Character of employment and overtime pay, Ontario Bar Association Newsletter, Vol. 14, No. 4 (August 2013)

In Aristotle’s view, “we are what we repeatedly do.” The validity of this proposition cannot be taken for granted in the context of employment relations. If a manager repeatedly performs non-managerial tasks, does it destroy the essential character of his managerial position so as to entitle him to overtime pay? This is a question of degree, not of the kind of the individual acts performed. In Tsakiris v. Deloitte & Touche LLP, the Superior Court of Justice, for the first time, judicially considered statutory provisions that deal with the overtime pay exemption for managers. The Court’s analysis is both helpful and troubling. Helpful, because it provides guidance in making determination of whether the character of employment is managerial for the purpose of the overtime pay; troubling, because the analysis is incomplete. In addition, Tsakiris appears to suggest that a company’s internal organizational structure, and not traditional managerial indicia (e.g. ability to hire, fire or otherwise affect the working lives of others), is determinative of their managerial employees’ entitlement to overtime pay.

Just Cause: Unwarranted

In Tsakiris, a 33-year old plaintiff operated at the highest level below partner, that of senior manager in Deloitte’s International Tax department. Deloitte fired him for cause for allegedly filing fraudulent expense reports. The Court determined that Deloitte did not have cause for dismissal and awarded the plaintiff 10 months’ pay in lieu of notice for 8 years of service. Like in Love v. Acuity Investment Management Inc., the factors that lengthened the plaintiff’s reasonable notice were his “highly specialized nature of the work” and “likelihood of finding new employment”. Tsakiris reinforces the notion that the character of one’s employment is capable of attracting a significantly longer period of notice.

Mitigation: Reasonableness of Hope

In an attempt to minimize damages, Deloitte unsuccessfully argued that the plaintiff failed to mitigate his losses by refusing to accept a generalist tax position in a small accounting firm, because he was hoping to secure an international tax position with a large public accounting firm. In support of its argument, Deloitte relied on the British Columbia Court of Appeal decision in Coutts v. Brian Jessel Autosports Inc., which stands for the proposition that the hope of securing a position that did not yet come into existence, is both unrealistic and unreasonable. Justice Penny refused to follow Coutts, stating: “the plaintiff was entitled to seek a position commensurate with his level of expertise and skills and was not obliged to seek a lesser paying, generalist position until he had completed a reasonable search for comparable employment.” In coming to this conclusion, Justice Penny accepted the plaintiff’s evidence that he “held a reasonable belief based on advice from his recruiters that some international tax opening were in the offing.” Like in Tsakiris, in Chandran v. National Bank, 2011 ONSC 777, the court also refused to follow Coutts, because it was of the view that Mr. Chandran had the right to seek “to replace the job he lost”. Taken together, Tsakiris and Chandran stand for the proposition that, in certain circumstances, the dismissed employee is entitled to take some time to make attempts to replace the job he lost, before changing his strategy and giving up hope of replacing that job.

Overtime Pay: Managerial Exemption

As part of his quest for damages, the plaintiff sought, albeit unsuccessfully, to persuade the Court that, although he occupied the position of senior manger, his job was not managerial/supervisory in character and, as such, he was entitled to the statutory overtime pay, which is triggered when an employee works more than 44 hours in a week. In subsection 8(b), Regulation 285/0111 provides that the right to overtime pay applies to all employees, expect those whose “…work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis”. The term character of position is not comprehensive without an effort. “Character” does not mean the individual acts that make up the particular job, but instead, it means “feature, trait, essential particularity, nature, sort”.

To determine whether an employee’s job is truly managerial/supervisory, Justice Penny endorsed a two-step approach propounded by the Ontario Labour Relations Board’s jurisprudence: (1) there must be a determination of whether the character of the employment is managerial or supervisory; If the answer is yes, then there must be a determination of (2) whether the individual performs non-managerial/non-supervisory tasks; and, if yes, whether these tasks are done on an irregular or exceptional basis.

In Tsakiris, the plaintiff argued that while he was a manager, he was supervised and assigned work by senior managers. Although he was involved in coaching and the annual performance reviews of subordinate staff, he could not hire or fire staff. Justice Penny brushed these traditional managerial indicia aside stating: “in a large organization like Deloitte, this was also true of any individual partner. Hiring, firing, final performance reviews, salary increases, bonuses, etc., were not decisions made by individuals but resulted from a process involving a number of partners and staff”. This observation is a cause for concern for managerial/supervisory employees. It allows employers to argue that their company’s internal organizational structure (that is capable of unilateral change), and not traditional managerial indicia, is determinative of their managerial employees’ entitlement to overtime pay, even though their status as a “manager” might be nominal.

Having acknowledged that: “as senior manager, he continued to do research and draft memo,” “prepared the final bill subject to the engagement partners sight off” Justice Penny concluded that the plaintiff did “not regularly perform non-supervisory or non- managerial duties.” Arguably, the requirement for the plaintiff to continue to draft memos and perform highly technical research, resulted in a regular pattern that necessitated him performing these non-supervisory/non-managerial duties on a basis that cannot be characterized as “irregular”. Given the presence of the disjunctive word “or” in subsection 8(b) of Regulation 285/01, which indicates the legislature intended the overtime exemption to be available to a managerial/supervisory employee who performs non-managerial tasks on either “an irregular basis” or “an exceptional basis”, Justice Penny did not consider whether the plaintiff performed non-managerial duties on an “exceptional” basis, nor did he consider the plaintiff’s claim to overtime pay in the light of subsection 22(9) of the Employment Standards Act (“ESA”).

Subsection 22(9) of ESA allows overtime pay to be paid to an employee in a managerial/supervisory position, who due to irregular or exceptional circumstances, finds himself in a situation where the duties of his position require him to perform both exempt work and non-exempt work, to such an extent that non-exempt work is 50% or more of the time spent working during that work week. Consequently, despite finding that the plaintiff’s performance of non-managerial tasks did not alter the character of his managerial position, the Court should have considered whether the plaintiff devoted 50% or more of his working time in a week to the non-managerial duties. Such an assessment is of particular importance, when, as in the case at bar, the Court concluded the plaintiff’s non-managerial duties “were part and parcel of his supervisory and managerial duties.” The Court’s failure to do so renders its analysis of the plaintiff’s entitlement to the statutory overtime pay incomplete.

Conclusion

The Tsakiris decision is a welcome step towards an interpretation of treacherous statutory provisions, which are designed to provide managerial/supervisory employees with the statutory overtime pay. It reminds us of the well-accepted principle that exemption provisions in remedial legislation, such as the ESA, are to be narrowly construed and painstakingly analyzed in the context of a unique factual matrix of each case. The Court’s pronouncement that “even if I had reached the opposite conclusion, the plaintiff failed to adduce the necessary evidence to permit a calculation of his overtime” sends a clear message to managerial/supervisory employees to document hours worked performing non-managerial/non-supervisory tasks in order to substantiate a claim for the overtime pay.