Duelling Overtime Cases Heading for Appeals
When two trial courts faced with similar facts come to opposite conclusions, it’s almost certain that the cases will go up the appellate ladder. So it is with two class actions getting underway against CIBC and the Bank of Nova Scotia, both of whom are alleged to have withheld overtime pay from their employees.
The plaintiffs in both cases (Fresco v Canadian Imperial Bank of Commerce, 2009 CanLII 31177 (ONSC), and Fulawka v Bank of Nova Scotia, 2010 ONSC 1148) are bank tellers and other customer service representatives and account officers. They are being represented by the same firm, and the cases are in many ways carbon copies of each other. The core issue is whether the banks’ overtime policies contravene the Canada Labour Code. Specifically, both banks require that overtime be approved in advance; if not, it is not paid.
However, section 174 of the CLC provides that when an employee is “required or permitted” to work more eight hours a day, then that person must be paid at least 1.5 times their regular rate. The argument is that many employees must work overtime to meet their sales goals and customer service standards, but they are rarely compensated for it. In a decision released in June, Justice Lax denied certification of the action against CIBC; that decision was appealed to the Divisional Court, which will hear argument in the case sometime in March. The appellants’ case got a boost on February 19, when Justice Strathy released his decision in the Scotiabank case, in which he disagreed with Lax J.’s view of the issues and held that the case should be certified and go to trial.
Lax J. disposed of the CIBC case essentially on the basis that the plaintiffs failed the commonality requirement that is key to certifying a class action. She found that none of the common issues put forward by the plaintiffs could be answered on a class-wide basis, and even if some could, they would not materially advance the litigation. The reasons for allegedly failing to pay overtime would have to be examined on a case-by-case basis, meaning that a class proceeding would serve no useful purpose. The plaintiffs had also argued, unsuccessfully, that a common issue was resolving whether CIBC owed a duty to its employees to accurately record their hours worked and establish a system for ensuring they were properly compensated for overtime. As Lax J. put it:
Ultimately, the central flaw in the plaintiff’s case is that instances of unpaid overtime occur on an individual basis. This lack of commonality cannot be overcome by certifying an issue that asks whether the defendant had a duty to prevent a series of individual wrongs, without any basis for the existence of this duty and where the duty does not relate to any pleaded cause of action.
As Justice Lax’s decision on the duty issue appeared to be partly based on the fact that no duty was pleaded, the plaintiffs amended their statement of claim in the Scotiabank case to include an action for negligence.
The principle underlying Lax J’s decision appears to be embodied in the following passage:
[I]t is the fundamental right of the employer to control its business, including employees’ schedules, hours of work and overtime hours. … An employee cannot unilaterally and without agreement of the employer determine what is “work” (i.e., services to be paid for). Put another way, an employee cannot foist services on an employer and expect to be paid wages for them.
From that starting point, it is hardly surprising that she resolved the case in the manner she did. There was nothing inherently unlawful about the pre-approval requirement, and therefore there were no common issues to be decided.
On the other hand, Justice Strathy focused on the fact that the employees in this case were in a position of “particular vulnerability”, since they were not members of a union or of management:
The understandable need for managers to control overtime costs and the pre-approval requirement in the policy create institutional impediments to claims for overtime pay. … Putting the onus on the employee to obtain pre-approval for overtime does not adequately reflect the realities of the work place. It puts emphasis on protecting the interests of the employer as opposed to protection of the employee, to whom the duty of good faith is owed.
Strathy J. positioned the duty of good faith and fair dealing as the fulcrum of his reasoning. The plaintiffs pleaded that the Canada Labour Code and its regulations set up implied terms in their contracts with the bank. Scotiabank tried to strike these parts of the statement of claim, but Strathy J. held that, because Scotiabank owed a duty of good faith, the Code could potentially inform the content of those duties.
Different Approaches to Common Issues
Justice Lax and Justice Strathy approached the common issue question in different ways. While Justice Lax held that the case involved individual claims that would have to be proven on a case-by-case basis, Justice Strathy chose to accept the plaintiff’s formulation of the case, based on a contract common to all class members and the system nature of the breach of duties owed by Scotiabank. In his view, resolving the issues of whether Scotiabank had a duty to put a fair overtime system in place and whether it had a duty to maintain accurate records would advance the claim of each class member.
While nothing is ever certain in the legal field, the opposite outcomes of the nearly identical cases pretty well guarantees that these cases will head up the appeal chain together. Scotiabank is certain to appeal Justice Strathy’s decision, and one of the lawyers for the plaintiffs told the Financial Post’s Legal Post blog that he believes the cases will be resolved at the Ontario Court of Appeal level, if not the Supreme Court of Canada. Both sides are likely to fight tooth and nail: the plaintiffs in the CIBC case are seeking $600 million, while the Scotia employees are looking for $300 million. Watch for the Divisional Court’s ruling in the appeal later this year.