Overtime class actions are in the headlines again. On February 22, 2019, a class action claim seeking damages of over $100 million was filed against Flight Centre, an Australia-based travel services provider with stores in Canada and internationally. The claim alleges that Flight Centre systematically failed to pay overtime to its retail sales employees, referred to as “travel consultants”, requiring them to consistently work more than their scheduled hours, and implemented policies that fail to comply with the overtime entitlements under employment standards legislation.

The claim seeks to encompass all travel consultants across Flight Centre’s locations in Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia and Newfoundland for the period of October 2010 to the date of certification. The claim was filed in Ontario and alleges that the applicable employment standards legislation in each jurisdiction contains materially the same provisions with respect to overtime entitlements. The claim alleges that the deficiencies in the employer’s policies include:

  • failing to have a system in place to track, monitor and compensate travel consultants for their actual hours worked;
  • mandating that travel consultants sign averaging agreements and excess weekly hours of work agreements as part of their standard employment contracts;
  • requiring travel consultants to attend meetings and training sessions for which they were not compensated; and
  • offering travel consultants “special incentives” as compensation for overtime.

Key Takeaways

To ensure compliance with statutory overtime entitlements, employers should undertake the following:

  1. Properly classify: seek advice from legal counsel before classifying an employee as exempt from statutory overtime entitlements. Assuming that an employee is exempt, when they actually are not, may expose the employer to retroactive liability.
  2. Track hours worked: develop and implement systems to properly monitor and track actual hours worked by employees, including overtime hours.
  3. Implement an approval system: require that employees obtain the approval of a supervisor prior to working overtime hours. This can be achieved by having clear, unambiguous policies in place that stipulate (i) who must approve overtime, and (ii) when overtime can be approved and for what purposes.
  4. Don’t unilaterally impose averaging agreements: avoid unilaterally imposing averaging agreements on employees, such as requiring employees to sign averaging agreements as a condition of employment.

Employers should obtain legal advice where there is any uncertainty as to their compliance with overtime entitlements. By being proactive, employers may be able to avoid allegations of bad practice later on, saving their time, money and reputation.

Statutory Overtime Pay Entitlements

This development highlights the need for employers to refresh their understanding of the overtime pay entitlements under applicable employment standards legislation. In Ontario, for example, provincially regulated employers should be aware of the following provisions under Part VIII of the Employment Standards Act (“ESA”):

Overtime Threshold: Non-exempt employees are entitled to overtime pay for hours worked in excess of 44 hours in each work week.

Overtime Rate: Non-exempt employees are entitled to either: (i) overtime pay of 1.5 times their regular rate for each hour worked in excess of the Overtime Threshold, or (ii) 1.5 hours of paid time off work for each hour worked in excess of the Overtime Threshold (if agreed to in writing).

Exempt Employees: Employees may be exempt from the overtime protections under the ESA because they either (i) have a job that is exempt or (ii) they work in jobs where the overtime threshold is more than 44 hours in a work week.

Examples of exempt industries and jobs include: EMS, healthcare and health professionals; manufacturing, construction and mining; hospitality services and sales; transportation; agriculture, growing, breeding, keeping and fishing; household, landscaping and residential building services; government employees and professionals.

Under the ESA, employers can enter into averaging agreements with their employees. In these cases, the employer and employee(s) can agree, in writing, to average the employees’ hours of work over a period of 2 or more weeks for the purposes of calculating overtime pay: employees would only qualify for overtime pay if their average hours worked per week during the averaging period exceed 44 hours. In non-unionized environments, averaging agreements must expire a maximum of 2 years from the date they take effect. Once approved by the Director of Employment Standards, the averaging agreement cannot be revoked by the employer or employee(s) before the expiry date, unless otherwise agreed. However, if Bill 66 becomes law, employers would no longer require the Director’s approval for an averaging agreement.

History of Overtime Class Actions in Canada

The proposed class action against Flight Centre is by no means the first of its kind in Canada. In recent years, several overtime class actions have been filed against Canadian employers, including the following:

  • Eklund v GoodLife Fitness Centres Inc.: In October 2016, a class action for unpaid wages, including overtime, was filed against GoodLife Fitness Centres Inc. (“GoodLife”). The claimants alleged that GoodLife violated employment standards legislation by requiring and/or condoning class members to work beyond their scheduled hours, in certain cases exceeding the overtime threshold under employment standards legislation, and failing to compensate class members for such hours worked. The lawsuit eventually settled for $7.5 million in April 2018. GoodLife also implemented a variety of voluntary changes to their employment practices, such as: scheduling paid hours for personal trainers to consult with prospective new clients; eliminating clawbacks on trainers’ commission; and paying trainers an extra 2.5 hours every pay period for administrative tasks.
  • Rosen v BMO Nesbitt Burns Inc.: In 2010 an action alleging unpaid overtime was filed in Ontario and the class was approved in August 2013. The class, comprised of financial advisors, claimed that they worked more than 60 to 80 hours per week without proper compensation. BMO Nesbitt Burns Inc. claimed that financial advisors were exempt under the Employment Standards Act. After more than 6 years of litigation, the class action settled in 2016 for $12 million.
  • Fulawka v Bank of Nova Scotia: This $350 million class action was originally certified on February 19, 2010, with the certification being upheld by the Ontario Court of Appeal on June 26, 2012. The class alleged that the bank’s policies for compensating overtime violated the class members’ contracts of employment and breached the bank’s obligation to act in good faith. In particular, the plaintiffs alleged that their employer’s stipulation that class members received “pre-approval” from a manager in order to be compensated for overtime violated the Canada Labour Code. The class action eventually settled in 2016 for $39.3 million.

From a review of these class actions, it is clear that non-compliant overtime practices and policies can expose employers to significant financial and reputational risk.