“Managers are not entitled to overtime.” This is a statement that is often regarded as undeniable and unquestionable. But how true is it really?

In Ontario, managers are exempt from overtime rules, but only if they fall within a fairly narrow exemption for managers and supervisors. That exemption is not nearly as broad as many people believe, which means that many employees who are considered to be managers by their employer are actually entitled to overtime pay.

Companies should exercise caution before denying employees overtime pay on the basis that they are managers, as it may result in significant liability for back-pay if the employee challenges their entitlement.

Overtime pay and exemptions

Overtime pay applies to most employees in Ontario. The way the employee is paid does not matter: salaried employees, hourly employees and commissioned employees are entitled to overtime for every hour that they work in excess of 44 hours per week, unless they fall within a specific exemption. The employee and employer are also permitted to enter into an “averaging agreement”, in which the hours are averaged over a 2, 3 or 4 week period.

The exemptions to the overtime rules are written in O. Reg. 285/01, a regulation under the Employment Standards Act, 2000 (“ESA”). Many licensed professionals, including lawyers, accountants, architects and engineers are exempt from the overtime rules.

The exemption for managers and supervisors is based on the following wording:

“a person whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis”

Courts and the Ontario Labour Relations Board (“OLRB”) have found that where an employee performs non-supervisory or non-managerial tasks on a regular and unexceptional basis as part of their normal job duties, the employee is not exempt from overtime rules as a manager or supervisor. In other words, for the exemption to apply, all of the employee’s regular tasks must be supervisory or managerial in character, except those performed on an irregular or exceptional basis.

The employee’s title is not determinative: just because they have the title of “manager” does not automatically make them exempt from overtime rules. Rather, the actual job functions of the employee must be assessed on a case-by-case basis.

Irregular or exceptional basis

It is important to note that a manager or supervisor may undertake some non-managerial or non-supervisory tasks and still be exempt from the overtime rules, so long as such tasks are on an irregular or exceptional basis.

“Irregular” generally means that tasks that are unscheduled or sporadic, and do not occur at a regular or set time. Examples of a task being “irregular” include a manager occasionally covering for sick employees or stepping in to assist with an unexpected rush of customers. However, if a pattern develops in which the manager is required to perform such tasks at the same time each week, then it is no longer irregular. The frequency and the amount of time spent on such tasks will also be factors in determining whether a task is “irregular”.

“Exceptional” means tasks that are outside of the ordinary course of the employee’s duties. A manager shovelling snow after a severe snowstorm or taking on additional duties during a labour strike are examples of tasks that may be considered exceptional.

There is a fairly common belief that as long as non-managerial or non-supervisory work takes up less than 50% of the employee’s time, then the exemption will apply. However, that is not the case, and any amount of non-managerial or non-supervisory tasks will render the exemption inapplicable, so long as such tasks are not performed on an irregular or exceptional basis.

Ultimately, whether a task is irregular or exceptional will depend on a consideration of the specific facts of the case. As a general rule, if managers are required to perform non-managerial or non-supervisory tasks in the ordinary course of their duties, the exemption will not apply. As stated by the OLRB:

“the regular performance of non-managerial duties in the ordinary course of an employee’s work renders the exemption inapplicable.”

Liability to the employer

Unfortunately, it is not uncommon for employers to misclassify employees as managers and not provide them with their entitlement to overtime pay. This can have serious consequences for the employer.

The employee can challenge their entitlement to overtime pay through a complaint to the Ministry of Labour, Immigration, Training and Skills Development of Ontario, or through the courts in a civil lawsuit.

Usually, the Ministry or the courts will only consider the employee’s overtime pay over the period beginning two years before the claim was commenced. However, in some cases a longer period can be considered.

For example, in the case of Fernandes v. Goveas, a caregiver and housekeeper was awarded damages for unpaid overtime pay, as well as underpayment of her salary, for the full nine years of her employment. In its decision, the court found that the caregiver’s particular circumstances meant that she could not have reasonably known that she was underpaid until after her employment had ended. These circumstances included the fact that she spoke only minimal English, did not understand her financial affairs, lived and worked for her family members, and had little social interaction outside of her employment.

The circumstances in Fernandes were somewhat unique, and in most cases the courts will not award backpay for such a long period of time. However, it is important to note this case as a reminder that an employer’s liability for unpaid overtime pay can be very significant.

To avoid such liability, employers should do one of two things regarding managers and overtime pay:

1. Ensure that the employee performs only managerial and/or supervisory tasks as part of their regular duties; or
2. Provide the employee with applicable overtime pay.

Employees that believe they are being unfairly denied overtime should obtain legal advice to assess their entitlements and their options for pursuing a claim.

By Alex Minkin, Rudner Law