Fresco v. CIBC: Divisional Court Adds to the Turbulence in Overtime Class Action

Written By Mike Eizenga, Eric Hoaken and Ranjan Agarwal

On September 10, 2010, the Divisional Court released its decision in Fresco v. Canadian Imperial Bank of Commerce. In a 2-1 split decision, the Divisional Court upheld the motion judge's decision not to certify the class action. Fresco is the first in what is likely to be a trilogy of overtime class actions that will be decided by Ontario's appeal courts in the coming year. In Fulawka v. Bank of Nova Scotia and McCracken v. Canadian National Railway Company, class actions for unpaid overtime wages were certified. Both decisions are under appeal.

Background

Darlene Fresco commenced a class action against CIBC claiming that there had been a systematic breach of CIBC's duty to compensate eligible employees for overtime work. She alleged that the bank's policies and practices placed her and other front-line employees at risk of not being compensated for overtime work, and that CIBC breached its duty to establish a company-wide system to ensure appropriate compensation for overtime work. Fresco proposed to represent a class of 31,000 current and former employees of CIBC dating back to 1993. Her claim is for $600 million in damages.

In 2009, Justice Lax denied the plaintiff's motion to certify the class action. Justice Lax held that none of the nine proposed common issues would significantly advance the litigation and there was no evidentiary foundation for the appellant's assertion of systemic wrongdoing by CIBC. The common issues proposed by the plaintiff were:

1. Are CIBC's overtime policies contrary to the Canada Labour Code?
2. Did CIBC have a duty to prevent or not permit or encourage unpaid overtime and, if so, did it breach that duty?
3. Did CIBC have a duty to accurately record hours worked and, if so, did it breach that duty?
4. Did CIBC have a duty to implement an effective and reasonable system to ensure that its other duties were satisfied?
5. What are the terms of the class members' employment contracts with respect to hours of work and payment, and were those terms breached?
6. Was CIBC unjustly enriched by failing to pay overtime?
7. Do any limitation periods apply to the claims?
8. What remedies are the class members entitled to?
9. Is CIBC liable on a class-wide basis?

Justice Lax also found that the plaintiff's claim that CIBC's overtime policy was unlawful because it conflicted with the Canada Labour Code did not disclose a cause of action. In considering the evidence filed on the motion, Justice Lax struck out an affidavit from the plaintiff's lawyer, and disregarded certain expert evidence about the prevalence of unpaid overtime in federally-regulated industries. Justice Lax awarded $525,000 in costs to CIBC.

The Divisional Court's Decision

Justices Swinton and Ferrier denied the plaintiff's appeal. They held that Justice Lax was correct in finding that the plaintiff's claim that the overtime policy violated the Code did not disclose a cause of action. They also held that Justice Lax made no overriding error in finding that the plaintiff failed to adduce evidence to establish that there is some basis in that the proposed common issues in the litigation are in fact common to all of the class members. For example, Justices Swinton and Ferrier agreed that the only way to prove systematic wrongdoing was through an examination of individual claims. They also agreed that the bank's alleged duties are not established either by CIBC's overtime policy or by the Code. Simply, the plaintiff failed to show that there was a systematic practice of unpaid overtime at CIBC and, as such, the common issue criterion was not met.

Justice Sachs dissented on the substantive issues. She would have allowed the plaintiff's claim that the bank's overtime policy violated the Code, and would have certified most of the plaintiff's proposed common issues on the grounds that the evidence adduced was sufficient to meet the otherwise low evidentiary burden on the plaintiff.

The Court was unanimous in agreeing with Justice Lax's decision on the other evidentiary issues and costs.

Though some commentators have suggested that the motion judges' decisions in Fresco and Fulawka represent two different ideological views about overtime and employment class actions, the majority of the Divisional Court in Fresco made clear that this was not the case. Justices Swinton and Ferrier found that there was an evidentiary basis to finding systemic wrongs in Fulawka. As Justice Swinton plainly noted in her reasons: “Each motion judge applied the legal principles concerning common issues to the facts and pleadings before them.”

That view is in contrast with the Divisional Court's decision granting leave to appeal in Fulawka. Justice Greer held on that motion that Fresco and Fulawka were in conflict. In her view, the common issues in both cases substantially overlap and are similar. The only difference she identified was that the cases were started six months apart and involve two different financial institutions. She also found that the banks' overtime policies were “not far apart” and the banks relied on the same experts. Given that Justice Lax in Fresco and Justice Strathy in Fulawka came to opposite conclusions, she was of the view that there was good reason to doubt the correctness of the decision in Fulawka.

Looking Forward

Given the financial stakes at issue for both the plaintiff and her lawyers, and in view of Justice Sachs' dissent, it is not surprising that the plaintiff will seek leave to appeal the Divisional Court's decision to the Court of Appeal for Ontario. In the interim, the appeal in Fulawka is to be heard in December 2010. The decision in McCracken has also been appealed. Though Fresco provides some answers for the parties, it seems to be clear that the final chapter on overtime class actions is yet to be written.