Lawsuit Alleging Breach of The Employment Standards Code Allowed to Proceed

By Peter Mueller on 2015/01/07

The Employment Standards CodeA recent Manitoba Court decision has given employers cause for concern about potential liability under The Employment Standards Code (“the Code”).

The decision in Hutlet v. 4093887 Canada Ltd. and 4093879 Canada Ltd. involved a claim for unpaid overtime by an employee against her employer. The employee had worked for the employer as an executive assistant from 1995 to 2008, during which she alleged that she had worked overtime hours and that she had not been paid for those hours at the overtime rate of 150% of her regular wage rate – a right under the Code.

Rather than making a complaint under the Code, the employee opted to sue the employer in court for the allegedly unpaid overtime.

The employee filed her claim in court in 2011 – approximately 3 years after her relationship with the employer had ended. In response, the employer attempted to get the employee’s claim thrown out, arguing that the employee had no right to sue in court for a breach of the Code. The employer argued that unless the employee was entitled to overtime wages under her employment agreement (for which she could sue for breach of contract), her only recourse to recover unpaid overtime wages was through the complaint process under the Code.

What is the practical difference between an employee recovering unpaid overtime wages through the court versus through the complaint process? Besides procedural issues, a significant difference is that the limitation for liability for an alleged breach of contract is normally six years. However, the complaint process under the Code normally caps liability for unpaid overtime wages going back only six months, for orders issued by an Employment Standards officer.

The Court concluded that the Code does provide a right for employees to sue for a breach of the Code in court. The rationale included that the right existed in previous versions of the Code, and that subsequent changes to the Code did nothing to change it.

The employer argued alternatively that if employees do have the right to sue in court, then their claim must be capped to the previous six months. The Court rejected this argument, saying that the six month cap applicable to the complaint process had no effect of reducing the six year cap applicable in court.

The implications extend beyond claims for unpaid overtime wages to other benefits under the Code, such as vacation pay and holiday pay. While other recent court decisions from Manitoba have suggested that there is no claim in Court for a breach of the Code, this decision increases employer risk.

Note that this was not the ultimate decision on the merits. This was the outcome of a “motion to strike” that would prevent the case from proceeding at all. The decision allows the case to proceed. It may also be appealed to the Court of Appeal. There are also conflicting decisions in other provinces. This story has several more chapters, and we will keep you updated.

Don’t hesitate to contact us if you wish to discuss how to prevent or limit the risks that may result from this decision.

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