Canada: Overtime Exempt Or Non-Exempt? Issue May Be Certified As A Class Action

In a very important decision, the Ontario Superior Court of Justice in Rosen v.BMO Nesbitt Burns Inc.  has certified a class action launched by investment advisers (IAs) at BMO Nesbitt Burns (BMO) for overtime pay. While this is not the first overtime class action to be certified in Ontario, it is noteworthy given that the issue involves the alleged misclassification of the IAs as managers or as otherwise exempt from overtime under the Employment Standards Act, 2000 (ESA).

Brief Commentary

Key in the reasons for certifying the class action was the fact that the proposed class of employees was defined more narrowly than in previous cases (e.g. Brown  v.  CIBC). This allowed the Court to find that it could determine whether the employees were misclassified as exempt employees on a common basis because the job functions of the IAs were similar. Other cases have found that a class action was not the appropriate procedure because the employees' eligibility for overtime could only be determined based on an individual analysis of each employee's job duties.

The case will now proceed on the merits. BMO will argue that the IAs are exempt from overtime because: (i) they are employed in a managerial/supervisory capacity; and (ii) their terms of employment provide a "greater benefit" than the overtime provisions in the ESA resulting in the overtime provisions not applying. As noted by the Court at para 8:

Nesbitt acknowledges that being paid by commission is not a recognized exemption under the ESA, but argues that its IAs are nonetheless exempt because they fall within one or both of the two applicable exemptions: (i) they manage their own business; and (ii) their overall autonomy and potential for high earnings provides them with a greater benefit than overtime pay.

The ESA's managerial exemption provides that an employee "whose work is supervisory or managerial in character" is exempt from overtime. Generally speaking, to fall within this exemption, the employee must be a "true" manager in the sense that he/she: (i) has the authority over staff to direct, supervise, hire, fire, performance manage, grant time off, etc.; or (ii) can make or participate in substantial decisions that impact the employer's operations and budgeting. In addition, the employee must only perform non-managerial/non-supervisory tasks on an "irregular or exceptional basis".

Adjudicators have found that the "greater benefit" defence under s. 5(2) of the ESA requires a specific "apples to apples" comparison and that employers cannot claim a "greater benefit" by comparing different employment terms. This would constitute an "apples to oranges" comparison. Although the IAs work long hours (more than 60 per week according to the Court), they are well-compensated for their work by their commission structure, and are not traditionally thought of as employees who may be exploited or otherwise in need of the protections of the ESA. As such, it will be interesting to see how the Court deals with the argument that the overall autonomy, earnings and status of IAs constitute a "greater benefit" than compliance with the overtime pay provisions of the ESA.

Employer Take-Away

Employers should be aware that just because an individual is a high earner, paid on commission and has some autonomy over their own work (or even the work of others), this does not mean that such employee is exempt from overtime pay under the ESA. It is important to remember that the exemptions to overtime under the ESA are very narrow and the employer must prove that the exemption applies. As such, a full review of an employer's overtime policy is a must for all employers. This is even more pressing given the Court's new appetite to certify overtime class actions involving the alleged misclassification of employees.

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