On March 30, 2020, the Ontario Superior Court of Justice released its decision on the merits in Fresco v Canadian Imperial Bank of Commerce, a class action seeking compensation for unpaid overtime wages under the Canada Labour Code (the “Code”) on behalf of non-union service workers of the Canadian Imperial Bank of Commerce (the “Employer”).
In a 2009 decision, the Superior Court had initially refused to certify the action as a class action on the basis that it lacked the essential element of “commonality”, which requires that the issues raised by the action be shared and answerable on behalf of all class members. This decision was later reversed by the Ontario Court of Appeal in a 2012 decision, which certified the class action and identified the common issues to be determined. After years of litigation, the first five of these common issues, which address the Employer’s liability for the alleged breach of statutory and/or contractual overtime and hours of work provisions, proceeded to a hearing on the merits before the Superior Court.
The Court answered all of the common issues before it in favour of the plaintiff class of employees. The Court found:
- The Employer had a duty under the Code to pay overtime wages for work that was “required” or “permitted” to be worked in excess of standard hours. This includes overtime work that the Employer “allowed” or “failed to prevent”.
- The Employer’s overtime policies contravened the Code because they required pre-approval as a precondition for overtime compensation and/or specified that post-approval could only be granted in certain circumstances. Moreover, the Employer delegated the interpretation and enforcement of these policies to more than one thousand branch managers without guidance or direction. Consequently, the Employer’s policies and practices created “institutional impediments” to overtime claims that were compensable under the Code.
- The Employer breached its duty under the Code to accurately record and maintain a record of all hours worked by the employees in question. Employees were only expected and directed to write down their actual hours of work on an “exceptional basis” when seeking payment for overtime.
- There was sufficient evidence that, as a result of the above, some of the employees in question worked uncompensated overtime hours that the Employer had “permitted” or failed to prevent. The Employer knew or should have known that some employees were working unpaid overtime, but simply “looked the other way”.
- The relevant hours of work and overtime provisions of the Code were incorporated as implied terms in the employees’ contracts of employment with the Employer, which terms the Employer had breached.
Issues of remedy will be dealt with in a subsequent decision. It remains to be seen whether the Court’s decision on liability will be appealed.
The Court’s decision addresses obligations arising under the Code, which applies to federally-regulated employers. However, provincially-regulated employers should be aware that similar requirements to record hours of work and compensate overtime hours arise under provincial employment standards legislation.
For example, under the Ontario Employment Standards Act, 2000 (the “ESA”), overtime pay is generally required for each hour of work in excess of 44 hours in each work week (subject to various exceptions). The ESA’s Regulations deem work to be performed where work is “permitted or suffered to be done by the employer”, or where it is “in fact performed by an employee” even though a term of the employment contract expressly forbids or limits hours of work or requires the employer to authorize hours of work in advance.
Similarly, the ESA generally requires Ontario employers to record the dates, times, and number of hours worked by an employee in each day and each week, or, where the employee is paid a salary, the number of hours in excess of those in his or her regular work week (subject to certain additional requirements and exceptions).
The decision emphasizes the importance of strictly adhering to these statutory requirements, and suggests that the following practices may be helpful with respect to managing overtime:
- While employers may continue to stipulate that employees must seek pre-approval to work overtime, employers should revise or refrain from implementing policies or practices that either expressly stipulate or give the impression that overtime will not be paid unless pre-approval to work the overtime was sought and granted.
- Do not “look the other way” when overtime is worked without authorization. Accurately record and compensate all overtime that is worked, with or without prior authorization, in accordance with statutory requirements. Take steps to prevent the performance of unauthorized overtime by clearly communicating standards and expectations with respect to hours of work, balancing workloads, and issuing verbal or written warnings regarding non-adherence to related procedural requirements in appropriate circumstances.
- Provide consistent guidance and direction to front-line managers or supervisors responsible for interpreting and enforcing overtime policies.
- Implement measures to systematically record employees’ actual hours of work in accordance with statutory requirements. This may include policies or practices requiring employees to accurately document and promptly submit their time.