The Importance of Addressing Overtime in Employment Contracts

In Scheffler v Mourits Trucking Ltd., 2023 ABKB 139, the Alberta Court of Kings Bench recently held that an employee who brought a civil claim for unpaid overtime, rather than pursuing his claim through the established Alberta Employment Standards (“Employment Standards”) complaint process, was entitled to an overtime payment greater than the maximum limit set out in the Employment Standards Code (the “Code”).

Background

Division 4 of the Code sets out the requirements for overtime and overtime pay. Overtime must be paid to employees in accordance with these requirements even if an employment agreement does not address overtime.

Section 90 of the Code also addresses the limitation period for overtime orders. It states that an employee can make a claim for overtime going back 6 months before the date of the claim or the date of the employee’s termination.

If an employee is owed overtime, they have the option of either utilizing the complaint process provided by Employment Standards or filing a civil claim. Past decisions provide that even if an employee initiates a civil action for overtime, the employee’s recovery is still limited to the six-month limitation period set out in the Code, rather than the two-year limitation period which applies to civil claims.

In this case, Mr. Scheffler, a truck driver for Mourits Trucking Ltd. (the “Employer”), brought a civil claim against his Employer, alleging that he was owed $22,648.50 for working 719 hours of overtime. Notably, there was no written agreement between the parties regarding how overtime would be handled, and Mr. Scheffler’s claim for overtime relied solely on the entitlements set out in the Code.

Issue

The key issue was whether Mr. Scheffler’s claim should be limited to the amount of overtime he worked in the six months preceding termination of his employment.

Decision

The Court found that Mr. Scheffler was entitled to overtime greater than the six-month limitation period set out in the Code. The Court acknowledged prior decisions which found that when an employee sues for overtime, they are only entitled to the rights set out under the Code. However, the Court disagreed with the prior decisions, stating:

[21] I conclude, however, that while the Code establishes the right to overtime, it would be inequitable to constrain an employee’s recovery to the six-month limit under the Code when an employee uses conventional litigation instead of the Code. In my view, the remedies and their restrictions prescribed under the Code apply only when an employee engages the resources and collection mechanism available under the Code .

[22] Section 90(3) of the Code restricts an employee's claim for overtime to six months, but section 90(1) states that that relates to "[an] order made under this Division". Mr. Scheffler has not made this claim under that Division and therefore has not employed the resources and collection mechanism under the Code. [emphasis added].

The Court decided, and clarified, that because Mr. Scheffler sued the Employer in a civil action rather than relying on the recovery processes established by the Code, he was not restricted to the maximum recovery amount prescribed in the Code.

Key Takeaways: What does this decision mean for employers?  

This decision is concerning for both employers and the courts. While the decision creates uncertainty for employers, it also encourages employees to forgo established and efficient processes for resolving overtime disputes. By potentially increasing employee use of the courts to challenge workplace issues, the decision may exacerbate an already strained court system.

This case highlights the importance of ensuring that employees are paid correctly for overtime during the course of their employment so that employers are not surprised by a significant claim for overtime after an employee has been terminated. Employers should take steps to ensure their employment contracts or policies clearly address how employees should track and report overtime so that it is paid as it arises.

If you would like assistance or advice on this or other labour and employment matters, please contact a member of our Labour & Employment practice group.