Canada: Beyond "9 To 5": Understanding Ontario's Overtime Rules

Last Updated: September 25 2019
Article by Mary Lou Brady

Aside from some "tweaks", not much has changed when it comes to the Ontario's overtime rules1 in many years.  Why then do I see so much employer non-compliance?  Are employers unaware of their overtime rights and responsibilities?  Or do they simply choose not to comply and hope no one complains?

For those employers into the former category, this blog is for you. 

What is the Basic Overtime Rule?2

Employees must be paid overtime pay for each hour worked in excess of 44 hours in a given workweek.3  The rate of overtime pay is 1.5 times the employee's regular hourly wage rate.

A workweek is any recurring period of seven consecutive days selected by the employer for the purpose of scheduling work.  The ESA uses 12:00 am each Sunday to 11:59 pm the immediately following Saturday as the default workweek when the employer has not selected one.

Does Everyone Get Overtime Pay?

Almost.  There are surprisingly few exemptions to overtime under the ESA and they are narrowly interpreted.

One of the more common exemptions are for managers and supervisors.  However, it applies only if they do not perform non-managerial and non-supervisory tasks on more than an exceptional or irregular basis.

Similarly, another common exemption is for salespersons, but only if: (a) they are paid in part by way of commissions for sales of products and services; (b) these sales are normally made away from the employer's place of business; and (c) they are not a route salesperson.

Other common exemptions include information technology professionals, teachers, farm workers, regulated professionals like doctors, dentists, lawyers, public accountants, engineers, etc. 

But Salaried Employees Must be Exempt?

Not true.  Whether someone is paid a fixed salary or by the hour has no impact on whether they are exempt or not from overtime under the ESA.  To be exempt, they must fall within one of the regulated exemptions.

But Highly Paid Employees Must be Exempt?

Not true.  It does not matter how much someone is paid.  Even highly compensated employees are entitled to overtime under the ESA, unless they fall within one of the regulated exemptions.

But What If the Employee Agreed Not to Get Overtime when Hired?

It likely won't matter.  The agreement will not be enforceable, unless the person falls within one of the regulated exemptions.  This is because it's not possible for an employer and employee to "contract out of" the overtime entitlements under the ESA.  Either the provisions apply or they do not.

But What If I Didn't Know About the Overtime Hours?

Generally, if an employer knows, or reasonably ought to know, about overtime hours being worked, then these are overtime hours that must be compensated under the ESA.  If an employee were to secretly work extra hours – let's say by bringing home work to get caught up in order to avoid having the employer know she is struggling with workload, or to spend extra time preparing for an important customer presentation in order to make a good impression – then it may be that these hours do not attract overtime.  What cannot, however, happen is for an employer to effectively permit an employee to perform overtime work by being "willfully blind" to the overtime hours being worked in the hopes of avoiding owing overtime.

But What If I Never "Approved" the Overtime Hours?

Many employers have a policy that requires management approval of overtime before it can be worked.  When that doesn't happen, you can discipline the employee for working unapproved hours.  But you cannot refuse to provide the employee with his/her overtime entitlements under the ESA if you knew, or reasonably ought to have known, that the overtime hours were being worked.

Do I Count Everything When Calculating Overtime Hours?

All hours worked must be included when determining overtime, except for hours worked on a public holiday if the employee was already paid premium pay for those hours.  Also note that time taken off work as an eating period – whether paid or unpaid – does not count toward overtime.

Can I Provide Lieu-Time Instead of Overtime Pay?

Yes, but only if the employee has agreed to this either electronically or in writing.  Further, the lieu-time must be at the rate of 1.5 hours of paid time off work for each overtime hour worked.  It must be taken within 3 months after it was earned, unless the employee has agreed – again either electronically or in writing – to take it within 12 months after it was earned.4

Are There Other Ways to Reduce Overtime Obligations?

Yes.  The ESA allows employees and employers to enter into agreements, either electronically or in writing, to work excess hours (i.e. more than 8 hours, or their regular workday if longer, in a day; more than 48 hours in a workweek), and to have working hours averaged over periods of up to four weeks for the purpose of calculating overtime entitlements.5  By way of example, where such agreements exist, an employee who works 40 hours in Weeks 1 and 2, 44 hours in Week 3 and 50 hours in Week 4 would not be entitled to overtime compensation as not more than 176 hours were worked in that 4-week period.

Until recently with the passage of Bill 66, the Restoring Ontario's Competitiveness Act 2019, approval from the Director of Employment Standards was required if employers needed employees to work more than 48 hours a week.  Approval was also required if employers wanted to average hours worked over two or more consecutive weeks in order to reduce the cost of overtime.

Since Bill 66 received Royal Assent on April 3, 2019, those approvals are no longer required.  In our experience, the Director typically approved requests for excess hours and/or overtime averaging, so in our view, the removal of this bureaucratic requirement is unlikely to significantly change most employer workplaces.  That said, we do expect removal will result in more employers taking advantage of overtime averaging.

Ooops!  After Reading This, I Think I Owe Overtime.  What Do I Do?

Good question.

To start, contact your employment lawyer to assess the overtime liability and to help you understand your various options, which – depending on your risk profile – may range from continuing with the status quo to back-paying some or all unpaid overtime.

When deciding on course of action, it is important to understand that, for the most part, the ESA is a complaint-driven system.  While there are occasional spot audits by Employment Standards, most situations of non-compliance come to the attention of Employment Standards only when a complaint is made.

Further, there are limits on how far back an Employment Standards Officer can order unpaid overtime to be paid.  Such order can only include overtime pay that became due no earlier than 2 years before the complaint was made or before the matter otherwise came to the officer's attention.  Once outside of the 2-year limit, options are limited on how to recover the older unpaid overtime.  

One strategy, therefore, is to continue with the status quo of non-compliance until caught.  This is clearly a breach of the ESA and certainly not a recommended strategy.  However, employers with a high risk tolerance and who are not concerned about getting on the "bad employer" radar of the Ministry of Labour may choose this option against the advice of legal counsel.

Another strategy is to start to comply with the overtime rules going forward, but in a way that does not advertise to employees that there has been a past breach of the overtime rules and that outstanding overtime may be owed to them.  This is admittedly hard to do as, understandably, employees will be suspicious with sudden unexplained changes in the employer's overtime practices (e.g. receiving overtime pay when they previously did not).

The most legally compliant strategy is, of course, to comply with the overtime rules going forward and to compensate the employee for historic unpaid overtime.  Often employers choose this upfront strategy when the amount of historic unpaid overtime owed, especially in the prior 2-year period, is not significant.

Of course, these listed strategies are not exhaustive, and will depend on the specific circumstances of the employer organization.

Where Do I Get More Information About Overtime Obligations?

For more information, click here.  It will bring you to an excerpt from the Ministry of Labour's Your Guide to the Employment Standards Act on overtime.  For another useful resource, click here.  This will link you to the Ministry of Labour's ES Self-Service Tool, which includes a tool for calculating overtime.

If you have questions about, or need any assistance with respect to, an employer's rights and obligations regarding overtime, you are encouraged to reach out to any member of Siskinds' Labour & Employment Group for advice and direction.

Footnotes

1 This blog only address how overtime works under Ontario's Employment Standards Act, 2000 (the "ESA"), which is the legislation that applies to provincially-regulated employers in Ontario (i.e. roughly 90 percent of the workforce here).  Note that overtime rules differ somewhat from province to province for provincially-regulated employers and, as such, provincially-regulated employers with employees in different provinces will need to understand the overtime rules in each of those province.  In contrast, federally-regulated employers only need to know about the overtime rules under the Canada Labor Code, which governs all of their Canadian employees.

2 There are special overtime rules that apply to certain limited industries or categories of employees in Ontario.  This blog does not address those special overtime rules, details of which can be found on the Ministry of Labour's website.

3 The overtime provisions in the ESA are minimums only.  Employers are free to agree to better overtime entitlements – for example, allow exempt employees to receive overtime, or allow employees overtime at something lower than the 44-hour threshold, or allow employees overtime pay at a rate greater than 1.5 for certain types of overtime hours such as on the weekends.  Where the employer has agreed to better overtime entitlements, the employer will be required to comply with such greater rights or benefits than under the ESA.

4 Note that written agreements can be obtained either in paper or electronic format.

5 Note that, where a union does not represent the employee, the overtime averaging agreement must contain an expiry date that cannot be more than two years from the date that the averaging agreement takes effect.  Where the agreement applies to unionized employees, the expiry date cannot be later than the day the next collective agreement takes effect.  Further, an averaging agreement cannot be revoked by either the employer or the employee before its expiry date, unless both the employer and the employee agree electronically or in writing to revoke it.

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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