Case highlights the need for companies to have 'crystal clear' policies in place to manage contractual overtime
A British Columbia court has found an employer liable for more than $45,000 in unpaid overtime pay, plus punitive damages for trying to intimidate the worker with a meritless counterclaim – even though the worker didn’t claim any punitive damages.
The worker was an engineer for Ecora Engineering and Environmental, an engineering consultant company in Kelowna, BC, starting in February 2021. She worked long hours on two big projects in the field, often 12 to 16 hours per day. As such, she was authorized to work overtime, which was built into the contracts Ecora had on the big projects.
Ecora’s overtime policy specified that the worker was to be paid time-and-a-half for the first four hours worked in excess of eight in a day, and double-time for hours over 12 in a day. When overtime hours were approved by a supervisor, they were entered into Ecora’s pay system. Sometimes, the company delayed paying overtime when it experienced cash flow problems.
Engineers in BC are exempt from overtime under employment standards legislation, so the worker’s overtime entitlement would only come from a contractual term, according to Melanie Samuels, pictured, chair of the Employment and Labour Group at Singleton Reynolds in Vancouver.
“For an overtime claim by contract, the employer needs to make it clear that it has to be approved or it's subject to discretion if they pay it,” she says. “But it better have a crystal clear policy about how it’s going to be enforced - often employers will have a policy that says you have to get approval, but if they implicitly let someone work overtime, they're not going to be able to get out of it by saying it was discretionary.”
Hundreds of hours of unpaid overtime
In the summer of 2022, the worker raised concerns with management that she hadn’t been paid for hundreds of hours of overtime she had worked on a big project. The project manager told the human resources professional responsible for compensation to pay the worker 90 hours of overtime.
However, the worker was paid for the 90 hours in straight time, and the HR professional instructed the payroll department to pay the worker another 0.5 times her overtime hours at the next payroll run.
In August 2023, Ecora reviewed overtime worked for all employees and found that the worker had more than 260 hours of unpaid overtime in 2021 and 2022, before it implemented a new overtime policy on Jan. 1 that year.
Ecora terminated the worker’s employment on Oct. 19. The company later sent a letter to the worker offering to pay the worker for those hours at overtime rates, including double-time for hours worked in excess of 12 per day “on a gratuitous basis.” However, it required her to sign the letter, which it said meant she agreed with its findings and would close the matter. The worker signed the letter, but the company once again paid her for the hours at straight-time rates.
Company responded to worker’s lawsuit with counterclaim
The worker launched an action against Ecora claiming more than $46,000 in unpaid overtime wages and associated RRSP contributions, statutory holiday pay, and vacation time.
Ecora filed a counterclaim against the worker alleging that the worker made inappropriate comments to clients that would have been just cause for dismissal. The comments appeared in “colourful” song lyrics about drilling written by drillers at the work site where the worker had worked following her termination. The company sought repayment of the severance pay it had provided to the worker.
Ecora also contested the worker’s claim to overtime pay for 2021 and 2022, arguing that it had paid her already - and in fact a company audit showed she was overpaid by $28.75 after accounting for all entitlements and severance pay.
It’s not a typical case in which an employer files a counterclaim, as that often happens in a wrongful dismissal lawsuit, not something like a contractual unpaid overtime claim, says Samuels.
The court noted that the company emails in response to the worker’s concerns about unpaid overtime corroborated the worker’s claim that she was authorized to work and be paid overtime, as overtime was built into project contracts and the worker’s overtime hours were logged and approved.
The court found that that the worker was entitled to be paid at the rate of time-and-a-half for work between eight to 12 hours per day and double-time for hours worked over 12.
Counterclaim an attempt to bully worker into dropping lawsuit: court
As for Ecora’s counterclaim that the worker wrote and shared inappropriate song lyrics with clients, the court accepted evidence that the lyrics were written by drillers at the work site that weren’t intended to offend, and the company wasn’t mentioned in the song. As a result, the court also found that the company’s counterclaim was “meritless and made in bad faith,” with the intention of bullying the worker into dropping her lawsuit. Because of this egregious behaviour, the court ordered that Ecora pay punitive damages to the worker, even though the worker hadn’t included any claim for such damages, due to the potential harm to the worker’s reputation the baseless accusations could have. The court stated that it would determine the amount of punitive damages following written submissions from the parties.
“It’s a strange case, and it seems [Ecora] tried to get out of what seemed like a pretty straightforward obligation to pay wages, and it tried an underhanded way to get out of it,” says Samuels. “Other than relying on the song that presumably the worker created or sung, it sounds like it had no direct impact on the company – it would have to show there was some nexus between it and damage to their reputation when [Ecora] wasn’t even mentioned.”
“There's not a lot of detail in the decision, but it appears like it was pretty far-fetched to pin on the worker that somehow she was defaming the company - and after-acquired cause means it had to have happened during employment, not after,” adds Samuels.
The court ordered Ecora to pay the worker more than $45,000 for overtime pay plus interest, as well as an amount for punitive damages, to be determined.
Punitive damages are fairly rare in employment law cases, as a court has to find that an employer acted reprehensibly to warrant them – such as accusing an employee of theft, defamation, or other reputation-damaging conduct when there’s no evidence, says Samuels. And a court awarding punitive damages when an employee doesn’t include them in their lawsuit is even more rare - she sees it as a warning to employers about the risks of pursuing counterclaims in response to legal action from an employee seeking employment entitlements.
“[Ecora] and maybe its legal counsel came up with a strategy involving the counterclaim as leverage to get the worker to back off, but employers better be really careful when making allegations of after-acquired cause so it doesn't look like it's revenge,” she says. “For the court to award punitive damages when they hadn't been sought is pretty extreme, so it wasn’t impressed with that tactic.”
Noting that BC courts are particularly employee-friendly, Samuels believes that making a counterclaim often isn’t a good idea given the potential legal and financial costs.
“You’re not going to get away with it unless you have a sure thing to rely on – you might think it's going to be in your best interest as a negotiating tactic, but it could come back and bite you like it did for [Ecora],” she says. “And when you think of the value of the claim - $46,000 plus punitive damages and perhaps $25,000 in legal costs - sometimes you have to be more practical.”
