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OCA confirms challenges to ‘misclassification’ overtime class actions

Trials & Tribulations
|Written By Margaret L. Waddell
OCA confirms challenges to ‘misclassification’ overtime class actions

The particular challenges inherent in misclassification class actions were highlighted in the recent decision of the Ontario Court of Appeal upholding the denial of certification in Brown v. CIBC.

In Brown, the proposed representative plaintiff sought to certify an overtime class action on behalf of the investment advisers (financial advisers) and associate investment advisers engaged by CIBC World Markets Inc. The plaintiffs alleged that the bank did not pay them overtime, even though the job routinely required the employees to work well in excess of 44 hours per week.

The motions judge, Justice George Strathy (as he then was), concluded the action was fundamentally not certifiable because the evidence established that individual inquiries would be necessary to assess whether or not any particular class member was eligible for overtime based upon the work that the employee performed. Since the actual job functions of the proposed class members varied widely, it would be impossible for the court to answer the primary issue regarding eligibility for overtime on a class-wide basis. Both the Divisional Court and the Court of Appeal agreed.

The appeal court found this case was largely analogous to McCracken v. Canadian National Railway Company, another proposed misclassification overtime class action where certification was denied. In both cases, the evidence adduced by the defendant corporations established the job functions carried out by their employees within the targeted job classification varied widely — with many of the individuals within the classification carrying out managerial or other responsibilities that put them outside the scope of entitlement for overtime wages.

McCracken was one of the trilogy of overtime class action certification decisions delivered by former chief justice Warren Winkler in 2012. In that case, the court distinguished the case’s facts from the other two cases making up the trilogy, Fulawka v. Bank of Nova Scotia and Fresco v. Canadian Imperial Bank of Commerce.

In both Fulawka and Fresco, the defendant banks admitted the employees making up the proposed classes were eligible for overtime, i.e. they were non-managerial employees. The key common issue was whether the banks’ policies, practices, or reporting systems resulted in a systemic denial of overtime compensation to the class members.

In contrast, in McCracken, the proposed class were designated by CN as “front-line supervisors” all of whom it treated as management, and therefore not entitled to overtime pay. The dispute was over the question of whether these front-line supervisors had been misclassified. The motion judge and the Court of Appeal concluded this fundamental issue could not be resolved on a common basis, because the evidence established that individualized assessments of the job duties and responsibilities carried out by each class member would be needed to determine if they were engaged in managerial duties.

Commonality in the job function within the impugned classification is key to certification in misclassification cases. In Fulawka, Strathy was also the motion judge. In that case, he commented at para. 145, that “misclassification cases are appropriate for certification due to commonality of employment functions and common treatment by the employer.” Similarly, motion judge Justice Joan Lax in Fresco, at para. 54 observed:

“In [misclassification cases], commonality arises from the employees’ identical or similar job duties and the determination by the employer that it is not required to pay overtime to employees with these duties. The question for the common issues judge is whether the employees’ duties entitle them to overtime within the meaning of the applicable statutes and regulations. This can be assessed without examining individual claims. Success for one does mean success for all . . . .

“In other words, to succeed in certifying a misclassification class action, the plaintiff must be able to demonstrate that all the employees in the class perform identical or similar functions, and that the employer treats that function as being outside of the scope of entitlement to overtime pay.”

The importance of the factual record in misclassification class actions was emphasized in both the cases denying certification. In both McCracken and in the new Brown case, the plaintiff could not demonstrate the employees within the job category actually had identical or similar job duties. Rather, the defendants successfully undermined the allegations of commonality through largely uncontroverted responding records.

Both CN and CIBC established their employees within the job name at issue carried out a spectrum of duties and responsibilities. The courts agreed that without reviewing the actual function performed by each individual, potential entitlement to overtime pay could not be determined. As the Court of Appeal observed in Brown at para. 26:

“The validity of the appellants’ contention that eligibility for overtime pay raises a common issue within the meaning of s. 5(1)(c) of the [Class Proceedings Act] depends on whether the job level designations and job titles used by CIBC capture a sufficient commonality of employment function and responsibility among employees who have the same job level designation and/or job title.”

If the answer to the question “are the subject employees managers?” must be “it depends,” then the action will not be certifiable. Only cases where the employment functions relevant to the issue of eligibility for overtime pay are similar within a particular job classification will a class action for misclassification overtime succeed.

Importantly, if this fundamental question cannot be answered in common then the action will not be certified, even if the plaintiff can establish peripheral common issues. As Winkler concluded in McCracken: “In the absence of an evidentiary basis for certifying a common issue that would resolve the misclassification issue, the proposed class action for unpaid overtime wages simply collapses.”

Brown ultimately emphasizes the lessons taught in McCracken. While misclassification class actions may be inherently certifiable if the employees’ jobs at issue are in fact alike, the actual evidence of common job function will make or break the certification motion.

“Some evidence” of commonality will not be sufficient, if the employer can establish that in fact a range of duties, obligations, and responsibilities are carried out by individuals engaged within the categorization.

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