May 16, 2017
Section 37 of the Employment Standards Act allows employees and employers to agree on work schedules that are irregular and that would otherwise attract overtime. As a tourism employer, you might find that averaging agreements provide a degree of flexibility and related cost savings
You and an employee may agree to average the employee’s hours of work over a period of one or more weeks for the purpose of determining an employee’s entitlement to overtime. The week or weeks used for averaging agreements must commence on a Sunday. Such agreements must also:
- be made in writing.
- be signed by the employer and the employee before the start date provided in the agreement.
- specify the number of weeks over which the agreement applies.
- specify the work schedule for each day covered by the agreement.
- specify the number of times, if any, that the agreement may be repeated.
- provide for a start date and an expiry date for the number of weeks over which the agreement applies.
An employee must receive a copy of the agreement before the date on which the period specified in the agreement begins. As of 2021, Employers must retain the agreement for four years after the expiry of the agreement or any agreed upon extension of the agreement.
There is no restriction on how long (e.g. how many “periods”) the agreement to average may be in place. For example, the agreement itself may not expire for two years, but the maximum number of weeks that can be used in any period to calculate overtime entitlement is four weeks.
Although the agreement must not schedule employees to work more than 40 hours per week on average, this does not mean that working more than 40 hours per week is not permitted.
OVERTIME FOR EMPLOYEES WORKING UNDER AVERAGING AGREEMENTS
Do overtime rates apply to an employee working under an averaging agreement? That will depend on both the number of hours scheduled and the number of hours worked. Under an averaging agreement, an employee can be scheduled to work up to 12 hours in a day, without attracting overtime rates.
Under an averaging agreement, employees scheduled to work eight or more hours in a day must be paid 1.5 times the employee’s regular wage only for those hours worked over the hours scheduled, up to 12 hours. Again, this means that an employee who is scheduled to work up to 12 hours in one day will not be entitled to overtime pay under an averaging agreement.
Where employees are scheduled to work more than 12 hours, or for any reason are directly or indirectly allowed to work more than 12 hours in a day, they must be paid double time.
Employees may also be entitled to overtime rates based on the number of hours worked in a week. If employees work more than an average of 40 hours in a week within the period specified in the agreement, they are entitled to time-and-a-half for the time worked over 40 hours. In calculating the average weekly hours for an employee, you count the first 12 hours worked by the employee in each day and exclude any hours worked beyond their scheduled hours for which daily overtime rates were paid.
HOURS FREE FROM WORK UNDER AVERAGING AGREEMENTS
Employees working under an averaging agreement, where the hours are averaged over a period of one week, must be provided with at least 32 consecutive hours free from work each week.
Employees working under averaging agreements where the hours are averaged over a period longer than one week must either be provided with 32 consecutive hours free from work for each week in the averaging period, or be paid 1.5 times their regular wage for time worked in lieu of being provided with hours free from work.
If the employer provides hours free from work, those hours may be scheduled at any time during the averaging period. This means they can be scheduled each week, or may be scheduled consecutively any time during the averaging period.
For a more detailed view of the averaging agreement provisions see Section 37 of the ESA. For further information view the following Employment Standards Branch Guidelines: Averaging Agreements Factsheet, Variances Factsheet, and Averaging Agreement Interpretation Guidelines.
Information provided by Ryan Anderson, an employment lawyer with Mathews Dinsdale & Clark LLP. The information provided in this article is necessarily of a general nature and must not be regarded as legal advice. For more information about Mathews Dinsdale & Clark LLP, please visit mathewsdinsdale.com.
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