The Upside for Employers in Recent Overtime Class Action Decisions
The Ontario Court of Appeal has finally spoken in the three overtime class action lawsuits that we have been following over the last few years: Fresco v. Canadian Imperial Bank of Commerce (“CIBC”), Fulawka v. Bank of Nova Scotia (“BNS”), and McCracken v. Canadian National Railway Company (“CNR”). In somewhat of an unexpected move, the Court of Appeal allowed certification in CIBC and BNS (overturning the CIBC decision in the lower court), but denied certification in CNR.
The press has generally heralded the rulings as a victory for the plaintiffs. This is somewhat ironic, as many pundits suggested that CNR would be the easiest to certify. BNS and CIBC were both “off the clock” cases, in which the claimants are all obviously eligible for overtime and so the main issue is whether they worked overtime for which they were not paid. To certify “off the clock” cases, the plaintiffs must overcome the argument that whether or not someone has been paid properly is an individual issue, and therefore not suited to a class action that must have issues and questions that are common to all the potential claimants in the class.
CNR, in contrast, was a “misclassification” case. In such cases, the question is whether a group of employees have been improperly classified as being within a job category that is overtime exempt. In most misclassification cases, all of the plaintiffs usually do the same job and as such, typically will all either fall within or outside the exempt category at issue. This being the case, there is usually a clear common issue that assists in obtaining certification as a class action. In fact, the lower court judge who originally refused to certify the CIBC case had specifically commented that misclassification claims were more amenable to certification than off the clock cases.
While the certification of CIBC and BNS are not good news for employers, CNR gives rise to some hope. More importantly, one critical part of the CIBC and BNS decisions has the potential to turn both into Pyrrhic victories for the plaintiffs in those cases.
In both CIBC and BNS, the Court of Appeal refused to allow damages to be determined on an aggregate basis, and instead decided that they be determined individually. The lower court decision in BNS was specifically overturned on this issue. Originally, that decision allowed damages to be assessed using a statistical sample of the class members to determine the quantum of damages owed to the larger class as a whole. The Court of Appeal ruled that doing so would be inappropriate, and ordered that each employee’s entitlement to overtime pay must be assessed individually.
The use of aggregate evidence was allowed in two previous appellate decisions, both of which involved credit card companies allegedly overcharging their clients for interest (see Markson v. MBNA Bank Canada and Cassano v. Toronto-Dominion Bank). It was a critical finding, because it may otherwise have been impossible, or at least uneconomical, for customers owed sometimes very small amounts of overcharged interest to have proven their damages individually.
Given this history, refusing aggregate evidence in CIBC and BNS becomes particularly significant. Many of the class members are current employees. This means that these employees will need to testify in the case in order to prove any claim and receive any payment. Some (or many) may decide it is better not to become actively involved in litigation against their employer, particularly if their potential overtime entitlement is small. Had the Court of Appeal allowed the use of aggregate damages, then many of these employees could have remained completely passive, and still received an award of damages based on the statistical evidence (albeit not one that necessarily reflected the amount of overtime that they actually worked). Moreover, the prospect of holding thousands of mini trials is unlikely to be attractive to the plaintiffs given the failed history of that procedure in earlier employment class actions.
While the banks will probably appeal the certification decisions in CIBC and BNS to the Supreme Court of Canada, it is even more likely that the plaintiffs will file appeals on the issue of the use of aggregate damages. We will continue to report on developments as they occur.