Taking a cue from their U.S. counterparts, Canadian plaintiffs lawyers have identified unpaid overtime as the next employment issue ripe for litigation, with several Canadian companies already accused of violating employment statutes by failing to pay their employees for overtime work.

In light of the increasing risk of overtime pay disputes, Canadian employers must be diligent in ensuring that their overtime policies are compliant with all relevant federal and provincial employment laws and are being strictly implemented and enforced, employment lawyers say.

Three major Canadian companies were sued last year for allegedly violating federal and provincial labor laws mandating overtime pay for employees who worked above hour limits dictated by the statutes. The first unpaid overtime lawsuit, which is seeking class action certification, was filed against Canadian Imperial Bank of Commerce in June 2007, while similar lawsuits were launched against accounting firm KPMG L.L.P. in August and the Bank of Nova Scotia in December (see box).

Unpaid overtime lawsuits will be the next "big wave" of class action filings in Canada, said Henry Juroviesky, a partner with Juroviesky & Ricci L.L.P. in Toronto who filed the lawsuit against KPMG on behalf of an employee who asked for and was denied overtime pay.

As class action overtime lawsuits have exploded in the United States in recent years, Canadian lawyers are beginning to embrace such suits, emulating the principles and provisions established in U.S. court decisions. "The American case law was certainly in our minds when we were drafting the claims," said Douglas Elliott, a partner at Roy, Elliott, O'Connor in Toronto who filed the complaints against CIBC and Scotiabank.

The three complaints are just the beginning, as class action lawsuits continue to gain traction in Canada and plaintiffs lawyers explore their use in the employment standards arena, lawyers say.

"If these actions are disposed of successfully by the defendant organizations, it may be that the enthusiasm of the plaintiffs bar may die out," said Brian Johnston, a labor and employment lawyer with Stewart McKelvey in Halifax, Nova Scotia, who represents employers. "Certainly, if there's some favorable resolution to the plaintiffs, it may act as some form of encouragement for future lawsuits."

Federally regulated institutions such as banks are seen as particularly viable targets for unpaid overtime lawsuits because they are governed by a federal statute known as the Canada Labour Code, which plaintiffs attorneys are using as the basis for class action claims. In contrast, class actions become more complicated if the company is regulated at the provincial level, because complaints must address each relevant provincial employment statute, which may differ from province to province.

Scotiabank's overtime policy is based on the federal statute and CIBC says it pays overtime for work in excess of 37.5 hours per week, more stringent than the federal statute's requirement that overtime be paid for working more than 40 hours a week. "When eligible employees do work overtime, it is our explicit policy to compensate them for having done so," CIBC said in a statement. KPMG did not return telephone calls and did not release any statements.

Many financial institutions tend to have a "culture of volunteerism" in which employees are tacitly encouraged to work longer hours to be promoted, but the federal law mandates overtime be paid whether the employer requires or permits the work, said Louis Sokolov, a partner with Sack Goldblatt Mitchell L.L.P. in Toronto, which is jointly pursuing the complaints filed against CIBC and Scotiabank with Mr. Elliott's firm. "It's there to discourage subtle or not so subtle pressures in the workplace for employees to start donating their time," he said.

Companies often mistakenly believe their employees fall within limited exceptions to employment laws, leading them to improperly deny overtime pay requests. "Really, the burden is on the employer to demonstrate the employee is exempt from the overtime provisions," Mr. Juroviesky said.

Another misperception is that salaried employees in Canada are not entitled to overtime pay, but the employment statutes distinguish between management and nonmanagement employees who are eligible for overtime pay. "The fact that they're getting a salary is no defense at all," Mr. Elliott said.

In response to the high-profile suits, many Canadian employers have launched reviews of their overtime policies to ensure compliance with the applicable statutes, lawyers say.

Employers with overtime policies have to carefully examine whether these policies are actually being followed or implemented by their employees, employment lawyers say. For example, if a company's policy requires prior written approval for overtime, the company must ensure that the requirement is being implemented and strictly enforced.

"It's not good enough from a statutory or regulatory perspective that the policy says they're not supposed to work the overtime," said Jonathan Dye, a partner and employment law specialist with Heenan Blaikie L.L.P. in Toronto. "If they worked the overtime, you have to pay them."

Employers must also ensure that accurate records are kept because employment laws place the onus on them to maintain accurate records and a failure to do so may benefit the employee in a court proceeding. "That is where (employers) seem to be in trouble the most," Mr. Dye said.