Employment Standards Act
Section 22(1), under Part VIII of Ontario’s Employment Standards Act, 2000 (“ESA”) states that “an employer shall pay an employee overtime pay of at least one and one-half times his or her regular rate for each hour of work in excess of 44 hours in each work week or, if another threshold is prescribed, that prescribed threshold.” Non-managerial and non-supervisory roles are subject to overtime payment provision under Ontario’s – Employment Standards Act. Employees who work over 44 hours per week are owed overtime pay. However, there are some situations that may lead to confusion on how to calculate overtime pay.
Who is Entitled to Overtime Pay?
While there are exceptions, most employees are entitled to overtime pay after they have worked forty-four (44) hours in a work week. This includes full-time workers, part-time workers, student worker, casual workers, etc. It does not matter whether an employee is paid on hourly rate or has a fixed salary, they are entitled to overtime pay. There are some workers who are excluded from the ESA overtime provisions. These employees include, but are not limited to:
- Managers or supervisors if the work they are doing is managerial or supervisory. Managers and supervisors may be entitled to overtime pay if the work they are doing is not managerial or supervisory, but this will vary on a case-to-case basis and will depend on the details of the situation;
- People who are employed as superintendents, janitors, or caretakers of a residential building in which they reside;
- An Information Technology (IT) professional;
- Duly qualified practitioners of architecture, law, professional engineering, public accounting, etc.
A full list of employees who are excluded from the ESA overtime provision can be found in Ontario Regulation 285/01. One method of calculating pay is by giving an employee a yearly salary divided by the amount of pay periods within the year without set weekly hours. If this is the case, overtime pay will be subject to provisions of the Employment Standards Act (ESA). Weekly earnings are then divided by 44 and overtime pay will end up being one and one half (1.5) times that amount.
Alternatively, if an employee has set hours and is paid in weekly installments, employers will have to make adjustments to comply with the legislation. If your set hours are 42 per week, hours worked above 44 hours will be paid at one and one-half times your weekly salary, divided by 42. For hours worked between 42-44, employees will be given their average hourly rate. If an employee is making an hourly rate plus commission, the overtime worked will have to reflect this amount.
Averaging Periods for “Overtime”
Generally, overtime is calculated on a weekly basis. However, this can be changed by agreement between the employee and employer. While sometimes this will allow overtime to be earned on a daily basis, it is much more likely that the agreement will be for overtime to be calculated over a longer period of time than a week using an averaging agreement. The averaging period can be for two or more weeks, up to a maximum of four weeks. The employee’s hours over this period would be averaged per week, and they would qualify for overtime pay if the average hours worked per week exceeds forty-four (44) hours. For example, if an employee worked a total of ninety (90) hours over the two-week averaging period, they worked an average of forty-five (45) hours per week. This means that the employee is entitled to one overtime hour per week, or two overtime hours in total.
If your employer is requiring you to work over-time, ensure you are given an agreement in writing. Also ensure that you are provided with an information sheet about your hours worked and how overtime pay will be calculated. Furthermore, employers and employees can agree that instead of receiving over-time pay, they can get paid time off in lieu of overtime pay. This is usually called “banked” time. If an employee agrees to bank overtime hours, they must be given 11/2 hours of paid time off for every hour they worked overtime. It is important to note that paid time off must be taken within three months during the week that an employee earned overtime. Alternatively, if there is a written agreement, paid time off may be taken within twelve months. Lastly, if an employee is terminated before they took paid time off, they are entitled to receive payment for banked time. Employees must receive this no later than seven days after their employment end date or on the next pay day. Many categories of workers are exempt from overtime pay under the current legislation such as lawyers, high level managers, IT professionals and workers in health care.
If you are an employer, it is best to ensure that you address overtime and hours of work questions in employment contracts and in workplace policies. If you are an employee working regular overtime hours, ensure that you know your legal rights and entitlements to overtime pay. Overtime laws vary across Canada. It is important to be cognizant of the regulations that apply to you and your company.
Paid Time Off Instead of Overtime Pay
An employee and employer are allowed to have an agreement where the employee will receive paid time off instead of overtime pay. The employee must be given 1.5 hours of paid time off work for each hour of overtime worked. If the employment of a worker ends before they have taken their paid time off, they must receive overtime pay for their “banked” time.
Contact experienced Toronto employment lawyer Stacey Ball to set up a consultation. Our office is located in Toronto, Ontario, and handles various employment law matters, including wrongful dismissal. If you have questions regarding overtime pay, please consult a lawyer for advice. We can also be reached at 416-921-7997 extension 225.