Although Canada's experience with "overtime" class
actions is relatively recent, there have been some significant
developments. One such development has occurred in the
"misclassification" class action McCracken v. Canadian National
Railway Co. A question that has been lingering in the
context of overtime class actions is: Can the provisions of the
Canada Labour Code be seen as implied terms of employment
contracts, and if so, can they be the foundation of a direct claim
in breach of contract? McCracken has now answered this
question in the affirmative.
In this recent decision of Justice Perell of the Ontario
Superior Court of Justice, certification of the class action
against CN Railway Co. was granted despite some initial concerns
regarding commonality. The claim, brought by the proposed
representative plaintiff Michael Ian McCracken, seeks a total of
$300 million in damages. The claim alleges that CN intentionally
classified all of its "first-line supervisors" as
"managers" in order to deprive them of overtime and
holiday wages payable under the Code.
While the decision is instructive in revealing how commonality
issues will be confronted in cases of
"misclassification," more important is Justice
Perell's finding that:
The effect of a conclusion that courts have a jurisdiction to
enforce the statutory right [referring to the Code] is
that the right is an implied term of the contract of employment by
force of statute. In other words, as a matter of law, the statutory
provisions become contractual stipulations.
Justice Perell went on to clarify that his conclusion did not
merely mean that it was possible that a cause of action
for breach of an implied contract existed, but that the
representative plaintiff actually had a cause of action
for breach of a statutory implied term.
It is not clear if this decision settles the debate of
whether a civil claim can be advanced directly under the provisions
of the Code. Prior to McCracken, another overtime
class action, Fulawka v. The Bank of Nova Scotia,
considered the same issue and came to the opposite conclusion. The
Fulawka claim is currently only months away from being
re-considered on appeal. In Fulawka, Justice Strathy
decided that the Code could not be used to bring a civil
claim. However, Justice Strathy went on to apply it indirectly by
concluding that it could influence and inform existing contractual
duties. By comparison, Justice Perell's decision, which
specifically discussed Justice Strathy's, provided extensive
reasoning as to why the Code could be used as the basis of
a direct civil claim. In fact, Justice Perell remarked that his
methodology would have allowed Justice Strathy to do directly that
which was done indirectly. How the Divisional Court chooses to deal
with this issue on appeal remains to be seen. However, there are
compelling reasons for why Justice Perell's decision may be
seen as more enticing. For instance, Justice Perell undertook a
thorough analysis of the Code and several of its
provisions; this was not done in the Fulawka decision.
It is likely that McCracken, like the other major
overtime class actions, will be the subject of an appeal. Until
then, it may delineate the basis on which class claims will be
brought against federally regulated employers.
McCarthy Tétrault Notes
This conclusion is important to employers and class action
defendants generally. If the McCracken analysis is
affirmed at the appellate level, there will be little doubt that
the Code can be used as a vehicle to launch a direct civil
class action claim. As a result, employers should be mindful of
their definitions of "managers" or
"supervisors" and ensure compliance with Code
provisions as they will be held to be contractual stipulations of
the employment relationship.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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