Employers Must Ensure All Overtime Work Complies With Employment Standards

Written by Lewis Waring, Paralegal, Student-at-law, Editor, First Reference Inc.

In the federally regulated employment sector, working overtime hours is subject to a number of requirements under the Canada Labour Code. Although such legislation requires that any and all overtime work be compensated adequately, even providing such compensation does not ensure that employers in the federally regulated sectors are in compliance with their obligations. In a recent decision, an Ontario court decided an employer’s policy and labour practices regarding overtime hours failed to comply with the Canada Labour Code in a dramatic and broad class-action lawsuit brought by a coalition of workers against one of Canada’s largest corporations.

On March 30, 2020, the Ontario Superior Court of Justice (“Superior Court”) decided Fresco v Canadian Imperial Bank of Commerce, 2020 ONSC 75-a class-action lawsuit against Canadian Imperial Bank of Commerce (“CIBC”) brought by approximately 31,000 of its current and former employees of various front-line positions, such as tellers and personal bankers from a number of retail branches throughout Canada. One of the key findings of the Superior Court in Fresco was that the employer permitted its employees to work overtime hours without fulfilling its related obligations under the Canada Labour Code.

Permitting uncompensated overtime

In Fresco, the Superior Court found that the relevant definition of “permitted” in this case was that an employer had “allowed” or “not prevented” something. Permitting overtime work thus does not mean necessarily that the employer granted explicit permission for its employees to work overtime but might instead mean it merely allowed them to or did not prevent them from working overtime. In other words, an employer does not need to ask an employee to work overtime in order to violate the Canada Labour Code’s provisions regarding overtime work. In fact, a federally regulated employer has a positive duty under federal labour legislation to prevent employees from working overtime without proper compensation (at para 37).

As stated in the court’s analysis in Fresco, there was “an abundance of evidence that some of the class members worked uncompensated overtime (at para 77).” This abundance of evidence was enough for the Superior Court to decide that, if the employer did not know about that uncompensated overtime work, it should have. The evidence that the Superior Court was ultimately persuaded by was presented in five parts.

The employer’s overtime policies contravened the Canada Labour Code

In Fresco, the specific provision at issue was section 174 of the Canada Labour Code and associated provisions under federal labour regulations, namely section 24(2) of the Canada Labour Standards Regulations. The obligations set out in these provisions require that employers compensate overtime work at a minimum of one-and-a-half times their regular rate and that any overtime work be systematically recorded. The employer’s policy in Fresco violated these provisions in two ways.

First, section 174 of the Canada Labour Code states the simple fact that overtime work must be compensated and that it must be compensated at least at what is commonly known as “time-and-a-half.” The implication of this provision is that employers are not allowed to make compensation for overtime work dependent upon any sort of factors. In short, an employer is not allowed to deprive an employee of pay for overtime work under any circumstances.

Second, employers are required under s 24(2) of the Canada Labour Standards Regulations to record “the hours worked each day” and “the actual earnings, indicating the amounts paid each pay day, with a recording of the amounts paid for overtime, vacation pay, general holiday pay, bereavement leave pay, termination pay and severance pay[.]” The Superior Court in Fresco found that the employer’s policy failed to require that such records were made.

The employer failed to record actual hours worked each day

As may be imagined, the employer’s failure to require record-keeping of overtime work carried forward into its practices in the workplace. In Fresco, the Superior Court found that the employer failed to keep records of the overtime work of its employees adequate to fulfill its obligations under the Canada Labour Code. This lack of record-keeping had dramatic effects on the employer’s ability to compensate overtime work, even if we were to assume that the employer intended to provide such compensation. The effects on the employer’s payroll records made knowing who had worked how many overtime hours impossible and, according to the Superior Court, showed that the employer “effectively [permitted]” the employee’s uncompensated overtime work (at para 81).

The employer delegated the responsibility for the interpretation and enforcement of its overtime policy to more than 1,000 branch managers without any guidance or direction

In Fresco, The Superior Court found no evidence of the employer giving any “guidance or direction” to managers regarding its overtime policy or how it ought to approach employees working outside of their agreed-upon schedule. For instance, there was no requirement that managers record the number of hours worked by employees beyond the usual working hours. On the whole, the Superior Court found that the employer had no plan for recording or controlling overtime hours. The Superior Court found that the employer having drafted policy did not mean that they did not permit employees to work overtime without compensation. Instead, the employer’s failure to take active steps to require that overtime work be tracked, recorded and compensated showed that, regardless of policy, the employer had permitted its employees to work overtime without compensation.

The employer knew or should have known that some employees were working unpaid overtime

In Fresco, the Superior Court found that the employer, who denied knowledge of overtime work not in compliance with federal labour legislation taking place, should have known that such work was taking place. In other words, the court found that the employer, although it may not have had actual knowledge, had “constructive knowledge” of such work. Federally regulated employers are held liable for “permitting” overtime work if they “knew or should have federally regulated that overtime hours were being worked and failed to take steps to prevent the work (at para 83).” Thus, in addition to being liable for permitting overtime work when explicitly requiring it, employers are also liable for not interfering with employees’ overtime work in certain circumstances. Specifically, an employer is liable for the overtime work of its employees when “there is compelling evidence of actual or constructive knowledge” of that work going on (at para 83).

The employer looked the other way

In Fresco, the employer argued that a flaw in what is referred to as its “‘delegation’ model (at para 84)” prevented it from responding to complaints filed by its employees regarding unpaid overtime wages. Evidence at trial showed that hundreds of complaints were submitted on an annual basis by class members. The Superior Court found that the employer effectively permitted its employees to work overtime without compensation because it did nothing in response to the numerous complaints reporting such work.

Takeaways

1. Policy is not enough

Federally regulated employers may believe they are safe from the fate of the employer in this case because they have drafted overtime policy. Unfortunately, the essential takeaway from Fresco is that drafting policy regarding the overtime work of employers will not, on its own, prevent an employer from being found liable for its workers uncompensated overtime work. The employer in Fresco had drafted policy regarding overtime. That policy did institute certain requirements which must have been met before overtime work was to be authorized. However, that policy did not comply with obligations mandated under the Canada Labour Code. Federally regulated employers are required to have overtime policy which is compliant with all obligations under federal labour legislation. Fresco demonstrates two specific obligations under such legislation, that the Canada Labour Code requires that federally regulated employers must both authorize and document what work took place after that work has taken place.

2. Employers must ensure any and all overtime work complies with federal labour legislation

Furthermore, even if the employer’s policy had been compliant with all relevant labour legislation, the employer had not taken sufficient action to ensure that its policy was enforced. The Superior Court in Fresco demonstrated that the federally regulated employment sector requires that employers take active steps to ensure that overtime policy is enforced and complied with. In short, stating that employees must be compensated for overtime work is not enough. It is the duty of federally regulated employers to ensure that any and all overtime work which takes place is in compliance with federal labour legislation and that, if proposed overtime work may violate obligations under such legislation, that any such work is actively prevented from taking place. Any failure to prevent overtime work which may not comply with the Canada Labour Code will be deemed by the justice system to be permission from an employer. Furthermore, a lack of actual knowledge of incompliant overtime work will not prevent the justice system from finding that an employer had constructive knowledge of such work, that, in other words, the employer should have known about.

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