Class action lawsuits can provide punch in an overtime fight

By LegalMatters Staff • Class action lawsuits targeting misclassification to avoid overtime pay should serve as a warning to employers and welcome news to disenfranchised workers who feel they are not being fairly compensated, says Toronto class-action lawyer Margaret Waddell.

Waddell, a partner with Waddell Phillips Professional Corporation, says recent class actions could be the leading edge of a wave of more lawsuits as employees join the fight for their rights.

 “Overtime cases are gaining traction these days,” she tells LegalMattersCanada.ca. “This is a positive development because there are many employers who don’t pay enough attention to the fact that their salaried employees are not exempt from the overtime provisions of Ontario’s Employment Standards Act (ESA) or the equivalent in other provinces.

“There’s going to be many more of these class actions now that the law has become comfortably settled and where there is clarity about the duties a worker is performing,” Waddell adds.

Emergence of class action lawsuits

She points to three cases that have been in the news as examples of the emergence of the class-action lawsuit to battle wage inequalities.

In the first, it was reported that an international travel agency reached a $7-milliom settlement in a proposed lawsuit brought by its Canadian sales agents. 

According to the news article, it was claimed the Canadian branch of the agency failed to properly compensate agents for overtime in breach of provincial labour statutes.

In a similar case from earlier this year, Ontario Superior Court found a Canadian bank breached its overtime obligations under the Canada Labour Code.

In the judgment, the court found that “rather than implementing a system to pay for all hours required or permitted (and to track actual hours worked so that this could be achieved), the bank failed to record actual hours worked and made overtime compensation contingent primarily on pre-approval.”

“The bank’s unlawful overtime policies and hours-of-work recording practices were systemic or institutional impediments. That is, they were system-wide in nature and they impeded class member overtime claims that were otherwise compensable under the Code,” writes Justice Edward P. Belobaba.

Fill evidentiary gaps

Because the lawsuit represented about 31,000 former and current employees from across Canada, the plaintiff can use a method called “sampling” to fill in evidentiary gaps about the total unpaid overtime, says Waddell.

“It makes perfect sense. You can’t trot out thousands of employees to testify about the hours they worked and when,” she explains. “It’s just not manageable so, where data is missing, you do a sampling. You get a statistically significant handful of people and then apply the results to the case. It is the logical way to deal with quantifying the damages.”

Both cases illustrate the need to consider overtime provisions for salaried workers, Waddell says.

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Under Ontario’s ESA, employees are entitled to time-and-a-half pay after a 44-hour workweek. However, that does not apply to supervisors as long as they only perform non-managerial tasks on an “irregular or exceptional basis.”

Waddell says employers often consider such overtime regulations “in the context of hourly employees only, but when it comes to a salaried employee, they forget that the provisions still apply.”

In the third example, a former manager of a coffee chain outlet has launched a $50-million class-action lawsuit against his former employer.

The lead plaintiff contends the company erred when it excluded store managers from overtime. The suit still needs court certification.

‘Managers don’t just manage’

“What they’re saying here is that the managers don’t just manage. They actually do everything that regular employees do so. They act as baristas, they clean, they run the till. They aren’t solely managers,” says Waddell. “They are a hybrid of manager and regular employee. They don’t fit clearly into the definition of managers.”

She says the ESA defines a manager as a person whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis.

“If you regularly do tasks that non-managers perform then you are not a manager who is who exempt from the right to overtime,” says Waddell. “That would apply to other retail workers as well. A clothing store manager who is out on the floor helping customers, ringing up sales and stocking the shelves should also be entitled to overtime if they are working it.”

She says the class-action lawsuit is “such a powerful tool for disenfranchised workers.”

Effective remedy

“It can be an effective remedy for people who are afraid of speaking up for fear of losing their jobs,” Waddell says. “The class action is able to fight for everybody. You need something like a class action to even the playing field.”

She says an increase in lawsuits can be an effective deterrent to those who try to flout labour laws and a reminder to companies to act responsibly.

“Employers need to be more vigilant and thoughtful about how they are treating their employees. They must ensure they are acting fairly, especially when we are talking about large organizations where they have a multitude of corporate-owned stores. They are going to be the ones who are going to be particularly vulnerable to a class action,” Waddell says.