We often assist employers in defending claims by managers who allege that the employer failed to pay overtime. In this blog post, we explore some of the common pitfalls we see in such cases.
Many employers assume that managers are never entitled to additional pay for any additional hours worked, and that the manager's wage or salary is their entire entitlement to compensation regardless of the hours the manager works. This is not always the case. Whether a manager is entitled to additional pay for any additional hours worked is dependent on more than just their position.
To start with, inserting the word "manager" into an employee's title will not necessarily mean that they are not entitled to statutory overtime pay. Exemptions to overtime pay for managers vary from province to province. For example, the B.C. Employment Standards Regulation (the "Regulation") defines a "manager" as
- a person whose principal employment responsibilities consist of supervising or directing, or both supervising and directing, human or other resources, or
- a person employed in an executive capacity.
Employment standards decision makers will look at what job duties an employee is performing, and will not place much weight on the employee's title or the fact that the employee agreed in their employment agreement that they are a "manager." For example, employees are often held to not be a manager where their managerial duties do not take up much of their time, meaning those duties are not their "principal employment responsibilities."
Pursuant to section 34(f) of the Regulation, managers are exempt from overtime under the Employment Standards Act, (the "Act"), which sets out the requirements regarding hours of work and overtime, and provides that non-exempt employees are entitled to premium rates of pay for overtime hours. However, while properly classified managers are exempt from overtime pay under the Act (and under other employment standards legislation across Canada), managers may still have a right to be paid for additional hours worked under the terms of their employment agreement.
Example One: Potential Entitlement to Additional Pay
An employee accepts an offer of employment as a manager and signs a written employment agreement that states that the employee's annual salary is $75,000 based on a 48 hour work week. The employee works 58 hours in one week. Based on the terms of the manager's employment agreement, it is likely that the manger could make a claim for additional pay at their regular rate of pay, for the 10 hours worked in excess of the 48 hours per week set out in the manager's employment agreement. This is due to the fact that (depending on the exact wording of the employment agreement) an employment standards decision maker or a court could interpret the employment agreement as being for a specific or finite number of hours per week.
Example Two: Likely No Entitlement to Additional Pay
An employee accepts an offer of employment as a manager and signs a written employment agreement that states that the employee's annual salary is $75,000 and that the salary is compensation for all hours worked. The employee generally works 45 hours per week; however, one week the employee works 50 hours. Based on the terms of the manager's employment agreement, it is unlikely the manager is entitled to any additional pay for the additional hours worked, as they agreed that their salary was compensation for all hours worked regardless of the number of hours.
While employers always need to be cognizant of the provisions of the applicable employment standards legislation when drafting employment agreements, extra care should be taken when drafting employment agreements for managers and other categories of employees exempt from overtime, to ensure that the terms and conditions of the employment agreement reflect the intentions of the parties. If an employer does agree to pay a manager for their time worked beyond a particular threshold, the employer should make clear the rate that applies for that time (e.g. straight pay), and take steps to ensure it has an accurate method of tracking the manager's hours.
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.