“Time’s Up!” on Unpaid Overtime in the Banking Industry

Time’s up for employers in the banking industry who reap the benefits of employee overtime, only to later deny payment on the basis that the overtime was not formally approved by management. The Ontario Superior Court of Justice recently concluded as much in the landmark decision of Fresco v Canadian Imperial Bank of Commerce, 2020 ONSC 75. 

In this class action, a plaintiff representing all non-management and non-unionized employees having worked at CIBC between 1993 and 2009 claimed that the overtime policies in effect during this period violated section 174 of the Canada Labour Code (“CLC”), which guarantees overtime pay at a rate of at least 1.5x the employee’s regular wages, where the overtime is “required or permitted” by the employer. 

The court held that requiring formal approval of overtime (before or after the fact) as a precondition for payment offended section 174 of the CLC, which offers a broader guarantee of pay whenever the overtime is “permitted” by the employer.  Simply put, the bank couldn’t look the other way while employees worked overtime, only to later refuse to pay because the overtime was not formally approved by management.

The court also found the bank liable for failing to record the overtime hours actually worked by employees.  This resulted in inaccurate payroll records, which made it impossible for employees to be properly compensated.

The Fresco decision is important for several reasons: 

1)      It sheds light on an issue that is rampant throughout the banking industry.  Most banks, including Canadian subsidiaries of foreign banks and other credit institutions, have similar policies in place;

2)      It raises serious doubts about the efficacy of the Class Proceedings Act, 1992 as a tool for improving access to justice.  This class action was commenced in June 2007.  Thirteen years later, the parties have argued a summary judgment motion on the bank’s liability, but another hearing must take place on limitations issues, the quantification of damages, and the appropriate method for compensating class members.  There are still many obstacles to surmount before the class can obtain justice;

3)      It poses interesting questions about a plaintiff’s burden of proof in situations where a defendant has created conditions that make it “impossible” to accurately quantify damages.  Legislative guidance on this issue could bring much-needed certainty, limit protracted litigation, and encourage offending parties to settle early or face stiff penalties.

Further litigation is sure to follow, and banks would do well to proactively revise their policies in order to limit their exposure. Change in this industry is long overdue.  For advice on any unpaid overtime issues, employees should contact me at pierre@pnladvocacy.com.

Crisis Causing Frustration – But Is The Employment Contract Frustrated?

In these uncertain economic times, employees and employers alike are apprehensive about what the future holds. 

Even with the assistance promised by Federal Minister of Finance Bill Morneau, many businesses are concerned that they will have to downsize their workforce to reduce overhead. Small to medium-sized businesses will be hit the hardest. Many are trying to strike a balance that will save the team, while saving money. 

But even COVID-19 cannot absolve the parties from performing their obligations pursuant to the employment contract, with some exceptions where the contract becomes impossible to perform, or in other words, is “frustrated”.

If an employee is sick and cannot work, the employer cannot dismiss them without paying the minimums required by the Employment Standards Act, 2000. This applies even if the contract becomes frustrated as a result of a prolonged illness.

Unless they can establish frustration of contract, employers must always pay a dismissed employee the ESA minimum notice, and severance (where applicable), or any amounts greater than the minimums specified by written employment contract. Employee benefits, including group health and disability insurance coverage, must also be continued during the minimum notice period.

Proving “frustration” is a high threshold. Courts will expect employers to demonstrate severe financial hardship before they can be absolved of their minimum obligations. Even a “permanent discontinuance of all or part of the employer’s business because of a fortuitous or unforeseen event” won’t justify withholding an employee’s severance. 

Unilateral changes to terms of employment, including abrupt reductions in compensation, should also be avoided, as they can be viewed by the Courts as “constructive dismissal”. Transparency on proposed changes, obtaining the written agreement of employees, or providing working notice of changes in accordance with the ESA/contract, will be key to avoiding or reducing liability for decisions made during this crisis.

Just because the contract becomes harder to perform, doesn’t mean that it becomes impossible to
perform. Mere apprehension of the hard times ahead is not enough to justify dismissing without compensation.  

For advice on how you or your business can properly weather these unprecedented times, please contact me at pierre@pnladvocacy.com.