Overtime for Employees Paid on an Annual Basis: Quebec’s Superior Court Denies Class Action Authorization

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In its recent decision in Godin c. Aréna des Canadiens inc. (Decision), the Québec Superior Court (Court) refused to authorize an employment class action against Aréna des Canadiens inc. and Aréna du Rocket inc. (Arenas).

The plaintiffs claimed that salaried employees were entitled under Quebec law to overtime pay if they worked more than 40 hours in one week. In Quebec, entitlement to overtime pay is a matter typically addressed by an employment standards commission called the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST), however, in this case, the plaintiffs had commenced a class action without the involvement of CNESST and sought to obtain overtime pay under section 55 of Quebec’s Act respecting labour standards (Act).

The Court dismissed the motion for authorization of the class action and confirmed that pursuant to section 55 of the Act, employees who are paid on an annual basis are not entitled to overtime pay for hours worked beyond the regular 40-hour workweek as set out in the Act. The Court confirmed that the Act does not prohibit remuneration on an annual basis and that the Quebec legislature allows overtime pay only to employees paid on an hourly wage.

Furthermore, the Court cautioned against the use of a class action in the context of monetary claims under the Act, noting that the principles of proportionality and sound administration of justice do not argue in favour of allowing such class actions to proceed, as the CNESST may make monetary claims under the Act on behalf of an employee or a group of employees, which is a faster, more efficient and less costly recourse for employees than a class action.

BACKGROUND

The plaintiffs, two former Arenas employees (Plaintiffs), had been employed by the Arenas pursuant to employment contracts whereby the work schedule was determined by the Plaintiffs’ supervisor based on need; work hours would therefore vary. However, regardless of the number of hours worked, the Plaintiffs’ pay never fluctuated. The Plaintiffs received an annual salary divided into 24 pay instalments per year.

According to the Plaintiffs’ respective schedules, the Arenas granted leave based on the Plaintiffs’ assignments, and the duration of such leave did not depend on the number of hours worked or the hours worked during a given week. The Plaintiffs argued that despite their remuneration being on an annual basis, it was possible for the Arenas to determine their usual hourly wage and, in short, for the Plaintiffs to obtain overtime pay for hours worked beyond the regular 40-hour workweek as set out in the Act.

DECISION

The three causes of action of the Plaintiffs can be summarized as follows:

  1. Remuneration of an employee on an annual basis does not allow an employer to circumvent the overtime pay provisions of the Act
  2. The control exercised by the Arenas over the Plaintiffs’ work hours made it possible to determine the Plaintiffs’ usual hourly wage for the purpose of calculating overtime pay
  3. Section 39(1) of the Act allows for the CNESST to determine an usual hourly wage for each employee.

Under Quebec law, the criteria for authorizing a class action are set out in article 575 of the Code of Civil Procedure (CCP):

575. The court authorizes the class action and appoints the class member it designates as representative plaintiff if it is of the opinion that

(1) the claims of the members of the class raise identical, similar or related issues of law or fact;

(2) the facts alleged appear to justify the conclusions sought;

(3) the composition of the class makes it difficult or impracticable to apply the rules for mandates to take part in judicial proceedings on behalf of others or for consolidation of proceedings; and

(4) the class member appointed as representative plaintiff is in a position to properly represent the class members.

As the Court pointed out, these criteria are cumulative: if any one criterion is not met, the authorization must be refused. The Court concluded that, in this Decision, criteria (1) and (4) had been met, whereas criteria (2) and (3) had not.

After analyzing the criteria set out in sub-section 575(2) of the CCP, the Court determined that there was no arguable case with respect to the first cause of action, noting that both doctrine and caselaw were unanimous on the matter: To the extent that an employee is truly paid on the basis of an annual salary, regardless of the number of hours worked, such employee is not entitled to receive overtime pay based on his or her “usual hourly wage”, as no such wage exists for that employee.

The Court also indicated that the Act does not establish a mandatory mode of remuneration, nor does it prohibit certain modes. Section 55 of the Act explicitly provides that the right to overtime is dependent on the existence of an hourly wage. An annual salary implies a fixed, non-variable salary for one year and is in no way dependent on the number of work hours. According to the Court, the number of work hours may vary, but the annual salary may not.

Furthermore, after analyzing sub-section 575(2) of the CCP, the Court also determined that there was no arguable case with respect to the second and third causes of action. It found no factual basis demonstrating that the Arenas exercised effective control over the hours of work of the Plaintiffs so as to establish a usual hourly wage. In addition, Section 39(1) of the Act does not allow the CNESST to establish, on any basis whatsoever, a fictitious hourly wage for an employee when it is impossible to do so if that employee, whose hours of work fluctuate from week to week, is paid on the basis of an annual salary and if its employer does not control work hours so as to be able to determine a usual hourly wage.

The Court also found that the criterion set out in sub-section 575(3) of the CCP had not been met. The Court rejected the Plaintiffs’ arguments regarding sub-section 575(3) because the class members were employees of the Arenas located in the nearby cities of Montréal and Laval; the possibility of reprisals against class members was unfounded since the employees could avail themselves of the protections in section 122 of the Act against retaliation for the exercise of a right under the Act; and the class members appeared to be easily identifiable.

Moreover, the Court seemed to indicate that a class action was not the appropriate procedural vehicle in this case, given that under the Act, the CNESST has the role of ensuring compliance with the Act and can bring monetary claims before civil courts on behalf of employees. The CNESST may, on behalf of an employee or a group of employees, exercise at no cost to them, any recourse in respect of a monetary claim. Any such action brought by the CNESST is considered urgent and is likely to be heard more promptly than a class action. Class actions, even when authorized, are not heard on an urgent basis.

Given that the composition of the class was easily identifiable and that the CNESST can, on behalf of the members of the class, undertake proceedings for monetary claims, the Court determined that the criterion set out in Article 575(3) of the CCP had not been met.

CONCLUSION

This Decision confirms that employees paid an annual salary are not entitled to receive overtime pay. It also confirms that, in this type of situation, a recourse exercised by the CNESST on behalf of a group of employees to bring proceedings for a monetary claim under the Act would be the preferred solution over a class action.

While employees who are paid an annual salary are not entitled to overtime pay, the Court indicated that nothing prevents an employer or employee from keeping a record of hours worked for purposes other than determining remuneration. According to the Court, an employee paid an annual salary could therefore refuse to work more than 12 hours in a 24-hour period or more than 50 hours in a week, as is set out in section 59.0.1 of the Act. However, according to the Court, section 58 of the Act, which provides for a minimum remuneration of three hours for employees who report for work, does not apply to employees who are paid on an annual basis.

The Plaintiffs have 30 days to appeal the Decision.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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