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Overtime class actions: an endless maze of rulings and appeals

|Written By Julius Melnitzer

The release of Ontario Superior Court Justice Paul Perell’s 102-page decision in McCracken v. Canadian National Railway Co. on Aug. 17 is nothing less than a welcome path through the maze of wage and overtime class actions.

The judge found no support for allegations that employees were forced to work extra hours, Mort Mitchnick says of the decision in Fresco.

The difficulty is that in this case, the maze is like an underground labyrinth composed of many chambers. When the explorer finally arrives at the end of one chamber having carefully mapped the route, a gateway to a new chamber, perhaps as puzzling as the previous one, awaits.

The extent to which the map of the first chamber will be of real assistance in the overall journey won’t be evident until the journey is complete.

It all started when Ontario Superior Court Justice Joan Lax refused to certify the class in Fresco v. Canadian Imperial Bank of Commerce in 2009. Fears of an onslaught of wage and overtime class actions against Canadian employers abated.

But on Feb. 19, Lax’s colleague Justice George Strathy gave new life to the genre when he certified the class in Fulawka v. The Bank of Nova Scotia.

About a month after the decision in Fulawka, the Divisional Court heard the plaintiff’s appeal in Fresco, but at press time the decision was still on reserve. In May, Superior Court Justice Susan Greer added another layer of complexity to the issues by granting leave to appeal in Fulawka.

Greer granted leave on both permitted grounds. She accepted the arguments made by the bank’s defence team of Robert Armstrong, Mary Gleason, and Jeremy Devereux of Ogilvy Renault LLP that the decisions were conflicting and that there was “good reason to doubt the correctness of the decision of the judge and the proposed appeal involves matters of such importance that leave to appeal should be granted.”

The plaintiff’s lawyers, David O’Connor and Adam Dewar of Toronto’s Roy Elliott O’Connor LLP and Louis Sokolov of Toronto’s Sack Goldblatt Mitchell LLP, had argued the decisions weren’t conflicting in principle but merely a case of different judges exercising their discretion on different facts and coming to different conclusions.

O’Connor also asked Greer not to rule on the conflict issue until the full Divisional Court had rendered its decision in Fresco. But Greer rejected that argument.

“I disagree with that proposition,” she wrote. “Each case moves through our legal system at its own pace.”

The Divisional Court has scheduled a date this December for the Fulawka appeal.

To be sure, the suits had striking similarities. In both cases, the representative plaintiffs argue class members were routinely required to work overtime without pay in order to fulfil the demands of their jobs, which violated employees’ contracts of employment and breached the Canada Labour Code.

Lax, however, ruled against certification in the suit brought by CIBC employee Dara Fresco because a class proceeding wasn’t the preferable procedure for resolving the claims of class members for unpaid overtime.

“In my opinion, there is no asserted common issue capable of being determined on a class-wide basis that would sufficiently advance this litigation to justify certification,” she wrote.

Mort Mitchnick of Borden Ladner Gervais LLP says the motion for certification against CIBC failed largely over lack of evidence and an adequate record.

“The case started with some very serious allegations about being forced to work extra hours, but Lax found no support for that in the evidence,” he says. “And each of the nine affiants who were cross-examined about their testimony regarding massive systemic wrongdoing came up with different grounds for their assertions.”

But as Strathy saw it, the case against the Bank of Nova Scotia was stronger. He concluded there was an evidentiary basis for systemic wrongs that gave rise to common issues.

“The systemic wrongs flow from a policy that failed to reflect the realities of the workplace because it put the onus on the employee to obtain prior approval for overtime rather than requiring the employer to ensure that employees were paid for overtime that they were permitted or required to work,” Strathy wrote.

“The systemic wrongs included the failure of Scotiabank to establish a system-wide procedure to record overtime, making it all the more difficult for employees to obtain fair compensation for their overtime work.”

Strathy acknowledged his conclusions differed from those reached by Lax in Fresco but ruled “there is evidence in this case that the failure to pay overtime occurred because of the policy, not independent of the policy.”

As well, there was evidence that the failure to pay overtime was attributable to systemic conditions as opposed to purely individual circumstances.

But Mitchnick says Strathy’s reasoning was skewed. “The judge got caught up in the case, decided his sympathies were with the plaintiff, and pushed everything their way. The upshot is a decision that imposes a reverse onus on the employer on just about every issue in the case.”

According to Jeff Goodman of Heenan Blaikie LLP, the two cases represent a fundamental split in judicial thinking.

“There’s a serious philosophical divide here,” Goodman says. “Lax sees the question of whether employees work overtime or not as an individual issue, but Strathy says that even if that is true, the underlying common issue is whether Scotiabank’s system inhibited individuals from recording their overtime and seeking compensation.”

Indeed, employees at the Bank of Nova Scotia were in a difficult situation. “As Strathy saw it, it was very difficult to predict when overtime was required and when it was, there wasn’t enough time for the pre-approval that the system required,” Goodman notes.

Complicating the issue is the fact that there are two main genres of overtime cases.

The proceedings against the banks are so-called off-the-clock cases.

“The defendants don’t really dispute the eligibility for overtime but offer various defences, such as that no claims were made,” Goodman says. “In reply, the plaintiffs are saying in part that there was systemic pressure against them not to make claims.”

But CN involves supervisory personnel, and eligibility is in issue. There’s no real dispute that the class in CN worked overtime. Instead, the plaintiffs allege class members were misclassified as managers exempt from the provisions of the labour code.

Legal observers tended to the view that the eligibility cases were more amenable to certification than the off-the-clock cases in the sense that common issues were more readily apparent.

To the extent that Perell actually certified the class in CN, they were right, at least in comparison to Fresco.

“But even Justice Lax felt that misclassification cases were more appropriate to certification,” Goodman says.

The difficulty is that Perell certified CN, although he differed with Strathy on fundamental issues.

Strathy concluded that by enacting an admnistrative recovery process for overtime claims in the labour code, Parliament didn’t intend to confer jurisdiction to enforce it on the courts.

Nevertheless, he granted certification on the basis that the code’s requirements could be implied terms of employee contracts and could therefore inform an employer’s duty of good faith.

For his part, Perell reasoned that the labour code allowed for concurrent jurisdiction and was enforceable as a claim for breach of contract.

All of this suggests that a relentless stream of appeals awaits observers of wage and overtime class actions. There’s certainly enough at stake: the CIBC employees are claiming $500 million in damages; the Bank of Nova Scotia plaintiffs are claiming $300 million; and the CN class is seeking $250 million.

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