B.C. court strikes blow against overtime class actions

Overtime disputes a matter for employment standards branch, not common law
By Jeffrey R. Smith
|Canadian HR Reporter|Last Updated: 09/04/2008

The British Columbia Court of Appeal has overturned a B.C. Supreme Court decision in a claim for unpaid overtime for multiple employees. The appeal court’s decision reinforced the jurisdiction of the province’s employment standards branch in such matters and could have ramifications for class-action overtime lawsuits across Canada, said Colin Gibson, a partner at Vancouver law firm Harris & Company.

When Cori Macaraeg was hired by payday loan provider E-Care Contact Centers in 2004, she was told the company didn’t pay overtime and she didn’t have an overtime provision in her employment contract. However, when she was fired two years later, she launched a lawsuit that included a claim for overtime pay for herself and all the E-Care employees who worked long hours but weren’t paid overtime.

In 2006, the B.C. Supreme Court ruled the minimum overtime standards in the Employment Standards Act (ESA) were implied terms of an employment contract. That decision opened the door for claims for unpaid overtime or any other statutory rights to be pursued in court for breach of contract, said Gibson. Before that decision, overtime claims, as statutory rights, were handled under the enforcement regime provided by the ESA.

However, in the

Macaraeg

ruling, the B.C. Court of Appeal put things back as they were, finding statutory requirements for overtime are not implied terms of an employment contract and are intended to be governed under the ESA’s enforcement regime — the employment standards branch. The only way an overtime claim could go to court, it ruled, would be as an action for breach of contract for overtime pay agreed to as a contractual provision above and separate from the statutory minimum.

The Court of Appeal’s decision was consistent with previous law, said Gibson, and considered the intent of the legislation in that where an enforcement regime is established, as in the ESA, the purpose is to enforce its standards under that regime, not in common law.

Onus on employee

“The way the Court of Appeal approached the issue is the onus would be on the employee to establish an exception that the statutory enforcement regime isn’t comprehensive enough,” said Gibson. To meet this standard, Macaraeg would have to prove the employment standards branch wasn’t equipped to adequately address her claim.

The decision essentially removes the threat of class-action lawsuits for overtime in B.C. Claims under the ESA must be pursued on an individual basis and breach of contract lawsuits can only be pursued for specific contracts. Because of this, the

Macaraeg

ruling could have some fallout for the overtime class-action suits filed in Ontario against Scotiabank and CIBC, said Gibson.

The claims in those lawsuits rely on both contractual and statutory provisions for overtime, said Gibson, but with the B.C. decision, the statutory part could be thrown out at the certification hearing. If that happens, the suits could be irreparably damaged, he said. In Ontario, there is a requirement for a properly recognized legal cause of action for the suit to be certified and the statutory overtime claims may not meet this standard in light of

Macaraeg

. Alternatively, Ontario’s rule enforcement regime could be deemed inadequate and the class actions allowed to continue anyway.

However, Gibson cautioned the law differs in various jurisdictions and the Ontario courts might not choose to apply

Macaraeg.

Macaraeg is seeking to appeal to the Supreme Court of Canada and if the appeal is granted, the issue will be up in the air until Canada’s top court renders a final decision.

“Ultimately, this issue is going to have to be decided by the Supreme Court of Canada, whether based on

Macaraeg

or one of the Ontario class actions,” said Gibson.

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