Canada: Overtime Class Actions – Directors Take Note Of Your Potential Exposure

Last Updated: May 25 2015
Article by Margaret L. Waddell

The Court of Appeal's 2012 trilogy of overtime class action decisions (Fresco, Fulawka and McCracken) confirmed the viability a relatively new form of class action that was previously unexplored and highly uncertain in Ontario. In the US, overtime class actions are an established and substantial industry, and now that the Ontario courts have set a clear roadmap for the path to overtime class action certification, it is likely that we will see more proceedings brought across a wide range of industries and businesses, extending well beyond the banks and substantial national corporations who have been the targets of these class proceedings to date.

While the risk and expense of responding to an overtime class action may be a manageable cost of business for healthy corporations with millions or billions of dollars of market capitalization, that may not be the case for a company teetering on the edge of insolvency. However, corporate directors should be attuned to that the fact that the financial peril of a company may not dissuade its employees from pursuing a class proceeding for unpaid overtime wages. Indeed, directors should be aware that in the event the corporation does become insolvent, the threatened or extant overtime class action may not fizzle up and die, rather the directors, themselves, may become the sole remaining defendants against whom the class action proceeds.

It is well established that the insolvency of a company will not absolve its directors from personal liability for wages owed to the company's employees. Under both the OBCA and the CBCA, as well as under s. 251.18 of the Canada Labour Code, and s. 81 of the Ontario Employment Standards Act, directors are personally liable to pay earned, but unpaid wages to the company's employees. Earned, but unpaid overtime falls squarely within the scope of a director's personal liability under these statutes. Hence, if the company is unable to meet the obligation, the directors are personally at risk to pay the unpaid overtime up to the statutory cap.

Under s.131(1) OBCA, directors are liable for all debts not exceeding 6 months wages and 12 months vacation pay that become due and payable while they are directors. Section 119(1) CBCA contains similar language: "all debts payable to each employee for services performed for the corporation", and the directors' liability is limited to six months wages. The performance of services by the employee while the director is in office is the fundamental criteria triggering personal liability.

The policy behind imposing personal liability upon the directors is to provide a measure of financial protection to the employees who continue to provide services to the company, and who may be unaware of the company's deteriorating financial position, and who, in any event, are not in a position to be able to protect themselves from the risk of not being paid while they continue to serve the company. The directors ultimately control the payment of wages to the employees, so if the payments are in arrears, public policy holds that the loss should be borne by the directors rather than the employees, as the directors were in a position to protect the employees and failed to do so.

Under both Acts, directors are not liable for all debts owed by the corporation to its employees. Liability is only imposed for debts that are for "services performed for the corporation", and they are quantitatively limited to a sum equivalent to 6 months' wages (and 12 months vacation pay under the OBCA). Directors are not liable for employees' wrongful dismissal damages. The obligation is secondary to the obligation of the company to pay the wages. To trigger a director's personal liability, recovery from the company must be impossible or very unlikely.

Under the CBCA. s. 123(4), a director can avoid liability to unpaid employees if she or he can prove that she or he was also an unwitting dupe to the true financial state of the company. The director must prove that he or she relied in good faith upon the company's financial statements or similar reports that show that the wages were paid or had been provided for. If the directors had no reason to know that the report was incorrect, then they can avoid personal liability under this section. If, however, the directors knew or reasonably ought to have known that the report was wrong, the defence will not stand.

The concept of holding directors liable for unpaid wages is long-standing. It originated in Ontario in 1874 with the Ontario Joint Stock Companies Letters Patent Act, 1894 (Ont.) c. 35, which followed from the federal Canada Joint Stock Companies Letters Patent Act, 1869, S.C. 1869, c. 13. This legislation came as a significant incursion on the general rule that directors of corporations will not be held liable for the debts of the company. The purpose of this section, both originally under the Ontario Joint Stock Companies Letters Patent Act, and under the current Business Corporations Acts was and is to protect employees in the event of bankruptcy or insolvency of the corporation (per L'Heureux-Dubé J. at p. 75 of Barrette v. Crabtree Estate), while at the same time capping the directors' personal exposure.

To date, there have been virtually no class actions that have made use of these special protective provisions, other than an action in respect of the insolvency of Dylex, which resulted in a settlement in the insolvency proceeding, and a default judgment against a director in the class proceeding for a modest sum. However, now that overtime class actions have found their place among the pantheon of certifiable class actions, it is to be expected that we will see an increase in the number of actions naming directors as defendants in those proceedings, particularly in cases where the company is insolvent, or nearly so. Directors – take note!

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.