If Employees Work Overtime, Employers Must Pay Despite Overtime Policies

In a recent class action proceeding which affected 31,000 CIBC customer service employees across Canada, the Ontario Superior Court of Justice has ruled that overtime premiums (i.e. 1.5 times an employee’s hourly rate) must be paid whenever overtime hours are required or permitted by an employer even if approval was not specifically granted prior to working the overtime hours.

The Court ruled that an overtime policy cannot require that management approval - either before working the overtime hours or after - constitutes a precondition for receiving overtime premiums.

The employees’ in the CIBC class action case alleged that for a period of over 16 years, CIBC’s overtime policies and record-keeping systems contravened the Canada Labour Code (the “Code”) and, as a result, thousands of employees were not properly compensated for their overtime hours of work.

Over the 16-year class period, CIBC had two relevant overtime policies: one that was in effect from February 1993 to April 2006 (the “Old Policy”) and a second that took effect in April 2006 (the “New Policy”).

Under the Old Policy, employees were required to obtain “prior authorization” or a pre-approval from their supervisor or manager in order to be eligible for overtime premiums. There was no provision for any post-approval (i.e. approval after the hours were worked).

The New Policy extended the Old Policy’s “pre-approval” requirement for overtime claims and added the possibility for an employee to obtain post-approval from the employer but only under “extenuating circumstances” and only if the post-approval was obtained “as soon as possible” after the overtime hours had been worked.

The Code provides for “standard hours of work” of eight hours per day and forty hours per week. Excess hours are subject to overtime pay under s. 174 of the Code:

When an employee is required or permitted to work in excess of the standard hours of work, the employee shall … be paid for the overtime at a rate of wages not less than one and one-half times his regular rate of wages.

Key to this case was the interpretation of the word “permitted”. The Court concluded that it meant the employee had been “allowed” or was “not prevented” from working the overtime hours.

The Court held that the burden is not on the employee to ask permission to work the extra overtime hours but on the employer to intervene and prevent the employee from working the overtime hours in order to avoid the payment of the overtime premium. If the employer knows or ought to know that an employee is working overtime but fails to take reasonable steps to prevent the employee from working the overtime hours, then overtime premiums must be paid to the employee.

In its analysis, the Court relied upon Ontario’s Employment Standards Act, 2000 (the “ESA”) and the regulations under the ESA,  which provide that work shall be deemed to be performed when it is “permitted or suffered to be done by the employer”. Employees will be considered to have performed the work “if the employer was aware that the employee was working or could have anticipated that they might be working but failed to take steps to prevent it”.

Accordingly, CIBC’s overtime policies were deemed to contravene the Code and could not be used as a basis upon which to deny employees their entitlement to overtime premiums.

Employers should be mindful of the fact that work not requested but suffered or permitted is considered to be worked (and paid) time. It is the employer’s responsibility to exercise control and ensure that work is not performed if the employer does not want or need the work to be performed at overtime rates of pay.  

We have historically been consulted by employer clients who have been recipients of Employment Standards Act complaints in which employees (often employees who have been terminated) allege that they have not been properly paid for overtime hours worked. Quite often, the complainant employee has maintained a written record of all such overtime hours worked which were never specifically authorized by the employer. The employer is at a disadvantage in these situations because the employer generally will be relying upon its own timekeeping pre-approval records which may not reflect the overtime hours actually worked and that the employee is pursuing.  

Employers should ensure that their managers are educated about this issue and that workplace protocols are established which direct managers to implement appropriate strategies which limit an employee’s ability to unilaterally decide when and if such overtime hours will be or must be worked. In short, employers must be proactive in ensuring excess hours of work are not worked by employees (or that employees are specifically told not to work excess hours beforehand) if overtime pay is to be avoided.

If you have any questions about the way in which this decision will impact your existing procedures or policies on overtime, please contact a member of our team.