Overlooked and Underpaid: Misclassifying “Managers” as Overtime Exempt

With more than 30% of Canadians working in the gig economy, the problem of employment misclassification is one that is increasingly in the spotlight. Cases like the one brought against Uber in Canada highlight how workers (mis)classified as independent contractors are vulnerable to labour abuses and exploitation; but there is another group of workers who also face the problem of employment misclassification and are routinely undercompensated: managers.

Managerial exemptions

Managers in the retail, food and beverage, and many other sectors frequently perform all of the same tasks as the employees they manage but are never paid overtime pay. Why? The reason is that federal and provincial laws across Canada carve out an exemption for managerial employees.

In Ontario, “a person whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis” [1] is not entitled to overtime pay and is also exempt from hours of work, rest periods and time off between shifts rules in the Employment Standards Act, 2000.

Similar exemptions exist in most other Canadian provinces. For example, in British Columbia, a person whose “principal employment responsibilities consist of supervising or directing, or both supervising and directing, human or other resources” or, a person who is “employed in an executive capacity” is not entitled to overtime pay, statutory holiday pay or hours of work protections.[2]

Which managers are really overtime exempt?

The rules in Ontario mean that while some managers are legitimately exempt from overtime pay and other employment standards, there are many “working managers” who are not exempt and who should benefit from employment standards protections concerning hours of work, rest periods and time off between shifts. These managers should also be paid overtime pay for any work they perform in excess of 44 hours per week, subject to industry specific rules.

There are two types of managerial employees who are frequently misclassified as being overtime exempt: (1) employees who manage other employees and perform at least some managerial tasks; and (2) employees who are “managers” in name only.

The first group of managerial employees perform a range of managerial functions like scheduling, supervision, and discipline of employees who report to them. The fact that these employees perform those duties is not in and of itself enough to take away their entitlement to overtime pay and other protections under the Employment Standards Act, 2000 in Ontario and equivalent legislation across Canada.

In Ontario, if a managerial employee regularly performs non-managerial tasks and they spend half or more than half of their time fulfilling those non-managerial duties during any given work week, they are entitled to overtime pay.[3]

For the purposes of hours of work, rest periods and time off between shifts rules, a managerial employee in Ontario only needs to perform non-managerial tasks regularly, even if for a very short period of time, in order to receive these protections.

Here is a common scenario that describes an employee that fits into the first group of employees who are frequently misclassified:

An Assistant Store Manager in Ontario is responsible for scheduling employees’ shifts and managing any problems that arise with their job performance. On a typical day, these duties take up no more than two hours of the Assistant Store Manager’s time. The rest of the day the Assistant Store Manager stocks shelves, operates the cash register, serves customers, and performs all the other tasks that regular employees perform. If an employee takes a break, the Assistant Store Manager will cover their duties. If an employee calls in sick, the Assistant Store Manager will cover their shift. There is no dispute that the Assistant Store Manager performs some managerial duties and is a manager, but they are still entitled to overtime pay when they work in excess of 44 hours in a week and are entitled to rely on the hours of work, rest periods and time off between shifts rules.

The second group of employees find themselves in a situation where their employers mislead them with job titles or other labels that ultimately deprive them of their minimum employment entitlements, including overtime pay. These employees might be called “managers”, but never perform any managerial duties like scheduling, supervision, and discipline of employees or other supervisory tasks. They may work long hours but are misclassified as being overtime exempt just because their job title contains the word “manager”.

Managers need to enforce their rights

Misclassification of “managers” as being overtime exempt is a widespread and underreported problem across Canada.

Managers need to take stock of the job duties they are performing on a day-to-day basis and look beyond their job titles to determine if they are being underpaid. Managers who are aware of their rights have successfully challenged their employers and received compensation for unpaid overtime pay in various sectors.

If you are a manager in name only, or a manager that regularly performs non-managerial tasks and are being denied overtime pay, contact us to discuss your rights.

[1] Exemptions, Special Rules and Establishment of Minimum Wage, O Reg 285/01, section 4(1)

[2] Employment Standards Regulation, BC Reg 396/95, s. 1(1), s. 34 and s. 36.

[3] Employment Standards Act, 2000, s. 22(9).