Court File and Parties
COURT FILE NO.: CV-20-641242-CP
DATE: 2023-01-13
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
SUNG TAEK LEE Plaintiff
- and -
ALLSTATE INSURANCE COMPANY OF CANADA Defendant
Proceeding commenced under the Class Proceedings Act, 1992
BEFORE: Justice Edward P. Belobaba
COUNSEL: Andrew H. Monkhouse, Alexandra Monkhouse and Reshida Darrell for the Moving Party / Plaintiff F. Paul Morrison, Seann D. McAleese and Matthew G. Smith for the Responding Party / Defendant
HEARD: May 14 and August 30, 2022 via Zoom video with follow-up written submissions
Motion for Certification
[1] This proposed class action alleges that the defendant, Allstate Insurance Company of Canada, ("Allstate") breached provincial employment standards by failing to include certain bonus payments when calculating wages and the related vacation and public holiday pay obligations.
[2] The motion for certification was adjourned for 60 days to allow counsel for the plaintiff to revise and refocus the proposed action. The claim was narrowed to exclude the initial overtime claim, focus only on the alleged non-payment of vacation and public holiday pay relating to two specific bonuses and limit the claim to Allstate employees in Ontario. The plaintiff also asks to substitute a new proposed representative plaintiff, Jody Delorme, in place of Sun Taek Lee.
[3] The proposed Ontario-based class members fall into two groups: (i) those that work for an Allstate Insurance Agency ("AIA") selling or supporting the sale of home and auto insurance — such as the sales agents or Business Development Agents ("BDAs"), their office management personnel, service and support staff; and (ii) all others, generally providing corporate leadership and support, including the higher-level executives, IT personnel and human resource officials, referred to herein as the "non-AIA" employees.
Background
[4] Allstate provides a number of bonus or "variable incentive" plans to both commissioned and salaried employees. For example, the BDAs, who work on commission rather than salaries, receive an Individual Performance Bonus that in essence is based on the BDA's individual production and is not at issue in this action. This action focuses on the two bonus plans that are arguably not geared to individual production — the Agency Performance Bonus or APB that is paid out to the AIA employees and the Annual Incentive Plan or AIP bonuses that is paid to the non-AIA employees.
[5] The plaintiff says that both the APB and the AIP are "wages" as defined in s. 1(1) of the Employment Standards Act[^1] ("ESA") and as such must be considered in the employer's calculation of vacation and public holiday pay. The defendant does not agree. The defendant points out that the definition of "wages" excludes:
(e) any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency.
[6] The defendant submits that the APB and AIP bonuses are not wages for two reasons: both are "dependent on the discretion of the employer" and neither is "related to hours, production or efficiency." The defendant, a long-running recipient of a Best Employer in Canada award, is adamant that it has not only fully complied with all ESA requirements but has exceeded them.
[7] The Agency Performance Bonus for AIA employees. As the defendant explains in affidavits filed by two senior vice-presidents, the focus of the APB is not on hours worked or individual production but the overall performance of the insurance agency:
The objective of the APB is to reward employees in the AIAs as a whole for balanced performance while ensuring corporate and individual goals are aligned. Each measurement category (Production, Retention, and Profitability) has independent targets and levels. Points from each category are added together, and the point total is used to determine the AIA award level. Measurement category weights are set at a national level while category goals, such as Retention, sometimes vary by province and even within regions by AIA. The APB payment is distributed amongst employee within each AIA, i.e. the Agency Manager, Customer Care Agents, Agency Assistants and BDAs. Each role has a relative weighting measured in Units (though Step BDAs receive fewer unites). The product of the number of people in each role multiplied by the corresponding role weight determines the Total Number of Receiving units in the office. The total AIA Payout is then divided by the Total Number of Receiving units to determine $/unit ratio. Each team member in the AIA receives the equivalent of the number of units attached to their role multiplied by the $/unit ratio.
[8] The defendant says that the APB is a discretionary payment, as supported by multiple assertions to this effect in the documentation, and is not at all related or attributable to hours worked or individual production or efficiency. It is driven in large part by Allstate's overall loss ratio and retention rates which have no correlation to the hours worked by any particular BDA or other employees in the AIA — as such, this variable incentive payment does not qualify as wages within the meaning of the ESA.
[9] The Annual Incentive Plan bonuses for non-AIA employees. Here again, the defendant argues that, like the APB, the AIP bonuses do not fall within the ESA's definition of "wages". Moreover, they vary by role and level within the defendant's organization structure. According to the defendant:
Allstate's Director and Executive level incentive plans are payable at the discretion of the company based on performance metrics and allocations determined by the U.S. parent corporation which does not account for individual employee production or efficiency. The subsequent distribution of such allocation to employees at Allstate are not calculated by reference to their hours worked, production levels or how efficiently they performed their duties.
There are also specific individual roles which qualify for the above referenced annual incentive plan, including employees in the actuarial department and some Market Team leads.
Other non-AIA employees also participate in a different Allstate Canada incentive plan based on Canadian results. After 2018, Vice Presidents were no longer eligible for compensation under this plan. The relevant assessment metrics are established and approved by the CEO, CFO and Vice President, People, Culture and Communications. The awards under this plan are the same for each employee in any particular year. Individual employee hours of work, production or efficiency are not relevant.
There also specific and different incentive plans for Broker Sales Managers at Allstate's Pembridge division and for Broker Sales Directors and Allstate Sales Directors. However, these individuals would be excluded from any potential class given the statutory exemptions applicable to supervisors and above, although any dispute on this would require an individual analysis of each incumbent's duties and responsibilities. The variability (and relevance) in employee responsibilities, which are not necessarily informed by their titles alone ... Allstate's contract employees do not receive variable incentive pay.
[10] The defendant makes the same point about the AIP bonuses as it did about the APB: that the calculation of the discretionary payments made under these incentive plans are not in any way related to an employee's hours, production or efficiency, and therefore do not fall under the statutory definition of "wages". As such, these variable incentive payments do not qualify as wages within the meaning of the ESA and do not engage any calculations for vacation or public holiday pay.
[11] With this backdrop, I can now turn to the certification requirements set out in s. 5(1) of the Class Proceedings Act.[^2] I note that the unamended CPA applies herein.
The proposed common issues
[12] I begin with s. 5(1)(c) and the proposed common issues because the consideration of the PCIs at the outset will do much to simplify the certification analysis. The plaintiff proposes the following common issues:
Revised Proposed Common Issues
Subclass 1: Whether the APB bonuses are wages
Do the bonuses known by the Defendants as Agency Performance Bonus ('APB') awarded to AIA employees fall within the exception of wages being "any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency"?
If the answer to Common issue 1 is no, were the members of the class underpaid Vacation Pay and Public Holiday Pay based on the failure of the Defendant to count the APB as wages?
If the answer to Common issue 1 is no, are the members of the class owed Vacation Pay and Public Holiday pay based on the failure of the Defendant to count the APB as wages?
If the answer to Common issue 1 is no, what is the quantum of damages of each member of the class?
Subclass 2: Whether the AIP bonuses are wages
Do the bonuses known by the Defendants as Annual Incentive Pay ('AIP') awarded to non-AIA employees fall within the exception of wages being "any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency"?
If the answer to Common issue 5 is no, were the members of the class underpaid Vacation Pay and Public Holiday Pay based on the failure of the Defendant to count the AIP as wages?
If the answer to Common issue 5 is no, are the members of the class owed Vacation Pay and Public Holiday pay based on the failure of the Defendant to count the AIP as wages?
If the answer to Common issue 5 is no, what is the quantum of damages of each member of the class?
Subclass 1 and 2: Whether the Class Members Were Underpaid Holiday Pay
How do the Defendant's policies calculate Public Holiday Pay for the class members?
Do the Defendant's policies for calculating Public Holiday Pay for class members during the class period violate the Employment Standards Act, 2000?
If the answer to Common issue 10 is yes, were the members of the class underpaid Public Holiday Pay?
If the answer to Common issue 10 is yes, what is the quantum of damages of each class member?
[13] For the reasons that follow, the only PCIs that can be certified are those that relate to the APB, that is PCIs 1-3, but only as they relate to the BDAs. I will defer the damages issue PCI 4 to the trial judge.[^3] I am not prepared to certify PCIs 5-8 relating to the AIP bonuses or PCIs 9-12 relating more broadly to public holiday pay.
[14] My reasoning is based primarily on the commonality requirement and, in particular, the "some basis in fact" or "some evidence" prerequisite.
[15] As I noted in Omarali,[^4] the law of commonality is well established. Under s. 5(1)(c) of the CPA, the plaintiff must show that his claim raises common issues that will advance the litigation. In order to satisfy the commonality requirement, the plaintiff only needs to adduce some evidence that the proposed common issue actually exists[^5] and some evidence that the proposed issue can be answered in common on a class-wide basis.[^6] Of course, an issue cannot be common if its resolution is dependent upon individual findings of fact that have to be made with respect to each individual claimant.[^7]
[16] Here it is not enough for the plaintiff to baldly assert that the impugned bonuses are wages and then suggest that certification should automatically follow so that this "dispute" can be resolved. Class action machinery should not be engaged unless there is some actual evidence that, here for example, the APB or the AIP bonuses were indeed wages in whole or in part — that they were not discretionary and that they related at least in part to an individual's hours, production or efficiency.
[17] The only evidence in the record that genuinely satisfies this "some evidence" requirement is found in the 2018 and 2019 offer letters to BDAs. These offer letters represented that:
(i) The BDA's compensation package would include "a share of an Agency Performance Bonus." This was stated without qualification and provides some evidence that the payment of this share of the APB was reasonably predictable and thus, according to the case law, not wholly discretionary.[^8]
(ii) The BDA's "individual production" would be taken into account in the calculation of the BDA's share of the APB – as stated in the offer letter:
Each quarter the APB pool of dollars assigned to BDAs who are assigned full production plans will be distributed based on a formula which takes into account both your individual production to your sales plan and your overall contribution to the total earned premium of the Agency. (Emphasis added).
[18] I therefore conclude that, at least in the context of the BDAs, some evidence has been provided that the APB is not wholly discretionary, that the APB may well relate in part to individual production and thus may arguably fall within the definition of wages. I am prepared to go beyond the reach of the 2018 and 2019 offer letters and include all BDAs in the proposed class because on the defendant's own evidence these offer letters were "pretty standard" letters that provided a template that applied to "all BDA contracts or the vast majority of them." This may all be disproved when the merits are decided, but at this point, the "some evidence" requirement is satisfied.
[19] The certification of PCIs 1-3, strictly limited to BDAs, will advance the liability determinations. Individual assessments may still be needed to decide individual BDA entitlements, if there are any, but the need for such individual assessments does not defeat the analysis. In this case, the nature and extent of the "individual production" factor in the determination of the BDA's APB award is information that will likely be found in the defendant's data base.
[20] In any event, for an issue to be a common issue, it need only be a necessary and substantial ingredient in the resolution of each class member's claim. There can be many individual issues which remain after the determination of the common issues.[^9] As the Court of Appeal reaffirmed in Hodge v. Neinstein:[^10]
[E]ven a significant level of difference among the class members does not preclude a finding of commonality. If material differences do emerge, the court can deal with them at that time.[^11]
[21] It is also important to remember that s. 6 of the CPA provides that the court "shall not refuse to certify a proceeding as a class proceeding" by reason of "a claim for damages that would require individual assessments."This statutory reminder reinforces the oft-repeated proposition in the case law that any individual issues which may remain after the common issues trial need not detract from the core commonality of the action. Here, to repeat, PCIs 1-3 (as narrowed by the court) that ask about the APBs paid out to the BDAs and the extent to which individual production is a relevant factor satisfy the commonality requirement.
[22] However, I cannot draw the same conclusion with respect to the AIP bonus plans available to the non-AIA employees. Here there is simply no evidence from any non-AIA employee or anywhere in the record that these bonus plans are not discretionary and relate even in part to hours worked, production or efficiency. It follows from this, that none of PCIs 5-8 can be certified.
[23] Nor is there any acceptable evidentiary basis for PCIs 9-12 that ask about the non-payment of public holiday pay generally. The evidence presented by the plaintiff on this point comes in part from Ms. Delorme, a former BDA and the proposed representative plaintiff, and in part from counsel's calculations and submissions. The problem is this evidence is incoherent and confusing.
[24] Ms. Delorme's evidence is that defendant's calculation of public holiday pay used an incorrect formula that only took into account her base pay. Counsel then points to the defendant's evidence (V of Ms. Sullivan-Campeau's affidavit) that confirms that this calculation does not account for incentive bonus plan monies. But the determination of this particular issue relating to the incentive bonuses is already covered in PCIs 1-3 that ask about the APB. The plaintiff's submission on this point is, to say the least, unclear and bears no relation to PCIs 9-12.
[25] Plaintiff's counsel then directs the focus to the BDA's "first year of work":
The direct consequence for employees is that at least in their first year of work with Allstate they are systemically underpaid Public Holiday Pay, since the Public Holiday Pay is only paid on their Advance of Commissions of $45,000 and not on their full wages. Thereafter, they are not paid based on the ESA but on an artificial formula based on their prior year's earnings.
[26] Plaintiff's counsel then suggests that this erroneous focus on the Advance of Commissions (which only affects the BDAs) can somehow be extrapolated to all Allstate employees, most of whom are not BDAs and do not receive advances on commissions. In short, the plaintiff's submissions remain unclear and confusing. Plaintiff's counsel may be able to "re-explain" his submissions and remove the confusion but at this point the "some evidence" requirement is not satisfied. PCIs 9-12 are not certified.
[27] Having completed the s. 5(1)(c) analysis and having concluded that only PCIs 1-3 will be certified as common issues limited to the APB and BDA class members, I can now return to the remaining CPA requirements.
Section 5(1)(a) – cause of action
[28] The plaintiff advances a breach of contract action. She pleads violations of provincial ESA requirements that are implied terms in Ontario employment contracts.[^12] She notes correctly that this cause of action, when properly pleaded as it was here, has have been recognized by courts in the context of employment class actions because it "easily" satisfies the cause of action requirement."[^13] The defendant does not suggest otherwise.
Section 5(1)(b) – class definition
[29] After the adjournment, the plaintiff proposed the following revised class definition:
All Ontario Variable Compensation employees of ALLSTATE INSURANCE COMPANY OF CANADA ("Allstate") from September 1, 2009 until notice is delivered to the class. Variable Compensation employees are all employees who were not contract employees and who fall within the following employee categories, as defined by Allstate:
- Subclass 1: Allstate Insurance Agency ("AIA") employees:
a. AIA Commissioned;
b. AIA Management;
c. AIA Service;
d. AIA Support;
- Subclass 2: Non-AIA employees:
a. Individual Contributor – Non-Technical Professional;
b. Individual Contributor – Technical Professional;
c. Individual Contributor Sales;
d. People Manager;
e. Directors Individual Contributor Non-Sales;
f. Director: Non-Sales;
g. Director: Sales;
h. Vice President.
[30] The suggested start date for the class period, at least for certification purposes, is reasonable and is approved. However, as I have already concluded, the only class that remains viable after the required "some evidence" analysis are the BDAs ("commissioned employees") and only in relation to one particular bonus, the APB. The other three AIA categories and all eight of the non-AIA categories must be removed from the proposed class.
[31] Here, we have at least two BDA class members, Mr. Lee who remains a class member and Ms. Delorme, the substituted representative plaintiff. We therefore have the required "two or more persons." In any event, as the Court of Appeal noted in Keatley,[^14] "the existence of more than one claim [may] be apparent from the very nature of the claim being advanced."[^15] This is probably the case here. It is certainly plausible that other BDAs in addition to Mr. Lee and Ms. Delorme may have claims for the ESA benefits in question.
[32] The class definition requirement is satisfied.
Section 5(1)(d) – preferability
[33] To satisfy the (unamended) preferability requirement, the plaintiff must show some basis in fact that the proposed class action would: (a) be a fair, efficient and manageable method of advancing the claim; (b) be preferable to any other reasonably available means of resolving the class members' claims; and (c) facilitate the three principal goals of class proceedings, namely access to justice. judicial economy and behaviour modification.
[34] In a recent decision that also dealt with an ESA claim for unpaid vacation and public holidays, the Divisional Court reviewed the applicable case law and concluded that: "[C]lass proceedings have repeatedly been found to be the preferable procedure for employment and ESA-related cases."[^16]
[35] This is not surprising.
[36] Access to justice is almost always best achieved via a class proceeding in a group ESA case because claims may be small and not be pursued at all, and even if larger, may not be pursued for fear of reprisal. Judicial economy is best achieved when the core liability issues can be litigated and decided, as here, in one proceeding. Behavioural modification — encouraging large financial entities to comply with ESA requirements that were enacted in the public interest to protect employees — is a self-evident social benefit and may well be achieved on the evidence herein. And, in any event, there is no credible suggestion from the defendant that some other from of proceeding would be preferable.
[37] The preferability requirement is satisfied.
Section 5(1)(e) – a suitable representative plaintiff
[38] I am also satisfied that Ms. Delorme is a suitable representative plaintiff. She will fairly and adequately represent the interests of the class, has no conflicts of interest with other class members and has filed a workable litigation plan. The plaintiff's request that Ms. Delorme replaced Mr. Lee as representative plaintiff is granted.
Other submissions
[39] The defendant submits that the plaintiff did not comply with my Direction of May 14, 2021 to propose a genuine class and advance a suitable representative plaintiff. However, with the revisions and limitations as set out above, both of these concerns have been addressed. In any event, I would not have dismissed a motion for certification in its entirety for non-compliance with a court Direction that itself was open to differing interpretations.
[40] The defendant also advanced several proposed defences such as limitation arguments, the 'greater benefit' analysis under s. 5(2) of the ESA, and the 'sales person' exemptions under s. 2(1)(h) of the ESA. The defendant, however, has not yet pleaded these defences. In any event, I am inclined to follow the case law which, in the main, has deferred these issues to the merits phase of the litigation where they can be adjudicated on a more complete record and I do so here.[^17]
Disposition
[41] The motion to certify this action as a class proceeding is granted but the certification is limited to PCIs 1-3, relating only to the APB and only involving BDAs.
[42] Counsel to draft the required Order under s. 8 of the CPA.
[43] The costs analysis may prove challenging. This has been a protracted (and no doubt costly) motion for certification. Given the revisions made by the plaintiff during the adjournment, the defendant is right to press for some or all of the costs thrown away. The defendant is also right to point out the issues or areas where the plaintiff did not prevail.
[44] The parties are in the best position to resolve what costs if any are payable by whom. I encourage this discussion. If no such resolution can be achieved within 30 days, counsel should advise and I will either grant an extension or provide a schedule for brief written submissions.
[45] I thank counsel on both sides for their assistance.
Belobaba J.
Date: January 13, 2023
[^1]: Employment Standards Act, 2000, SO 2000, c. 41. [^2]: Class Proceedings Act, 1992, S.O. 1992, c. 6. [^3]: In my view, the judge hearing the merits of this dispute on a more complete record is in a much better position to certify and determine the "quantum of damages" issue. Much will depend on the court's analysis of PCIs 1-3 and its determination of the scope and content of liability. PCI 4 is therefore deferred to the trial judge or the judge hearing a summary judgment motion. [^4]: Omarali v. Just Energy, 2016 ONSC 4094, at para. 36. [^5]: Fulawka v. Bank of Nova Scotia, 2012 ONCA 443, at para. 79 ("...some evidentiary basis indicating that a common issue exists beyond a bare assertion in the pleadings.") [^6]: Dine v Biomet, 2015 ONSC 7050, at paras. 15-19; affd, 2016 ONSC 4039 (Div.Ct.). [^7]: Fehringer v. Sun Media Corp., [2002] O.J. No. 4110 (S.C.J.), aff'd, [2003] O.J. No. 3918 (Div. Ct.). [^8]: Technica Group Inc. v. Corey Thompson and Director of Employment Standards, [2019] O.E.S.A.D. No. 1071. [^9]: Hollick v. Toronto (City), 2001 SCC 68, at para. 18. [^10]: Hodge v. Neinstein, 2017 ONCA 494. [^11]: Ibid. at para. 114. [^12]: Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 75, at para. 37. [^13]: Montaque v. Handa Travel Student Trip Ltd., 2020 ONSC 6459, at para 13. [^14]: Keatley Surveying Ltd. v. Teranet Inc., 2015 ONCA 248. [^15]: Ibid., at para. 70. [^16]: Curtis v. Medcan Health Management Inc., 2022 ONSC 5176 (Div. Ct.) at para. 54. [^17]: See, for example, Rosen v. BMO Nesbitt Burns Inc., 2013 ONSC 2144 at paras. 55-63, where this court concluded that the 'greater benefit' submission was a merits-based argument that should be decided at the common issues trial. Importantly, this court also noted that any 'greater benefit' analysis would have to be conducted at trial on the basis of the terms of the employment contract at the time the contracts were entered into and not with the benefit of hindsight.