In a decision that marks the first of its kind, on August 20, 2013, Justice Belobaba of the Ontario Superior Court of Justice certified a class action alleging that BMO Nesbitt Burns Inc. ("BMO") failed to pay overtime to a group of 1,500 current and former Investment Advisors. The decision in Rosen v BMO Nesbitt Burns Inc. follows on the heels of a tumultuous period in which the Supreme Court of Canada denied leave to appeal certification in two "off-the-clock" overtime cases and the Superior Court of Justice, Divisional Court and the Court of Appeal of Ontario declined to certify two "misclassification" cases, including a case premised on a group of similarly situated employees in Brown v Canadian Imperial Bank of Commerce.
Despite the significant volume of judicial decisions and
commentary in this area in recent months, Rosen is the
first "misclassification" case of its kind to be
certified in Canada, as well as the first overtime class action to
be certified advancing claims under the Employment Standards
Act (Ontario). The proposed class in Rosen (much like
the proposed class in Brown) is comprised of current and
former BMO Investment Advisors, Associate Investment Advisors and
Investment Advisor Trainees who claim they were denied overtime pay
contrary to the ESA. Class members allege that contrary to their
employer's position, they did not properly qualify for one of
two exemptions under the ESA from the requirement to pay overtime
for employees who have managerial or supervisory duties and
employees who receive a "greater benefit".
The ESA contains prescribed exemptions which apply to exempt employers of certain classes of employees from the requirement to compensate employees for overtime hours worked. Although the ESA creates an exemption for real estate brokers and certain types of salespersons who receive all or part of their remuneration in the form of commissions, the exemptions, as currently drafted, do not extend to Investment Advisors.
Identifiable Class & Common Issues
Despite acknowledging the general appropriateness of the
misclassification cases for certification (due in part to inherent
commonality of employment functions and treatment by the employer)
the court in Brown (a case which alleged violations of the
Canada Labour Code) ultimately declined to certify the
action on behalf of a group of Investment Advisors. Justice Strathy
attacked the proposed common issues as "unworkable" and
"lacking in commonality" before ultimately concluding
that it would be too difficult to make a fair determination as to
whether class members performed managerial duties – the
critical issue in determining eligibility for overtime on a class
Despite the fact that Justice Strathy's decision to deny certification in Brown was rendered on the basis of a group consisting of nearly identical class members, Justice Belobaba differentiated the proposed class before him in Rosen on the basis that it had already specifically excluded Branch Managers, Team Leads and Investment Advisors with managerial or supervisory functions. On that basis, Justice Belobaba concluded the proposed class and common issues were appropriate.
(a) Managerial Exemption
BMO argued that, much like in Brown, individual determinations would be necessary to decide whether specific individuals qualified for an exemption under the ESA on the basis of managerial duties or greater benefit. Despite Justice Strathy's contrary conclusions in Brown, Justice Belobaba was satisfied that because class counsel had expressly excluded positions that are conventionally understood to be supervisory in nature (i.e., Branch Managers and Team Leaders) from the class definition, the remaining members could be viewed as having the same or very similar job functions, sharing a common scope of functions sufficient for the purposes of meeting the threshold imposed by the Class Proceedings Act.
(b) "Greater Benefit" Exemption
Justice Belobaba likewise found the applicability of the greater benefit exemption could properly be determined on a class basis given such an assessment required only an examination of class members' employment agreements. In his view, there was no need to conduct individual assessments "years into the employment relationship". The conditions of each class members' employment agreement upon becoming an Investment Advisor were virtually identical and thus the court concluded the greater benefit exemption could be determined as a common issue.
In concluding his section 5(1)(c) analysis, Justice Belobaba also found that a policy argument advanced by BMO bank that Investment Advisors should be excluded from overtime pay on the basis that their commission based remuneration was inconsistent with overtime compensation and could have a "detrimental impact on the financial services industry at large" applied to all class members equally and thus was "eminently suitable for a common determination".
Citing the Superior Court's findings in Fulawka
that misclassification cases would be appropriate for certification
where there is a "commonality of the employment functions and
common treatment by the employer", Justice Belobaba found the
key questions at issue in Rosen could be assessed without
examining individual claims, concluding that "success for one
does indeed mean success for all". In this particular case,
the court viewed a class proceeding as being "generally more
effective than individual claims under the ESA", where there
are strict time-limits and caps on recovery. Moreover, the court
concluded that a class proceeding might also provide class members
with the added advantage of anonymity, which could limit employees
fears of reprisal from their employer. The fact that individual
assessments of damages would have to be conducted if the common
issues were resolved in favour of class members was not, in Justice
Belobaba's view, sufficient to quash a preferable procedure
finding in light of section 6(1) of the CPA.
Justice Belobaba concluded his analysis by noting "the fact that current Nesbitt [Investment Advisors] have not openly complained about being paid overtime, or that they appear to accept the no-overtime reality because they view themselves as entrepreneurs prepared to work long hours to build a book of business from which they will benefit in the long term is irrelevant". Employees are not entitled to opt-out of the protections afforded under the ESA. Certification motions are not determined through a "referendum or polling of class members". Thus, whether or not the Investment Advisors were exempt from the ESA overtime provisions was not a matter of individual choice but a common legal question.
Justice Belobaba's decision to certify the class action in Rosen, in contrast to the decisions of Justice Strathy in Brown and Justice Perell in McCracken v Canadian National Railway Co. denying certification of other misclassification cases, appears to bring Ontario in line with the current approach adopted by U.S. courts, which have generally viewed misclassification cases more favourable than "off-the-clock" cases. It also suggests that class counsel maybe focusing more closely on provincially-regulated employers. Ultimately, the expansion of the scope of overtime claims certified in Ontario suggests prudent employers should carefully review their own overtime and classification policies to ensure they are complying with the statutory minimum requirements under the ESA. This is particularly important for employers of Investment Advisors, many of whom do not sign formal employment agreements and may not necessarily keep "traditional" hours of work. In the face of the court's decision to expand the array of certified overtime class actions into the realm of provincially regulated employers and in light of the close resemblance between the way in which Investment Advisors and other exempted salespersons are compensated, employers will likely be watching with interest to see if the Legislature will take steps to expand the class of prescribed exempt employees under the ESA.
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