Update on Class Actions for Unpaid Overtime

In a previous newsletter, we reported on the repeated attempts in recent years by Canadian employees to launch class action claims for unpaid overtime against their employers. In our Spring 2010 issue, we reported on a decision of the Ontario Superior Court, certifying a class action which authorized a claim against the Bank of Nova Scotia on behalf of over 5,000 employees claiming approximately $300 million in unpaid overtime.

In that case, the Ontario Superior Court held that systemic wrongs arose from the bank placing the onus on the employees to obtain approval for overtime, rather than ensuring that the employees would be paid for overtime worked. An appeal to the Divisional Court was heard in December, 2010.

In another decision of the Ontario Superior Court, the Court had refused to certify a class action against CIBC by employees claiming approximately $600 million in overtime. The Court found that the class members had no common issues, as there were no systemic failures to pay overtime. This decision was appealed and, on September 10th, 2010, the Court upheld its refusal to certify the class action.

Yet another class action case has made the headlines recently. Employees of CN Rail are claiming approximately $300 million in unpaid overtime. The claim was certified in Ontario in mid-August, 2010. The claim alleges breach of contract, violations of the Canada Labour Code (the “Code”), and unjust enrichment.

The CN case was brought by Michael McCracken on behalf of over 1,000 employees of CN Rail. The class includes both current and former employees of CN. The employees argue that they regularly worked overtime, often working more than 50 hours per week, but were never paid for overtime. The failure to pay overtime is argued as both a breach of contract and a contravention of the Code by CN Rail. The Code requires overtime to be paid to employees in non-managerial and non-exempt positions for hours worked in excess of 40 per week, or eight hours per day.

CN Rail argues that the employees worked as “first line supervisors” properly excluded from the overtime provision of the Code. The employees, however, argue that they were deliberately misclassified by the Company in order for CN Rail to avoid its legal obligations concerning overtime.

The Court certified the action; however, the decision to certify has been appealed and the appeal is expected to be heard in 2011.

It is important for employers to understand the legal definition of the term “manager” for overtime purposes in order to avoid a contravention of Code overtime obligations and the costly consequences that may result from a contravention. Determining who is, or is not, working as a manager or supervisor is not simply determined by the title given to the employee. Further, the fact that others may refer to that person as their manager is not determinative. In order to determine whether a position should be classified as managerial will depend on many factors. For example, managerial responsibilities include: the ability to hire, promote, transfer, discipline and terminate employees, manage operations, make decisions in regards to company policy, make significant purchases or be responsible for the company finances or budget, and attend high-level meetings.

Employers are also advised to maintain accurate records, have a clear and well-understood company policy regarding overtime, and use overtime banks with care.

For employees working under Ontario legislation, the Employment Standards Act contains similar provisions regarding overtime and should be reviewed by employers to ensure compliance.

The outcome of these cases will have an important impact on the future of class action cases in the employment context. Bird Richard will continue to keep readers apprised of the status of the cases as they work their way through the courts.