When is a 'manager' owed overtime pay?

Recently, the Ontario Labour Relations Board ruled that an Ontario worker was not entitled to statutory overtime pay – even though he put in plenty of overtime.

The worker was hired in 2019 to be an area zone supervisor for Kellermeyer Bergensons Services Canada (KBS), a cleaning company based in Edmonton. His job was to oversee various accounts with clients such as shopping malls, warehouses, and department stores in Ontario.

The worker estimated that he worked up to 28 extra hours per week. And in 2023, he resigned and then filed a claim under the Ontario Employment Standards Act (ESA) for unpaid overtime.

However, the board found that the worker’s job was supervisory or managerial in nature and any overtime work in that regard was not done on a regular basis, so he was exempt from being entitled to overtime pay under the ESA. The employment standards officer’s decision was upheld by the tribunal.

While this latest decision might be pretty straightforward, they aren’t always that way, and mistakes can be made, according to Ellen Low, managing partner and principal lawyer at Ellen Low & Co. in Toronto.

“This is a seemingly simple area that people get wrong very frequently [and] the actual application of the legislation can lead to enormous awards of historical overtime.”

As examples, the 2023 Le Feuvre v Enterprise Rent-A-Car Canada Company is a class action case alleging individuals were classified as managers but performed job duties that were indistinguishable from the non-managerial employees, so they felt they had been misclassified in order to deny them overtime pay.

Similarly, a proposed class action has been commenced on behalf of current and former employees of Starbucks Coffee Canada who held the position of store manager. They allege they were “working managers” entitled to overtime but say Starbucks misclassified them as persons who are not entitled to overtime, and failed to pay them accordingly.

While there have been cases where there’s an intentional misclassification of individuals as managers to avoid the overtime exception, many employers are also “under the view that this is a relatively cut-and-dried assessment. And I will be the first to tell you that… it's not as straightforward as people seem to think it is,” says Low.

Defining ‘supervisory or managerial’

The legislation around overtime pay is both straightforward and not straightforward, according to Geetha Philipupillai, a lawyer at Goldblatt Partners in Toronto.

For example, in Ontario, an employer’s statutory obligation to pay for overtime is triggered when an employee works more than 44 hours in a week. However, if someone’s work is supervisory or managerial in character, then employment standards around overtime pay don’t apply — as long as any non-supervisory or non-managerial tasks are done “on an irregular or exceptional basis.”

“The result of that is that we can't just look at someone's job description in assessing a claim that they have to overtime, we have to look at what work they're actually doing on a regular basis,” she says. “If it comes to be that they are undertaking, for example, the work of the workers that they supervise on a regular basis, then they do actually become entitled to overtime.”

Legally, the courts or tribunals will look beyond a person’s job title or job description to understand what they actually do on the job, says Philipupillai.

“It could even change over the course of their employment. If someone originally has this title of supervisor, and maybe they are actually having a supervisory role, but there's downsizing and the people that they're supervising are terminated — so their job changes to include things that the people that they were supervising were originally doing — do they still fall within the exemption? In that case, I would say probably not.”

When a manager does non-managerial work

In trying to understand what “irregular or exceptional basis” means, some people refer to the 50-50 rule, meaning a “supervisor” who does non-supervisory work at least 50 per cent of the time, says Low – but that may be ill-advised.

“You need to be really cautious about saying there's a 50-50 rule because when you look at the jurisprudence coming out of, in particular, the Ontario Labor Relations Board, that doesn't actually appear to be the case,” she says.

“You kind of have to parse it apart in terms of the test and application.”

The case first used in Ontario to determine if a supervisor is entitled to overtime has been the 2010 Glendale Golf decision, which established the two-part test looking at both the nature and character of the work performed, and how often non-supervisory work is performed, says Low.

That involved a chef who claimed overtime pay, and the OLRB agreed, finding that the frequency and duration of his non-supervisory duties were on a daily basis, which couldn't just be deemed irregular, she says.

“He had no alternative but to regularly perform the day-to-day duties of a non-supervisory and-non managerial employees. And that seems to be a bit of a theme when you look at the jurisprudence coming out of the OLRB.”

Tracking overtime by employees

Employers and HR, of course, do not want to find themselves facing an unexpected, and possibly sizeable, claim for overtime pay from one or more employees.

To that end, employers and HR should be tracking people’s hours carefully.

“Given that their entitlement to overtime pay depends on what they're actually doing, and not what their job title is, tracking hours would ensure that there's actually a basis upon which to later assess a claim of overtime, as well as potentially entitlement to overtime,” says Philipupillai.

“But, if you have other records which would demonstrate what an employee is doing, the fact that there may not be readily accessible records about their hours can then create an issue in terms of an entitlement to overtime, because an employee would have credible evidence about their recollection of what hours they worked, generally.”

Overall, employers should keep records and “observe critically” if they have someone who’s a supervisor but regularly doing non-supervisory overtime, says Low.

“Is there a point at which you reevaluate your practice and payments to try and avoid some sort of complaint or litigation about unpaid overtime?

Should overtime be approved in advance?

Some employers – as cited in the Starbucks case, for example – state in their policy that overtime work must first be approved.

But there is a fair amount of jurisprudence — at least with the Ontario Labor Relations Board — that says that that may not be enforceable, says Low.

“If the employee is still permitted to perform the service, the fact that they haven't asked for permission to do it or get paid for it in advance likely will not obviate the requirements to provide them with compensation,” she says.

“For the most part, the cases seem to indicate that where that work has been performed, it really ought to be compensated in accordance with the Employment Standards Act, which may give rise to a claim for overtime.”

Investigating a claim for overtime

If someone comes to you and says they are entitled to overtime, it's always best to assess such a claim when it's brought forward, says Philipupillai, “rather than leaving the issue and creating a situation where maybe multiple ‘supervisory or managerial’ employees are being misclassified.

“Look into it based on the actual work that they're doing, and not just what the job description says; if they're needing to do other things to ensure that, overall, work is completed and that whatever needs to be done is happening, and non-managerial and non-supervisory duties are regularly falling on them, then that should definitely be a concern for employers.”

And while HR or leadership may be surprised or concerned that an employee went so long before raising the issue of overtime pay, if the issue goes before the tribunal, they will likely be “pretty lenient” with employees — especially if they've asked the employer and the employer has said they're not entitled to it, says Low.

“Which is why I caution employers and HR professionals just to be really, really cautious in that representation.”