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Employees Find Strength in Numbers: Overtime Class Actions Arrive in Canada

Date

December 4, 2007

AUTHOR(s)

Trevor Lawson


When strength is yoked with justice, where is a mightier pair than they? — Aeschylus

Although large employment-related class action lawsuits have become commonplace in the United States, particularly in relation to unpaid overtime and pension entitlements, such lawsuits were virtually unknown in Canada prior to 2007. The relative peace enjoyed by Canadian employers on this front was shattered with a $651-million class action lawsuit filed in June 2007 against the Canadian Imperial Bank of Commerce, followed quickly by a $20-million class action lawsuit against KPMG LLP. Both lawsuits seek damages for unpaid overtime in relation to thousands of current and former employees. If certified, these lawsuits are expected to serve as a springboard for similar class action lawsuits targeting large employers in Canada.

Background

On June 4, 2007, Dara Fresco, a teller currently employed in Toronto by the Canadian Imperial Bank of Commerce (CIBC), filed a $651-million class action lawsuit against CIBC (Fresco lawsuit).

In her lawsuit, Fresco claims that for approximately 10 years, she has been routinely required to work overtime hours for which she has not received overtime pay, contrary to the Canada Labour Code. Fresco claims that this practice is widespread among non-management employees at CIBC. Fresco is seeking to become a representative plaintiff for thousands of current and former non-management, non-unionized employees of CIBC who are, or were, tellers or other front line customer service employees working at CIBC retail branches across Canada. If Fresco’s lawsuit is certified as a class action, it will be the largest employment-related class action ever to proceed in Canada.

Following quickly on the heels of the Fresco lawsuit, on September 5, 2007, Alison Corless filed a $20-million class action lawsuit against her former employer, KMPG LLP (Corless lawsuit). Corless was employed by KPMG LLP as a "technician" between 2000 and 2004.

In her lawsuit, Corless claims that she routinely worked overtime hours for which she did not receive overtime pay. Like Fresco, Corless alleges that this practice is widespread at KPMG. Corless is seeking to be a representative plaintiff for other current and former employees of KPMG who were required to work overtime hours for which they did not receive overtime pay.

According to Corless, employees received instructions from their managers that they were to charge more hours per week than they were permitted to work under applicable provincial legislation. Corless alleges that when KPMG’s management told employees to charge 50 and 60 hours per week, management was aware that such employees would be required to work between 65 and 90 hours per week to complete such charge requirements. No overtime was paid for the overtime hours worked in order to meet these targets.

Although the Corless lawsuit currently seeks $20 million in damages for the class members, Corless’ lawyer now estimates the potential exposure to KPMG to be between $65 and $100 million.

Class Action Lawsuits Must Be Certified

In Ontario, before a lawsuit can proceed as a ‘class action’ it must be certified by the court. To date, neither the Fresco lawsuit nor the Corless lawsuit have been certified as a class action. The following requirements must be met before an Ontario court will certify a lawsuit as a class action:

  • The pleadings must show a genuine cause of action (i.e., there must be a legal ground of complaint).
  • The lawsuit must seek to represent an "identifiable class" of persons, which must be defined in a way that is capable of later determination as to ‘who is in’ and ‘who is out.’
  • The claim of the class members must raise "common issues."
  • A class proceeding must be the preferable procedure considering issues such as judicial economy, access to justice, manageability of the proposed class proceeding and so forth.
  • There must be a representative plaintiff, who can fairly represent the other class members and who does not have a conflict of interest with other class members.

A certification hearing in relation to the Fresco lawsuit is scheduled to proceed in December 2008. To date, a certification hearing has not been scheduled in relation to the Corless lawsuit.

Employers Must Take Immediate Action

In light of this significant development in Canadian employment law, it is imperative that employers immediately adopt strategies to assess their current exposure to similar class action lawsuits. Immediate action may assist in (i) reducing the likelihood of an overtime class action lawsuit being filed against your organization; (ii) reducing the likelihood that such a class action lawsuit, if filed, will be successful; and (iii) reducing potential liability.

We recommend that such strategies include the following:

  • Conduct an audit of your organization’s current overtime policies in relation to all employees in Canada.
  • Conduct an analysis of the eligibility requirements under such overtime policies.
  • Create a complete list of the employee positions/classifications that are (and are not) eligible to receive overtime, the number of hours that must be worked before such employees are eligible to receive overtime and the rate of overtime pay for each hour of overtime worked by such employees. Determine whether such eligibility requirements have changed over the past several years and, if so, catalogue all such changes.
  • Determine whether your overtime policies have been compliant with the overtime provisions of all applicable employment standards legislation over the past several years. Evidence that your overtime policies comply with applicable employment standards legislation may assist your organization in arguing that a lawsuit should not be certified as a class action. A lawsuit should not be certified as a class action if the underlying claims are based on individual circumstances and where there are no "common issues" raised by an "identifiable class" of individuals. If your organization can establish that all such claims arise only in exceptional circumstances where your overtime policy was not followed, you are in a stronger position to argue that a class action should not be certified.
  • Conduct an analysis of whether your organization’s overtime policies have actually been followed by your organization over the past several years. Ensure that employees have not been ‘allowed’ to ‘voluntarily’ work overtime without additional compensation. This will assist your organization in determining its exposure to both class action and individual lawsuits. Plaintiffs are more likely to argue that a class action is appropriate if an employer’s widespread practices are inconsistent with its policies.
  • Ensure that managers keep good records of all hours worked by employees, including authorized overtime. Such records will be essential to defending against any claims.
  • Make any changes necessary to existing overtime policies to ensure they are compliant with all applicable employment standards legislation on a going-forward basis.
  • Regularly review your overtime policies to ensure ongoing compliance with all applicable employment standards legislation and to ensure such policies are followed in practice.

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