Ontario Labour Relations Board
[1999] OLRB REP. SEPTEMBER/OCTOBER 856
3940-98-ES Mariposa Cruise Line, Applicant v. Scott S. Smith and Ministry of Labour, Responding Parties
BEFORE: David A. McKee, Vice-Chair.
APPEARANCES: Harold Rubin for the applicant; no one appearing for the responding party, Frank Camilleri for the Ministry of Labour.
DECISION OF THE BOARD; September 24, 1999
This is an employer appeal pursuant to section 68 of the Employment Standards Act R.S.O. 1990 Chapter E. 14 as amended ("the "Act") seeking a review of an Order to Pay issued by an Employment Standards Officer under section 65. The order was made in respect of monies the Officer found to be owing in respect of overtime worked by an employee, Scott S. Smith ("Smith"). There is no dispute about the hours actually worked, or that in certain weeks Smith worked in excess of 44 hours per week during his period of employment with the applicant between July and September 1997. At the hearing of this matter the employer was represented by Mr. Harold Rubin. Smith did not appear.
Section 24(1) of the Act provides:
- (1) Except as otherwise provided in the regulations, where an employee works for an employer in excess of forty-four hours in any week, the employee shall be paid for each hour worked in excess of forty-four hours overtime pay at an amount not less than one and one-half times the regular rate of the employee.
- The applicant's evidence was that it offered Smith a choice. He could be paid at $6.85 per hour plus overtime when applicable or he could be paid for $10.00 an hour for all hours worked regardless of the number of hours worked in each week. The difference between $6.85 and $10.00 was to reflect the overtime he would likely earn. Mr. Rubin stated Smith agreed to work for $10.00 an hour. In fact he filed a contract executed by Smith which sets out the following information:
- (b) Hourly-rate: $10.00 payable by-weekly...
(e) Other Information: extended hours required will be paid at regular hourly rate.
Mr. Rubin stated that this was an advantage to Smith as it enabled him to earn more money during the "shoulder" season when the number of hours available for work was lower. Further he presented a cumulative calculation of hours at $6.85 per hour plus the overtime rate as opposed to $10.00 per hour for each hour worked. This calculation demonstrated that Smith was in fact paid more money over the season at the $10.00 per hour straight rate than he would have been paid at the calculation of $6.85 per hour plus overtime where applicable. The difference is about 1.5 percent.
I do not doubt that the employer was proceeding in good faith. However, it is possible to look at the rationale in a different light. The payment of wages with overtime "bundled in" clearly enables the employer to attract employees at a time when the hours of work are more limited. It is an open (and probably unanswerable) question whether $6.85 would have been sufficient to attract employees in the "shoulder" season with limited hours of work available at that time and only the promise of overtime to come in a business dependent on the general tourist season and the chances of the weather. Further, the "advantage" to Smith is dependent on the actual number of hours worked. Another employee on a different work schedule might in fact be paid less under this arrangement. The validity of the agreement should not vary from employee to employee depending on the idiosyncrasies of a particular tourist season or a particular employee's schedule.
It is to avoid this type of debate that the Act does not permit parties to contract out of the provisions of section 24 of the Act. Section 3(1) of the Act provides as follows:
- (1) Subject to section 4, no employer, employee, employers' organization or employees' organization shall contract out of or waive an employment standard, and any such contracting out or waiver is null and void.
Section 24 must be observed and parties are not legally competent to contract out of that portion of the statute, no matter how good an idea it appears to be to one or both of them. In a similar situation Referee Bendel said in Astro Dyeing and Finishing (Canada) Ltd. (February 7, 1990 (Bendel) E.S.C. 2631) said as follows:
The Act does not allow an employer and an employee to "contract out" of its provisions (section 3). It has been held in previous rulings under this legislation that the combined effect of section [241 and section 3 is that an employee on a salary that is supposed to cover overtime work is nonetheless entitled to claim overtime pay under section [24]: see Re Encom Information Systems Inc. (decision of Referee Adamson, dated 8 July 1986, No. 2145) and Re Just One Hour Film Processing System Inc. (decision of Referee Baum, dated November 10, 1989, No. 2590). It appears therefore that, under this legislation, an employer who, albeit it in good faith, does not identify an employee's pay as "regular pay" and "overtime pay" but bundles it all together is liable to having to pay overtime pay a second time. I am concerned that the legislation, interpreted this way, constitutes a costly trap for the unwary employer, but I was offered no good reason for refusing to follow what appears to be the accepted interpretation of section [24]...
This is to be contrasted with the situation where hourly wages combined with a guaranteed number of hours per week create a fixed salary as the basis for payment. See for example D & D Diamond Cutting and Coring Inc. (October 6, 1993 (D. Harris) E.S.C. 3277). In this case Smith was paid an hourly rate for a fluctuating number of hours and the application of section 24 is mandatory.
- Accordingly this application is dismissed. The monies held in trust for the employee being $870.85 shall be paid to Smith. The balance being $122.81 is to be retained by the Government of Ontario Consolidated Revenue Fund. Any interest which has accrued on this money will be calculated and apportioned by the Director of Employment Standards.