If company policy is that overtime must be pre-approved, is the employer liable for overtime that an employee chooses to work without obtaining approval first?
Question: If company policy is that overtime must be pre-approved, is the employer liable for overtime that an employee chooses to work without obtaining approval first?
Answer: Many employers require employees to obtain approval before working overtime. This requirement may be found in employer rules, policies or practices, as well as in employment contracts or collective agreements.
However, the mere existence of a requirement that overtime must be preapproved before it is worked will not necessarily relieve an employer of the obligation to pay for overtime that was not approved. Employers who don’t monitor and enforce their preapproval requirements carefully and consistently may find themselves liable for unexpected overtime payments.
In Fresco v. CIBC, a group of non-union employees brought the largest class action for unpaid overtime in Canada. The employer’s policy was that all overtime must be authorized. The Ontario Superior Court of Justice ruled that “if the employer knows or ought to know that the employee is working overtime but fails to take reasonable steps to prevent the employee from working then overtime must be compensated.” Section 174 of the Canada Labour Code — which stipulates that overtime must be compensated whenever it is “required or permitted” — applied in this case. The court determined that the policy did not extinguish the employer’s liability because it had “required or permitted” the overtime by allowing or failing to prevent it.
Similarly, the B.C. Employment Standards Act requires an employer to pay overtime wages if the employer “requires, or directly or indirectly allows” an employee to work more than a prescribed number of daily or weekly hours.
If an employer sits back and does nothing while an employee works unauthorized overtime hours, it will not be able to rely on its preapproval policy to avoid responsibility for payment. Rather, employment standards adjudicators have found that employers must address unauthorized overtime with enforcement and discipline, rather than by withholding wages.
In Delta Enterprises, Re, for example, the B.C. Employment Standards Tribunal considered whether the employer was required to compensate the complainant for overtime that had been worked against the employer’s direction. The tribunal found that since the employer knew the employee was working overtime but took no action, the employee was entitled to wages. A reconsideration panel upheld the original decision and noted that if an employer does not want its employees working overtime, it must do more than tell them not to work. It must ensure that they do not work unapproved hours.
In unionized workplaces, employers have generally been more successful in resisting grievances seeking payment for unauthorized overtime, if the collective agreement specifically states that overtime will not be paid unless it has been preapproved. The result may be different, however, if the collective agreement requirement has not been enforced consistently or if the employee had a reasonable excuse for working the overtime.
In the arbitration case of Five Hills Health Region and HSAS (Entitlement to Pay for Working Late), Re, for example, the collective agreement stated: “Wherever possible, all overtime must be authorized by the employer, and except in emergency situations, such overtime must be authorized in writing in advance.” The arbitrator decided that the employees, who were physical therapists, were entitled to compensation for working overtime to complete an essential component of their job, even though it had not been authorized in writing in advance. The arbitrator stated: “They were faced with a Hobson’s choice — work overtime even though they were led to believe they would not be paid or leave on time and neglect their professional responsibilities.”
In Insurance Corp. of British Columbia and COPE, Local 378 (Unpaid Overtime Claim), Re, the union filed a grievance claiming pay for overtime hours worked by its members. The collective agreement stated that employees would receive overtime pay for time worked in excess of their regular working hours. The employer argued that it was not liable to pay for the alleged overtime because it had not been approved, and it presented evidence showing it had sent out emails and other reminders stating that all overtime must be pre-approved. The arbitrator ruled that under the KVP principles, the employer could not rely on its policy because it was inconsistent with the collective agreement, and it had not been enforced consistently. The arbitrator found that the employer had knowingly permitted employees to work overtime and had benefited as a result. The grievance was accordingly upheld.
The takeaway for employers is to ensure that their policies and collective agreement provisions requiring pre-approval for overtime are clear and consistently enforced.
For more information, see:
- Fresco v. CIBC, 2020 ONSC 75 (Ont. S.C.J.).
- Delta Enterprises, Re, 2005 CarswellBC 4342 (B.C. Emp. Standards Trib.).
- Five Hills Health Region and HSAS (Entitlement to Pay for Working Late), Re, [2016] S.L.A.A. No. 17 (Sask. Arb.).
- Insurance Corp of British Columbia and COPE, Local 378 (Unpaid Overtime Claim), Re, [2012] B.C.C.A.A.A. No. 112 (B.C. Arb.).
Colin Gibson is a partner with Harris and Company in Vancouver. He can be reached at (604) 891-2212 or [email protected].
