Class-Action Lawsuits Filed Against KMPG, CIBC, Scotiabank

By Trevor Lawson and Donovan Plomp
McCarthy Tetrault

Although large employment-related class-action lawsuits have become commonplace in the United States, until recently they were virtually unknown in Canada.

The relative peace enjoyed by Canadian employers on this front was shattered with a $651 million class-action lawsuit filed in June 2007 against the Canadian Imperial Bank of Commerce (CIBC), followed quickly by a $20 million class-action against international finance and accounting giant KPMG LLP. And in early December, a $350 million-dollar suit was filed against a second major Canadian bank, Scotiabank.

These lawsuits seek damages for unpaid overtime in relation to thousands of current and former employees. If successful, they‘re expected to serve as a springboard for similar class-action lawsuits targeting large employers in Canada.

Some background

CIBC: Dara Fresco, a teller, filed the CIBC lawsuit. She claims that for about 10 years, she and thousands of other tellers and frontline employees were routinely required to work overtime without overtime pay, contrary to the Canada Labour Code, a statute that governs overtime pay at banks and other federally regulated employers.

If Fresco’s lawsuit is certified as a class action, it will be the largest employment-related class action ever to proceed in Canada.

Scotiabank: The Scotiabank lawsuit appears to be similar. Cindy Fulawka, a personal banking representative, filed the lawsuit. She alleges that she was required to work 10 to 15 hours a week more than the law allows without overtime pay. She alleges this situation is widespread and that employees are required or permitted to work overtime without pay to meet the demands of their jobs.

KPMG: The KPMG lawsuit was filed in September 2007 by Alison Corless, a technician employed at KPMG between 2000 and 2004. She claims that she and other employees routinely worked overtime without overtime pay, contrary to the Ontario Employment Standards Act. That Act regulates overtime pay at provincially regulated employers in the province of Ontario.

According to Corless, employees were told by their managers that they were to meet certain weekly targets for billed time even though management was aware that the employees would have to work between 65 and 90 hours per week to meet the targets. She claims that no overtime was paid for the overtime worked toward meeting the targets.

Although the Corless lawsuit originally claimed $20 million in damages for class members, her lawyer now estimates the potential exposure to KPMG to be between $65 and $100 million.

Certification required

All of these lawsuits were filed in the province of Ontario. Before a lawsuit can proceed as a class action in Ontario, the court must certify it. The following certification requirements must be met:

• The claim must show a genuine claim, that is, there must be a proper, legal ground of complaint.
• The lawsuit must seek to represent an “identifiable class” of persons. The class must be defined so that it can be determined who is in and who is out of the class.
• The claim of the various class members must raise “common issues.”
• A class proceeding must be the preferable procedure (instead of a normal lawsuit) considering issues such as judicial economy, access to justice, manageability of the proposed class proceeding, and so forth.
• A person filing the suit must fairly represent other class members and must not have a conflict of interest with other class members.

To date, the courts haven’t decided whether any of these lawsuits will be certified as class actions.

Employers, be proactive

What should you do in light of this significant development in Canadian employment law? Your operations in Canada should immediately assess the risk of similar class-action lawsuits and take steps to reduce that risk.

Here are some steps to minimize your potential exposure to class actions regarding overtime work:

• Review your current overtime policies in Canada to ensure they meet the minimum statutory requirements.
• Make sure all employees who should be eligible to receive overtime pay are eligible to receive overtime under your policies.
• Create a complete list of the employee positions/classifications that are (and are not) eligible to receive overtime. Catalog the number of hours that must be worked before employees are eligible to receive overtime and the rate of overtime pay for each hour of overtime worked. Determine whether eligibility requirements have changed over the past several years and, if so, catalog those changes.
• Make sure you have evidence that your overtime policies comply with employment standards legislation. Having that evidence can help in arguing that a lawsuit shouldn’t be certified as a class action. A lawsuit shouldn’t be certified if the underlying claims are based on individual circumstances and when there are no “common issues” raised by an “identifiable class.” If you can establish that any overtime claims arise only in exceptional circumstances, such as when your overtime policy wasn’t followed, you’ll be in a stronger position to argue that a class action shouldn’t be certified.
• Investigate whether your organization’s overtime policies have actually been followed over the past several years. Make sure employees haven’t been allowed to “voluntarily” work overtime without additional compensation. That will help in determining your exposure to both class-action and individual lawsuits. Employees are more likely to argue for a class action if an employer’s widespread practices are inconsistent with its policies.
• Ensure that managers keep records of all hours worked by employees, including authorized overtime. Such records will be essential to defending claims.
• Make any changes necessary to existing overtime policies to ensure they’re compliant with employment standards legislation on a going-forward basis.
• Regularly review your overtime policies to ensure ongoing compliance and to ensure they’re followed in practice.