Overtime pay and the cost of non-compliance: Three misconceptions about overtime pay in Canada
My experience in acting for employers as a partner in Labour and Employment law at McCarthy Tétrault is that many companies unknowingly violate overtime pay requirements and, as a consequence, have accumulated significant financial liability. Here are three common misconceptions employers have regarding overtime pay requirements:
- Paying a fair and fixed salary “covers off” overtime. Wrong. Most salaried employees are not required to punch in or to formally record their time. However, a fixed salary and a flexible work environment do not negate overtime pay obligations. An employer is still responsible for calculating and paying overtime when its non-managerial employees work hours that qualify for overtime pay. It is critical that employers have a process to monitor and control overtime hours for all eligible employees, whether salaried or not.
- If the employee chooses to work longer than standard hours on a fixed salary, it is his/her responsibility. Not true. Consider this common scenario. A salaried employee works fewer hours in some weeks and more in others due to the usual ebb and flow of the workload, but generally his hours average out at 40 per week. Your company’s business picks up but you decide not to hire additional staff. Without being asked by his manager, the employee starts coming into work early, eating lunch at his desk, leaving late and responding to numerous emails on evenings and weekends. Soon, the employee’s new “normal” is 50 hours a week. In Ontario, any hours over 44 per week is considered overtime and payable at time and a half. So, unbeknownst to you, this salaried employee is racking up a weekly entitlement to 6 hours of overtime pay on top of his base salary.
- Claims are rare. This is simply not true. Today’s work environments are evolving and workers are more knowledgeable about their rights. It is now expected that a terminated employee will seek legal advice about the reasonableness of the employer’s severance offer and demand more. The discovery of a hidden overtime claim by the employee’s lawyer will increase the demand and the liability. The liability magnifies if numerous employees are part of the same “downsizing”. In a recent class action case, a group of laid off workers is claiming unpaid overtime totaling over $1,000,000.
The point is this: an organization has to be proactive in assessing its compliance with basic employment regulations. Otherwise, plaintiff-side lawyers and/or government regulators will have a field day challenging your practices and procedures.
At McCarthy Tétrault, we have developed an HR Compliance & Risk Management Diagnostic tool. We use it to help employers achieve compliance with employment regulations, reduce the risk of individual employee claims and multi-employee class actions, and mitigate reputational damage caused by embarrassing litigation. We see it as an invaluable tool in helping employers and HR managers navigate increasingly complex employment laws and their inherent nuances.
By Tim Lawson
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