Video Update: The Entitlement To Overtime Pay

Video Update: The Entitlement to Overtime Pay

Stuart Rudner here with another Rudner Law employment law update.

While most of us are focused on COVID-19 and all of the implications on our society, our health, and of course the economy, our businesses and our jobs, it’s important to remember that life does go on, as does the legal system.

Last week the Superior Court of Ontario released a very important decision relating to overtime and entitlement to overtime pay. Many of you will recall that over a decade ago we saw a number of class actions commenced by employees seeking unpaid overtime against, among other organizations, several of the major banks. Those cases have languished over the years through procedural issues and other twists and turns in the process, but one of them finally made it to the point where we have a substantive decision on the merits.

In Fresco v. CIBC, we had a number of employees, actually thousands of employees, claiming that they worked lots and lots of overtime but CIBC refused to pay them, and CIBC’s explanation or defense essentially was that the overtime was not approved and that they had a very clear policy in place which said you will only be paid for overtime that is approved. That was their defense and they failed completely.

And this is consistent with what we’ve been telling people for years, which is that Employment Standards legislation, whether it’s federal or provincial, because of course employment is regulated provincially, so every province has their own legislation but they’re all consistent, in the sense that they require employees to be paid for time worked. In this case because it was a bank, the federal Canada Labour Code applied, and it requires payment for time worked where it is required or permitted, and in that case, the judge looked at the fact that the policy very clearly said that overtime had to be approved, but that wasn’t enough to allow CIBC to avoid paying for the time that was worked.

We help clients with this situation all the time. First of all, it’s critical to have a policy, which says that overtime must be approved, but just because the policy says that you won’t be paid for overtime that is not approved, doesn’t mean you can avoid paying. If someone works a time, they must be paid, which gets us to some other very important points. First of all, every employer should have a system of recording and tracking time worked. The challenge here is that in many workplaces, especially where it is a professional services firm or white collar workers, people get their backs up when they are told that they have to track time and they don’t want to have a punch clock or otherwise make employees feel as though they’re being watched.

The reality is, I understand the lack of comfort or the discomfort in that case, but what often ends up happening is you get an employee who becomes disenchanted and they will make a claim alleging all sorts of unpaid overtime and they will produce records, and it might be hand written logs of their time worked, but it’s more than the employer has, because the employer has not been tracking their time. And at the end of the day, a court or a tribunal, or the Ministry of Labour, is likely to believe the individual and their hand written records over the employer which has nothing to disprove those records, which can mean that the employer is on the hook for lots of unpaid overtime.

So have a system to track overtime, have a policy, as I said, but then also understand that if someone works unauthorized overtime, your recourse is not to refuse to pay them, your recourse is discipline, and although it sounds silly, we have helped a lot of employers go through this process and impose progressive discipline where you clearly warn the individual that overtime is not permitted unless it’s approved and there will be discipline, up to and including termination, if they continue to breach the policy. And if they do, then at some point you will terminate their employment, either with or without cause, and that’s a whole other discussion, but the point is you have to continue paying them for their overtime, assuming that they are eligible of course, and as most people know, eligibility for overtime is not based upon the way someone is paid, in other words there’s a common misconception out there that people paid by salary don’t get overtime. That’s simply not true.

People are entitled to overtime unless they fall within one of the exempt categories, the most common of which is supervisors or managers. But it doesn’t matter how you’re paid. So if someone is not exempt, if they’re entitled to overtime, you must pay them. If they are breaching your policy by working overtime that’s not approved, that’s when you engage in discipline.

This case and presumably others that will follow, have confirmed the longstanding law which is that employees are entitled to be paid for time worked, whether it is required, approved, permitted, or whether the employer just basically chooses to ignore it and hope it goes away. If they work it, they have to be paid, that’s what this case confirms. You need to have a clear policy and you need to enforce that policy if you want to avoid having to pay people for work that you don’t want them doing. That’s all for today, thanks for tuning in.