its business. This includes establishing the hours of work and overtime requirements. Similarly, Justice Lax characterized the “choice” between pay or time off in lieu as a greater right or benefit than that provided in the Code. Therefore she held that it is “plain and obvious” that the Policy’s provision for paid time off in lieu of overtime pay is lawful on its face.

What Fresco Means for Employers

The Court’s decision to dismiss the class action due to the absence of commonality suggests that many employment claims over issues such as hours of work, vacation pay and “off-theclock” overtime pay may not be suitable for class proceedings. The Court left the door open for the possibility of an “eligibility” overtime class action in the future: that is, a claim alleging that a group or groups of employees have been mischaracterized as overtime exempt. It remains to be seen whether the plaintiffs will appeal this decision. Moreover, the Ontario Superior Court currently has other class action claims for unpaid overtime before it and it will be interesting to see if they are distinguishable on their facts.

Employers are well advised to carefully review and consider the application of their overtime policies and eligibility requirements. Any member of our Employment and Labour Relations Group would be pleased to assist in preparing and reviewing such policies.