The Use Of Class Actions To Enforce Employment Standards Obligations

The class action is frequently used in the United States to pursue employers who have policies or practices that breach legislative requirements in the area of employment, including the payment of wages. Large judgments have been obtained in the United States against employers for systemically failing to pay overtime wages owed to employees for work performed.¹ A jury in Pennsylvania awarded Walmart employees $78 million in October 2006 in connection with overtime wages.

Class proceedings legislation was introduced in the Province of British Columbia on August 1, 1995²; in Saskatchewan on January 1, 2002³; in Manitoba on July 25, 2002⁴; and in Alberta on April 11, 2004⁵. To date, there have been fewer than 20 class proceedings in Western Canada in connection with the employment and pension obligations of employers.

A recent decision of the British Columbia Supreme Court in Macaraeg v. E Care Contact Centres Ltd.⁶, ("Macaraeg") confirms that employees who are subject to the BC Employment Standards Act are entitled to pursue claims in the Courts for wages and benefits conferred by the Act. Although the Macaraeg decision is subject to a pending appeal, the implications of this decision in the area of human resources management in British Columbia are significant. In addition, the Macaraeg decision adds another level of complexity to the overlapping jurisdiction of the Courts and Tribunals that administer the law in connection with employment. The availability of class proceedings means that claims may be efficiently pursued by employees for non-compliance with the Employment Standards Act. The Macaraeg decision is likely to promote the use of class proceedings to pursue employment related claims.

Macaraeg is the named Plaintiff in a proceeding brought pursuant to the Class Proceedings Act in the Supreme Court of British Columbia. In the course of that proceeding, the Plaintiff brought an application for rulings on 2 points of law:

1. As a matter of law, were the minimum overtime pay requirements of the Employment Standards Act, R.S.B.C. 1996, c. 113 implied terms of the contract of employment between E Care and its employee, Cori Macaraeg?
2. Is Ms. Macaraeg entitled to bring a civil action to enforce her statutory rights to overtime pay, or does the jurisdiction to determine such claims lie exclusively with the Director of Employment Standards under the enforcement mechanisms of the ESA.⁷

The Court held that it was indeed an implied term of the employment contract between Ms. Macaraeg and E Care that overtime would be paid in accordance with the requirements of the Employment Standards Act. As well, the Court held that the Act did not preclude a civil action being maintained.

The Macaraeg decision is consistent with the interpretation of similar employment standards legislation in the provinces of Ontario and Alberta, holding that employment standards requirements are implied terms of employment and employees may pursue proceedings in the Courts where an employer does not comply with the legislation.

The significance of the Macaraeg decision is to significantly increase the potential liability for employers where there is a breach of employment standards legislation. Non-compliance with employment standards legislation may occur in various ways. Frequently, employers have well established practices and policies that are in breach of the legislation. For instance, some policies may require employees to report to work earlier than the time that they are scheduled to work. Other policies require specific work to be performed but with a limitation on the number of paid hours which are authorized.

Prior to the Macaraeg decision, BC Employers relied upon the decision in Sitka Forest Products Ltd. v. Andrew⁸, where the Court held that the Plaintiff could not advance a counterclaim in a civil action on the basis of rights under the Employment Standards Act. The Court held in Sitka that the Employment Standards Act included a mechanism by which the Director of Employment Standards pursues unpaid wages and may issue a certificate of an amount owing which constitutes a lien or secured debt in favour of the Director.

Given the nature and purpose of employment standards legislation and the decision of the Supreme Court of Canada in Machtinger v. HOJ Industries Ltd.,⁹ the Court held in Macaraeg that the Employment Standards Act does not grant exclusive jurisdiction to the Director of Employment Standards nor does it restrict employees from pursuing a claim in the Courts to wages and benefits conferred by the Employment Standards Act. On the basis of the Machtinger decision and the nature of the legislation, the Court in Macaraeg decided not to follow the Sitka decision. On April 26, 2007 the BC Supreme Court in Holland v. Northwest Fuels Ltd., et al¹⁰, followed the Macaraeg decision and similarly declined to follow the Sitka decision.

The implications of the Macaraeg decision are potentially catastrophic for employers in light of the potential value of the claim that may be made by employees. An employee who files a complaint under the Employment Standards Act may be limited to wages that ought to have been paid in a 6 month period before the earlier of the complaint being filed or the termination of employment.¹¹ Historically, such a claim by an individual employee may have had a nominal value in most instances. In contrast, a civil action claiming indebtedness or damages for breach of contract based upon an implied term of compliance with the Employment Standards Act such as overtime requirements, may be very large. Such a claim may be subject only to a six year limitation period for breach of contract. If non-compliance with the Employment Standards Act involves a large work force, the amount of the claim may reach the level commonly associated with U.S. jury awards.

The Macaraeg decision emphasizes the need for policies and practices that promote strict compliance with employment standards legislation. The availability of class proceedings legislation and the recognition that Employment Standards Act requirements are an implied term of employment, will make the pursuit of claims economical from the perspective of employees. At the same time, technology has made the organization of large groups of individuals to pursue litigation efficient and cost effective. Although there is always the possibility of a legislative response to this development in the law in BC., it is unlikely that governments will attempt to limit the potential liability of employers for non-compliance with employment standards legislation. In fact, governments may view this development in the law as an efficient means to promote compliance with the legislation which may lessen the burden of the Director of Employment Standards.

The use of class proceedings legislation to pursue claims for non-compliance with employment standards legislation should not be viewed as an unexpected development in light of the U.S. experience and the stated goal of class action legislation which is to promote access to the justice system. An audit of current employment policies and practices to ensure compliance with employment standards legislation may be prudent in order to reduce the risk of claims.

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