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Bulletin | The HR Space

Court Rules Employer Must Pay Overtime for Overtime Work it Does Not Prevent Even if Work was not Pre-Approved

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Labour, Employment and Human Rights Bulletin | The HR Space

In a series of recent decisions in a class action for unpaid overtime, the Ontario Superior Court found a bank’s policy requiring overtime to be preapproved as a condition of payment did not comply with the labour standards in Part III of the Canada Labour Code (the “Code”).[1]

What Happened?

A class action was filed for unpaid overtime on behalf of approximately 31,000 customer service employees across Canada who worked for a bank over sixteen years. The bank’s policies required management pre-approval of overtime hours or post-approval in extenuating circumstances. The bank used software to record hours worked by employees. However, employees did not regularly record their actual hours of work. They generally only did so if they were seeking overtime pay for hours worked in excess of their regular work hours.

The class action claimed that the bank had to pay for overtime work where the employer permitted its performance.

What Did The Court Say?

The  Code says employers must pay 1.5 times the regular rate of wages where an eligible employee “is required or permitted” to work hours that exceed the standard hours of work. For most federally regulated employers, the standard hours of work is eight hours per day or 40 hours per week.

The court said the word “permitted” should mean overtime work that is “allowed” or “not prevented” by the employer. This decided the case in favour of employees. If the employer does not prevent the overtime from being worked, the overtime work must be paid at overtime rates. The onus is not on employees to get pre-approval.

The court also said the employer’s record-keeping practices did not comply with the Code. This was because the Code requires employers to keep a record of the hours worked by employees each day and the amounts paid in overtime. The court said that the bank’s practices created inaccurate payroll records that prevented employees from being paid for overtime work that was not prevented.

Despite this, the court said the bank did not breach its legal duty to perform its contractual obligations in good faith and that the bank had not “lied or knowingly misled its employees” about the overtime rules in the Code. Accordingly, the court refused to award punitive damages because the employer’s conduct was not a marked departure from ordinary standards of decent behaviour or malicious, oppressive and high-handed. The court also refused to order other equitable remedies because class action members would be compensated with damages under their breach of contract claim.

The last issue was how to determine the amount of damages. The court considered whether it should award aggregate damages to the class action members. This allows the court to determine the class members’ losses without individual proof of their claims. The court said the amount of damages could be determined in the aggregate if damages can be fairly and reasonably assessed with sufficient reliability. This issues and the amount of damages will be decided at a future hearing.

The bank is appealing these decisions.

What Are The Takeaways For Employers?

Workplace policies commonly require employees to obtain prior authorization to perform overtime work. This series of court decisions does not mean that such policies are invalid. However, the prior authorization requirement should not be a precondition for being paid overtime for work that the employer did “not prevent” an employee from performing. A policy stipulating otherwise would not comply with the Code’s overtime rules.

Employers in the federal jurisdiction should review their overtime and record-keeping policies and practices. Current policies and practices should be adjusted to ensure compliance with the standards in the Code. Past policies and practices should also be reviewed to assess liability for past unpaid overtime. Provincially regulated employers should also review their policies and practices because provincial legislation may have similar rules for payment of overtime.

If you need assistance reviewing your policies and practices, please contact the author or your regular Fasken lawyer.

[1] 2020 ONSC 75 (CanLII)


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