Averaging agreement for hours worked

Question: Can an averaging agreement for hours worked be binding under Alberta labour standards rules?

Answer: Some Canadian jurisdictions explicitly provide for averaging agreements in their employment standards statutes. The number of hours worked is averaged over a given period and regular and overtime hours of work are calculated at the end of the period rather than be confined to the pay periods in which they were worked. Where averaging is permitted by statute, rules differ by jurisdiction with respect to whether the agreement must be posted and approved by government, the written detail required, time limits for the agreement and averaging period, when overtime worked during the averaging period is payable and other requirements.

In Alberta, averaging agreements are problematic. Generally speaking, the Alberta Employment Standards Code does not permit the practice of paying wages for an average number of hours worked over more than one pay period. The typical averaging agreement will violate the code in various respects, namely its overtime rules (s. 21) and possibly others, like mandatory payment of wages within 10 days of the end of a pay period in which the wages were earned (s. 8), deductions from earnings (s. 12) and the providing of pay statements setting out regular and overtime hours of work (s. 14).

Consider an example in which employees are paid for an average of 36 hours of work per week over the course of a four week cycle. The employees work 34 hours in weeks one and three and 38 hours in weeks two and four. Under this scheme, there might not be much risk of a complaint to employment standards, since the arrangement will at least seem fair to the employees. However, in the event of a complaint, the danger to an employer is a finding by an employment standards officer the employee was underpaid for weeks two and four in contravention of the code. The officer is under no obligation to consider the corresponding overpayment for weeks one and three as reconciling the situation. In fact, officers tend to look at each pay period in isolation.

However, there is one specific type of scenario for which the averaging of hours is explicitly permitted under the code and that is in the case of a compressed work week. This is an arrangement whereby employees may work longer than eight hours in a day (up to 12) without earning overtime pay by virtue of working fewer days per week. Where the averaging comes in is with respect to a cycle, or multi-week, compressed work week schedule. With such an arrangement, the entire cycle must be shown on the schedule and the average number of regular hours worked over the course of the cycle may not exceed 44 per week. In other words, employees will be entitled to overtime pay for those hours worked in excess of an average of 44 over the course of the cycle.

This type of averaging arrangement is enforceable, although it is not really an averaging agreement since an employer does not need approval from its employees to implement it, nor does the employer need approval from employment standards.