An innovative settlement agreement between the Bank of Nova Scotia ("Scotiabank") and a class of bank branch employees seeking compensation for unpaid overtime in Fulawka v. The Bank of Nova Scotia has recently been approved by the Ontario Superior Court of Justice ("ONSC").

Background

In 2010, the ONSC certified a class consisting of more than 5,000 full-time retail branch employees of Scotiabank. The class members alleged that their employer's overtime policies and practices violated the provisions of the Canada Labour Code regarding overtime pay. All told, the class members claimed that they were allegedly entitled to $250 million in general damages and $100 million in punitive damages.

The decision to certify the class was subsequently upheld by the Divisional Court and the Ontario Court of Appeal, with leave to the Supreme Court of Canada being denied in 2013.

Innovative settlement

According to terms of settlement approved in August 2014, individual class members have until October 15, 2014 to submit a claim for unpaid overtime to Scotiabank. Class members may submit claims whether or not they have documentation to support their claim. Scotiabank will then review each claim and pay class members for each hour of required or permitted overtime worked, subject to applicable provincial limitation periods.

If Scotiabank rejects or reduces a claim, it is required to disclose the evidence relied upon to do so. Any dissatisfied class member may then appeal to an independent arbitrator who has the power to make a final ruling.

While it is not possible to determine the exact settlement value at this time, counsel has predicted that class members will receive up to $95 million in total compensation. The settlement also requires Scotiabank to pay for the class members' legal fees, which have been assessed at $10.45 million.

Lessons for employers

As is clear from the Scotiabank case, even if the underlying merits of a claim are not clearly established, class action lawsuits can be remarkably lengthy and expensive. In light of the recent proliferation of class actions for unpaid overtime, employers are advised to consider the following in order to avoid common pitfalls associated with overtime claims:

Salaried employees
 Employees are not precluded from overtime pay by mere virtue of the fact that they are on a fixed-salary. A salary only compensates employees for non-overtime hours, up to and including the prescribed overtime threshold (for example, 44 hours per week in Ontario).

Exempt employees
 Avoid misclassification at all costs. If the employer is going to rely on a prescribed exemption to the hours of work and/or overtime provisions of applicable employment standards legislation, such as the "manager and supervisor" exemption, it is important to make sure that the employees in question meet the legal tests established in the legislation and case law.

Policies and procedures
Prudent employers establish written policies and procedures governing overtime, including rules requiring approval for overtime hours. It is also crucial that such policies are consistently applied, and regularly renewed and updated.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014