Legal battles over bank overtime pay are heating up as conflicting court rulings head toward appeal courts. Lawyers are predicting that multimillion-dollar class-action suits against Canadian Imperial Bank of Commerce and Bank of Nova Scotia, together with similar cases now before the courts, will set legal landmarks and could transform business practices in the financial services sector.

“Whatever their ultimate outcome, these cases will certainly have a significant impact on the future of overtime class actions in Canada and will have a potential impact on how businesses are run in Canada,” says David O’Connor, partner in the Toronto-based law firm Roy Elliott O’Connor LLP and one of the lawyers spearheading the cases against CIBC and Scotiabank, as well as another huge overtime suit against Canadian National Railway Co. of Montreal.

Henry Juroviesky, the managing partner at Juroviesky LLP in Toronto, makes a similar prediction with respect to the overtime class-action cases he is leading against BMO Nesbitt Burns Inc. and CIBC World Markets Inc. , both based in Toronto. He says these suits, which could end up forcing the banks’ investment arms to pay sales staff overtime in addition to commissions “could put a serious dent in their current business model.”

All these cases have a long way to go, and one or more may end up in the Supreme Court of Canada before it’s decided whether or not the banks owe their employees any of the more than $1 billion claimed in these suits. Nevertheless, the mere fact that the suits have been launched, challenging bank overtime practices in court, has already taken its toll on financial services institutions and other businesses, according to Donna Gallant, an em-ployment lawyer and partner in Toronto with Fasken Martineau DuMoulin LLP.

“When these proceedings came to light,” she says, “many employers — both federally and provincially — looked at their overtime and asked themselves: ‘What are our policies? What are our record-keeping policies? How do we know when people are working? And, are we paying overtime appropriately?’ We have found that employers are now much more conscious of the statutory requirements regarding hours of work and overtime.”

Changing overtime policies and procedures can involve a significant upheaval and major expenses, O’Connor observes, as firmwide processes and technologies may need to be upgraded or replaced.

As a result, many people in the financial services sector are keeping a close eye on the progress of the overtime class-action cases. Yet the view is currently murky, as even lawyers are struggling to reconcile the diametrically opposite conclusions that the judges have reached in the two leading cases.

Says Gallant: “It’s obvious that, somehow, those have to be reconciled.”

In both cases, the courts are considering the question of whether the cases should be certified as class actions and then go to trial, not the fundamental merits of the allegations being made on behalf of the employees.

What the courts have to decide in each case is whether all the individual claims of thousands of employees across the country have enough in common that they can be dealt with in one lawsuit — a class action — rather than be broken up into a huge number of individual cases.

From a practi-cal point of view, O’Connor maintains, a decision not to certify a class action would effectively deny the employees any opportunity to have their claims tested in court: “A class action, in our view, is the only effective way to resolve thousands of claims because there is not a system in place that could handle that load.”

Also, he adds, a class action provides the employees with an opportunity to confront their employers as a group, whereas they would not want to do so individually because “there is a natural fear about challenging the person who signs your cheque at the end of the week.”

In the CIBC case, a claim for unpaid overtime is being made on behalf of 31,000 front-line bank employees in branches across the country over a period dating back to 1993. The lead plaintiff, Darlene Fresco, alleges that the bank’s overtime policies are illegal in that they failed to comply with the Canada Labour Code requirement that statutory overtime be paid and that the bank also failed to keep proper records of employees’ hours of work.@page_break@In a decision released last month, however, Ontario’s Divisional Court confirmed an earlier court ruling that the CIBC case should not be certified as a class action. The court rejected the claim that the labour code had been violated and found there was no evidence of systemic violations or common issues shared by all the employees. This was a split decision, endorsed by two judges, with a third offering a dissenting opinion. O’Connor says his firm is seeking leave to appeal.

On the other hand, the $300-million class-action suit brought by Scotiabank employee Cindy Fulawka on behalf of 5,300 sales staff was certified earlier this year in the Ontario Superior Court of Justice , a ruling that has been appealed by the bank, with an appeal date set for December.

In the Scotiabank case, the court accepted the plaintiffs’ claim that there were systemic defects in the bank’s companywide overtime policies and procedures that could be considered a common issue suitable for considering in a class-action suit. For example, the bank had a policy that overtime would be paid only if approved in advance, yet the nature of the job sometimes required sales staff to respond to unanticipated requests from customers that might mean extending calls or meetings after regular business hours without any opportunity to obtain pre-approval. The situation was, according to the judge who certified the class action, a catch-22.

Both the Scotiabank and CIBC suits are so-called “off the clock” cases, involving employees who are paid an hourly rate and who claim that they were denied the overtime pay that was due to them.

The CN case, like the CIBC World Markets and BMO Nesbitt Burns cases, is a “misclassification” case, in which it is alleged that the employees were wrongly classified as exempt from overtime pay rules.

The CN case, which involves a $300-million claim on behalf of 1,500 front-line supervisors, has been certified as a class-action; this ruling is also under appeal. This case, which clearly provides encouragement for plaintiffs’ lawyers in other similar cases yet to be certified, could also have far-reaching implications if the claims are ultimately upheld at trial, Gallant notes: “It could have serious consequences for other institutions if they have classified people as managers using similar criteria.”

For those keeping score, the current tally in the most recent trio of overtime class actions is 2-1 in favour of certification. Plaintiffs’ lawyers can also take some comfort in the fact that the one decision against certification was opposed by one of the three judges on the case.

O’Connor says he is encouraged and “cautiously optimistic” that he can convince Appeal Court judges that it is appropriate to certify these cases so they can proceed to trial. But he and other lawyers agree that these cases still have a long way to go even before the merits of the plaintiffs’ allegations can be tested in court.

Overall, Gallant says, the three cases are important because they demonstrate the possibilities of overtime class-action suits on a large scale. “It’s something we have not had a lot of experience with in the past,” she adds, noting that these cases now give non-unionized employees a way of getting together in a group to make a claim.

Nevertheless, Gallant does not expect to see a lot of new cases along the same lines. That’s simply because there are not that many federally regulated employers with huge workforces.

She says financial services firms are likely targets for overtime class actions because they are federally regulated and subject to the overtime provisions of the Canada Labour Code. “Many other employers are subject to the employment laws in place in the province where they work,” she says, “so, it may be more difficult to amass the employees that would make a class action feasible.”

And, given that employers have learned from these cases and have an opportunity to improve their overtime procedures, there are not necessarily many more situations that are ripe for a class-action suit, O’Connor adds. “We haven’t launched actions against every employer,” he says. “I understand that a lot of organizations do get it right.” IE