The Impact Of Employment Standards Legislation On The High Tech Sector: Potential Liability In Ontario; The Potential Solution In British Columbia

In the high tech sector long hours, project-based work and tight deadlines are the norm. Many workers in this area quite willingly accept this reality. The problem with this situation is that in most jurisdictions it will cause many employers to violate employment standards legislation. Such legislation sets out minimum standards of employment such as maximum hours of work and overtime pay.

As set out below, one jurisdiction, British Columbia, has recently recognized this problem and has addressed it by creating exemptions for certain high tech workers and companies. On the other hand, Ontario's Employment Standards Act ("ESA") has not been 'updated' and therefore high tech companies there may unwittingly be exposing themselves to liability under the Act.

The Ontario ESA does exempt some categories of workers from hours of work and overtime provisions. However, there is no exemption for most non-managerial high tech and knowledge workers, who are therefore covered by the ESA. Furthermore, it is illegal for an employer and an employee to contract out of the protective provisions of the legislation, so it is not a defense for an employer to say that the employee agreed to a certain arrangement. The general rule for maximum hours of work under the ESA is 8 hours per day, and 48 hours for the work week. Overtime must be paid after 44 hours (less if a company has an overtime policy that is more favourable). Overtime must generally be paid at 1.5 times an employee's regular rate. Note that persons who are paid by way of salary must still be paid overtime (unless their category of work is specifically exempted under the ESA), although the method of calculating overtime for salaried employees is different than the method used for hourly employees.

The bottom line: Many employers in the high tech field in Ontario are violating the maximum hours and overtime provisions of the ESA. While many employees may never make a formal complaint to the Ministry of Labour about these violations, the potential liability is there. Complaints most often arise after an employee is terminated.

British Columbia addressed this problem in early 1999 by making amendments to its Employment Standards Act (ESA) which grant employers of " high tech professionals" an exemption from hours of work and overtime provisions, as well as creating a slightly more flexible threshold for paying overtime for "high tech companies". The changes help bring the B.C. ESA into line with existing practices in the high tech industry.

The regulation provides employers with a total exemption from the hours of work, overtime pay and statutory holiday provisions of the ESA for employees who meet the definition of "high tech professional" ("HTP"). In effect, employers are no longer required to pay overtime premiums or even statutory holiday pay to HTPs. HTPs must satisfy three criteria:

They must work in one of twenty listed high technology professions, e.g. computer programmer, technology sales professional, software developer;

They must be entitled to receive "performance-based pay" in addition to salary pursuant to a written agreement. Although not defined, this requirement is likely satisfied by classic bonus plans where payout depends on performance of the business and/or the employee. Stock options do qualify; and

The employee must have a post-secondary degree, diploma or " equivalent experience". "Equivalent experience" is not defined.

Any employer of HTPs in any industry may benefit from this exemption. Any business running large information technology departments should assess whether the exemption applies to some employees. The new exemption allows employers of HTPs to avoid potentially huge overtime liabilities.

In addition, in companies where more than 50% of the employees are either HTPs or "managers" (as defined in the ESA), employers need only pay overtime to eligible staff where hours work exceed

12 hours in a day; or.

80 hours in two weeks

If these thresholds are exceeded, the employer need only pay overtime at the rate of 1.5 regular pay with no liability for double time wages. Previously, high tech companies had been required to-pay non-exempt staff at time and a half for hours worked in excess of 8 in a day or 40 in a week, and double time for hours worked in excess of 11 in a day and 44 in a week.

While this second exemption is more modest in scope, it will permit high tech companies to require overtime eligible staff to work short periods of long hours without necessarily incurring overtime if compensatory time off can be given promptly. Overtime worked is only subject to a time and a half premium, regardless of the duration.

British Columbia's approach marks the first time that the high tech industry has obtained specific exemptions from hours of work and overtime standards. The change clearly reflects the reality of many high tech positions. The B.C. government has also sent a strong signal that it wants to encourage employment in this fast-growing sector.

This move by B.C. may lead the way for other provinces, particularly Ontario. However, in the meantime, Ontario's high tech companies and employers that have internal computer or IS departments must be aware that most of their high tech professionals and employees are covered by the maximum hours of work and overtime provisions of the Ontario Employment Standards Act.

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.