Trucking firm facing overtime class action (Legal view)

When it started to pay overtime, there was ‘unilateral decrease in rate of pay,’ says lawyer
By By Jennifer Brown
|Canadian HR Reporter|Last Updated: 12/16/2013

An overtime class-action suit has been launched against trucking company Canada Cartage, Direct Distribution Centres and its related companies.

The statement of claim filed Nov. 8 in the Ontario Superior Court indicated the company required or allowed employees to work hours in excess of their standard hours of work “in order to complete the common duties of their employment.”

However, Canada Cartage and Direct Distribution Centres didn’t properly compensate the employees for overtime, contrary to their contractual and legal obligations, stated the claim.

The lawsuit also alleged that beginning around July 2012, Canada Cartage and Direct Distribution Centres improperly reduced hourly rates of pay without reasonable notice, in order to make it appear that they were paying employees overtime when in fact, employee weekly earnings remained unchanged.

Canada Cartage employs about 3,500 people. However, some are managerial and therefore not eligible for overtime under the Canada Labour Code.

“We would expect a good number of the 3,500 would fall within our class definition,” said Ian Matthews, a lawyer at Lax O’Sullivan Scott Lisus in Toronto, who is representing the plaintiff in Baroch v. Canada Cartage.

“Canada Cartage is a national company and we expect their practices would be uniform throughout the country because they are federally regulated by the same labour laws. We are eager in hearing from people across Canada,” he said.

“We’ve seen a lot of traffic on message boards from people in the trucking industry that seems to suggest this problem is widespread in the industry, not just Canada Cartage.”

Canada Cartage has 20 days to respond to the statement of claim. Calls to the company by Canadian Lawyer InHouse were not returned by press time.

The class definition goes back to March 2006.

Plaintiff at company 5 years, working long hours

The representative plaintiff, Marc-Oliver Baroch of Mississauga, Ont., started working for the company in 2007. He was a shunter operating a truck that positioned semi-trailers to loading docks within the yard of a warehouse.

The company routinely required or permitted Baroch to work between 50 to 60 hours per week.

Prior to July 2012, he was only paid overtime when he worked more than 60 hours per week.

Other positions held by class members in the Baroch lawsuit include drivers, dispatchers, warehouse personnel, dock workers and inventory co-ordinators.

When Baroch lost his job due to outsourcing in July 2013, he was not part of a union. The vast majority of employees with the company are not unionized.

Baroch sought legal advice and an examination of his pay stubs revealed there was a problem with how he was being compensated.

It was discovered that at the point in time Canada Cartage appeared to begin paying overtime in July 2012, it corresponded with “what appears to be a unilateral decrease in Mr. Baroch’s rate of pay,” said Matthews. His hourly wage decreased to $17.34 per hour from $19.50 per hour.

He was then being “notionally” paid overtime for hours worked in excess of nine hours in a day or 45 hours per week. However, due to the reduction in his rate of pay, a typical 60-hour workweek for Baroch with “overtime” still amounted to the same gross weekly earnings he made before, without overtime pay.

“When we looked at the numbers, it seems the reason $17.34 per hour was chosen was because it resulted in the exact same gross weekly pay as Canada Cartage would have been paying Mr. Baroch,” he said.

“We characterize that in our statement of claim as reverse engineering class members’ rates of pay on a systemic basis, which had the effect, as we allege, of not actually paying class members a cent more — even though they were notionally now being paid overtime.”

Overtime class action first for industry

This is the first overtime class action of its kind in the trucking industry, and it may well be a byproduct spawned by greater awareness of the overtime class actions in the banking sector.

In March, two lawsuits filed on behalf of thousands of CIBC and Scotiabank employees were cleared to go ahead after the Supreme Court of Canada said it would not hear the banks’ appeals.

In Fulawka v. Bank of Nova Scotia and Fresco v. Canadian Imperial Bank of Commerce, the “off the clock” cases involved plaintiffs who said they were eligible for overtime but it was not recognized and paid by the employer.

Dara Fresco filed the case on behalf of bank tellers and other customer service employees, while Cindy Fulawka filed on behalf of personal or senior bankers, advisers and small business account managers.

Growing awareness of class actions

“As a result of the bank overtime cases, there is a greater awareness of the issue and it extends beyond the banking sector to the more blue collar sector,” said Steven Barrett, a lawyer at Sack Goldblatt Mitchell in Toronto.

“With the greater awareness out there, other employers may have taken steps to avoid detection.”

But even so, there are always two sides to a story, said Barrett.

“From the pleadings, there certainly seem to be a lot of common issues in terms of the employer’s class-wide policies and practices,” he said.

“So I think, given the decision in Fresco and Fulawka, there’s a good chance that employees in a particular workplace are being systematically denied their overtime requirements or not paid at all for working extra hours are amendable to being certified.”

Greater chance of certification with consistency

In the realm of overtime class-action cases, when the facts are fairly consistent (there either is a policy about overtime or there isn’t one), that’s when the courts have been consistently more likely to certify the class, said Erin Kuzz, a founding member of law firm Sherrard Kuzz in Toronto.

“That’s where we’re going to see more of these,” she said. “The courts have been more prone to certifying straight overtime cases than they have to other types of cases like the misclassification cases involving managers not entitled to overtime.”

Kuzz said she is having more “proactive” conversations with employers about the overtime issue.

But in Ontario, employers also have to be mindful that the employment standards branch can conduct an audit — and it doesn’t take a class action or a complaint, she said.

“While an employer may not have this huge-scale vulnerability in the form of a class action, there is always vulnerability to an employment standards auditor coming in and saying, ‘Pay these folks back a significant amount of unpaid overtime.’”

So while it certainly must be determined if the employer acted illegally and failed to pay overtime, the other question becomes how to assess damages.

“That’s very much an open question,” said Barrett.

Jennifer Brown is the editor of Canadian Lawyer InHouse magazine, a sister publication to Canadian HR Reporter. She can be reached at jen.brown@thomsonreuters.com or (416) 649-8867. For more information, visit www.canadianlawyermag.com.

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