Canada: An Update On "Overtime" Class Actions

Last Updated: June 17 2014
Article by Gillian Hnatiw

Since 2012, "overtime" class actions have been successfully certified in Ontario but were limited to certain areas.  Recent additional certification success suggests we are likely to see more such claims. 

At a basic level, the "overtime" cases involve a plaintiffs' class of employees claiming damages as a result of an employer's alleged failure to compensate them for "overtime" work as required by statute.  The "overtime" generally falls into one of two categories: "off the clock" claims, which centre on an employer's policies or practices that are alleged to result in the systemic denial of fair compensation to employees, or "misclassification" claims, which centre on allegations that the employees at issue have been intentionally misclassified as "managers" in order to avoid mandatory overtime pay provisions. 

Fulawka v. Scotiabank 2012 ONCA 443 and Fresco v CIBC 2012 ONCA 444 are two recent "off the clock" actions certified in Ontario. In both cases, the putative plaintiff class consisted of non-managerial bank employees. The Canada Labour Code applied and mandated that time-and-a-half compensation be paid to bank employees who work more than 8 hours a day or 40 hours a week.  Both defendant banks had policies which required employees to obtain pre-authorization for overtime.  The plaintiffs argued that the policies discouraged them from seeking approval and compensation for the overtime they worked, resulting in systemic under-compensation of the class.  Certification in this case was not granted at first instance, and it was the Court of Appeal which ultimately allowed certification. In both cases, the Court of Appeal underscored the systemic nature of the banks' alleged misconduct, which allowed the plaintiff class to meet the commonality requirement of certification. Leave to appeal to the Supreme Court of Canada was refused in both cases.

McCracken v CN 2012 ONCA 445 and Brown v CIBC 2013 ONSC 1284 (Div C) stand in contrast to the above two cases. In McCracken, the proposed plaintiff class consisted of First Line Supervisors. There were about 70 job titles under this job umbrella, each with a different level of responsibility. In Brown, the proposed plaintiff class consisted of investment advisors and associate investment advisors employed by CIBC (Canadian Imperial Bank of Commerce). In both cases, the plaintiffs alleged that they were misclassified as "managerial" employees, meaning they were improperly denied overtime pay. The Court of Appeal and the Divisional Court in both cases upheld the lower courts' refusals to certify both cases, largely because the class description proposed by the plaintiffs included individuals with divergent job descriptions. The Courts held that an individual inquiry into work hours, level of responsibility, degree of control over own work, and where and how work was done would be required in every case to determine whether that particular employee was misclassified. Since the individual nature of the inquiry meant that the findings could not be extrapolated to the whole class, the "common issues" requirement of certification was not met in either case. This is in contrast to Fulawka and Fresco, both of which involved a more homogenous class of plaintiffs.     

Rosen v BMO Nesbitt Burns 2013 ONSC 7762 (Div Ct) is the most recent decision in a "misclassification" case. The plaintiffs' class was comprised of non-managerial investment advisors whose compensation was entirely commission-based.  Although they were subject to the provisions of Ontario's Employment Standards Act (ESA)  requiring overtime pay, the bank withheld this pay on the ground that statutory exemptions applied.  At certification, the bank relied on the rules that time-and-a-half pay is not required if the employee can be said to receive a "greater benefit" than ESA compensation, or if the employee holds a "managerial" position. The bank further argued that the class was unsuitable for certification as the question of whether either exception applied would have to be determined on an individual basis. The Bank's arguments in this regard were rejected at first instance and at the Divisional Court.    

In rejecting this argument and refusing leave to appeal the certification order, the Divisional Court held that the class consisted of a homogenous group of plaintiffs with similar job descriptions, and it was possible to determine on a class-wide basis whether the statutory exceptions applied to the common group. In this regard, the Divisional Court held that this case, while also a "misclassification" claim, is distinguishable from both McCracken and Brown.

The growing number of certified overtime class actions in the last two years reflects the trend towards commencement of such claims in Ontario. The above caselaw suggests that the success of an "overtime" certification motion in Ontario – whether of the "off the clock" or "misclassification" variety – will depend in large part on the homogeneity of the plaintiff class and on whether the defendant's alleged wrong was systemic in nature. While not all of the overtime claims have been certified – and while we have yet to see whether those that have been certified will ultimately succeed on their merits – the cases should cause regulated employers to carefully review their "overtime" policies to ensure compliance with legislation and reduce exposure to potential class actions.

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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