Another Canadian fin-ancial services institution has been hit with a class-action lawsuit related to overtime pay, this time on behalf of its financial and investment advisors. This latest suit, against Bank of Montreal’s Toronto-based brokerage house, BMO Nesbitt Burns Inc., joins a growing list of similar claims.

Although none has yet succeeded at trial, another large class action for overtime was recently certified; that judgment, against Bank of Nova Scotia, ratchets up the pressure for the settlement of such claims.

In the Nesbitt action, the representative plaintiff, former Nesbitt advisor Yegal Rosen, alleges that the brokerage has “misclassified” its commission sales force as not being entitled to overtime.

Indeed, many companies view employees on commission as being ineligible for overtime. But Rosen’s statement of claim alleges that Nesbitt has violated Ontario’s employment standards legislation by not paying overtime to its advi-sors. That legislation states that employees must be paid time-and-a-half for work that exceeds 44 hours a week.

“Many people think salespeople, or those on commission, are not entitled to overtime. But that’s not the case,” says lawyer Henry Juroviesky, whose firm, Juroviesky & Ricci LLP, has launched the suit. “It’s a myth.”

The suit against Nesbitt asks for $100 million to satisfy unpaid overtime among 1,800 to 2,000 investment and financial advisors who had worked — or continue to work — for Nesbitt between 2002 and 2010. The suit also claims that Nesbitt uses a compensation structure that benefits managers and top producers at the expense of other advisors.

“It’s a sink-or-swim environment,” says Juroviesky. “You are paid a commission that is not a flat commission, but is based on a matrix or grid. The grid provides that the more you produce, the higher on the matrix you are and the higher the [rate of] commission you get. The lower your production, the lower the [rate of] commission.”

The atmosphere allegedly created by this structure in the workplace is being challenged in the lawsuit. “You are pitted one against another,” Juroviesky says. “Everyone is rated every month.”

Essentially, he adds, Rosen believes that the way commissioned employees are treated at Nesbitt is unfair. Juroviesky notes that this type of pay structure is widely prevalent in the investment industry.

A spokesperson for BMO stated in an email that the bank deals fairly with overtime pay for its employees. Nesbitt intends to defend the action, the email says, but is unwilling to comment further while the matter is before the courts.

On average, Juroviesky says, class-action suits take two to three years to proceed through the courts.

Only a few days after the Nesbitt suit was filed in the Ontario Superior Court of Justice, the same court rocked the industry by certifying a class action for overtime pay against Scotiabank. (Certification can be difficult to achieve and is frequently viewed as a crucial step in the litigation process, taking the plaintiff much closer to the possibility of settlement.) That suit, on behalf of bank employees who sell products such as mortgages, credit cards and RRSPs, makes a $300-million claim on behalf of the class of plaintiffs and dates back to 2000.

In ordering certification, Justice George Strathy concluded that the claim deals with “systemic wrongs [that] flow from a policy that failed to reflect the realities of the workplace because it put the onus on the employee to obtain prior approval for overtime that they were permitted or required to work.”

Justice Strathy also noted that employees in sales positions were expected to work overtime to meet the “unpredictable demands of customers,” but that the bank “had no consistent corporate policy or system applicable to all branches for the tracking of overtime.”

A further blow to Scotiabank was the rejection of its argument that, because the bank kept overtime records on a branch-by-branch basis, the claim could not be resolved in a class action. In order to achieve certification, the bank argued, plaintiffs must show that their individual claims are homogeneous in nature.

On that point, Justice Strathy stated: “The bank cannot point to its own record-keeping failures to defeat certification.”

The result in the Scotiabank case may be a game-changer for the current cluster of overtime-related class-action suits against financial services institutions. In June 2009, Justice Joan Lax, also of the Ontario Superior Court of Justice, declined to certify a $600-million class action for overtime made on behalf of tellers at Canadian Imperial Bank of Commerce. In that case, the court concluded that the claims of the individual members of the class did not have enough in common to justify a class action. That decision has been appealed.

@page_break@Although it’s still unclear what an average payout might be if the Nesbitt suit is successful, Juroviesky estimates, in the case of Rosen, the lead plaintiff, that if it is assumed that Rosen worked an average of 10 overtime hours per week, he could be eligible for additional compensation of 25% to 30%.

Juroviesky’s firm has considerable experience in piloting overtime pay-related class actions. In 2007, it launched a class-action lawsuit against the Canadian arm of Delaware-based accounting giant KPMG LLP for overtime on behalf of employees who were not accountants. That case was settled in February 2008, with KPMG making substantial payments for unpaid overtime.

Just calculating how much overtime is due is itself a seriously expensive proposition, requiring the services of experts in fields such as labour economics. In the KPMG case, the costs of investigation and the payouts for overtime “ran into the millions,” according to Juroviesky.

In short order after that case was settled, several other big accounting firms revised their overtime practices and made voluntary, retroactive overtime payments to employees.

And, in 2008, Juroviesky’s law firm filed a suit against CIBC World Markets Inc. for $350 million for overtime pay on behalf of banking and capital-markets employees. That case has not yet reached its certification hearing.

Although lawsuits by financial advisors are relatively new within the Canadian judicial system, they follow a model well established in the U.S. In 2007, St. Louis-based brokerage firm Edward Jones spent US$40 million to settle two class actions dealing with wages and deductions, including overtime pay for its advisors.

In 2005 and 2006, several large U.S.-based brokerages — including Merrill Lynch & Co. Inc. , the U.S. arm of Swiss bank UBS AG and Citigroup Inc.’s Smith Barney brokerage — settled large overtime-related class-action suits with their advisor employees. The Smith Barney settlement amounted to almost US$100 million. IE