Our clients ask a lot of questions about overtime. Despite many workplaces that are trying hard to keep work hours reasonable and limit them to 40 hours per week, in busy workplaces, overtime is very often inevitable – at least once in awhile.
There is a lot to know about overtime, more than we can cover in this post, but here are some highlights and practical tips.
The overtime threshold
In Ontario, the overtime pay threshold is 44 hours per week. This is set out in the Ontario Employment Standards Act. In some provinces, the threshold is 40 hours, but we will focus on Ontario in this post. The 44-hour threshold means that any time an employee works beyond 44 hours in a week is overtime. Employees who work overtime receive extra pay (or time off — see below) for that time. The value of overtime is 1.5 times that of regular time. In other words, an employee who works 1 hour of overtime is entitled to 1.5 hours of their regular pay.
Exemptions: Who gets overtime pay?
Not every type of employee is entitled to overtime pay. Some categories of workers are exempt from aspects of the Employment Standards Act, especially as it relates to hours of work and overtime. These exemptions are set out in a separate regulation, titled O. Reg. 285/01: WHEN WORK DEEMED TO BE PERFORMED, EXEMPTIONS AND SPECIAL RULES. Exemptions from overtime pay are set out in section 2 and 8. Broadly, most regulated professionals are not entitled to overtime pay. This includes workers such as architects, lawyers, doctors, engineers, veterinarians, dentists, massage therapists, physiotherapists, pharmacists etc. IT professionals, travelling salespeople, commercial fishermen, certain farming and landscaping jobs are also exempt. There are nuances to many of these exemptions and this list is not exhaustive, so we suggest you get legal advice before making any final determinations.
The most commonly used exemption is for managers. Many employers will use “manager” in a job title and pay the employee a salary, thinking that this will make the employee exempt. This is not always the case, as to meet the exemption criteria, the manager must actually be spending most of their time managing and only perform non-supervisory or non-managerial tasks on an irregular or exceptional basis (section 8.b) of O.Reg 285/01).
What about employees on salary?
Many employers believe that paying an employee a salary means that they do not have to be paid overtime. This is not the case. Salaried workers are entitled to overtime unless they fall under an exemption.
In order to determine the overtime rate of a salaried worker, divide their weekly salary by 44. This will give you their regular hourly rate. The overtime rate will be 1.5 times the regular rate.
Averaging: When work weeks are different
Employers whose employees only occasionally work over 44 hours per week, or whose workload fluctuates, can take advantage of averaging agreements. This allows the employer to average the employees hours of work over a period of up to four weeks. If the average number of hours per week is less than 44, then the employer will not have to pay the employee overtime pay.
Averaging requires the employee’s agreement. The employer cannot unilaterally decide that they will use averaging.
Lieu time instead of pay
Lieu time is another way that employers commonly deal with overtime. Instead of paying out overtime, employees can take time off. The value of the time or pay is the same. One hour of overtime is 1.5 hours of time off or pay.
Lieu time requires the agreement of both the employer and the employee. The time off must be taken within three months of the time when it was earned, or if the employee agrees, within 12 months. If lieu time was earned more than 12 months ago, or more than 3 months ago and the employee does not consent to an extension to 12 months, it must be paid out as overtime pay.
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