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The HR Space: Court Refines Rules for Employee Class Actions

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Labour, Employment and Human Rights Bulletin

The HR Space is edited by Louise Béchamp, Karen M. Sargeant and Brian P. Smeenk.

Class actions for unpaid overtime or other employment claims have met with mixed results in the past. Now the rules of the class action game – at least in the employment context – may be a little clearer. On June 26, the Ontario Court of Appeal issued its decisions in 3 closely watched cases: Fulawka vs. The Bank of Nova Scotia (PDF), Fresco vs. Canadian Imperial Bank of Commerce and McCracken vs. Canadian National Railway Company.

What the 3 Cases are About

The claim for unpaid overtime in McCracken rested on the allegation that CNR had misclassified a large number of employees as managers. This would mean that CNR unlawfully avoided its obligation to pay for overtime.

In the Fulawka and Fresco cases, the crux of the claims is that the overtime policies of the Banks imposed more restrictive conditions for receiving overtime pay than those in the applicable statute, the Canada Labour Code. The claims focus in part on the Banks’ policies requiring prior approval from a manager in order to be compensated for overtime work. It is claimed that such policies are used to avoid the obligation to pay for overtime work that is required or permitted. The claims also rely on the Banks’ alleged failures to implement proper record-keeping systems for recording the overtime hours worked.

Criteria for Class Actions

There are statutory criteria in many provinces as to what kind of claim can be pursued as a class action. Only if these criteria are met will the courts allow an action to proceed. Ontario’s criteria for certifying an action as a class proceeding are not unlike those in other provinces. They can be summarized as follows:
a) a proper legal claim or cause of action;
b) the class of claimants can be identified;
c) the claims raise common issues;
d) a class action is the best process for resolving the common issues; and
e) there are appropriate representative plaintiffs and a workable litigation plan for the case.

The Contentious Issues

A hotly contested issue in all three cases was issue c) - did the claims raise common issues? The Fulawka case also addressed issue d) - whether the class action is the preferable procedure for resolving common issues. Or, is the dispute resolution procedure for overtime claims under the Canada Labour Code preferable?

The Court’s Conclusions

The appeal court found that the claims in McCracken based on misclassification were not suitable for a class action. But it found that the claims in the Fulawka and Fresco cases should be certified as class actions.

In McCracken, the court found that because the job functions, titles and workplaces of first level supervisors varied widely, there was insufficient commonality. The trial judge would not be able to determine the misclassification issue without resorting to the evidence of individual class members. In a different case, the similarity of job duties performed by class members might provide sufficient commonality to be amenable to a class action. But not here.

In the Fulawka and Fresco cases, however, the court did not buy the argument that the case was really about individualized claims of thousands of employees across Canada. There are common issues about allegedly improper policies and systematic practices of the employers. To the extent that such policies and practices fall short of the employer’s duties to employees, these elements of potential liability can be determined on a class-wide basis. They do not depend on individualized facts.

The court came to this conclusion despite finding that it would not be possible to assess the monetary relief for the class of employees on an aggregate basis, if the Banks are found to be liable. Proof of entitlement to compensation would still have to be done on an individual basis. But this did not prevent the cases from being certified as class actions.

The court went on to find that the class action procedure is also the preferable procedure in these two cases. The courts have broader remedial authority than would inspectors and referees under the Code. And efficient methods of resolving individual overtime claims could be found within the class proceeding.

Key Take-Aways for Employers

These three decisions provide both good news and bad news for employers. On the one hand, it would appear that it will be difficult for misclassification cases to be pursued as class actions. The exception may be where the proposed class consists of similar jobs with similar working conditions. On the other hand, where there is some factual basis for claims alleging improper policies or systemic practices that violate employees’ rights, class actions may now be more feasible.

These cases also serve to remind us of the importance of ensuring that your policies fulfill all legal obligations; that your actual practices are consistent with those obligations; and that you have good dispute resolution processes in place to deal with such claims. Fasken Martineau can assist you to minimize your exposure to such claims.

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