Big bank breaks the rules

Employers take note: Overtime is overtime, whether pre-approved or not, whether required or permitted, so be sure to track employee hours and pay accordingly.

That was a lesson delivered by the Ontario Superior Court recently in finding CIBC breached overtime obligations prescribed by federal labour law. The decision stretches back to 2007 when CIBC employee Dara Fresca started a class action on behalf of some 31,000 customer service employees who worked for the bank between 1993 and 2009, alleging the bank’s overtime policies and record-keeping systems contravened the Canada Labour Code and, as a result, thousands of workers were not properly paid.

In his March 30, 2020 decision, Justice Edward Belobaba agreed. Rather than implementing a system to pay for all hours required or permitted, the bank failed to record actual hours worked and made overtime compensation contingent primarily on pre-approval, he said.

“CIBC was careless and indifferent, indeed negligent, about its obligation to comply with the requirements of the code… The bank dropped the ball, to be sure.”

But the bank is reviewing the decision and assessing next steps — including an appeal, says Tom Wallis, senior director of CIBC communications and public affairs in Toronto.

“We believe we have effective overtime policies and practices in place, including a clear overtime policy that is easily accessible.”

‘Required’ or ‘permitted’
In his decision, Belobaba cited the bank’s two relevant overtime policies. A 1993 version stated employees must obtain prior authorization from management before incurring any overtime. A 2006 version then said that overtime, “for which prior management approval was not obtained, will not be compensated unless there are extenuating circumstances and approval is obtained as soon as possible afterwards.”

The Canada Labour Code states that if an employee is “required or permitted” to work more than standard hours, they must be paid time-and-a-half. And every employer is required to record the hours worked and keep this information on file for at least three years.

But does “permitted” favour the employer, meaning it’s “impliedly required,” or does it favour the employee, as in “allowed” or “not prevented”? For the most part, case law has interpreted “permitted” to mean allowed or failed to prevent, said Belobaba, citing the testimony of John Silverthorn, senior vice president of HR and advisory services at CIBC, who said that “a key aspect of the overtime policy [was] that managers were to prevent hours that they had not approved.”

The bank had “both a statutory and contractual duty” to prevent or not permit employees from working overtime for which they were not properly compensated, said Belobaba. “The [bank’s] overtime policies fell short of the requirements set out in the code and were, therefore, unlawful.”

And the imposition of a pre-approval requirement as a precondition for overtime compensation is more restrictive than the “required or permitted” language in the code, said the judge. “There is nothing in the code that predicates an employee’s eligibility for overtime compensation on formal pre-approval or extenuating circumstances.”

Looking at the bank’s evidence, there was effectively a duty to not permit or to prevent hours the bank did not intend to pay, says David O’Connor, founding partner at Roy O’Connor  in Toronto and co-counsel for Fresco.

“The bank's own overtime policy from 2006 onward indicated that managers were to not permit hours that had not been approved,” he says. “The code speaks of required or permitted, it doesn't speak of just required, it doesn't speak of directed and it certainly doesn't speak of only paying for approved hours.”

The bank had survey results and reports that employees were working extra time and not being paid and did nothing about it, says Steven Barrett, a partner at Goldblatt Partners  in Toronto, also co-counsel for Fresco.

“An employer can have a policy saying, ‘Look, before you work overtime, check in and have it preapproved,’ but where an employer is found to know that such a policy is preventing employees from being paid when they work overtime — that the bank is permitting to be worked — the requirement for preapproval can’t subvert the employee’s entitlement to be paid.”

There’s a big misconception that if a policy says overtime must be approved, you don’t have to pay someone if they work overtime without approval, says Stuart Rudner, founder of Rudner Law in Toronto.

“That is 100-per-cent false and this case confirms that… If someone works overtime that’s not approved, you have to pay them.”

Record-keeping lacking
CIBC’s record-keeping efforts around overtime were also deficient and contravened the code, said Belobaba in his decision.

“While actual hours may have been recorded for some employees at some branches on some occasions, there was no system to ensure this was done consistently across all branches. In the vast majority of cases, the only hours recorded were the regular hours and the approved overtime hours… This resulted in inaccurate payroll records, which, in turn, made it possible for all employees to be compensated in accordance with the code. Case law tells us that the failure to keep track of hours worked by employees ‘effectively permits’ employees to work overtime.”

The bank should be recording the hours that were worked by employees every day and not assuming, or defaulting, to regularly scheduled hours, says O’Connor.

“You can't just allow a system that's designed to record all actual hours of work to be satisfied by simply assuming that scheduled hours were the hours that were actually worked.”

Effectively, CIBC instructed employees to only record extra hours of work that had been pre-approved, says Barrett.

“The bank simply didn’t have in place an institution-wide mechanism to ensure that overtime hours worked were recorded, and that meant that in many, if not most, branches, the time worked simply wasn’t recorded.”

Lessons for employers
Employers have to think seriously about preventing hours and monitoring hours that they don't intend to pay for — especially with more people working remotely, says O’Connor.

“Employers should be vigilant to adopt and monitor systems that record when their staff is working outside of the confines of the concrete building that the business is usually conducted from… Employers have to be aware that people are working strange hours.”

Employers should be examining their overtime policies both in terms of entitlement and record-keeping to make sure they’re onside with both the Canada Labour Code and provincially regulated employment standards, says Barrett.

“We now have a decision that [shows] they’re at risk of finding that they’ve failed to compensate employees the overtime they not only deserve to be paid but are legally required to be paid.”

This decision is also a reminder that it doesn’t matter how someone is paid, whether it’s hourly or by salary, by default everyone should be given overtime pay unless they fall into one of the exempt categories, says Rudner.

And if employers don’t properly record people’s hours of work — even if it’s a white collar job or a professional services firm — there’s not only the risk of breaching legislation, he says, “but, more importantly, the employer is then open to a claim for overtime where the employee may track their own time but the employer has no record to refute any claims of the hours that were worked.”

And if an employer becomes aware of unauthorized overtime, it should speak with the employee to find out why they are working those hours, says Rudner. If it’s a matter of a heavy workload, their manager should assess what is realistic and adjust the download if necessary.

But if it appears the overtime is not necessary, then the employee should be warned that any unauthorized overtime will result in discipline, he says.

“That’s another thing people get up in arms about… but that’s the only recourse available — you cannot say you’re not going to pay them for the time they worked.”

OVERTIME HOURS MINIMAL IN CANADA

1.6
average number of overall overtime hours per week in Canada in 2019

3.9
average number of weekly overtime hours for forestry, fishing, mining, quarrying, oil and gas sectors

2.8
average number of weekly overtime hours for utilities sector

1.6
average number of weekly overtime hours for finance, insurance, real estate, rental and leasing sectors

Source: Statistics Canada