The concept of overtime pay conjures up many misconceptions for both employers and employees. Based on our experience, the two biggest misconceptions appear to be which employees qualify for overtime pay, and whether an employee can be forced to work overtime at all. Acting on incorrect assumptions can lead to costly payouts on the part of employers on one hand, and on the other hand, employees feeling forced to work excessive hours without proper compensation and fear reprisal on the part of their employer if they ask for overtime pay. In this first of a two part series on overtime pay, we uncover the bare truths about which employees qualify for overtime pay.
Who is entitled to Overtime Pay?
The starting point is section 22 of the Employment Standards Act, 2000 (“the ESA”), which provides that the majority of employees in Ontario qualify for overtime pay regardless of whether the employee is paid hourly or on a fixed salary, and whether they are full-time, part-time, temporary workers, students or contract workers. There are a number of exemptions to this general rule which we will delve into later. The most common misconception is that employees paid by salary are not entitled to overtime pay. The reality is that eligibility for overtime pay is based on the nature of an employee’s duties and NOT whether the employee is paid an annual salary or their job title happens to contain the word “manager” or “supervisor”.
Truth #1: an employee on an annual fixed salary (who is not subject to an exemption) can qualify for overtime pay
Overtime pay accrues once an employee has worked more than 44 hours in a week. Overtime pay is calculated at time and a half of the person’s hourly wage (which the employer must calculate if the employee is on an annual fixed salary).
With this first bare truth in mind, we look to section 15(1) of the ESA, in particular item 4, which requires all employers to record the number of hours the employee worked in each day and each week.
Truth #2: employers are required to record an employee’s daily and weekly hours worked
This recording requirement makes sense given that overtime pay is calculated based on weekly hours worked. At first blush this task may seem practically onerous and unrealistic to some employers, especially for employees on an annual fixed salary. However, most employers who employ those on an annual fixed salary, cover hours worked in their employment agreements, offer letters, policies or handbooks which indicate the employee’s expected daily hours of work. It is when a period of time arises where the employee works beyond those established hours that record keeping becomes critical. In these situations, we counsel employers (and employees) to be diligent in their daily recording of the hours an employee actual works. As we will see, a failure on the part of an employer to not keep detailed records of hours worked can prove costly, and is not a bar to an employee’s entitlement to overtime pay.
Section 8 of Ont. Reg. 285/01 under the ESA provides for a number of different categories of employees who are exempt from receiving overtime pay. The most often cited exemption is set out in s. 8(b) which sets out that employees whose work is “supervisory or managerial” in nature for the most part is not entitled to overtime pay. This has led to the misconception that if the employee has the title “manager” or “supervisor” then that employee is exempt from overtime pay.
Truth #3: if an employee is a manager or supervisor, do not assume they are exempt from overtime
What is relevant for purposes of this exemption is the nature and the amount of non-managerial work performed by the employee claiming overtime pay. In a decision by the Ontario Labour Relations Board (the “OLRB”), Newrick v. 2439436 Ontario Ltd., 2015 CanLII 78646, the Executive Head Chef of the restaurant employer sought overtime pay. He earned an annual salary of $50,000. At issue was whether the s. 8(b) managerial exemption applied. The employer took the position Mr. Newrick was hired to act as a manager and the OLRB should look at what he was hired to do and not what he actually ended up doing in the restaurant. The employee took the position that due to a number of issues beyond his control which he blamed on the employer, he spent an inordinate amount of time prepping, cooking and cleaning instead of managing the kitchen. The OLRB ultimately decided in favour of Mr. Newrick, awarded him overtime pay, and held that the s. 8(b) exemption did not apply. In reaching this decision, the OLRB noted that it is to apply this exemption narrowly and it was important to have regard for what job the employee was actually doing as opposed to a job description.
The OLRB came to a similar result in the decision Mayahi v. 1784917 Ontario Ltd., 2015 CanLII 32244. This case was another claim for overtime pay from a head chef. The employee was hired as an executive chef and was ultimately successful in his claim for overtime pay because he spent the bulk of his time cooking seafood instead of overseeing the kitchen. In both of these cases, the OLRB was critical of the employer for not keeping the requisite time records, and ultimately relied on the records presented by the employee as to how many hours of overtime worked in awarding overtime pay. In Mayahi, this reliance on the employee’s estimates led the Board to order the employer pay $10,000 on account of overtime pay.
Apart from section 8, section 2 of Ont. Reg. 285/01 provides a number of professions which the overtime provisions do not apply to including doctors, architects, lawyers, engineers, chiropractors, dentists, pharmacists, and teachers. Sections 13-18 of Ont. Reg. 285/01 provide a number of special rules which place higher thresholds for hours worked before overtime applies for certain employees who work in road building, tourism, fruit and vegetable processing, sewer and watermain construction, local cartage and highway transport. Given the complex legislative framework, it is always prudent to consult with counsel first to determine whether a certain type of employee is even entitled to overtime under the ESA.