Bill 66 – New Poster and Overtime Rules

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:

1. Employers are no longer required to post the Employment poster in the workplace. Previously the ESA mandated Employers post the employment standards poster in the workplace;
2. Employers no longer require the Director of Employment Standards (the “Director”) approval to make agreements that allow their Employees to exceed 48 hours of work in a work week. Previously, an Employer had to apply to allow certain of their Employees to work in excess of 44 hours per week;
3. Employers no longer require the Director’s approval to make agreements that allow Employers to average their Employee’s hours of work for the purpose of determining the Employee’s entitlement to overtime pay. Previously, Employers had to apply for permission from the Director to do so. An Employer can now enter into an averaging agreement directly with its Employees; and
4. The Employee’s hours may be averaged in accordance with the terms of an averaging agreement between the Employee and the Employer over a period that does not exceed four weeks. Previously, Employers were only allowed to average hours worked over a two week period.

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.

For example:

Before:

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.

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.