Employers should seek class-action alternatives (Legal view)

Courts likely to interpret class proceedings rules liberally
By Jonathan Dye
|Canadian HR Reporter|Last Updated: 07/12/2007

The CIBC class-action lawsuit could usher in a new era for employers. While Quebec has had class proceedings legislation since 1978, and other provinces enacted similar legislation roughly a decade or more later, employment law has not been an area in which class proceedings have taken hold.

But if the CIBC overtime claim is certified, this long-standing potential may become a reality. Class actions expose companies to exponentially increased litigation costs, higher potential liability (regardless of whether the matter proceeds to trial or settles) and the increased likelihood of adverse publicity. Given their wide scope, such claims may often venture into the court of public opinion. The adverse publicity can result in increased financial loss beyond the settlement or judgment amount through decreased sales, consumer boycotts, reduced consumer confidence and investor withdrawal.

Class actions are filed when there is a large number of potential plaintiffs (employees or former employees) with relatively small claims against a common defendant (the employer). The costs of litigation often outweigh any award an individual employee might receive, so class actions allow employees to cobble their claims together and have them decided together, reducing the cost and risk to each member of the class. Usually, one employee — known as the “representative plaintiff” — litigates the case on behalf of the others.

However, if the employer can stop the matter from proceeding as a class action, the employees lose the financial benefits of litigating together. This returns the scenario to its original state, where it’s not economically feasible for employees to litigate individually. It’s therefore in an employer’s best interest, when faced with a class action, to try to “short-circuit” the proceedings as early as possible.

While various jurisdictions have their own rules, the basic process is similar. The normal steps a class action will take are:

• commencement of proceedings (filing the claim);

• certification hearing;

• litigation of the common issues;

• litigation of any individual issues; and

• assessment of damages.

While all five steps would occur if the case went to trial, frequently the certification hearing is most important. If the proceedings are certified by the court, the case moves on. If not, it often ends because the employees have to go back to suing the employer individually.

Before certifying the action, the court assesses whether it meets the criteria under the applicable legislation. Five criteria must usually be satisfied:

• the pleadings disclose a cause of action (there must be something to sue over);

• there is an identifiable class of two or more persons who are to be represented;

• the claims of the class members raise common (but not necessarily identical) issues;

• a class proceeding is the preferable procedure for the resolution of the common issues; and

• the proposed class representative will fairly and adequately represent the interests of the class, has a plan for advancing the proceeding and does not have a conflict of interest with other class members.

Courts will generally interpret these rules liberally and generously. Certification will occur even if the number of class members is unknown or if some of the class members have separate issues.

Once a class action is certified, the representative plaintiff must give notice of the action to the other employees in the class. The court has broad discretion to decide how the notice should be given and can dictate the content of the notice.

In most jurisdictions, once the action is certified, class members are presumed to be included and bound by any judgment or settlement in the action unless they opt out. However, some jurisdictions work on an opt-in basis, meaning members of the class only participate in any award or settlement if they expressly agree to have their claim dealt with in the class proceeding.

If the plaintiff gets an award or settlement, the court decides how it should be distributed among the class. It may decide an individual assessment of damages is appropriate or it can make an aggregate assessment of damages within an acceptable degree of accuracy. In other words, the court can either determine damages on an individual basis or assess a total award that must be divided between the class members.

There have been a handful of Canadian employee class actions of note. Many of them turned on the question of whether a class action was the “preferable procedure.”

From the case law, it appears in order to prevent certification, employers must not only show there is an alternate procedure available, but the alternate procedure clearly meets the goal of “access to justice” better than a class action. Most judges appear to presume class proceedings are the preferable procedure without evidence to the contrary.

Jonathan Dye is a partner specializing in employment law at Heenan Blaikie in Toronto and secretary of the Labour Relations Section of the Ontario Bar Association. He can be reached at (416) 643-6841 or jdye@heenan.ca.


TIPS FOR EMPLOYERS

Keeping overtime under control

The following seven tips could help employers avoid a similar fate as the one facing CIBC.

• Know who is entitled to overtime pay. Managers generally are not entitled to overtime, but simply paying someone a salary (rather than an hourly wage) does not usually create an exemption.

• Have a system in place to track hours worked. A tracking system is generally mandatory in most jurisdictions, but some employers still don’t bother.

• Ensure all hours worked are recorded accurately. Employers will be responsible if there is an error in the information.

• Make sure prior approval, if required, is obtained before employees work overtime. Too often, managers do not enforce their own rules. An unenforced rule can soon become an unenforceable rule.

• Ensure pay records expressly reflect any overtime pay. Some tribunals have been known to assume pay over the regular amount was a bonus or an implied wage or salary increase.

• When it comes to overtime claims, it is not the employee’s job to prove she is owed money. It is up to the employer to prove the employee received all the money she was entitled to. It is the employer’s responsibility to make sure hours worked are recorded accurately and the appropriate payments are made and reflected in the documentation.

• Make sure to have the right records, otherwise the outcome of the claim will rest upon whom the judge or jury believes — the employee claiming to have worked hours for which she was insufficiently paid, or management trying to claim those hours were not worked, even though it failed to keep the required records.

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