July 15, 2009

Overtime and the Salaried Employee

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Employee claims to unpaid overtime has become a hot issue in Canada in the wake of a series of class action law suits alleging violations of the Canada Labour Code. The class action law suits were launched against a number of employers in the federal sector, including the Canadian Imperial Bank of Commerce (CIBC), the Bank of Nova Scotia and Canadian National Railway. In each lawsuit, salaried employees claim their employer failed to pay them for overtime hours in contravention of the Canada Labour Code’s overtime provisions.

The first step in any class action is a motion to certify the claim as a class action proceeding. If the certification motion is successful, the Court agrees to allow a representative plaintiff to advance a claim on behalf of two or more people whose claims raise common issues. In the case against CIBC, the representative plaintiff was Dara Fresco, a bank teller who had been working for the bank since 1998. Ms. Fresco applied to represent all non-management, non-unionized employees of CIBC in Canada who worked at CIBC’s Canadian retail branches as “front-line customer service employees” in their claims for unpaid overtime.

On June 18, 2009 the Ontario Superior Court released a decision, Fresco v. Canadian Imperial Bank of Commerce, dismissing the representative plaintiff’s class action certification motion against CIBC. The Court specifically found that the claims in question were too individual in nature to form part of a class action suit. The Court also found that CIBC’s overtime policy, which required pre-approval before employees could claim overtime, was not illegal under the Canada Labour Code. The Court noted, however, that a legal policy could be applied illegally. If, for example, an employer was to require or permit employees to work overtime, but withhold approval for overtime pay, the employer would be in violation of the Canada Labour Code.

The Fresco v. CIBC decision comes as a relief to employers who have been following the case for direction as to whether their overtime policies are legal under Canadian employment law. However, the decision still highlights the importance of reviewing formal overtime policies and monitoring the hours employees are working to ensure compliance with applicable employment standards legislation.

The Fresco v. CIBC decision focused on the Canada Labour Code, which governs federally regulated employers such as CIBC who operate in the banking, telecommunications, broadcasting, inter-provincial transportation or shipping industries as well as Federal Crown corporations. All other employers in Canada are governed by their respective provincial employment standards legislation. A brief summary of the legislative requirements in the four Atlantic Provinces with respect to overtime pay is set out below.

Overtime in New Brunswick

The Minimum Wage Regulation, enacted under the New Brunswick Employment Standards Act, sets the maximum number of hours for which an employee in New Brunswick can be paid minimum wage at 44 hours per week. An employee who works in excess of the maximum 44 hours per week must be paid at a rate not less than one and a half times (1.5) the minimum wage rate. It is important to emphasize that in New Brunswick, unlike Nova Scotia, Prince Edward Island and the federal jurisdiction, the overtime wage rate is based on the legislated minimum wage rate, not the employee’s regular hourly wage. Therefore, if an employee’s regular hourly wage rate exceeds the sum of the minimum wage rate times 1.5, he or she will not be entitled to further compensation for overtime hours. By way of an example, the minimum wage rate in New Brunswick is currently set at $8.00 per hour (which is set to increase to $8.25 per hour on or after September 1, 2009). An employee who currently makes $12.00 per hour or more ($8.00/hour x 1.5 = $12.00) is not entitled to additional compensation for overtime, absent an agreement to the contrary with his or her employer.

In addition to the general minimum wage rate, there are special minimum wage rates for certain categories of employees engaged in government construction work (i.e. roofers, bricklayers, carpenters, mechanics etc.). The overtime pay for these classes of workers is still time and a half of their higher minimum wage. However, depending on the type of work, the number of hours after which overtime must be paid for Crown construction employees varies from 44 to 50 hours per week. Additionally, counsellors and program staff employed by charitable or non-profit residential summer camps are also subject to a special minimum wage rate and by virtue of the fact that they are not assigned a maximum number of hours of work per week, they are exempt from minimum wage overtime rates

Notwithstanding the above, employers in New Brunswick may apply to the Director of Employment Standards to be exempted from any provision under the Act, including the overtime provisions. To be exempt, the employer must show that: (1) it suffers a special hardship that is not suffered by other employers; (2) the employee receives other benefits that can be viewed as reasonable compensation for the sacrifice of the legislated benefit, advantage, privilege or protection; or (3) the employment contract was entered into voluntarily and without force or coercion between persons having a close family relationship. Successful applications for exemptions under this provision are rare.

Overtime in Newfoundland and Labrador

The Newfoundland and Labrador Labour Standards Act states that an employer must pay an employee at least the minimum overtime wage rate for any hours worked in excess of 40 hours per week. The Newfoundland and Labrador Labour Standards Regulations, enacted under the Labour Standards Act, sets the minimum overtime wage at $13.50 per hour, which is one and a half times the minimum hourly wage of $9.00 per hour. Effective January 1, 2010, the minimum wage will increase to $9.50 per hour and the minimum overtime wage will increase to $14.25 per hour. Unlike Nova Scotia, Prince Edward Island and the federal sector, the minimum overtime wage rate in Newfoundland and Labrador not one and a half times the employee’s regular hourly wage rate, but is a legislated minimum overtime wage, which at $13.50 per hour is currently one and a half times the legislated minimum hourly wage. Therefore, if an employee’s regular hourly wage is $13.50 per hour, an employer is not required to pay that employee more than $13.50 per hour for overtime hours, absent an agreement to the contrary with the employee.

While the above requirements apply to most employment relationships governed by the Labour Standards Act and the Labour Standards Regulations, there are some exceptions to the minimum overtime wage requirements. For example, if an employee agrees with another employee to change his or her work schedule resulting in that employee working in excess of the standard working hours, the employer is not required to pay the rate of wages for overtime set out in the Labour Standards Regulations. Also, an employer may compensate an employee for overtime hours by giving one and a half hours of paid time off work for each hour of overtime worked instead of overtime pay where the employee agrees to this arrangement and where the paid time off is taken within 3 months, or with the employee’s agreement, within 12 months.

Finally, it is important to point out that the minimum rates for overtime wages set out in the Labour Standards Regulations apply to employees who are paid by the hour or on the basis of a fixed wage for a week or a month or a part of a month and to employees remunerated in whole or in part on a commission basis. However, the minimum overtime wage requirements do not apply to persons employed in the planting, cultivating and harvesting of farm produce (other than the production of fruit and vegetables in greenhouse and nursery operations), to persons employed in the raising of livestock, or to persons employed as a live-in housekeeper or baby-sitter.

Overtime in Nova Scotia

The Nova Scotia Labour Standards Code sets out the general rule that any employee who works more than 48 hours in a week is entitled to overtime pay for the 49th hour and beyond. Unlike New Brunswick and Newfoundland and Labrador, in Nova Scotia overtime pay generally means one and a half times an employee’s regular hourly wage.

The overtime provisions in the Nova Scotia Labour Standards Code apply to salaried workers as well as to those paid an hourly wage. To calculate a salaried worker’s overtime pay rate, an employer must divide the worker’s weekly salary by the regular average number of hours worked per week.

While the above requirements apply to most employment relationships in Nova Scotia, there are exceptions to the general rules. For example, many employees are specifically excluded from the overtime provisions in the Labour Standards Code. Apprentices, commissioned salespeople, and workers in the forestry, farm and fishing industries are all examples of employees who are not entitled to the protection of the overtime pay provisions. Other exceptions to the general rules are managers, transport workers and professionals who are entitled to overtime, but at a rate of one and a half times the legislated minimum wage, as opposed to one and a half times their regular hourly wage. Finally, workers in the construction industry operate under a special set of rules with respect to overtime. These workers are entitled to receive one and a half times their hourly wage once they work more than 110 hours in two weeks.

Overtime in Prince Edward Island

The standard work week under the Employment Standards Act for Prince Edward Island is 48 hours after which overtime begins to accumulate, overtime being at the rate of one and a half times the employee’s regular rate of pay. There are certain industries that have exceptions from the standard work week including the construction industry, fish processing industry, trucking industry, peat moss industry and the health care industry. Presently the Prince Edward Island Employment Standards Act does not allow for time off in lieu of overtime pay and such an arrangement would be a violation of the Employment Standards Act, even if the parties mutually agreed to such an arrangement.

The Guide to Employment Standards in Prince Edward Island was published by the Department of Community and Cultural Affairs in order to help both the employer and employee better understand the intent of the employment standards legislation. In this Guide it states that if an employer attempts to bank overtime without the consent of the employee the employee is obligated to discuss his or her concern regarding this practice with the employer and request overtime pay entitlement. If the employer continues to refuse payment of overtime entitlement, the employee is responsible to contact the Employment Standards Branch immediately to file a complaint. While there is an indication in the Guide that where the employer and employee have agreed on a practice of banking overtime an Employment Standards Branch inspector may decide not to handle a wage recovery complaint for the overtime pay, such a practice is still strictly speaking a violation of the Act and could result in a penalty under the Act.

In September 2006 the Employment Standards Review Panel published Enhancing Standards In The Island Workplace; Proposed Changes to the Prince Edward Island Employment Standards Act and the Prince Edward Island Youth Employment Act, which in part recommend the ability to bank overtime hours. The Employment Standards Review Panel suggested that an employee may be compensated for working in excess of the standard work week by receiving one and a half hours of paid time off work for each hour of overtime worked instead of overtime pay. This would only be granted on the conditions that the employer and the employee agree to do so in writing and the paid time off work is taken within three months of the work week in which the overtime was earned. However, any such amendments have yet to make it to Bill form for the Legislature of the Province to review.

Inquiries may be directed to:

New Brunswick - Trisha Gallant-LeBlanc at (506) 462-4764
Newfoundland & Labrador - Chris Peddigrew at (709) 570-5338
Nova Scotia -  Tom Groves at (902) 491-410
Prince Edward Island - Patricia McPhail at (902) 629-3936 


Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.