Canada: Ontario Superior Court Dismisses Overtime Class Action Claim Brought Against CIBC In Fresco v. Canadian Imperial Bank Of Commerce

The Ontario Superior Court is currently considering several proposed class action claims for unpaid overtime. Last week, the court dismissed the first contested certification motion in this series. On June 18, 2009, the Ontario Superior Court dismissed a certification motion brought by Dara Fresco on behalf of a proposed class of front-line service workers in branches of the Canadian Imperial Bank of Commerce (CIBC) seeking damages for allegedly unpaid overtime. The court refused to certify the claim, finding that there was no evidence of systemic wrongdoing by CIBC and that claims for unpaid overtime were individual in nature and should be resolved on an individual basis.

Background

The plaintiff sought damages estimated at $500 million for unpaid overtime on behalf of a large proposed class consisting of current and former non-management and non-unionized employees of CIBC working in front-line customer service at retail branches across Canada. Additionally the plaintiff claimed $100 million in aggravated, exemplary and punitive damages.

The plaintiff alleged that CIBC had systemically failed to compensate eligible employees for overtime as required by both the Canada Labour Code (CLC) and their employment contracts. In particular, the plaintiff alleged that CIBC's overtime policy was illegal because it required overtime to be pre-approved by management. The policy also gave employees who had worked authorized overtime the option of taking time in lieu instead of payment of overtime pay. The plaintiff's claim was based on breach of contract and unjust enrichment.

CIBC agreed that the proposed class was statutorily entitled to be compensated for overtime, but it maintained that there was no evidence of a systemic failure to adhere to its obligations.

Certification Denied

The court held that CIBC's overtime policy, which required pre-approval, was not illegal. To the contrary, the court found that the CLC contemplated an employer's right to pre-approve overtime as a way for an employer to meet its statutory obligation that an employee not exceed an overall maximum hours of work per week.

The court also found that offering employees the option of time in lieu or overtime pay was not illegal, as it provided contractual benefits that were more favourable to employees than the statutory guarantees in the CLC.

The plaintiff's claim failed on the common issues requirement. The court found that the individual issues in the case were "front and centre" and it would be almost impossible to engage in a common issues trial without an individual examination of the specific circumstances for each class members' claim. In the court's view, the main deficiency in the plaintiff's claim was its assertion that commonality arose from the illegality of the overtime policy itself and its pre-approval requirement. Although the court concluded that the policy was legal, it held that even if it had found to the contrary, the resolution of this issue would not advance any of the claims for unpaid overtime. The court found that the pre-approval requirement did not cause the wrongs that were alleged, but rather that required or permitted overtime worked may not have been paid. Liability hinged on the application of the overtime policy and the existence of a systemic practice of failing to pay overtime, not on the legality of the policy itself. On the facts of this case, the plaintiff was unable to provide sufficient evidence to demonstrate a systemic failure to pay overtime when required.

Ultimately, the court concluded that "the central flaw in the plaintiff's case is that instances of unpaid overtime occur on an individual basis" and the lack of commonality which was demonstrated by the evidence "[could not] be overcome by certifying an issue that asks whether the defendant had a duty to prevent a series of individual wrongs."

Implications of the Decision

The court made several key findings and observations that will have implications for the other overtime class actions before the court.

(1) "Misclassification" Versus "Off-the-Clock"

There are two general types of unpaid overtime claims. This decision is an example of what the court described as an "off-the-clock" case, in that the key issue is whether the plaintiff has led evidence of systematic unpaid overtime. In such cases, eligibility for overtime is not itself at issue. The second type of case is one of "misclassification" and involves an allegation that the employer has improperly classified employees who are eligible for overtime as being ineligible because of their managerial status (or otherwise). The court in Fresco takes care to distinguish the two types of cases, and future plaintiffs can be expected to argue the court's comments in Fresco suggest that commonality is more easily established in a misclassification case. However, it is important to note that these comments were made in obiter dicta without analysis of many issues. For example, the court's comments rest on the "assumption" that the job duties of the proposed class members are identical or similar. This may or may not be a source of debate amongst the parties in a misclassification case.

The court's decision suggests that the individual nature of overtime claims will make it difficult for any plaintiff to establish commonality in an "off-the-clock" case where statutory entitlement to overtime is conceded.

(2) Preferable Procedure

The court was persuaded by the plaintiff's argument that a class proceeding was preferable, despite the fact that the defendant had pointed to several means by which employee complaints could alternatively be addressed.

Specifically, the court held that the other means available to employees to raise concerns about their employment situation – for instance through an internal escalation process, or by filing a complaint with Human Resources and Social Development Canada ("HRSDC") – did not sufficiently address the objectives of class proceedings, namely access to justice and behaviour modification, to negate the preferability of a class procedure. In particular, the court found that the HRSDC's jurisdiction does not include investigating breaches of an employer's overtime policy or adjudicating claims for breach of contract and unjust enrichment. The court also noted that a power imbalance in the employment relationship may affect employees' decision to use alternative processes.

Defendants may want to consider leading further evidence on the effectiveness of alternative means for complaint resolution, including evidence of the desirability of the HRSDC complaint process, to support a preferred procedure argument in the future.

(3) Evidentiary Considerations

The court rejected the plaintiff's survey evidence regarding other class members and their experiences working unpaid overtime, on the grounds that this evidence was inadmissible hearsay. The court's adherence to the normal rules of evidence will provide certainty for both parties in the future on certification motions.

The court rejected the expert evidence led by the plaintiffs, on the basis that it spoke to general industry conditions and not to the specific experience at CIBC. In respect of two of the expert reports, the court commented:

This observation may have an impact on parties' willingness to rely on this type of evidence in the future, given the significant expense associated with it.

The court also underscored the importance of cross-examination to test the evidence put forward by the parties. Three of the plaintiff's affiants refused to be cross-examined, and the court did not consider their evidence as part of its analysis. It will be important in the future for parties to assess the strength of their affidavit evidence as well as their affiant's availability and willingness to be cross-examined before materials are filed.

Conclusion

There is no question that the decision in Fresco will influence the existing overtime class actions currently before the Ontario court as well as any future overtime claims. Given the significance of this decision as well as its precedence, one would expect the plaintiff to exercise her right to appeal to the Divisional Court.

Larry Lowenstein is the Chair of the Osler Litigation Department. He is a member of the Corporate Securities and Class Actions Speciality Group. Laura Fric is a partner in the Litigation Department in the firm's Toronto office. She practises corporate-commercial litigation, specializing in defending class actions. Denise Sayer is an associate in the Litigation Department in the firm's Toronto office. Adam Hirshis an associate in the Litigation Department in the firm's Toronto Office.

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