What every employer needs to know about overtime

May 21, 2008

With the recent high-profile class action lawsuits launched against many employers claiming over $600 million in unpaid overtime, it is important for all employers to review their policies and ensure they are meeting their overtime pay obligations. Below is a summary of some of the key facts employers who employ employees in Ontario should know about overtime.  Even though this article highlights the issues in Ontario, there is similar legislation in other jurisdictions.

Which employees qualify for overtime?

The main issue regarding overtime is determining which employees are actually entitled to overtime pay. The most common error employers make is incorrectly excluding employees who are eligible. The manner in which the employee is paid (i.e. salary or hourly) is not relevant to such a determination. In general, most employees are covered by the overtime pay provisions in the Employment Standards Act, 2000 (ESA). However, there are certain classes of employees to which the overtime pay provisions do not apply. As a practical step, an employer should assume that each employee is entitled to overtime unless specifically exempted by the ESA.

There are several job categories that are excluded from the overtime pay requirements. These categories include: information technology professionals (as defined in the ESA), architects, engineers, lawyers, medical professionals, accountants, teachers, commissioned sales people, and employees whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis. It is the "managerial and supervisory" category that employers need to give special attention to. Even though an employee may have the title of "manager," such an employee could still be entitled to overtime. When determining whether an employee is a supervisor or manager, it is vital to consider the nature and character of the work that the employee actually performs. If the employee regularly performs non-managerial duties in the ordinary course of his or her work, that employee will not be excluded from the overtime pay provisions.

What is the overtime threshold?

In Ontario, if an employee is covered by the overtime pay requirements, the ESA requires that he or she must be paid overtime pay for each hour of work in excess of forty-four hours in a week. ESA regulations also prescribe "special" overtime thresholds that apply to specific categories of employees. According to these special thresholds, overtime pay is triggered once an employee works in excess of fifty to sixty hours in a given week (depending on the applicable threshold). In general, these special overtime thresholds apply to employees engaged in road building, certain hotel employees, seasonal workers engaged in processing fruit or vegetables and certain truck drivers. Any time worked in excess of the overtime threshold must be paid out at a rate of 1 ½ times the employee's "regular rate" as defined in the ESA.  It is the employer's obligations to ensure that time records are kept by employees.  Failure to ensure such time records are kept will result in an inability on the part of the employer to defend against any claims.

As evidenced by the class action lawsuits mentioned above, failing to properly pay overtime pay can lead to costly and time-consuming litigation. To avoid becoming subject to similar litigation, every employer should ensure it has clear and consistent policies that meet the minimum standards required by the ESA, and that such policies properly identify which employees are entitled to overtime pay.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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