The legal wrangling over unpaid overtime has been ratcheted up a notch after accounting giant KPMG LLP announced in February that it had reached an agreement in the $50-million class-action lawsuit launched against it by a former employee this past year.

Similar but much larger suits against CIBC and Bank of Nova Scotia, both based in Toronto, remain outstanding; legal experts say the issue could get hotter for financial services institutions.

“The KPMG situation should serve as a wake-up call,” says Doug Elliott of Toronto-based law firm Roy Elliott Kim O’Connor LLP. Elliott is one of the lawyers acting on behalf of thousands of plaintiffs in the multimillion-dollar lawsuits against both CIBC and Scotiabank.

The KPMG response, which it calls an “overtime redress plan,” will provide some compensation for eligible employees. The class in that lawsuit is made up of non-management, non-unionized employees, including lawyers and non-chartered accountant staff, who worked more than 44 hours a week without overtime pay.

The recent eruption of lawsuits in this area follows a wave of massive class actions for unpaid overtime in the U.S. over the past decade. A wide range of companies have been hit with suits, including Rogers, Ark.-based Wal-Mart Stores Inc., which has already paid out more than US$200 million and is still fighting suits in several states; the U.S. sales operations of Switzerland-based pharmaceutical Novartis International AG (one of many drug-makers facing suits); and Armonk, N.Y.-based IBM Corp.

Large banks and securities dealers have also been sued; even highly paid brokers are collecting. Several brokerages have settled class-action lawsuits for unpaid overtime and it’s estimated that payouts in this sector exceed US$500 million. They include US$98 million from Smith Barney (owned by Citigroup Global Capital Markets Inc.) and US$89 million from the wealth-management unit of UBS Financial Services Inc.

With these sorts of amounts at stake, Canadian lawsuits are unlikely to disappear, and the value of potential awards could be substantial. Indeed, the KPMG response, while significant, has not ended that lawsuit. It is continuing and will eventually proceed to a certification hearing, says Henry Juroviesky of law firmJuroviesky and Ricci LLP in Toronto, who represents the plaintiffs.

Although KPMG estimates the payout to be less than $10 million and the lawsuit claims $50 million in damages, there is no cap on the amount that could potentially be awarded. “So, if people made claims for $100 million,” Juroviesky says, “and they were able to prove it, [the defendant] would have to pay.”

Juroviesky points out that many corporations are watching these lawsuits very carefully. He wonders whether they will voluntarily come forward and “make good on historical, unpaid overtime and prospectively revamp overtime policies. We hope that they will,” he says. “But, rest assured, that if they don’t, our firm will pursue those actions on behalf of employees that are owed unpaid overtime.”

He also has potential claims against other accounting firms, although he declines to name any. “It may be that potentially all of the Big Four are at risk of being sued through our firm,” Juroviesky says. “We represent the small guy against the giants. We’re not conflicted from suing any of the major banks, insurance companies or other corporations in Canada.”

Juroviesky cautions employers: “Take heed that you have to comply with the overtime laws down to the very nitty-gritty.”

The $500-million action against CIBC was launched this past June by employees in Canada who are or were tellers or other front-line customer service employees of the bank. The Scotiabank class action, which was launched in December, asks for $250 million in general damages. Both actions also ask for $100 million in punitive, aggravated and exemplary damages. Members of the class in both actions allege that the banks assign them heavier workloads than they can complete within standard working hours, requiring them to work overtime.

TIME AND A HALF

Pursuing federally regulated institutions such as banks makes it easier for the plaintiffs, as all affected employees are covered by Canada’s Labour Code. Provincially regulated companies would require a much more complex and costly province-by-province approach. The federal Labour Code, which sets standard hours of work at eight hours a day and no more than 40 hours a week, requires that employees who work longer hours be paid overtime at one-and-a-half times their regular rate.

@page_break@The CIBC claim states that there are 38,000 current employees in Canada, most of whom are non-management, as well as tens of thousands of former non-management employees. According to CIBC senior director of communications Rob McLeod, CIBC “has a clearly defined policy as to how we compensate our front-line retail branch employees, and that exceeds legislative requirements in Canada in terms of overtime. The legislation requires overtime payments after 40 hours, and we pay after 37.5. When eligible employees do work overtime at CIBC, it is our explicit policy to compensate them for having done so.”

The representative plaintiff in the Scotiabank class action says she worked an average of five to 15 hours of additional work beyond her maximum standard hours each week, for which she was not paid. Scotiabank has declined to be interviewed, but has stated in a press release: “We are confident that the bank’s employee policies have been applied fairly and consistently.”

Elliott says that banks have organized their operations in such a way as they have set themselves up for such challenges. “It’s virtually impossible to run the bank without the employees working overtime,” he says, “and the bank simply doesn’t pay for overtime. Bank managers are expected to stick to their budgets — and the budgets do not have an allowance for overtime.”

The cost to the banks to start paying employees overtime on a regular basis would be immense, he adds: “Probably in the order of millions of dollars, based on what I have seen with respect to the additional hours that our class members have been spending.”

The certification hearing for the CIBC case is set for December and, Elliott says, in Canada, class actions are usually fought hard until the certification stage. Once they have been certified, however, “defendants usually then endeavour to settle. There’s a great deal at stake once certification is ordered.”

All companies should step back and take a close look at their overtime practices, Elliott says: “Never mind what the policy says in writing. What’s really going on?”

Unfortunately, often an employer’s idea of an investigation and ensuring compliance is to tell managers that employees should not work overtime. But very few organizations can ensure that, and there are often situations in which people have to work overtime. IE