Ontario’s 'Managerial Exemption' enforcement blitz — Is your retail operation prepared?

Ontario's Ministry of Labour will be knocking on employer's doors to ensure anyone — including managers — performing extra hours of non-managerial work gets overtime pay
By Sundeep Gokhale and Lisa Bolton
|employmentlawtoday.com|Last Updated: 10/03/2013

The Ontario Ministry of Labour (MOL) is currently conducting a proactive enforcement blitz under the Employment Standards Act, 2000 (ESA) targeting “retail services” including retail chains, franchises, gas stations, convenience stores and grocery stores. The blitz is scheduled to last from October to December 2013.

Of particular emphasis is compliance with the overtime provisions of the ESA. The MOL is seeking to ensure retail managers and supervisors not currently receiving overtime pay are not in fact “working managers,” which status would entitle them to overtime pay. For large retail operations with hundreds, if not thousands, of managers and supervisors, the potential liability is considerable.

Overtime pay for ‘working managers’

In Ontario, an employee is entitled to overtime pay for each hour of work in excess of 44 hours per week. There are exceptions to this general rule, one of which is the Managerial and Supervisory Overtime Exemption. Under this exemption, an employee whose work is managerial or supervisory in character is exempt from the overtime provisions of the ESA. These employees may perform some non-managerial work and remain within the exemption but only if work is performed on an irregular or exceptional basis.

The Managerial and Supervisory Overtime Exemption — When Does It Apply?

The Managerial and Supervisory Overtime Exemption applies in the following circumstances:

Where work performed is managerial or supervisory in character. Determining whether work is managerial or supervisory requires an evaluation of the actual functions performed. The fact that an employee’s job title, job description or employment contract may include the word “manager” or “supervisor” is not determinative. A “manager” exercises discretion and independent judgment in the management of the affairs of the organization and in most cases has the ability to impact the employment of others (such as hiring, shift scheduling, performance reviewing, counseling, disciplining and firing).

Where some — but not all — of the work performed is not managerial or supervisory in character, but this work is performed on an irregular or exceptional basis. The phrase “irregular or exceptional” has been interpreted to mean that non-managerial duties may be performed so long as this occurs outside the ordinary course of the manager’s duties, or on an unscheduled or sporadic basis. For example, if the routine in a particular workplace is that a manager will take on non-managerial work during “the busy season/time,” the performance of that work cannot be said to be either unscheduled or sporadic. To the contrary, it is expected.

Risks unique to the retail industry

In retail, as in many workplaces, it is not uncommon, and often necessary, for a manager or supervisor to perform some non-managerial duties, whether sporadically or more consistently. Particularly in smaller communities or stores and even in larger operations where the workplace culture encourages managers to “chip in” whenever possible, it may be common for managers and supervisors to take on non-managerial functions. Unfortunately this willingness to “chip in” — a characteristic encouraged and lauded among the best workplace leaders — is the very characteristic that can expose an organization to liability because it blurs the line between “manager” and “employee.”

In retail, the type of non-managerial work will vary depending on the specific workplace and may include:

• Unloading merchandise after a delivery
• Tagging merchandise
• Stocking shelves
• Restocking returned merchandise
• Assisting on cash registers.

Steps to protect the organization

To minimize the risk a manager may be determined by the MOL to be a “working manager” and therefore entitled to overtime pay, consider the following strategies:

Conduct a Proactive Workplace Audit. The best and most cost-effective way to minimize exposure to liability is to: conduct a comprehensive, internal workplace audit; identify areas of risk; and take corrective steps, before the MOL is at the door. The audit should include a detailed, critical review of all workplace policies, protocols, handbooks, manuals, directives, employment agreements and, of course, practices. For large organizations with several operations across a wide geographic area, it will be important to select a range of locations representing differing geography, sales volumes, scheduling expectations, and workplace norms. The objective is to identify potentially troublesome language, protocols, and routines, and proactively correct them. For example, if the same manager assists co-workers unpack merchandise after each delivery, this is the kind of pattern that can expose the organization to liability. Experienced employment counsel can and likely should assist with this process.

Educate Your Leaders. Even the best drafted policies and procedures will be of little value if what happens on the ground is a different story. Once approved, workplace policies and practices should be transparent and consistently enforced at all levels of the organization. To enable this to happen it may be necessary to educate corporate leaders, managers and supervisors on the do’s and don’ts of the Managerial and Supervisory Overtime Exemption, and then hold them accountable so that, subject only to emergencies and unforeseen employee absences, managers and supervisors are not removed from the Exemption.

Sundeep Gokhale and Lisa Bolton are lawyers with Sherrard Kuzz LLP, a management-side labour and employment law firm in Toronto. Sundeep and Lisa can be contacted at (416) 603-0700 (Main), (416) 420-0738 (24 Hour),or www.sherrardkuzz.com.

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