Ensure employees properly classified to avoid unpaid overtime class-action suits
Question: I’ve been reading a lot about class-action lawsuits against Canadian employers, particularly when it comes to unpaid overtime. How do class-action lawsuits work and what can employers do to protect themselves from unpaid overtime lawsuits?
Answer: For years, headlines have been drifting across the border trumpeting the success of lawyers in the United States launching class-action lawsuits for unpaid overtime and achieving multimillion-dollar settlements.
It wasn’t long before Canada began compiling its own list of overtime class-action claims. Earlier this year, for the first time, a court certified one of these cases to proceed. (And in August a class action against CN Rail was certified.)
In February, Justice George Strathy of Ontario’s Superior Court issued a decision certifying a class action in the matter of Fulawka v. The Bank of Nova Scotia. The Fulawka decision stands in sharp contrast to the June 2009 decision of Justice Joan Lax, denying certification in the case of Fresco v. The Canadian Imperial Bank of Commerce. Both cases are headed for appeal. Nonetheless, the Fulawka decision has given lawyers for employees substantial encouragement in their efforts to establish a foothold in Canada for this form of collective action.
So how does a class-action lawsuit work? To begin with, a single employee or former employee must feel she has been improperly treated by an employer and serve as a representative plaintiff in the action. Counsel must then define the class of employees who have similar claims, and who would be represented if the class action was allowed to proceed by the court.
A statement of claim is filed describing the complaint and counsel must then bring a motion before the court, with supporting affidavits, to have the action certified to proceed as a class action. If the motion is successful, the plaintiff’s counsel then issues a notice to the class members, in a form approved by the court, advising them of the details of the action and their right to opt out if they choose. If they do not specifically opt out (in Ontario), they become part of the group with individual claims against the employer.
The court considers several issues when deciding if an action should be certified. In particular, it must determine whether the claims raise common issues that will advance the overall claim, and whether a class action is the preferable way to proceed.
So what does this mean for employers? A great deal. Employees are more likely to come forward with a complaint, given the relative anonymity and sharing of legal costs the class action provides. Such actions are also not constrained by the recovery periods stipulated in typical employment standards legislation.
Typically, actions in the U.S. have reached back years and even decades. The claim in Fresco dated back to 1993 and in Fulawka back to 2000. Perhaps more importantly, the Class Proceedings Act allows a court in appropriate cases to dispense with actual proof of loss for individual plaintiffs and, instead, award aggregate damages, to be ultimately dispersed to the class members, on the basis of samplings and statistical evidence. The court in Fulawka granted certification on the basis that case might be found to be an appropriate one for such an assessment of damages. The stakes for employers are enormous.
What steps should an employer take to protect itself? It’s all about limiting exposure. The most fertile ground in the U.S. has been in representing entire classifications of employees misclassified as exempt from overtime payment under the applicable statute, when in fact they were not. So the first step is to understand what types and levels of employees are exempt at law, and review organizational policies to ensure the lines are properly drawn.
Beyond that, employers need to review overtime policies to ensure they at least meet the requirements of the governing legislation. Provisions for the pre-approval of overtime, for example, have been the subject of attack in both the Fresco and Fulawka cases — in the Fulawka case successfully. Additionally, the age of BlackBerrys and home Internet has created the opportunity for 24-7 connectivity to the workplace, and the exposure to unlimited overtime claims that go with it. Employers need to consider carefully what their policy should be in that regard, and ensure it is communicated clearly to employees in writing.
Mort Mitchnick is a partner at Borden Ladner Gervais in Ottawa specializing in labour and employment lawyer. He can be reached at (613) 787-3568.
