Court Approves Unique Overtime Class Action Settlement

Canadian employers have been watching a series of class action claims, with employees claiming hundreds of millions of dollars in unpaid overtime, since 2007.  In January 2014 we summarized the progress of those cases here.  Banks have been the primary focus of the class-action claims, but more recently claims against a transportation company have also been brought forward.  While individual overtime claims are generally not substantial, the claims can balloon when a representative plaintiff claims unpaid overtime, not only for themselves but on behalf of colleagues as well.

Case Background

Cindy Fulawka (“Fulawka”) was employed at various Bank of Nova Scotia (“BNS”) branches and held various positions such as Personal Banking Officer and Account Manager. In 2007, Fulawka, acting as a representative plaintiff, claimed $250 million in general damages and a further $100 million in punitive damages on behalf of approximately 15,000 individuals.

On February 19, 2010, the class action was certified by the Ontario Superior Court. BNS appealed the certification to both the Divisional Court and the Court of Appeal of Ontario but was largely unsuccessful. BNS sought leave to appeal to the Supreme Court of Canada but was denied. The parties appeared before Justice Belobaba on August 12, 2014, where Justice Belobaba approved the settlement from the bench but has yet to issue a written decision.

Proposed Settlement

BNS has agreed to pay employees for overtime owed to them but the exact settlement value is uncertain. However, Fulawka’s counsel has predicted that class members will received approximately $95 million. Employees will be able to claim unpaid overtime for the previous 9-13 years, depending on applicable limitation periods, but will not be entitled to pre-judgment interest.

To assess unpaid overtime, BNS will participate in an informal but binding procedure in which employees can claim overtime, without any documentation confirming actual hours worked. If no supporting documents are available, claims will be assessed on the basis of best estimates. If BNS and the employee are unable to agree on the amount owed, an arbitrator will make a final ruling and is empowered to reasonably estimate unpaid overtime.  Arbitrations will be conducted either in writing or orally, depending on the discretion of the arbitrator and the claim size.

Notably, the claims process is designed to protect employees from retaliation. BNS will establish an Administrator outside of the normal HR stream within the bank. Except where reasonably necessary to investigate and respond to a claim, the claim will be kept confidential within and outside the bank.

Employees will need to submit their overtime claims by October 15, 2014, or have a reasonable explanation for the delay. BNS in turn must respond to the claims by November 28, 2014.

Legal fees for the class members have been assessed by an arbitrator at $10.45 million and will be paid directly by BNS. However, 10% of payments will be payable to the Class Proceedings Fund, which indemnified the class members from adverse costs awards.

Lessons for Employers

Although the class members will likely receive far less than their claimed amount of $350 million, this case highlights the potential liability that large employers face for systematically underpaying or withholding overtime pay.

To avoid claims and payments for unpaid overtime, employers should consider methods to control overtime costs such as an overtime policy, overtime agreements, or compressed work weeks, if permitted by applicable legislation. Further, this case highlights the importance of maintaining accurate records of hours worked. Without accurate records of hours worked, it is difficult to defend overtime claims.

If you have questions or would like to discuss overtime issues generally, please contact any member of our Labour and Employment Group.

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