Overtime Rules in Ontario: A Compliance Overview

There is a common misconception that all salaried employees in Ontario, Canada, are exempt from overtime pay under the Employment Standards Act, 2000 (ESA). This belief, as well as a misunderstanding of any of the overtime provisions, can lead to serious consequences for employers.

This article clarifies the overtime rules, including those that cover overtime pay, lieu time, and the proper course of action for employers to take if they need their employees to work more than 48 hours in a week.

The Basics of Overtime Pay

In Ontario, employees are entitled to receive overtime pay at a rate of one and a half times their regular hourly wage if they work more than 44 hours in a week. This applies to both hourly and salaried employees unless they are subject to special industry-based rules or fall under specific exemptions outlined in the regulations. 

Examples of employee categories that are exempt from overtime provisions include:

• Managers and supervisors: Generally, employees in roles with the authority to hire, fire, and make significant decisions.
• Professionals: Licensed professionals such as accountants, doctors, and engineers.
• Certain salespersons: Employees whose primary duties involve selling or negotiating sales for their employer and who earn a significant portion of their income through commissions.
• Information technology professionals: Employees who are primarily engaged in software design and development or who are responsible for managing and operating information systems.

When determining eligibility for overtime, it is crucial for employers to assess each employee’s role based on the employee’s actual duties rather than title alone. For example, managers and supervisors are only exempt from overtime if they perform nonsupervisory or nonmanagerial tasks on an irregular or exceptional basis. If that does not accurately describe the employee’s duties, despite their title or the majority of their duties, they are entitled to overtime pay.

The ESA does not refer to the method by which the employer calculates an employee’s wages. Whether an employee is paid hourly or on a salary basis is not determinative, or even relevant, to that employee’s entitlement to overtime pay. To ensure compliance, an employer must analyze all of an employee’s duties in order to determine the employee’s right to overtime pay.

Lieu Time: An Alternative to Overtime Pay

Receiving “lieu time” allows employees to take paid time off (PTO) instead of receiving overtime pay. Employers and employees must agree in writing to lieu time rather than overtime pay. Many employers fail to recognize that the PTO must be provided at the same rate as overtime pay: one and a half hours of lieu time for each overtime hour worked. For instance, if an employee works four hours of overtime, they would be entitled to six hours of lieu time. 

Agreement to Work More than 48 Hours in a Week

While the overtime rules contemplate work in excess of 44 hours per week, the weekly maximum that employers can allow employees to work is generally 48 hours in a week. There may be situations where an employer wants an employee to work more than 48 hours in a week. In such cases, the employer is only able to permit this if it obtains the written consent of the employee it wants to work in excess of 48 hours. This consent must detail the terms and conditions under which the employee agrees to work these extended hours. The employer must also ensure that its employees are fully informed of their rights and of the implications of working extended hours by providing them with the latest publication from the Ontario Ministry of Labour related to hours of work and overtime.

The ESA also permits averaging agreements, which allow employers to average employees’ hours over a specific period greater than one week (up to four weeks) for the purposes of determining overtime entitlement. This means that if an employee works more than 44 hours in one week and less than 44 hours in another week within the period, the total hours can be averaged over the agreement period. These agreements allow for flexibility in scheduling and a potential reduction in overtime expenses, but they do not negate the need for consent before an employee exceeds 48 hours of work in a week.

What to Do if Overtime Has Not Been Paid

If an employer has not been paying overtime as required by the ESA, it’s essential to address this issue promptly. Noncompliance can lead to significant financial and legal repercussions for employers.

Andrea Leung is an attorney with Gowling WLG in Waterloo Region, Ontario. © 2024 Gowling WLG. All rights reserved. Reposted with permission of Lexology.