Bill 66, Restoring Ontario’s Competitiveness Act, 2019 received Royal Assent (the process by which a bill becomes an act of Parliament and part of the law of Canada) on April 3, 2019.
This Act amends the Employment Standards Act, 2000 in the following ways:
What does this mean?
Previously, if the Director provided approval for an Employer to enter into an averaging agreement with its Employees, and the Employer did so, then the Employer could average the hours of work an Employee worked in a two week period to determine the amount of overtime to pay.
Now an Employer can enter into an averaging agreement with its Employees with no need for Director approval. The averaging agreement can allow an Employer to take all the hours worked by an Employee over four weeks, divide it by four, and only pay overtime on the amount of hours worked by that Employee over and above the 48 hours per week.
Week 1 – worked 45 hours
Week 2 – worked 48 hours
Week 3 – worked 37 hours
Week 4 – worked 45 hours
Pursuant to the previous version of the ESA, if the Employer had the Director’s permission, and entered into an averaging agreement, the Employer would have to pay five hours of overtime for the first two weeks and no hours of overtime for the second two weeks:
Week One 45 hours + Week Two 48 hours = 93 hours
93 hours/2 = 46.5 average each for Week One and Week Two
Hours worked each Week 46.5 – Maximum hours allowed per week at regular pay 44 hours = 2.5 hours
2.5 hours of overtime for each of Week One and Week Two
= 5 hours total overtime to be paid
Week Three 37 hours + Week Four 45 hours = 82 hours
82 hours/2 = 41 average each for Week Three and Week Four 41 hours each week is less than the maximum hours allowed per week at regular pay 44 hours
= 0 hours total overtime to be paid
Now, if an Employer and an Employee enter into an averaging agreement pursuant to the new ESA amendments:
Week One 45 hours + Week Two 48 hours + Week Three 37 hours + Week Four 45 hours = 175 hours
175 hours/4 = 43.75 average each for all four weeks
Maximum hours allowed per week at regular pay 48 hours = 0 hours total overtime to be paid for the four weeks
What this means for Employees
Employers cannot force you to enter into an averaging agreement. If your Employer asks you to do so, make sure that you obtain legal advice before you agree to this. Your Employer may be asking you to reduce your pay a sufficient amount that it may be considered constructive dismissal. Make sure to explore all your options with an employment law lawyer.
What this means for Employers
This may be a way to reduce your overall labour costs; however, there may be unseen costs that a lawyer can explain to you. All Employers and Employees have an Employment Agreement, even if there is nothing in writing. You may be in breach of that Employment Agreement if you attempt to unilaterally have your Employees enter into an averaging agreement. There is the right way and the costly way of making changes to how and how much you pay your Employees. See a lawyer first before making any significant changes. An Employment lawyer can guide you through the process.
Also – your original Employment Agreements may have spelled out that the Employee is to work 44 hours before beginning to earn overtime pay. That Agreement still supersedes the new changes to the ESA and means you still have to pay overtime over and above the 44 hours per week. Speak to a lawyer if you need to amend any Employment Agreement so as to allow for a 48 hour work week before paying for overtime.