Who is entitled to overtime pay?

Many companies incorrectly assume salaried employees are not entitled to overtime pay

Stuart Rudner

Many employers are unsure whether specific employees are entitled to overtime pay in accordance with the Employment Standards Act (ESA) of Ontario.

Unfortunately it has become apparent that many companies do not know the proper criteria to use in order to make this decision.

Some take the approach that salaried employees, as opposed to those paid on an hourly basis, are not entitled to overtime pay.

Others divide employees based upon who is in a bargaining unit, deeming anyone outside the bargaining units to be ineligible for overtime pay. Unfortunately neither of these approaches is entirely consistent with the law.

Who is entitled to overtime pay?

Part VIII of Ontario’s Employment Standards Act (ESA) requires an employer to pay overtime at a rate of one-and-a-half times the employee’s regular pay, for each hour in excess of 44 in one week.

There are some situations where other thresholds are prescribed, and it is possible for the employee and employer to agree to average the hours over a period of time.

Regulation 285/01, enacted pursuant to the ESA, provides various exemptions and “special rules” in relation to the ESA. It excludes specific groups of employees from specific provisions of the act, including those relating to overtime. This regulation provides the criteria to be used in determining who is exempt from various provisions and should be referenced whenever there is any doubt as to an employee’s eligibility for overtime pay.

Section eight of the regulation exempts a number of groups from the overtime provisions of Part VIII of the act, including gardeners, pool installers and horse breeders. Perhaps more importantly, the regulation exempts any “person whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis.”

This wording is notable because it is different than the previous regulation, under the old Employment Standards Act, which provided that the overtime requirements did not apply to employees “whose only work is supervisory or managerial in character.” The change in wording has been interpreted to have a very significant effect.

In order to fully understand the impact of the new wording it is worth looking at the recent case of Tri Roc Electric Ltd. v. Butler, which was heard by the Ontario Labour Relations Board.

This was a claim for overtime pay by an employee that, according to his employer, performed a managerial or supervisory function. Tri Roc provided electrical contracting services to commercial building projects.

The claimant started working for them in mid-1999, initially working independently on small projects and subsequently becoming involved in larger projects where numerous Tri-Roc employees were involved. He assumed some supervisory and administrative functions on these projects.

In October 2000 he started working on what was known as the “Maritime Project,” frequently working more than 44 hours in a week. When he sought overtime pay at one-and-a-half times his hourly rate, the company took the position he was working in a supervisory capacity and therefore not entitled to overtime pay as required by the ESA.

The evidence of the company was that the bulk of the claimant’s time was spent co-ordinating the work of the other Tri-Roc employees and dealing with a number of parties including the project owners, general contractor and electrical inspector.

It said that, as a result, he did not have time to perform actual electrical work. The company witnesses also testified that the complainant made executive decisions on a daily basis, determined how many employees were needed, hired and fired employees and approved their time sheets. Conversely he did not have to have his time sheets approved in order to be paid.

The claimant testified that 80 per cent of his time on the Maritime Project was spent doing electrical work and he did not have the power to hire or fire employees. He did acknowledge that he made recommendations as to persons that could be hired or, if they were not working out, fired.

The board reviewed the ESA and relevant regulation. As the timing of the events in question bordered between the applicability of the new and old legislation, the board reviewed both. Referring to previous case law, the board confirmed that under the old regulation, the determination of whether an employee’s work was properly characterized as supervisory or managerial was made “having regard to the whole of the work performed, the overall character of the work… “ The board quoted the Ontario Divisional Court in Kennedy v. William C. Cavell Enterprises Ltd., which held that

“[i]f the managing editor of the New York Times writes a single editorial or reports a single story, that does not necessarily destroy the essential character of his job as being only managerial. It is a question of degree.”

The board found that under the old act, the claimant’s work would have been deemed to be managerial and he would not have been entitled to overtime pay.

The board then considered the current legislation, and held that the implication of the new wording is that regular performance of non-managerial duties renders an employee’s job outside the scope of the managerial and supervisory exemption. The board reviewed the claimant’s evidence that he performed non-managerial tasks on a regular basis and considered the fact the company’s representative was not on site often enough to know how the claimant spent his time. As such it accepted that the claimant regularly performed non-managerial work and that the managerial and supervisory exemption set out in the regulation did not apply. As a result the claimant was entitled to the overtime pay he was seeking.

This case demonstrates a significant difference between the old act and regulation and the current versions. Although it may seem as though the wording in the previous regulation was narrower and more limiting with respect to who was a manager or supervisor, the case law interpreted it in a broader fashion.

The Tri Roc case suggests that under the current regulation, it will be more difficult to show that someone is a manager or supervisor than it was in the past. Therefore more employees will be entitled to overtime pay in accordance with the act.

Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at [email protected].

Q&A on overtime

Do managers and supervisors qualify for overtime pay?

Managers and supervisors don’t qualify for overtime pay if the only work they do is managerial or supervisory or if they only perform non-supervisory or non-managerial tasks on an irregular or exceptional basis.

What happens if an employee performs both work that qualifies and work that does not qualify for overtime?

The employee qualifies for overtime if at least half of the hours he worked in a regular work week were in a job that is covered by overtime provisions in Ontario’s ESA . A typical case:

Gerard works for a taxi company as both a cab driver and a dispatcher in the office. A cab driver’s work is not eligible for overtime pay, but a dispatcher’s work is eligible for overtime pay. During his work week, Gerard worked 26 hours as a dispatcher and 24 hours driving a cab, for a total of 50 hours. This is six hours over the overtime threshold of 44 hours. Because Gerard spent at least 50 per cent of his working hours that week as a dispatcher, all his hours worked are considered in determining whether he qualifies for overtime pay. Therefore, he qualifies for six hours of overtime pay.

What is an averaging agreement?

An employer and an employee can agree in writing to average the employee’s hours of work over a period of not more than four weeks to determine whether the employee will receive overtime pay. With the approval of the Ministry of Labour’s Director of Employment Standards, an employee and employer can agree to average the employee’s hours of work over a period of more than four weeks. These averaging periods cannot overlap one another and must follow one after the other without gaps or breaks.

This means an employee will qualify for overtime pay if his average hours exceed 44 hours.

So, if the agreed period for averaging an employee’s hours of work is four weeks, the employee is entitled to overtime only after working 176 hours during the four work weeks (44 hours x four weeks = 176 hours).

Source: Ontario’s Ministry of Labour

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