by Donovan Plomp
McCarthy Tetrault
The British Columbia Court of Appeal just issued an important decision about an employee’s right to make a statute-based overtime claim in a civil action. The decision, Macaraeg v. E Care Contact Centers Ltd., should make BC employers very happy. And it may provide a new defense to overtime pay class actions in other Canadian jurisdictions as well.
Avoiding a dangerous trap
The BC Employment Standards Act applies to most employees in British Columbia with some limited exceptions. It requires employers to pay overtime pay to employees if they are required or “directly or indirectly” allowed to work more than eight hours a day or 40 hours a week.
This is a dangerous trap for employers. What if an employer lets employees leave early some days if they work an extra half hour other days? Or expects employees to stay an extra 15 minutes or half hour during busy times without paying overtime?
This unpaid overtime can add up quickly. Overtime rates are 1.5 times an employee’s regular wage for time worked over eight hours a day or 40 hours a week. And the rate is double the employee’s regular wage for time worked over 12 hours a day.
In Macaraeg, Cori Macaraeg was dismissed and received the minimum severance required under the Employment Standards Act. She sued her employer, E Care, claiming the company regularly required her to work overtime without paying overtime pay pursuant to the Act. She applied to make the decision a class action. If certified as a class action, the claim would be on behalf of all of E Care’s approximately 100 employees in BC.
Unusual trip to court
Claiming overtime pay in court was unusual because the Act contains its own administrative process for claiming unpaid overtime. Employees must file a complaint with the Employment Standards Branch, which investigates the complaint. That process has significant limitations in favor of employers that a civil action does not, including:
- a limit on the amount of wages that the employer may be required to pay;
- a six-month time limit on bringing a complaint after termination of employment; and,
- no ability to bring a “class action” on behalf of other employees.
At trial, the employer claimed that Macaraeg must follow the administrative process under the Act, and therefore couldn’t bring her claim in court. This was the generally accepted view in British Columbia to that date.
The trial judge disagreed with the employer, and held that:
- the overtime requirements of the Act are implied terms of every contract of employment, including Macaraeg’s, so she could bring a civil action for breach of her contract in court; and
- the Act doesn’t prevent a court action for overtime pay, even though it provides its own administrative mechanism for bringing such claims.
The trial decision was bad news for employers. Employees can bring a civil action up to six years after their employment has been terminated, and there is no “cap” on the damages a court can award.
Class actions in court also make it profitable for employees’ lawyers to bring actions for small amounts on behalf of many employees. These actions would be unprofitable if brought only on behalf of individuals. Thus, the trial decision significantly increased potential liability for BC employers and contradicted the law to date.
The Court of Appeal unanimously disagreed with the trial judge’s conclusion that overtime rights under the Employment Standards Act are implied by law into employment contracts.
The Court of Appeal said the law is clear: The general rule is that one cannot bring a civil action in court to enforce a right conferred by a statute, such as a right to overtime pay under the Act. An exception to this general rule arises if the court finds legislators intended the statutory rights to be enforced by civil action.
Court of Appeal rules
The Court of Appeal ruled that the Act provided an effective mechanism outside of a civil action for enforcing the right to overtime. That mechanism is the “comprehensive administrative scheme” provided under the Act for the granting and enforcement of employee rights. In other words, the employee can bring a complaint to the Employment Standards Branch, and that branch will deal with it. A civil action isn’t necessary.
Although BC employers escaped expanded liability this time, employers should always make sure that an effective system for monitoring and controlling overtime is in place.
Perhaps more importantly, this BC decision could have significant ramifications for class actions in relation to overtime pay in other Canadian jurisdictions. As in the United States, we have recently seen a flurry of such multimillion-dollar class actions in Ontario and in relation to federally regulated employers.
Since the statutes covering overtime pay are somewhat different in other jurisdictions, it remains to be seen if the Macaraeg decision will be followed elsewhere in Canada. But it certainly does provide helpful judicial authority for a possible line of defense against such class actions.