Northern Exposure

$300 Million Overtime Class Action Against CN Rail Gets Green Light

By Donna Gallant

Michael McCracken’s claim against Canadian National Railway (CN) recently got the go-ahead to proceed as a class action. The third in a trilogy of high profile overtime cases in Canada, McCracken v. Canadian National Railway Company brings the score to 2 to 1 for certification of the class action — at least in the first round. Appeals are in progress. So stay tuned.

All three cases involve federally regulated employers. The basic issue is entitlement to overtime pay under the Canada Labour Code (the Code). Fresco v. Canadian Imperial Bank of Commerce and Fulawka v. The Bank of Nova Scotia are “off the clock” cases — claims by non-managerial employees for unpaid overtime work. These were discussed in an earlier article in this newsletter.

CN Rail is a “misclassification” case. The claim is that CN has misclassified over 1,500 first-line supervisors as managers and wrongly denied them overtime pay. The $300 million claim alleges that CN supervisors work an average of 50 and sometimes as many as 90 hours a week.

A note on class actions
Class actions provide individuals with the advantage of “strength in numbers.” To proceed as a group in Canadian courts, the action must be certified as an appropriate class action. The representative plaintiff must show there is a legitimate, potential claim or “cause of action.” The claim must be shared by an identifiable class of persons.

The claims of class members must involve common issues that are capable of being resolved efficiently. At the same time, the common issues can’t be overshadowed by individual issues since that would defeat the whole purpose of a class action: better access to justice and judicial economy.

Meeting the common issue challenge
In CN Rail, the existence of common issues was hotly debated. The “first line supervisors” include 70 different positions. Their work environments vary dramatically — from small towns to large cities across Canada, from offices to shops to train yards or vast lengths of track. Not surprisingly, CN argued there is insufficient commonality — that the issue of whether supervisors are managers can’t be determined on a class-wide basis. CN asserted that the status of each supervisor will depend on an assessment of their particular roles and responsibilities.

Mr. Justice Perell agreed that an employee’s status may ultimately depend on an individual assessment of what he or she does. However, he ruled there is an underlying question that applies to the whole class. The question is, essentially, what are the minimum requirements for a manager under the Code in the context of CN’s organization?

Perell gave examples of criteria that might result in someone being a manager at CN. His examples included representing CN at collective bargaining; conducting discipline or grievance procedures; setting and administering a large budget; controlling day-to-day operations at a site employing more than 12 employees; any two of the above; etc.

By answering the broader question, Perell felt that substantial advancement in the litigation could be achieved. The answer would enable the class to be divided into three groups: those who clearly meet the criteria for manager and aren’t entitled to overtime pay; those who clearly don’t meet the criteria for manager and are therefore entitled to overtime pay; and those whose status remains unclear and requires further inquiry.

Once sorted, Perell was confident that the necessary resources would be available under the class proceedings law to efficiently process individual claims.

Where does CN Rail leave employers?
While overtime class actions are still in their infancy in Canada, this decision reinforces the message that Canadian courts seem to be prepared to find the common ground necessary for class proceedings, even in misclassification cases. This case may also lead to court rulings that better define managerial exemptions. That would affect many workplaces across Canada. In the interim, it may be prudent to obtain legal advice about who is and is not exempt from overtime entitlement in your Canadian operations.

CN Rail also brings home the importance of properly recording payments made to employees, including managers, in recognition of excess hours. Proper communication and documentation will help prevent or reduce subsequent claims for overtime pay.

Will CN Rail open the floodgates to more class actions? Highly unlikely. Class actions are expensive and time-consuming propositions. Very few employers in Canada have the employee base necessary to tempt would-be representative claimants or their lawyers (who usually work on a contingency basis). However, what cases like this will continue to do is raise employee awareness of possible claims.

News that 1,500 supervisors were allegedly misclassified naturally makes people question their own managerial status. Again, prudent employers will want to ensure that their definition of who is exempt complies with applicable Canadian employment standards laws.

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