Court of Appeal Denies Certification in Another Misclassification Overtime Class Action

October 08, 2014

In the latest instalment in a series of recent employment class actions, the Court of Appeal for Ontario has dismissed an appeal by class action plaintiffs in Brown v Canadian Imperial Bank of Commerce. The decision (upholding the lower court's finding that a proposed misclassification overtime class action was not suitable for class treatment) confirms that for misclassification class actions to be viable in Ontario, class members will be required to demonstrate they have virtually identical roles and responsibilities.

Background

In 2012, a group comprised of analysts, investment advisors and associate investment advisors, commenced a proposed class action alleging their jobs were misclassified in a way that improperly disentitled them to overtime pay. Putative class members alleged a number of causes of action, including breach of contract and violations of the Employment Standards Act, 2000.

At first instance, Justice George Strathy (now Chief Justice of Ontario) of the Ontario Superior Court denied certification. The decision followed two other overtime cases in the financial sector (Fulawka v Bank of Nova Scotia, in which certification was granted, and Fresco v Canadian Imperial Bank of Commerce, in which certification was denied). Although Justice Strathy reiterated a sentiment he had expressed in Fulawka that misclassification cases may be more suitable for certification than "off-the-clock cases", in this case, he found the question of whether individual employees had management responsibilities was an "insurmountable stumbling block". He went on to find the common issues were lacking in commonality and concluded that proposed class members had little in common beyond job titles. These findings were bolstered by the acknowledgment by plaintiffs' counsel that a determination of whether positions had managerial responsibilities might have to be made after a common issues trial. Justice Strathy's decision was consistent with the Court of Appeal's decision in McCracken v CN Railway Co, which denied certification in a misclassification case because of too many individual issues.

The Divisional Court's Decision

In response to Justice Strathy's findings regarding the lack of commonality, plaintiffs' counsel narrowed the proposed class definition to attempt to exclude analysts as well as any investment advisors with supervisory or managerial responsibilities in its appeal to the Divisional Court. Despite this narrowing of the class, the Divisional Court affirmed Justice Strathy's decision and refused to certify the proposed class action on the basis of a finding that eligibility for overtime pay was still an employee-specific inquiry that was not amenable to resolution as a common issue.

The Court of Appeal's Decision

The plaintiffs subsequently sought and obtained leave to appeal to the Court of Appeal. In a decision released on October 6, 2014, the Court of Appeal affirmed the decision of both lower courts.

Specifically, the Court of Appeal found that, given the wide variability in the duties and responsibilities of employees having the same job title and classification, eligibility could not be determined on a class-wide basis. The Court of Appeal went on to note that, absent the ability to determine the threshold issue of eligibility for overtime as a common issue, the resolution of other, ostensibly common issues would only minimally advance the claim and would surely result in a case of "the tail wagging the dog". As such, the Court of Appeal found that there was a lack of "core commonality" sufficient to satisfy the common issues requirement and it denied certification.

In doing so, the Court of Appeal distinguished Brown from Rosen v BMO Nesbitt Burns Inc (a misclassification case in which certification was granted). In Rosen, the investment advisors in the proposed class had the same, or very similar, job functions. The class definition excluded all investment advisors with managerial responsibility, and, unlike Brown, their ineligibility for overtime pay was premised on a feature common to all members of the proposed class (i.e., in Rosen, the employer's policy denied overtime pay to anyone paid by commission).

Implications

Although the Court of Appeal denied certification in this instance, its decision does not appear to be intended to signal the end of misclassification cases at large. Rather, in denying certification, the Court of Appeal expressly noted the absence of any singular rule suggesting that misclassification claims are generally incapable of raising common issues.

Thus, while Rosen demonstrates that misclassification cases are by no means dead in Canada, the Court of Appeal's decision in Brown signals that they may no longer be the fertile ground that some previously thought (and the plaintiff bar hoped) they may be. In what will likely be welcome news for employers, Brown suggests that courts will strictly examine the commonality of proposed class definitions and common issues in an effort to ensure a class proceeding is truly the preferable procedure for dealing with overtime claims.

We recommend that employers carefully review their overtime pay policies and classification practices. Key facts that resulted in a more employer-friendly outcome in Brown than in Rosen include that CIBC did not have a blanket policy denying overtime to employees paid by commission and that CIBC led evidence that it made individual assessments of employees' duties and responsibilities for the purposes of determining eligibility for overtime.

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