Although Canada's experience with "overtime" class actions is relatively recent, there have been some significant developments. One such development has occurred in the "misclassification" class action McCracken v. Canadian National Railway Co. A question that has been lingering in the context of overtime class actions is: Can the provisions of the Canada Labour Code be seen as implied terms of employment contracts, and if so, can they be the foundation of a direct claim in breach of contract? McCracken has now answered this question in the affirmative.
In this recent decision of Justice Perell of the Ontario Superior Court of Justice, certification of the class action against CN Railway Co. was granted despite some initial concerns regarding commonality. The claim, brought by the proposed representative plaintiff Michael Ian McCracken, seeks a total of $300 million in damages. The claim alleges that CN intentionally classified all of its "first-line supervisors" as "managers" in order to deprive them of overtime and holiday wages payable under the Code.
While the decision is instructive in revealing how commonality issues will be confronted in cases of "misclassification," more important is Justice Perell's finding that:
The effect of a conclusion that courts have a jurisdiction to enforce the statutory right [referring to the Code] is that the right is an implied term of the contract of employment by force of statute. In other words, as a matter of law, the statutory provisions become contractual stipulations.
Justice Perell went on to clarify that his conclusion did not merely mean that it was possible that a cause of action for breach of an implied contract existed, but that the representative plaintiff actually had a cause of action for breach of a statutory implied term.
It is not clear if this decision settles the debate of whether a civil claim can be advanced directly under the provisions of the Code. Prior to McCracken, another overtime class action, Fulawka v. The Bank of Nova Scotia, considered the same issue and came to the opposite conclusion. The Fulawka claim is currently only months away from being re-considered on appeal. In Fulawka, Justice Strathy decided that the Code could not be used to bring a civil claim. However, Justice Strathy went on to apply it indirectly by concluding that it could influence and inform existing contractual duties. By comparison, Justice Perell's decision, which specifically discussed Justice Strathy's, provided extensive reasoning as to why the Code could be used as the basis of a direct civil claim. In fact, Justice Perell remarked that his methodology would have allowed Justice Strathy to do directly that which was done indirectly. How the Divisional Court chooses to deal with this issue on appeal remains to be seen. However, there are compelling reasons for why Justice Perell's decision may be seen as more enticing. For instance, Justice Perell undertook a thorough analysis of the Code and several of its provisions; this was not done in the Fulawka decision.
It is likely that McCracken, like the other major overtime class actions, will be the subject of an appeal. Until then, it may delineate the basis on which class claims will be brought against federally regulated employers.
McCarthy Tétrault Notes
This conclusion is important to employers and class action defendants generally. If the McCracken analysis is affirmed at the appellate level, there will be little doubt that the Code can be used as a vehicle to launch a direct civil class action claim. As a result, employers should be mindful of their definitions of "managers" or "supervisors" and ensure compliance with Code provisions as they will be held to be contractual stipulations of the employment relationship.
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