Canadian Lawyer InHouse

Aug/Sep 2010

Legal news and trends for Canadian in-house counsel and c-suite executives

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By Henry Dinsdale and Jeff Goodman Employers face uncertain legal landscape on unpaid overtime I n the April 2009 edition of Canadian Lawyer InHouse, we reported on the emerging risk of disgruntled cur- rent and former employees pursuing claims for unpaid overtime through class action litigation. Since then, con- flicting court decisions have resulted in confusion about whether overtime claims are properly heard as class actions in Canada. Ontario Superior Court Justice Joan Lax was first to weigh in on the question of whether overtime claims are appropri- ate for class action certification in Fresco v. Canadian Imperial Bank of Commerce. Lax refused to certify a proposed class action against the Canadian Imperial Bank of Commerce claiming $600 million damages for unpaid overtime allegedly worked by 10,000 current and former customer service employees. The action claimed CIBC's overtime policy violated statutory and contractual overtime rules by requiring employees to obtain advance approval to be compensated for overtime hours. The crux of the case was that CIBC systemically assigned more work than could be performed within standard working hours, and required employees to work overtime "off the clock" to complete the work. The plaintiff argued the bank's pervasive policy of routinely requiring unpaid overtime work raised common issues. Lax disagreed, finding there was no evidence of systematic wrongdoing by CIBC, and, even if there were such evidence, each claim still would have to proceed individually. The court held that the action lacked "the essential element of commonality" because there was "no asserted common issue capable of being determined on a class wide basis." She ruled any overtime claims against CIBC must proceed individually. The plaintiff appealed Lax's decision. The argument on appeal was bolstered when, a month before the appeal was heard, Ontario Superior Court Justice George Strathy certified a class action in a case with similar facts. The claim in Fulawka v. Bank of Nova Scotia was for overtime pay alleged to be owed to cur- rent and former members of Scotiabank's sales staff. The plaintiff alleged that sales staff worked unpaid overtime to carry out ordinary job functions. She argued Scotiabank's policy put employ- ees in a "catch-22" as advance approval of overtime was required, even though the unpredictable nature of the work made advance notice of overtime impos- sible. The "culture" was allegedly such that overtime was rarely authorized, so employees rarely requested it. Much like CIBC, Scotiabank argued there could be no class action because the issues were unique to each employee. Examples of individual issues include each employee proving he or she worked overtime, the number of hours worked, whether overtime hours were pre-au- thorized, which hours were payable under statute or the overtime policy, and the extent to which each employee was compensated for those hours. Strathy disagreed, finding there was evidence, albeit disputed, that members of the proposed class regularly worked over- time and Scotiabank encouraged this prac- tice. This was not itself inappropriate, but Strathy found evidence that Scotiabank's system put the onus on the employee to obtain prior authorization. The judge concluded that whether Scotiabank had a duty to put a protective overtime system in place, and whether its pre-approval requirement fulfilled this duty, was com- mon to every class member. He also held that an aggregate assessment of damages using statistical means could be appropri- ate to address any concerns about individ- ual compensation issues, thus overcoming the difficulty of assessment of individual damages. Strathy distinguished the CIBC case on the basis there was evidence Scotiabank's alleged failure to pay overtime was attrib- utable to systemic conditions, while Lax had found no evidence for the claim of systemic wrongdoing by CIBC. However, the reasons in the CIBC case do not sug- gest CIBC had a better system for record- ing overtime or that the overtime claims in that case were any more individual in nature than the claims in the Scotiabank case. Instead, the decisions reflect fun- damentally different approaches to the "commonality" test. Scotiabank was successful in obtaining leave to appeal Strathy's decision in favour of certification. A date for the hearing of the appeal has not been set. Meanwhile, the CIBC appeal was heard in March and the court has reserved its decision. These contrasting approaches to simi- lar issues do little to resolve the question of whether a class action is a suitable vehicle for adjudicating overtime pay claims. While the decisions on appeal may provide some clarity, it is likely the issue ultimately will have to be decided by the Supreme Court of Canada. In the meantime, employers concerned about potential liability for unpaid overtime face an uncertain legal landscape. IH Henry Dinsdale and Jeff Goodman are labour and employment law partners with Heenan Blaikie LLP in Toronto. INHOUSE AUGUST 2010 • 7

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