CIBC hit with $600-million lawsuit

Class-action lawsuit on unpaid overtime a ‘wake-up call’
By Shannon Klie
|Canadian HR Reporter|Last Updated: 01/21/2009

A bank teller could force corporate Canada to re-examine its overtime policies and practices.

Last month, Dara Fresco, a head teller at a Toronto branch of the Canadian Imperial Bank of Commerce (CIBC) who was recently recognized for her customer service, launched a $600-million class-action lawsuit against her employer for unpaid overtime.

She claimed that in her 10-year career with the bank at 12 different branches, she was required to work on average two to five hours of overtime every week. While she filled out time sheets, she was discouraged from recording the extra hours. She said the practice is widespread among non-management employees.

The ramifications of the lawsuit reach far beyond CIBC and the financial services industry, said Catherine Connelly, professor of human resources and management at McMaster University’s DeGroote School of Business in Hamilton, Ont.

“I expect it would be a huge wake-up call for a lot of managers,” she said.

According to Statistics Canada, about 1.6 million Canadians work unpaid overtime and they average 9.2 extra hours a week. Put those number together and that adds up to about 765 million hours of unpaid overtime per year. Using a low hourly wage of $10 an hour that adds up to $7.65 billion in unpaid overtime.

“Basically these people are being asked to volunteer for their employer,” said Connelly. “I think we’ll never truly appreciate the extent of the issue because it’s unpaid overtime which means it’s pretty much unreported.”

While unpaid overtime is common, many employers offer some sort of quid pro quo, such as lieu time, said Richard Powers, a lawyer and assistant dean at the University of Toronto’s Rotman School of Business.

Some people are willing to put in extra time with the expectation a good job will be recognized in other ways, through bonuses or performance appraisals, said Powers.

“But to the extent that someone doesn’t want to put those extra hours in, or feels that they should be compensated monetarily, that’s their right and the employer should recognize that,” he said.

However, it’s when employers expect employees to work overtime without any form of compensation that the real problems begin.

“What is unfair is that my colleagues and I are rarely paid for the overtime we are working and that’s just not right,” Fresco said at a press conference held last month.

That kind of expectation is becoming more pervasive in many Canadian workplaces, said Douglas Elliott, partner with Toronto law firm Roy Elliott Kim O’Connor LLP, which along with Sack Goldblatt Mitchell LLP is representing the class-action suit.

“With the pressure to increase productivity in the last number of years, one of the ways that people have been increasing productivity is illegally by breaking the law and requiring employees, or expecting employees, to work overtime and not get paid for it,” he said. “Slavery was abolished in Ontario 200 years ago and I don’t think we need to reinstitute it even on a part-time basis.”

The class-action suit covers about 10,000 current and former CIBC tellers, personal bankers, commercial bankers and account executives.

Lawsuit to use statistical data

Because employees have been discouraged from recording overtime, there are few records of how much unpaid overtime they worked. To address that issue, the lawyers will use statistical data to determine the average unpaid overtime worked by CIBC employees, said Elliott.

“This type of lawsuit has been anticipated for some time in Canada because it has been so common south of the border,” he said.

While untested in Canada, using statistical data in unpaid overtime class-action suits has gained recognition in the United States when the employer hasn’t kept official records, said Elliott.

“The American courts have said the law creates an obligation on the employer to keep accurate records of the time worked and to pay overtime. If (the courts are) satisfied there’s been a chronic problem of the employer not keeping proper records, that shouldn’t be a defence for the employer (not to pay overtime) because then they would be taking advantage of their own wrongdoing,” said Elliott.

Recently in a certification case against MBNA Canada, lawyers presented a statistical sampling to demonstrate a pattern of alleged interest rate abuse. Based on that evidence, the Appeal Court of Ontario certified the class-action suit against the bank.

“The cases in Ontario are now pointing to the ability of plaintiffs to use statistical information when it’s difficult to prove what any one individual has lost,” said Elliott.

Banks are regulated by the Canada Labour Code which states that federally regulated businesses must pay overtime to non-management employees who work more than eight hours a day or 40 hours a week.

CIBC’s response

CIBC has declined interviews about the case. In an e-mail to

Canadian HR Reporter

, Rob McLeod, senior director of communications and public affairs, said: “With respect to overtime, we have a clearly defined policy as to how we compensate our front-line retail branch employees that exceeds legislative requirements in Canada.”

Having a policy on the books and actually following it in practice are two different things, said Elliott.

“We don’t doubt that CIBC has an overtime policy that on its face is more favourable than the federal legislation. But the allegation in this lawsuit is that they don’t comply with their own policy, or the statute,” he said.

This is a problem that many organizations potentially face, said DeGroote’s Connelly. While most organizations do a good job of creating overtime policies in line with legislative statutes, it’s the practical application on the ground floor that can cause problems.

Organizations need to do a better job of preparing for fluctuations in demand and staffing availability, said Connelly.

“When you hear about people relying a lot on unpaid overtime… it’s a red flag about how things are being managed. It looks as though people are using stop-gap measures, reacting to the situation instead of thinking through the demands more carefully,” she said.

Canada’s banks have already been warned these kind of measures are unacceptable. In 2003, the Ontario Superior Court awarded Susanne Zorn-Smith, a former Bank of Montreal employee, $15,000 for mental suffering.

Zorn-Smith suffered a breakdown after working days, nights and weekends in an understaffed branch in Smiths Falls, Ont. In her ruling, Justice Catherine Atiken said the bank took advantage of Zorn-Smith and showed a “callous disregard” for her health.

In the past two years, the class-action lawyers have been speaking to current and previous CIBC employees across the country and not one of them has said Fresco’s claims are off-base, said Elliott. In fact, if the suit is certified, Elliott expects few, if any, of the eligible 10,000 employees will drop out.

As for how managers should handle employees who are covered by the class action, Connelly thinks the best tactic is to treat the situation like a unionization movement.

“A manager would never want to be seen interfering in a legal matter. You have to respect the autonomy of the worker,” she said. “It’s really up to them whether they’ll participate or not.”

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