Canada: Ontario Court Upholds CIBC Policy And Refuses Certification In Proposed Overtime Class Action

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Class Actions/Labour & Employment, June 2009

On June 18, 2009, in Dara Fresco v. Canadian Imperial Bank of Commerce, Justice Lax of the Ontario Superior Court of Justice denied certification in a proposed class action against CIBC for compensation and alleged damages related to unpaid overtime wages. Justice Lax found that the claim was not appropriate for certification as a class action because, while the majority of the requirements for certification were satisfied, the action lacked "the essential element of commonality". In reaching this conclusion, Justice Lax determined that CIBC's overtime policy was lawful. She also found that the plaintiff had failed to put forward any evidence to suggest systemic wrongdoing on the part of CIBC in the application of the policy and, in any event, this was not a case where issues of systemic wrongdoing on the part of the employer could be resolved without examining the claims of each individual employee. As such, Justice Lax found that none of the common issues proposed by the plaintiff would sufficiently advance the action in accordance with the requirement for commonality under section 5(1)(c) of the Class Proceedings Act (CPA).

In rendering her decision, Justice Lax drew an important distinction between "misclassification" cases in which an employer is alleged to have wrongly treated all members of the proposed class as ineligible for overtime, and "off the clock" cases where it is alleged that the employer has failed to compensate employees who are entitled to be paid overtime in the manner required by law. In "off the clock" cases, the question of class-wide overtime eligibility does not generally arise. Justice Lax categorized this case as an "off the clock" case, as CIBC did not dispute that the proposed class members would be entitled to compensation if overtime work was in fact performed. Nevertheless, the decision is important for employers as it demonstrates the importance of accurate and well-communicated human resources policies in defending potential employment-related class actions.

Background

Ms Fresco had been employed with CIBC since April 1998. She alleged that throughout her time working at CIBC she and other front-line employees were instructed to record no more than their regular daily hours and to exclude overtime hours worked on their time records.

In June 2007, Ms Fresco brought a proposed class action on behalf of current and former non-management and non-unionized front-line customer service employees of CIBC in Canada. She claimed breach of contract and unjust enrichment against CIBC on behalf of the class as it related to overtime pay. Central to these claims was the allegation that CIBC's overtime policy was illegal, in that it failed to comply with the requirements of the Canadian Labour Code (CLC).

The CIBC overtime policy at issue stipulated that in order for an employee to be compensated for overtime, the employee was required to seek prior management approval to work overtime, except where extraneous circumstances prevented prior approval, in which case approval was to be sought as soon as possible afterwards. The policy further provided for paid time off at the rate of time and a half in lieu of overtime pay at the option of the employee. The evidence established that CIBC's overtime policy was made widely available, in various media, to its employees.

CIBC did not dispute that the CLC or the employment contracts between it and its employees mandated that the employees be compensated for overtime worked. Moreover, it acknowledged that, if an individual contract of employment was breached, there would be a cause of action. However, CIBC maintained that its overtime policy was lawful, and therefore the issue of an employee's entitlement to unpaid overtime under the policy could only be determined on an individual basis. Further, there was no evidence of systemic wrongdoing on the part of CIBC in the application of its overtime policy that would support class-wide treatment.

Decision

In rendering her decision, Justice Lax addressed the legality of the overtime pay provisions in the CIBC policy. While the plaintiff argued that the question of the legality of the policy was itself appropriate for certification as a common issue, Justice Lax rejected this argument on the basis that the determination of the legality of the policy would not, in her view, materially advance any proposed class member's claim for unpaid overtime wages. Rather, in each case, the question of an employee's entitlement to unpaid overtime wages, if any, would turn on whether there was a "failure independent" of the policy to compensate the employee for overtime hours worked that were required or permitted by CIBC.

Turning to the question of the legality of the CIBC policy, Justice Lax concluded that CIBC's policy satisfied the requirement of the CLC and was therefore legal. She determined that the requirement for pre-approval before overtime could be worked was permitted and affirmed in ss. 169(1) and 174 of the CLC. These sections, she held, place the onus of responsibility on the employer to ensure that employees are not working beyond the maximum hours threshold set out in the CLC and, if so, only where the employer has required or permitted the overtime work. While not specifically in issue in the case, she also found that the overtime policy provision that provided for time off in lieu of overtime pay was permissible based on the existing case law, although not explicitly addressed by the CLC.

Turning to the requirements for certification, Justice Lax was prepared to find that the pleadings disclosed a cause of action and that the requirement to put forward an appropriate class definition had been met.

However, with respect to the nine common issues proposed by the plaintiff, Justice Lax found that none of them satisfied the test for commonality to a degree sufficient to justify their certification. Specifically, Justice Lax held that the plaintiff had failed to put forward some basis in fact that CIBC, in its application of the overtime policy, had breached a duty to the proposed class, such that it could be said that the proposed class members were deprived (or potentially deprived) of compensation to which they were entitled. In the absence of such evidence, there was nothing "common" for the common issues judge to decide. The central flaw of the plaintiff's case, highlighted by the plaintiff's own evidence, was that any instances of unpaid overtime would have occurred, if at all, on an individual basis. While the case had a "veneer of commonality", Justice Lax held that a determination of the issues would inevitably generate the need for individual inquiries, thereby defeating the efficiency purpose of class certification.

Although she found that the requirement of commonality was not met, on the assumption that there were common issues to be proved, Justice Lax went on to find that a class action was the preferable procedure for resolution of the common issues. She also held that the representative plaintiff and the litigation plan met the requirements set out in the CPA. However, in light of her finding regarding commonality, Justice Lax refused certification.

Application

The decision in this case certainly does not eliminate class action risks in relation to overtime and other employer compensation practices. In fact, Justice Lax was very careful to distinguish this "off the clock" overtime case from "misclassification" overtime cases. However, the decision does demonstrate that a clear and well-communicated human resources policy, consistent with applicable employment standards legislation, may make it difficult for potential plaintiffs to identify common issues suitable for certification. In upholding the CIBC overtime policy, the decision also highlights that the requirement of prior authorization for overtime work is both permissible under statute and advisable from a business perspective.

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