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Does Changing Employees to Salary Circumvent Overtime Regulations?

July 23, 2003
by Israel Foulon LLP

Question: We have negotiated a deal with our employees by which they have agreed to be paid at a regular rate of pay for any hours worked in excess of 40 hours a week. In order to implement this we had the employees sign an agreement which states they are willing to accept the above and to change their employment status to “salary” plus straight time for any additional hours worked. Is this permissible in Ontario ?

Answer: Under Ontario ’s Employment Standards Act, 2000, an employer and an employee cannot agree the employee will give up her right to overtime pay. Any such agreement is invalid and the employee is still entitled to overtime pay.

But there are specific job categories which are exempt from the above including taxi-cab drivers, ambulance drivers and janitors. If the employees in question do not fall within a job-specific exemption, then the overtime provisions apply and the employer is required to pay overtime of time and a half the employee’s regular rate of pay for any hours worked in excess of 44 hours per week.

This is the case even if the employee is on a fixed salary. Accordingly, even if the employees in question agree to change their employment status to “salary,” this does not negate the employer’s obligation to pay overtime. A fixed salary simply compensates an employee for all non-overtime hours up to and including 44 hours per week. After 44 hours the employee is entitled to overtime.

You should note there is an exception for supervisory or managerial employees (perhaps you have confused this exception with one for employees on a salary). Managers and supervisors do not qualify for overtime if the only work they do is managerial or supervisory in nature.

You should also be aware that it is possible for an employer and an employee to agree in writing to average an employee’s hours of work over a period of up to four weeks instead of calculating the individual’s overtime entitlement after 44 hours each week.

With the approval of the director of employment standards, Ministry of Labour, employers and employees can agree to averaging agreements over periods of longer than four weeks. Averaging agreements must be in writing and must provide for a specific expiry date not later than two years after the effective date unless the employee is unionized.

Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@qtw38575.mywhc.ca. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today


Legal Disclaimer

This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation. Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.