Vacation, OT, Public Holiday & Payroll Considerations
The recent $80 million class action lawsuit filed by a Toronto lawyer on behalf of RBC employee(s), highlights the importance of effectively managing employee hours, operating payroll correctly and doing right by your employees when it comes to their compensation.
While we hear a lot about how “employees quit their managers and not their company/roles”, we don’t hear a lot about employees bringing multi-million dollar lawsuits for bad leadership or management. Employees will however, pursue the issue when it comes to inaccurate payroll calculations and non-remittances of monies owed to them. Thus, it would seem that it is indeed, all about the money!
In April 2019, the same law firm filed for an order to certify the first $80 million employee class action lawsuit against RBC Insurance Agency Ltd. and Aviva General Insurance Company, for underpaid vacation and public holiday pay on commission payments. The lawsuit is the first of its kind in Canada and seeks to have the class action time period run from 1993, when RBC insurance was founded. Aviva purchased RBC Insurance in January 2016.
This class action lawsuit alleges that commissioned salespeople should have been paid vacation and public holiday pay based on their total compensation, not just their base salary.
The latest (second) class action lawsuit, filed on August 2nd 2019, has now also named RBC Life Insurance Company as well and alleges that the company’s practice of calculating overtime pay, vacation pay and public holiday pay, violated the Employment Standards Act, 2000 (ESA).
According to lawyers representing the employees: “We’re leading employee class action lawsuits in Canada because employers are getting creative about circumventing the Employment Standards Act that has been in place since 2000“.
The claim in essence, states that commissioned salespeople were shortchanged because the vacation and public holiday pay that was paid to employees was based solely on their base salary, rather than total compensation. As a result, those employees are owed substantial back pay. This practice undercompensates these employees and deprives them of having real vacations and accurate pay.
As defined in the Employment Standards Act, 2000 (ESA), eligible employees (vacation with pay provisions in the ESA, do not apply to all employees and employers in Ontario. There are exemptions set out in the ESA and in the regulations.), must receive a minimum of 4 % (or 6% as eligible) of the gross “wages” (excluding vacation pay) that they earned in the 12 months for which the vacation is being given. If an employee’s contract or collective agreement provides a better vacation benefit than the minimum required, the employee may be entitled to a higher percentage of his or her gross earnings for vacation pay.
The term “wages” is clearly defined in the ESA: The “wages” earned on which the vacation pay is calculated includes:
- regular earnings, including commissions;
- overtime pay;
- public holiday pay;
- termination (notice) pay (NOT severance)
- allowances for room and board.
The allegations have yet to be proven in court, but if recent rulings are any indicator, things don’t look promising for the employer, especially if records and clear communication as to the application of vacation pay are not evident.
Key Employer Take Away for VACATION Calculation & Reconciliation
- Understand the difference between Vacation PAY and Vacation TIME.
- Understand the ESA definition and interpretation of vacation pay.
- Understand the ESA definition and interpretation of vacation time.
- Review guidelines for employers on WHEN to pay vacation pay.
- Be mindful of the relationship between Vacation and Public Holidays.
Key Employer Take Away for OVERTIME Calculation & Reconciliation
- Understand the basic definition of OVERTIME Pay.
- Use Agreements for Paid Time Off instead of Overtime Pay to your advantage.
- Similarly Have Averaging and Time off in Lieu Agreements in place, in writing, if the circumstances call for it.
- Review how calculating Overtime Pay is to be done.
- Be aware of what you CANNOT do as an employer.
- Consistency and adherence to Employment standards is key.
- As an Employer its always best to have “better than” or at-least “equal to” policies in place when it comes to managing Overtime, Vacation calculation and public holiday pay.
- When it comes to vacation allocation, calculation and reconciliation for employees, ensure that you have a clear process and practice in place for annual reconciliation or carry over amounts. Set a fixed date and stick to it.
- The same applies for Overtime – ensure that a company policy & process is in place for granting overtime, recording it, and then either paying out or providing lieu time for employees in accordance with Employment Standards regulations.
- Company policies should be clearly documented and well communicated to employees, with acknowledgements where possible.
- Provide employees with a venue to escalate concerns or questions and provide speedy and equitable resolutions that make sense and are in compliance with established labour practices & laws.
- If you’re not certain on how to proceed consult your local HR expert or a labour lawyer for guidance, before you do something that may cause risk for your organization and affect employee morale.
If you’re a Beneplan client, please call or email us to get help with these or any other organizational HR issue that you may face. Also, don’t forget the HR Toolkit section of your client login, for template and document resources that you can avail of.
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