Canadian Lawyer InHouse

11 canadianlawyermag.com/inhouse june 2014 By Malcom MacKillop and Brandin O'Connor Workplace Solutions Malcolm MacKillop and Brandin O'Connor practise employment law with the firm Shields O'Donnell MacKillop LLP of Toronto. Keeping in line on overtime Policies should be reviewed often to avoid costly challenges. I n recent years Canada has seen an explosion in class action lawsuits for unpaid overtime. Even where a defendant employer is successful in resisting or appealing certification of a class, the legal costs can be devastating. In Ontario, courts have relied on s. 31(1) of the Class Proceedings Act to greatly discount the costs awarded in favour of successful defendants. In McCracken v. Canadian National Railway Co. in 2012, the federally regulated employer successfully appealed the certification of a class seeking to recover unpaid overtime on the basis there were no common issues. In refusing to deprive CN of its costs outright (as some courts have done), the Ontario Court of Ap- peal held "it must be recognized that class actions come at a cost to defendants" and that plaintiff counsel must always account for the risk of losing certification (see 2012 ONCA 797). Despite this acknowledgement, CN was awarded a scant $60,000 in costs, though its actual costs allegedly approached $300,000. Accordingly, employers should extinguish the threat of class liability at its source — that is, by ensuring overtime practices do not breach contractual or statu- tory provisions on an employee-by-employee basis. For most employers, provincial statute sets a legal baseline. Under Ontario's Employment Standards Act, employers must pay time-and-a-half for every hour in excess of 44. However, the employment contract or collective agreement may provide a greater benefit, such as a lower overtime threshold or a greater rate, to which an employer may be bound. Overtime calculations vary depending on the type of payment arrangement and employers can consult the Ministry of Labour's web site for examples. Alterna- tively, employees may agree to take time off in lieu of overtime pay. However, an employee cannot contract out of his or her overtime rights generally. Most employers in Ontario are subject to the ESA. However, Regulation 285 to the act sets out a num- ber of exemptions. Notably, some classes of employees are not entitled to overtime, including managers and supervisors. Employee classification is frequently liti- gated. The nominal title of the employee is irrelevant: it is the nature of the work that matters. For example, to be exempt, managers must only perform non-manage- rial tasks on an irregular or exceptional basis. What if the employee is required to do more than one kind of work? If at least 50 per cent of the hours the employee works are in a job category that is covered by the ESA obligation to pay overtime, the employee qualifies for overtime pay in respect of the total hours worked in both capacities. Under the ESA, employees may enter into agree- ments by which their hours are averaged over a period of two or more weeks for the purposes of calculating overtime. However, these "averaging agreements" are subject to a number of specific, statutory conditions under s. 22 — most importantly, agreement with the employee and approval from the ministry. Increasingly, the combination of fragmented corporate structures and part-time positions means that an individual may hold multiple positions at related companies. Notably, under s. 4 of the ESA, two legally distinct corporations may be considered the same employer for the purpose of calculating overtime if they conduct "associated or related" businesses. Typi- cally adjudicators look to factors such as common ownership, financial control, management, markets, branding, or assets when making this determination. Finally, just because an employer pays overtime does not mean the employee can work as many hours as he or she, or the employer, desires. The ESA prohibits em- ployees from being permitted or required to work over certain thresholds, unless they are exempt from the act. Generally, employees cannot work more than eight hours per day or 48 hours per week. Hours may exceed this threshold if the employee has made an informed, revocable written agreement with the employer, and the employer has obtained approval from the minis- try. The employer must provide each employee at issue with a prescribed "Overtime Information Sheet." Employers should review their overtime policies regularly in order to avoid the costly ordeal of a law- suit or fine down the road. For federally regulated employers, the road may be long indeed: in Ridke v. Coulson Aircrane Ltd., the Federal Court held that the Canada Labour Code contains no limitation for an unpaid overtime claim, allowing employees to claim for overtime worked at any time from any federally regulated employer. If any of these issues raises suspicion, an employer should seek legal advice to ensure they are keeping in line with their obligation to pay overtime. IH

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