On June 25, 2009, I reported on the decision in Fresco v. Canadian Imperial Bank of Commerce, in which a Superior Court judge refused to certify a class action for employees of CIBC claiming overtime pay. The issue has now been revisited in a proposed class action brought by employees of Scotiabank. In his decision in Fulawka v. Bank of Nova Scotia, 2010 ONSC 1148, Mr. Justice George Strathy of the Superior Court of Justice came to the opposite conclusion from that of his counterpart in the CIBC case, holding that systemic issues relating to the bank’s conduct made the class action a preferable procedure to that of individual claims by affected employees. The crux of Justice Strathy’s decision on the point is set out below:

“The obligation of the employer to take active measures to prevent uncompensated overtime being worked has been recognized in labour arbitrations applying the Code: see Referee Emrich in T-Line Services Ltd. v. Morin, [1977] C.L.A.D. No. 422 at para. 33-34:

It is within the control and discretion of management to establish the hours of work and to supervise the work force effectively to avoid the triggering of overtime liability. Thus it is reasonable to cast the onus upon management to take active measures to regulate the hours that employees may work. In the absence of such measures, the employer runs the risk that through oversight or omission, workers are permitted to work overtime and thereby liability to pay overtime is triggered …

Viewed from this perspective, it is arguable that Scotiabank’s policy put too much emphasis on the employer’s interests and insufficient emphasis on the interests of Class Members. It is also arguable that it failed to protect Class Members against the risk that they would be required to work uncompensated overtime because of the demands of the jobs or their superiors. There is a basis in fact in this case for common issues based on the duty of Scotiabank to establish and implement a fair process to fulfill the duties it owed to the Class in relation to their overtime work.

The resolution of the issue of whether Scotiabank had a duty to put a fair and reasonable overtime system in place, and whether its system (including the pre-approval requirement) fulfilled this duty, is one that will advance the claim of every Class Member. If a common issues judge were to find that there was such a duty and that Scotiabank’s system was unfair and unreasonable, the absence of pre-approval would not be a defence to an individual overtime claim. While Scotiabank now acknowledges, and its new policy appears to reflect, that it has an obligation to pay overtime that has been “permitted,” its pre-2008 policies and practices did not reflect this acknowledgement.

There is also a factual basis for a common issue concerning Scotiabank’s record-keeping system. Scotiabank’s position is that the Plaintiff has failed to advance any evidence of a systemic flaw in its recordkeeping practices, and because the implementation of those practices was at the branch level, any inquiry into how records were kept must be conducted branch-by-branch and cannot be resolved on a Class-wide basis. I do not accept this. It amounts to Scotiabank saying that its record keeping system was so decentralized, varied and idiosyncratic that every claim for overtime must be examined on a case-by-case basis. Scotiabank cannot point to its own record keeping failures to defeat certification. This would not be an acceptable way for a bank to manage its customers’ money and it is not an acceptable way to manage the compensation to which its employees are entitled. There is evidence that, for most of the Class Period, Scotiabank did not have an adequate system in place for the recording of regular time and overtime worked by Class Members. The staff plan was nothing more than a record, prepared in advance, of the hours that employees were scheduled to work. It was not a record of hours actually worked. While employees were supposed to check and correct their hours after the fact, Scotiabank’s policy prevented them from recording and claiming for hours that had not been pre-approved. The “Catch 22” gave them no reason to record the hours they actually worked because they would not be paid unless the overtime had been pre-approved. The bank had no consistent corporate policy or system applicable to all branches, for the tracking of overtime. It had no system of tracking time in lieu” or of ensuring it was “cashed out”. It is appropriate to ask whether this was a breach of a duty owed to the Class.

The evidence before me, therefore, provides a basis in fact to ask whether Scotiabank owed duties to the Class to put policies and procedures in place to prevent overtime from being worked without compensation and to properly record all hours of overtime worked, whether pre-approved or not. There is also a basis to ask whether those duties were breached. The answers to these common issues do not depend on individual findings that have to be made with respect to each individual claimant. The answers will significantly advance the action because if they are answered in the affirmative the absence of pre-approval in any particular case may be irrelevant and the inability of an employee to prove the quantum of overtime hours worked may not be fatal to the claim. A conclusion by the common issues judge that the bank had a duty to pay overtime that was permitted or required, and that it breached a duty to establish a system to properly record such overtime, could result in a conclusion that the failure to prove overtime hours worked is not a bar to recovery, or that the absence of records is not an impediment to proof of damages.”

There was much publicity a few years ago when claims began surfacing of unpaid overtime at Canada’s chartered banks. The spectre of a limitless number of claims made for interesting reading. On June 18, 2009, Justice Joan Lax of the Ontario Superior Court of Justice had occasion to consider the desirability of a class action in these circumstances. The stakes were high for everyone involved. The certification motion in the case of Fresco v. Canadian Imperial Bank of Commerce, 2009 CanLII 31177 (S.C.J.) was argued over the course of five days and involved no less than ten lawyers. Unfortunately for the affected employees, Justice Lax decided that a class action was not an appropriate procedure for this type of claim. Barring a successful appeal, the decision may for practical purposes grind these cases to a halt, as it would likely not be economically feasible to pursue the claims individually.

In order to certify a claim as a class action, it is necessary to show that there are common issues involved in the proposed proceeding which are more suitable to be adjudicated on a class wide as opposed to an individual basis. The central allegation in the action was that CIBC had a systemic policy of failing to pay overtime to its employees. However, the evidence put forward by some twelve employees showed differing circumstances: one said that time spent using a breast pump should be counted towards her overtime entitlement; another said that smoking breaks should be counted; another arrived a half-hour early as she was driven to work by her husband and said that time should be counted; on cross-examination before the hearing, two part-time employees admitted they were paid for the hours worked and received the pay to which they were entitled.

Faced with these circumstances, Justice Lax said “In my view, that evidence does not provide a sufficient basis in fact to show the existence of systemic wrongdoing. What it shows is a number of individual circumstances that arise for disparate reasons and require individual resolution.” She added “The individual issues in this case are front and centre and it would be virtually impossible to embark on a trial of the common issues without engaging in an individual examination of the specific circumstances that underlie each class member’s claim. The court would be asked to determine systemic wrongdoing either in a factual vacuum or on the basis of an individual examination of each claim, which defeats the very purpose of a class action.”

Given the stakes involved, there will undoubtedly be an appeal of the decision. In the meantime, make no mistake: this is a big win for the banks.

There is an interesting decision out today from the Court of Appeal for Ontario on the technical but important issue of the jurisdiction of the court. The decision, Mignacca v. Merck Frost Canada Ltd., 2009 ONCA 393, involves a class action lawsuit over the drug Vioxx. An Ontario Superior Court judge had certified the case as a class action. Under the Ontario Class Proceedings Act, section 30(2), appeal of an order certifying a proceeding as a class proceeding can be brought to the Divisional Court with leave of a Superior Court judge. Merck Frost brought such a motion but was refused leave to appeal in November 2008. In the meantime, on March 30, 2009, an earlier certification decision in Saskatchewan was set aside by the Saskatchewan Court of Appeal. Relying on that decision, Merck Frost sought an extension of time to seek leave to appeal to the Court of Appeal from the decision of the Superior Court judge denying leave to appeal. The motion was heard by a single judge in Chambers, Mr. Justice Paul Rouleau.

Mr. Justice Rouleau decided that an extension of time for leave to appeal was not required, since the decision of the Superior Court judge refusing leave to appeal could be construed as a final order. Under section 6(1)(b) of the Courts of Justice Act, final orders of a Superior Court judge can be appealed to the Court of Appeal without leave. While not finally deciding the issue, Justice Rouleau stated that, in the event Merck Frost considered the order to be a final one, they were given a ten day extension of time to appeal. The Plaintiffs could then seek to quash the appeal by a motion brought before a panel of the Court of Appeal.

In my view, there is considerable doubt the legislature intended that a refusal of leave to appeal the granting of a certification order could be appealed directly to the Court of Appeal. This would only serve to encourage further review of certification orders, which the legislature intended would be screened out by way of the leave to appeal procedure to the Divisional Court. Given that Justice Rouleau has suggested the Plaintiffs can seek to quash the appeal which will undoubtedly be brought by Merck Frost, we have clearly not heard the last of this issue.