Day rate not an incentive-based pay under ESC exemption
An oilfield worker paid by a flat day rate is not exempt from overtime pay under employment standards legislation, the Alberta Labour Relations Board has ruled.
Apex Well Servicing operates an oilfield service business providing service rigs, rod rigs, hot rigs, pressure pumping, and superheaters. The worker was hired in October 2021 to be a superheater operator.
Superheaters were used primarily in the winter for fracking in the oil industry. As a result, demand for superheaters fluctuated at different times of the year and the work for superheater operators could be uneven and seasonal.
Apex paid most of its employees an hourly wage rate and overtime based on those wage rates. However, superheater operators were a different story. Because of the uneven work over the course of the year, the company paid the operators a flat day-rate to attract workers to fill superheater operator positions. The idea was that a guaranteed flat daily rate would help offset fluctuations in work.
Overtime calculations depend on federal, provincial, and territorial laws that govern the employer.
Flat rate for 12 hours per day
The worker’s flat day rate was $500 per day based on the completion of a certain competency level. This encompassed 12 hours on location and two hours of travel to his accommodations.
However, the worker filed a claim for overtime pay under the Alberta Employment Standards Code (ESC), arguing that the ESC outlined overtime pay as 1.5 times the hourly rate.
An employment standards officer agreed that the worker was entitled to overtime pay. The officer calculated the worker’s hourly rate by dividing the $500 day rate by 12 hours to $41.67, and then multiplying that amount by 1.5 times to reach an overtime rate of $62.61 per hour. Based on these calculations, the officer ordered Apex to pay the worker $4,331.99 plus an order-of-officer fee of 10 per cent.
Apex appealed the order, arguing that its flat day rate was incentive-based remuneration because it was in excess of the statutory minimums and therefore it was not obligated to pay overtime or, if it was, the overtime should be 1.5 times the minimum wage rate as outlined in the ESC for employees paid entirely by commission or other incentive-based remuneration.
Employers are obligated to pay employees for overtime hours actually worked, whether authorized or not, says an employment lawyer.
Incentive-based pay
The Alberta Labour Relations Board noted that the ESC exempted both commission and incentive pay from overtime pay, but commissions normally fluctuate with the volume of sales an employee produces and the results the employee achieves. As a result, incentive pay should be considered similar to the exemption for commission-based pay and fluctuate depending on the employee’s productivity or results, said the board.
The board found that a higher-than-normal flat day rate intended to entice employees to accept offers of employment did not fall under the ESC exemption. The ESC’s meaning should be interpreted as referring to employee performance out outcomes, which aligned with “the ordinary meaning of that word and is also harmonious with the rest of the provision” that contemplated commission pay, said the board.
The board also noted that the Supreme Court of Canada established that the text of an act should be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the act, the object of the act, and the intention of Parliament.”
Employees paid by salary can still be entitled to overtime pay, according to an employment lawyer.
Overtime rate
The board also found that the ESC establishes an overtime rate of 1.5 times “the employee’s wage rate” and not “the statutory minimum wage rate.” As a result, the employment standards officer was correct in calculating the worker’s wage rate as the day rate divided by the 12 hours he worked each day, said the board.
The board determined that the worker’s flat day rate was not incentive-based compensation that was exempt from overtime. It upheld the order to pay the worker $4,331.99 and the order-of-officer fee. See Apex Well Servicing (2010) Inc. and Soucy, Re, 2023 CarswellAlta 304.
