Canadian employers often read newspaper reports of outrageously high American jury awards against large employers and shake their heads in the smug knowledge that “that could never happen here.” Two recent BC Supreme Court decisions may have changed all that when it comes to wage claim class actions. If upheld on appeal, these cases may spark a new wave of massive employee class actions for unpaid statutory wage claims for overtime, statutory holiday, and vacation pay.
Employees are protected by two distinct sorts of rights. The first set is created under employment standards and other legislation (“statutory rights”). Some of the most basic employee entitlements are found in the BC Employment Standards Act (the “ESA”). The ESA is the source of mandatory terms of employment, including the minimum wage and the obligation to provide overtime, statutory holiday pay, and maternity and parental leaves.
The second set of employee rights is rooted in contract law rules created by judges’ decisions over the centuries (known as the “common law”). Most contract terms must be agreed in writing or by practice; although the common law does recognize some “implied” terms (i.e. terms that will be enforced with no evidence of agreement).
The ESA sets out relatively strict time limits on wage claims: claims can only cover wages payable in the last 6 months worked and employees must file their claim within 6 months of terminating employment. Although, in theory, when investigating one employee’s claim, the ESB can investigate all potentially similar cases at that business, the ESB rarely does so and claimants have no way of forcing it to do so. These enforcement rules and practises substantially limit employers’ wage liability. By contrast, the courts allow employees to sue for breach of employment contracts going back 6 years and now permit “class actions” in which one plaintiff can sue in the name of an entire class of persons who have similar claims against the same defendant.
In the December 2006 decision in Macaraeg v. E Care Contact Centers Ltd., the plaintiff successfully argued that she should be able to pursue a claim to overtime pay based on the ESA as part of her wrongful dismissal lawsuit. The judge noted that courts in other provinces have accepted that the statutory rights under the ESA can also be considered implied terms of the employment contract and therefore enforceable in the courts.
It only took 5 more months for another judge to follow Macaraeg in ruling that an employee can sue for overtime based on the ESA in court even when it was not part of a wrongful dismissal claim, but also that the contract limitation period of 6 years rather than the ESA 6 month limitation period should apply to such claims. In Holland v. Northwest Fuels Ltd., the plaintiff had worked first for Tymoschuk Agencies as a fuel oil driver and depot manager then continued with Petro-Canada after it purchased the business in 2001 until finally being dismissed in 2003. Although Tymoschuk admitted it had only paid straight time for thousands of overtime hours worked in 2000 and 2001, it argued the overtime claim was barred either by the traditional rule that ESA entitlements were not enforceable in court or by the ESA limitation period. Both arguments were rejected and Tymoschuk was held liable for overtime pay earned some 7 to 6 years earlier in a lawsuit started more than 5 years after the wages were due.
Although the Macaraeg decision is under appeal and Holland will likely also be appealed, observers expect these rulings to be upheld. If so, this will pave the way for a new generation of ESA-based wage claims in lawsuits by individual employees. What is potentially far more serious for larger employers is the risk that BC’s enterprising plaintiff’s lawyers, who typically are the catalysts in leading and financing class action lawsuits, will start filing the kinds of multi-million dollar wage claims common in the U.S. seeking compensation going back 6 years for hundreds of current and former employees. This is just one more good reason for employers to review their wage and pay practices with an experienced employment lawyer to ensure they comply with the ESA.
This article should not be considered legal advice.
About the Author:
J. Geoffrey Howard is an employment lawyer with the Vancouver firm Shapiro Hankinson & Knutson Law Corporation. He can be reached at ghoward@shk.bc.ca or 604-408-2044.
Reprinted with permission. "BC Supreme Court Decisions Open Way for Wage Claim Class Actions by J. Geoffrey Howard, from Business in Vancouver, where he writes a column.
