CIBC is battling its second massive class-action lawsuit for unpaid overtime, this one by employees of its investment-banking subsidiary, CIBC World Markets Inc., which includes investment bankers and financial analysts.

The $360-million claim is the latest in a string of recent lawsuits for unpaid overtime against Canadian banks, and it is “just the tip of the iceberg,” says Henry Juroviesky of Juroviesky and Ricci LLP in Toronto, one of the lawyers representing the plaintiffs in the CIBC World Markets suit. Parent CIBC is fighting a similar lawsuit by tellers for $600 million in unpaid overtime, launched in 2007.

Juroviesky has spoken to dozens of current and former employees of several financial institutions about the possibility of launching further class-action lawsuits for unpaid overtime. “[More lawsuits] will occur,” he says, “against the competitors and peer companies of CIBC World Markets.”

The suit, filed in October, alleges that CIBC World Markets breached employment standards legislation, including failing to record employees’ work hours accurately and failing or refusing to pay overtime. A statement from Juroviesky’s firm says that CIBC World Markets “cultivates an environment in which employees are expected to work up to 80 hours a week in violation of provincial limits on hours of work.”

The lawsuit asks for compensation for those who have worked for CIBC World Markets at any time since October 2002, which could total 10,000 to 15,000 current and past employees, says Juroviesky.

By not recording their hours of work, the statement maintains, CIBC World Markets “led its employees to believe that they were not entitled to overtime pay.”

“[CIBC World Markets] paid overtime to secretaries but not to the professionals,” says Juroviesky. “It propagated the myth that certain types of people deserve overtime and certain types do not.”

With the exception of lawyers, accountants and professional engineers, all employees qualify for overtime, says Juroviesky, including “investment advisors, investment bankers, analysts, all the technical people who make the investment banking world work” — including those who are paid on commission.

In response, CIBC has released a statement saying it intends to defend this action vigorously: “Our overtime policy is clearly defined, exceeds legislative requirements in Canada and is easily accessible. It contains a clear process to resolve any questions or concerns an employee may have about overtime. Under our policy, when overtime is requested or required by CIBC, overtime is paid. We believe that this action is unnecessary given our clear policy and process to resolve employee issues internally.”

A certification hearing in the CIBC teller’s case is set to begin on Dec. 8 in Ontario’s Superior Court. It is unlikely that a decision will be released until the new year. Douglas Elliott, a lawyer with Roy Elliott O’Connor LLP in Toronto who represents the plaintiffs, says it’s the first major case of its kind to be considered for certification in Ontario. He predicts that those watching the outcome “will be emboldened to bring further cases forward.”

Certification proceedings are still underway in another unpaid overtime class action, which was filed by personal bankers at Bank of Nova Scotia in December 2007 for $350 million.

There’s also been a significant surge in class-action suits in the wake of the subprime mortgage crisis. One example is a $550-million class action filed on Nov. 13 in Ontario against American International Group Inc., AIG Financial Products Corp. and various current and former directors and officers of AIG and AIGFP. The suit has been filed on behalf of Canadian residents who acquired AIG securities.

“[The suit] arises out of AIGFP’s credit-default swaps,” says a statement from the plaintiffs’ lawyers, London, Ont.-based Siskinds LLP, “and the crippling decline in AIG’s stock price when the true effect of those credit default swaps became known to the investing public.”

But it may be that a new era of class actions was a reality for the big banks even before the market’s recent sharp declines. TD Bank Financial Group and MBNA Canada Bank are facing class actions regarding allegedly improper credit card fees (TD) and interest levied at an allegedly “criminal rate” on cash advances (MBNA). In November 2007, the Ontario Court of Appeal certified the TD action as a class-action proceeding.

Margaret Waddell of law firm Paliare Roland Rosenberg Rothstein LLP in Toronto is one of the lawyers representing the class in the MBNA lawsuit. That class action has been certified and is in the discovery stage.

@page_break@Referring to the recent overtime lawsuits, Waddell notes: “Any large employer could find itself faced with a similar lawsuit if it doesn’t have good policies in place with which it is complying.”

Waddell points out that the rules for certification of a class action in Canada are substantially different than those in the U.S., where class actions for overtime have been widely successful in the past decade. In the U.S., she says, a judge has to be persuaded that there is a good case before the lawsuit can proceed. In Canada, prior to certification, she says, “It just has to be a tenable cause of action.” The full merits in a class-action lawsuit are examined only after certification is granted. But once a suit is certified, she adds, “The likelihood of settlement is very high.”

It’s important for institutions that are being sued to defeat class-action claims early, prior to certification. After that, costs rise substantially, as do the plaintiffs’ chances of success. “Certification is the first chance that the defendant has to kill the action before it gets anywhere,” says Waddell.

Financial services institutions can avoid similar lawsuits by enforcing their overtime policies, says Waddell: “Having the right policies in place and making sure that you create an environment in which you’re encouraging your employees to take what they’re entitled to is really the best that you can do. If you create a systemic atmosphere that says you can and should, then the employee has a much harder case to make out when they don’t.”

Some firms facing potential overtime claims have been quick to act. Over the past summer, PricewaterhouseCoopers LLP conducted an internal review and made a retroactive change to its overtime pay policies. And a class-action lawsuit launched against KPMG LLP in August 2007 for unpaid overtime was settled this past summer, says Juroviesky, who acted for the plaintiffs.

“KPMG paid everyone 100¢ on the dollar,” Juroviesky says.

KPMG’s response to the suit was swift, launching an “overtime redress plan” that provided compensation to eligible employees.

“There’s a likelihood that we’re going to see more class actions against financial advisors with respect to investment advice that’s been given,” says Waddell, in reference to the market meltdown. “It’s all just ripe for class-action kind of litigation.” IE