Fresco v. Canadian Imperial Bank of Commerce (Summary judgment decision)
Superior Court of Justice finds CIBC liable for unpaid overtime
The Ontario Superior Court of Justice has held that CIBC violated the Canada Labour Code by permitting or requiring its employees to work overtime, but failing to compensate them for that work.
In 2007, Dara Fresco commenced a class action on behalf of some 31,000 customer service employees against the Canadian Imperial Bank of Commerce (CIBC). The claim alleged that the bank “required or permitted” its employees to work unpaid overtime in contravention of section 174 of the Canada Labour Code. This was one of the first unpaid overtime class actions in Canada. In the dozen or so years that followed, there have been many others. Until this decision, not a single one had been determined on its merits, either on summary judgment or at trial.
The Court’s decision
The Court held that the bank was liable for requiring or permitting uncompensated overtime to be worked by class members, and for failing to accurately record all hours worked by class members. It also found, in answer to a third common issue, that all of the uncompensated hours worked by class members were “required or permitted” by the bank, thereby triggering liability. Here is what the Court found on several issues of note:
What does it mean to “require or permit” an employee to work overtime?
Under the Canada Labour Code, an employer is liable to pay overtime where it requires or permits that overtime to be worked. A key issue turned on what it means to “permit” overtime. Consistent with prior caselaw, the realities of the workplace, and the remedial purpose of employment standards protections, the Court interpreted “permit” to mean “allow” or “fail to prevent”. It held that the Code imposes liability for overtime whenever it is permitted, even if it is not required or authorized. Moreover, an employer cannot simply look the other way when an employee is working overtime, and then claim the work was not required or permitted. And, significantly, an employer is liable for permitting overtime if it acquiesces by its failure to prevent. Notably, while the decision is based on the Code, the Court also commented on similar language in employment standards legislation and regulations.
A strict pre-approval requirement is inconsistent with the obligation to pay for all hours that are “required or permitted”
CIBC had two overtime policies during the class period, which spanned from 1993 to 2009. The first policy, from 1993, required pre-approval of the employee’s supervisor or manager and “[t]here was no provision for any post-approval.” The second policy, from 2006, extended the pre-approval requirement for overtime claims and “added the possibility of post-approval but only under ‘extenuating circumstances’ and only if the post-approval was obtained ‘as soon as possible’ after the overtime work was performed.” The Court held that both policies contravened the requirements in section 174 of the Code. It noted that there is nothing wrong with an overtime policy that proposes pre-authorization as the preferred corporate norm, provided that it is not a precondition for payment.
An employer must record all hours actually worked by its employees, not just those for which payment is sought
Section 24(2) of the Canada Labour Standards Regulations requires employers to record and retain “the hours worked each day” by their employees. The Court held that it had “no difficulty finding on the evidence before me that actual hours of work were not recorded.” It held that the bank “expected and directed” class members to write down their actual hours only on an exceptional basis, when they sought to be paid for overtime hours. But the overtime policy directed employees that they would not be paid absent pre-approval, and the timesheet where employees were to write down their hours “expressly repeats the pre-approval requirement.” Thus, “[h]ours worked that were otherwise permitted (not prevented) were not recorded and not compensated.” In failing to record actual hours worked, CIBC had “inaccurate payroll records which in turn made it impossible for all employees to be compensated in accordance with the Code.”
An employer cannot delegate the responsibility of enforcing its overtime policy to branch managers without direction or guidance
The Court held that CIBC “delegated the interpretation and enforcement of its overtime policy to its more than 1,000 branch managers and did so without providing any guidance or direction.” It found no evidence of any direction to managers, at any time during the class period, to record all hours that were required or permitted. Similarly, managers were never directed or instructed on “how they can go about not permitting or preventing unwanted hours.” The Court held that a policy prohibiting overtime work, in the absence of a plan for recording and controlling hours worked, is “meaningless.”
The Court found that some class members worked uncompensated overtime, and CIBC had knowledge of the problem
The Court held that “there is an abundance of evidence that some of the class members worked uncompensated overtime.” Further, he found “compelling evidence of actual or constructive knowledge” on the part of CIBC. This evidence included the results of the bank’s own internal employee surveys, in which employees complained about working unpaid overtime, despite not even being asked about this topic. The Court dismissed the bank’s attempt to exclude the survey results as inadmissible hearsay, given (among other things) that this was “survey data that the bank itself requested and found to be reliable and useful.” Last year, the Court similarly dismissed a privilege motion in which the bank sought to exclude certain “theme reports” that summarized the survey results and distilled them into themes. One such theme document, distilling the 2007 survey results, said: “Employees feel overworked and undervalued … Employees feel they put in too many hours and then are not recognized or compensated for it.”
Faced with knowledge of a potential overtime problem, an employer cannot simply “look the other way”
Where an employer has actual or constructive knowledge of uncompensated overtime being worked, it will be liable for “permitting” those hours unless it takes steps to prevent them. As the Court found:
The evidence shows that year after year, hundreds of class members complained that they were working unpaid overtime. The defendant bank had repeated notice that its “delegation” model was not working and did nothing in response. If an employer is told of the existence of numerous complaints about unpaid overtime, does nothing in response, and simply “looks the other way,” the employer is effectively permitting the employees to work overtime. A failure to pay attention to complaints about unpaid overtime “effectively permits” employees to work overtime pursuant to the Code.
Systemic unpaid overtime claims are amenable to summary judgment
The Court agreed with the parties that the common issues could be decided in a summary judgment motion and did not require a trial. It said the analysis was largely documentary in nature, there were no credibility issues, and the extensive volume of materials filed by both sides did not preclude summary adjudication. Applying the test articulated by the Court in an earlier decision on certification, the Court held that the bank’s policy and related practices were “systemic or institutional impediments” to overtime claims that were otherwise compensable under the Code. While CIBC put forward evidence of individual compliance by some managers, such anecdotal evidence could not derail the evidence of systemic deficiencies.
While questions of remedy and damages have yet to be determined, the Court’s decision on liability is a major victory for Ms. Fresco and the 31,000 front-line customer service employees she represents, and for other employee groups subject to similarly restrictive overtime policies.