Recent Development in Employment Law

Wage and overtime class action jurisprudence in Canada continues to present as nothing less than a labyrinth of judicial reasoning.

It all started when Ontario Superior Court Justice Joan Lax refused, in 2009, to certify the class in Fresco v. Canadian Imperial Bank of Commerce (Fresco). In September 2010, the Divisional Court confirmed Lax's ruling despite the fact that in February 2010 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 (Fulawka).

The suits had striking similarities. In both cases, the representative plaintiffs argued that class members were routinely required to work overtime without pay in order to fulfill the demands of their jobs. They maintained that this violated employees' contracts of employment and breached the Canada Labour Code (CLC).

Lax, however, ruled that certification could not be granted in the suit brought by Canadian Imperial Bank of Commerce (CIBC) employee Dara Fresco because a class proceeding was not the preferable procedure for resolving the claims of class members for unpaid overtime.

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

As Strathy saw it, the case against The Bank of Nova Scotia (BNS) was stronger. He concluded that there was an evidentiary basis for systemic wrongs that gave rise to common issues. Strathy acknowledged that his conclusions differed from those reached by Lax, but ruled that "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.

Arguably, the two cases represent a fundamental split in judicial thinking, and Ontario Superior Court Justice Paul Perell's decision in McCracken v. Canadian National Railway Company (McCracken), released in August 2010, added grist to the mill.

Perell's ruling is grounded in the recognition that there are two main genres of wage and overtime class actions.

The proceedings against the banks are "off-the-clock" cases where the defendants did not dispute the eligibility for overtime, but offered various defences such as that no claims were made. The plaintiffs replied in part that there was systemic pressure against them not to make claims.

McCracken involves supervisory personnel, and eligibility is in issue. There's no real dispute that the class in McCracken worked overtime. Rather, what the plaintiffs allege is that class members were misclassified as managers exempt from the provisions of the CLC.

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

The fact remains, however, that Perell certified McCracken although he differed with Strathy on fundamental issues.

Strathy concluded that by enacting an administrative recovery process for overtime claims in the CLC, Parliament did not intend to confer jurisdiction to enforce the Code on the courts. He, however, granted certification on the basis that the CLC's requirements could be implied terms of employees' contracts and could therefore inform an employer's duty of good faith.

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

The latest on the subject comes from the Divisional Court's June 2011 ruling in Fulawka, which upheld the certification order. The court ruled that Strathy had applied the correct test – whether it was "plain and obvious" that the claims could not succeed – to all the causes of action. On the basis of that test, he correctly ruled that the claims in breach of contract, breach of a duty of good faith, unjust enrichment and negligence could succeed. He also correctly concluded that the failure to pay overtime had to be assessed in the systemic terms advanced, and not as individual claims. Finally, he was correct in finding that a class proceedings was the preferable procedure for resolving these claims.