Are Salaried Employees Entitled to Overtime Pay in Ontario?

It is a common misconception that salaried employees are not entitled to overtime pay. Working as a salaried employee does not disqualify anyone from receiving overtime pay. In Ontario, the rules for overtime pay are outlined in the Employment Standards Act (ESA).

What is Overtime Pay?

The rule for overtime pay is found in section 22 of the ESA. This rule states that if an employee is entitled to overtime pay, then their employer must pay them at least one and a half times their regular rate for every additional hour of work that they perform beyond 44 hours in a work week. A permitted alternative is allowing the employee to take time off in lieu instead of receiving overtime pay. In this situation, the employee takes one and a half hours of paid time off per every hour of overtime work performed.

Who is Entitled to Overtime Pay?

To be entitled to overtime pay, an employee has to meet the aforementioned criteria and not fall into any exemptions. These exemptions are outlined in Ontario Regulation 285/01 to the ESA and include a wide range of roles.

Some exemptions apply to practitioners of particular fields, such as individuals who practice architecture, law, professional engineering, or medicine. Other exemptions cover broad fields, such as exemptions for information technology professionals and for salespeople who work on commission (excluding route salespeople). One exemption that focuses on the particular nature of the work that the employee performs pertains to employees who act as managers or supervisors.

The Manager or Supervisor Exemption From Overtime Pay

The exemption for managers or supervisors contained in Ontario Regulation 285/01 states that the rules regarding overtime pay do not apply to “a person whose work is supervisory or managerial in character and who may perform non-supervisory or non-managerial tasks on an irregular or exceptional basis”. This exemption looks at the character of the work that an employee does, rather than just the title of the role that the employee has. As a result, it is possible that an employee with the title of “manager” may not fall into this exemption or an employee without a managerial title may be exempt.

The rationale behind this exception is described by the Ontario Superior Court of Justice in the 2013 case Tsakiris v. Deloitte & Touche LLP as “because [managers and supervisors] have the power and responsibility to direct, supervise and manage and are paid accordingly, managerial employees do not require the protection afforded to rank and file employees and so they are exempt from the overtime protections”. The Court in Tsakiris also describes the two-step process of determining whether an individual falls into this exemption:

“First, there must be a determination of whether the “character” of the employment is managerial or supervisory; second, if the answer to the first question is yes, there must be a determination of (a) whether the individual performs non-managerial or non-supervisory tasks, and, if yes, (b) whether these tasks are done on an irregular or exceptional basis.”

An individual in a role with a managerial or supervisory character is likely to have authority over other employees in some way. Some examples of how a role can have a managerial or supervisory character include:

• Having the ability to hire and fire individuals
• Having the ability to discipline other employees
• Influencing management or policy in a way that impacts the working life of other employees
• Supervising the work or actions of other employees

After characterizing an employee’s work, a determination of whether they perform non-managerial or non-supervisory tasks takes place. If an employee has a role with a managerial or supervisory character but regularly performs non-managerial or non-supervisory tasks, it is likely that they are entitled to overtime pay. If their work is primarily managerial or supervisory tasks and they only perform non-managerial or non-supervisory tasks on an exceptional basis, then they are not likely to be entitled to overtime pay.

Can an Employee Contract Out of Overtime Pay?

According to the ESA, an employee is not permitted to contract out overtime pay. This means that if an employment agreement contains provisions that contract out overtime pay, those provisions are void, and the employee is still entitled to overtime pay.

Is the Overtime Threshold Always 44 Hours?

In certain circumstances, ‘overtime’ isn’t hit until an employee works a certain number of hours that is greater than 44. This threshold varies, but some examples are provided to give an idea of how it differs.

Examples of overtime hour threshold exceptions include:

• A 55-hour threshold for employees who take part in road building for streets, highways, or parking lots
• A 50-hour threshold for a seasonal employee who works in canning, processing, and packing of fresh fruits or vegetables
• A 50-hour threshold for an employee who takes part in laying, altering, repairing, or maintaining sewers and water mains

How is Overtime Pay Calculated?

Overtime pay is at least one and a half times the regular rate per hour for every hour worked after the overtime threshold. For a salaried employee, this would mean determining what the ‘hourly’ rate of pay is, and then multiplying that by at least 1.5 times. An employer and employee can contractually agree to a higher rate of pay if they choose, but the minimum amount is one and a half times the regular rate of pay.

Overtime pay can be calculated weekly or can be calculated by averaging consecutive weeks. If an averaging formula is to be used, the employer and employee must have a written agreement specifying the number of weeks used in the formula, up to a maximum of four weeks.