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Brown v. Canadian Imperial Bank of Commerce: A Nail in the Coffin for “Misclassification” Overtime Class Actions or Class Counsel Growing Pains?

Posted in Case Comments, Class Actions, Labour and Employment
Kosta Kalogiros

In Brown v. Canadian Imperial Bank of Commerce, 2013 ONSC 1284, the Divisional Court of Ontario further confirmed the approach to, and difficulty with, “misclassification” overtime class-actions (i.e. class actions alleging that an employer has unlawfully misclassified employees and managers to avoid the obligation to pay overtime). The Divisional Court, armed with the decisions of the Ontario Court of Appeal in the “Overtime Trilogy” (Fulawka v. Bank of Nova Scotia, 2012 ONCA 443; Fresco v. Canadian Imperial Bank of Commerce, 2012 ONCA 444; and McCracken v. Canadian National Railway Company, 2012 ONCA 445) upheld Justice Strathy’s denial of certification of a proposed class proceeding against CIBC and CIBC World Markets for misclassifying various employees, making them ineligible for overtime (Brown v. Canadian Imperial Bank of Commerce, 2012 ONSC 2377). The Divisional Court concluded that “ the issue of eligibility for overtime for the proposed class members could only be determine on an individual basis.” The Divisional Court found no commonality, as well as problems with the class definition generally.

Background

The plaintiff class commenced an action on behalf of employees whose job titles or business tiles contained “Analyst” or “Investment Advisor,” (thus including, “Associate Investment Advisors” in the class). At the time of the certification motion, CIBC’s breakdown of employee roles was organized by job level (between 1 and 10), job title (with an associated four digit job code), business titles (which were not necessarily formal CIBC titles for the purposes of internal organization), and job descriptions.

At the certification hearing, Justice Strathy concluded that eligibility was not determined exclusively based on job levels, job titles/codes or job descriptions. It was decided that the fact an employee had the word “Analyst” or “Investment Advisor” in his or her job title was not determinative of eligibility absent an appreciation of variations in individual circumstances of each employee. Justice Strathy concluded that the evidence established that the question of whether or not the class members are eligible for overtime could not be answered on a common basis. The eligibility of the representative plaintiff “Analyst” and “Investment Advisor” could not be applied to all other class member “Analysts” or “Investment Advisors.”

Recognizing the difficulty of the commonality issues, plaintiffs’ counsel proposed adopting an American approach and rely on statistical evidence to arrive at a conclusion on liability on a class-wide basis. Justice Strathy distinguished the American authorities presented and rejected the invitation to rely on statistical evidence, noting: “it is well-established in this province that the [Class Proceedings Act] cannot interfere with the substantive right of a defendant to have its liability established based on proof through evidence and not by statistical probability based on the behavior of others.”

Justice Strathy ultimately found that the class definition was overly broad and not suitable because the lack of commonality in the functions of the class members means that conclusions on the central common issues proposed could not be extrapolated to all members of the class. Justice Strathy summed up his views on the class action succinctly when concluding:

“The key issue of fact – namely, whether or not a person has managerial responsibility – which is critical to the determination of overtime eligibility, cannot be determined on a common basis. There is no workable methodology to resolve the issue. The action simply will simply not work as a class action.”

Following Justice Strathy’s decision, the plaintiffs appealed the decision on the basis that Justice Strathy erred in the application of the legal test for certification and because the issues raised on the appeal are matters of general principle which are central to the proper application of certification.

At the same time, the claim was altered to remove “analysts” from the class, leaving only those jobs with “Investment Advisor” in the title. This had the effect of restricting the claim to CIBC World Markets and provincial employment legislation alone. Plaintiffs’ counsel also amended the class definition to exclude any Investment Advisor who held any branch management position or had deductions taken from earned commissions which were attributable to Associate Investment Advisors assigned to the Investment Advisor.

 

The Decision

In its decision, the Divisional Court relied, in large part, on the Court of Appeal’s McCracken decision in deciding to uphold Justice Strathy’s denial of certification. In particular, the Divisional Court launched its analysis by noting the Court of Appeal rejected the general proposition that misclassification cases were appropriate for certification.

The Divisional Court adopted the Court of Appeal’s conclusion that certification is possibly suitable “where the similarity of job duties performed by class members provides the essential element of commonality” and that the “plaintiff’s evidence must establish some basis in fact to find that the job functions and duties of class members are sufficiently similar that the misclassification element of the claim… could be resolved without considering the individual circumstances of class members.”

Interestingly, the Divisional Court acknowledged that the plaintiffs’ revised class definition sought to exclude any worker exercising supervisory and managerial responsibilities over other employees; however, the Divisional Court was of the view that there was clear evidence that the revised definition still contained gaps wherein an Investment Advisor with a supervisory or managerial role could still be captured. Accordingly, the revised definition did not solve the problems identified by Justice Strathy in that each employee continued to have different and highly individualized job duties.

The Divisional Court, relying on the decision in McCracken, did, however, provide some further guidance and parameters for misclassification class actions:

…it is not good enough for a plaintiff to identify and seize upon apparently significant similarities if there are substantial differences which will inevitably require resorting to the evidence of individual class members. In this particular case, the appellant has failed to prove any basis in fact to show that the proposed class members’ job functions (even using the amended definition) are sufficiently similar that eligibility could be decided on a class-wide basis. [emphasis in original].

The Divisional Court noted that the lack of a common issue of eligibility further affects the determination as to whether a class proceeding would be the preferable procedure, under s. 5(1)(d) of the Class Proceedings Act. The Divisional Court upheld Justice Strathy’s decision that so long as the liability to pay overtime to every class member was an individual issue, a class action would not be a fair, efficient and manageable way of advancing the claims.

Potential Significance

While courts have seen an increase in overtime class actions in recent years, it is important to appreciate the difference between “misclassification” overtime actions and “off-the-clock” overtime actions focused on an employer’s imposition of more restrictive conditions for receiving overtime compensation than set forth in the relevant employment legislation. To date, the latter “off-the-clock” class actions, such as Fulawka and Fresco, supra, have been successful at the certification stage.[1] “Misclassification” overtime class actions, on the other hand, have never left the runway so to speak.

McCracken, and now Brown v. CIBC, make it abundantly clear that the courts are not prepared to accept commonality amongst a diverse spectrum of employee class members whose duties may vary and whose propensity to partake in supervisory or managerial roles fluctuate. So long as the eligibility analysis remains a question of whether or not an employee has managerial responsibilities, it is hard to contemplate a scenario where a class of plaintiffs can be extracted from a mass of employees within a company made up of several complex and unique positions and roles. Short of very narrowly circumscribed classes whose duties are clearly indisputable, decisions like McCracken and Brown suggest, at least implicitly, that there is no place for misclassification overtime class actions in Ontario (and possibly the rest of Canada as well). Even if this was not the intent of the courts, the practical implication is quite apparent.

While McCracken may be the coffin, Brown is only the first nail and employers are certainly not in a position to consider these sorts of actions dead. Given the slow rising trend of overtime class actions, it is only a matter of time before another claim is made to test the boundaries the appellate courts have set for misclassification class actions. Only time will tell whether class counsel rises to the occasion or if misclassification actions suffer a fatal blow.

 


[1] The Supreme Court of Canada dismissed applications for leave to appeal these decision in March 2013.