How to avoid paying overtime of $22,000

When an employee, or former employee, submits an unexpected and sizeable claim for overtime pay, it’s never good news for employers.

Some may be comforted by the limitation periods imposed by employment standards, such as six months — but what if the employee files a civil action, do the same limitations still apply?

Not necessarily, according to a recent decision from the Alberta Court of Kings’ Bench, which provides lessons for HR on how to handle overtime.

Overtime pay totalling $22,648

Roger Scheffler was a truck driver for Mourits Trucking until December 2019.

He earned an hourly wage of $21 and determined he had worked 719 overtime hours at the company, in accordance with Alberta’s Employment Standards Code, which prescribes an overtime rate of time and a half.

At $31.50 per hour for 719 hours, that comes out to a total of $22,648.

But Scheffler chose to commence an action in the Alberta Court of Kings’ Bench instead of pursuing a complaint through Alberta Employment Standards.

While the latter sets a deadline for overtime pay at six months preceding termination, that limitation does not apply with a civil claim.

While Mourits Trucking felt that limit of six months should still apply, Justice J.S. Little disagreed in his decision.

“While the Code establishes the right to overtime, it would be inequitable to constrain an employee’s recovery to the six-month limit under the Code when an employee uses conventional litigation instead of the Code. In my view, the remedies and their restrictions prescribed under the Code apply only when an employee engages the resources and collection mechanism available under the Code.”

Why a civil claim for overtime was allowed

Every province has its own legislation on this issue, says Jennifer Koschinsky, lawyer in the employment and labour group at Stikeman Elliott in Calgary. For instance, in British Columbia, you can only go to the Employment Standards branch and lodge a complaint; in Ontario, it's very clear that you have to pick a road, so you either have to go to the courts or the Employment Standards branch.

“Alberta has always been a little bit different because our legislation isn't quite as clear on that point. So there have been cases in the past where it has been found that ‘Nope, you have to go to the Employment Standards branch, overtime is a creature of statute, you have to use the statute to get your remedy,’” she says.

“The court in this case seems to have focused on the unfairness of that, in that it's inequitable that is the only road because it would basically put you in two places — you would bring your claim for the rest of your employment entitlements, severance, notice all of that stuff… in the court, and then you would have to have a separate claim for overtime through the Employment Standards branch.”

The problem with the cases that suggest everything should be brought through the Employment Standards tribunal is that they don't take into account there are many different things that an employee could be suing for, says Joel Fairbrother, a partner at Bow River Law in Calgary.

“And only some of them would be covered under the Employment Standards Code,” he says. “Basically, you would be forcing them to bring two lawsuits in many cases, which makes no sense. As a litigator, I can say if there's a way to make it so that they don't have to bring two lawsuits, then they shouldn't have to bring two lawsuits.”

Lesson no. 1: Know the rules for overtime

Overall, employers need to learn about how overtime works, says Fairbrother.

“Many employers come to us and they have a loose, implied obligate; for example, they'll say to their employees ‘Well, if you work a lot, then we'll give you a couple days off here and there, like lieu days.’ But that sort of loose understanding, that's not going to be enforceable for an employer.”

If an employer wants to be protected against a claim like this one, it needs to follow the rules, he says. So, if an employee is working over eight hours in a day or 44 hours in a week, they have to be paying overtime.

“If they don't want to do that, there are some ways around that,” says Fairbrother, such as having employees sign an overtime agreement, with the terms determined under the Employment Standards Code.

“Essentially, they can bank their overtime and then they have to be given days off in lieu of that, within six months.”

There are some exceptions to this under code, such as upper management or certain professions not being automatically entitled to overtime, unless it’s stated in their employment contract, he says.

“There are many chunks of the workforce that are not actually entitled to overtime, so it's important to look at them before you assume that you have to do something about it.”

It’s always a good time to review your overall overtime process, says Koschinsky.

“For me, that starts even before the employment agreement — it starts at making an assessment as to whether or not this employee we're bringing on, ‘Are they going to be exempt or non-exempt from overtime?’ and making sure that we're getting that assessment right.”

There’s a common misperception that anyone who is salaried doesn't get overtime, but that's not accurate, she says.

“There seems to be an idea that everyone who is called a manager isn't entitled to overtime — that isn't necessarily the case.”

Then it’s about making sure that in the employment offer or employment agreement, you cover overtime and say, “Here is what the entitlement is; here is when it will be payable; we need you to get pre-approval; we need you to submit timesheets on a weekly or bi weekly basis,” says Koschinsky, so that you're constantly tracking that overtime  and “not left with an overtime bomb after two years.”

Best practices for an overtime policy

Finally, it’s about making sure there are policies in place around approvals and validations, she says, “because the fact of the matter is, if an employee works overtime, they are entitled to overtime pay. There's no getting around that.”

That also means managing overtime from a disciplinary perspective, says Koschinsky.

“If someone is working 50 hours of overtime every week, and is getting no approval for it, but our policy says you need that approval, then we can manage it through the disciplinary process.

“If we're finding out when we terminate someone that they're advancing a claim for 791 hours of unpaid overtime, and that's the first we're hearing about it at that point, then we can look at our employment agreement and our policies and see if those have been complied with. Because now maybe we have after-acquired cause for that termination because they haven't complied.”

If an employer has a policy that says employees are not allowed to work more than x number of hours per week, and someone does more than that, then that's unapproved work, says Fairbrother.

“You don't have to pay them for work they're not allowed to be doing.”

If an employer wants to pay out overtime, consistently, the informal approach is totally fine, he says — no policy is needed.

“But if the employer wants to be able to say that they had an arrangement, the arrangement has to comply with the code and has to be in writing. So that's where they fall into trouble.”

Also important? Enforcement.

“It is much worse to have a policy that you're not enforcing than to have no written policy at all,” says Fairbrother. “Quite often, that's the issue is that the employer has these policies, but they don't actually enforce them — then, those policies are worth nothing.”

Tracking overtime through tech

On a side not, tracking software can be helpful when it comes to issues like overtime, especially with a lot of employees working remotely now, says Koschinsky. As an example, a case out of British Columbia involved time theft by a remote employee.

“It helps monitor to make sure that time is being accurately recorded, that we are not missing overtime hours, but also that we are not paying for hours that haven't been worked. So it works both ways,” she says.

Of course, all of that is subject to employee privacy, so it’s about making sure that you’re only collecting information that is needed for the purposes of managing the employment relationship, says Koschinsky.

“It's also subject to the various provincial requirements around monitoring employees electronically. So in Ontario, there's legislation that requires specific disclosures be made to employees and a policy in place that outlines exactly what we're using, what we're looking at, and what we're collecting.”

However, Fairbrother says there will always be a lot of litigation around overtime and technology may not help.

“It's always that the employee works partly on their computer screen, partly off; they may sometimes be looking for things… or they might be talking to a colleague or whatever it is, they might be on the phone. And a lot of the types of software that track this are limited to understanding when the mouse is moving,” he says.

“I'm not saying there is no accurate software, but I would say in general, every time that I've seen it so far, the tracking has been horrendously inaccurate.”