On January 31, 2015 the Ontario Superior Court of Ontario certified a $100 million dollar class action lawsuit for unpaid overtime against Canada Cartage, a transportation company governed by the Canada Labour Code.   The case is a stark reminder to employers of the potential costs of not complying with provincial or federal overtime requirements.

Overtime claims usually arise in one of the following circumstances:

  1. An employer mistakenly believes that the employee is not entitled to overtime because they are paid a salary rather than on an hourly basis. Most provincial employment standards legislation set out the specific exemptions to the overtime requirements.If an employer can’t fit within one of the exemptions, overtime will be owed. In Ontario, for example, the method by which an employee is paid is not relevant to the issue of entitlement – it is the nature of the position that matters, not whether the employee is paid a salary or an hourly wage. Regard must be had to these specific exemptions in order to ensure an employee is being properly compensated;
  2. An employer does not require an employee to keep track of hours worked and then the employee makes a claim for overtime once they leave the employ of the company. This is more common than people may think as employees often keep their own records of hours worked and then make a claim for those overtime hours after they have been dismissed or resigned from their position. If these claims are included in a wrongful dismissal action, an employee can claim up to 2 years’ worth of overtime. This practice and resulting liability can be avoided by having a clearly written policy that requires an employer’s written consent before overtime hours can be worked. Employers must be careful to make sure the policy is consistently applied and avoid condoning extra hours being worked by employees. Also, if an employer does discover that an employee has worked and claimed overtime without authorization the appropriate response for a first offence is to still pay the overtime but apply progressive discipline in accordance with the company’s discipline policy;
  3. An employer tries to assert that an employee’s salary includes a component of overtime as a defence to a claim that overtime should be paid in addition to the salaried compensation. Unless the employer can credibly identify the portion of the salaried compensation that represents overtime and defend that allocation through the use of time records/overtime hours actually worked by the employee, it should be expected that additional overtime will be awarded to the employee. The employer must be able to show a predictable pattern of overtime that is worked by the employee each week and the compensation terms must be set out in a hiring letter or employment agreement;
  4. An employer allows employees to take “lieu” time instead of paying out the overtime but does not bank the time off in accordance with the legislative overtime requirements. In Ontario, for example, overtime is generally owing at time and a half after forty-four hours in a week. While the practice of banking time off is permitted under the Employment Standards Act it must be banked at time and a half, not straight time. Claims arise when employees seek compensation for the half time not banked by the employer; and,
  5. Once an individual employee makes a complaint to the Ministry of Labour, many provincial employment standards statutes allow the Ministry to conduct audits of the entire workplace to determine if the overtime non-compliance is systemic or an isolated incident with the employee who complained. These audits can result in significant liability if overtime is not being paid in accordance with provincial statutes.

It doesn’t take a class action lawsuit for overtime to become a significant liability for employers. Adherence to applicable legislative requirements and carefully drafted policies are the best defence against expensive overtime claims.