Overtime Part 1: Averaging and Time Off In Lieu

Overtime: averaging and lieu time as alternatives to paid overtime
Photo by Jonas Leupe on Unsplash

Along with vacation pay, overtime is another area of the Employment Standards Act that can be confusing and can get employers in trouble. 

Entitlement to Overtime Pay

Most employees are entitled to be paid overtime – which is 1.5 times their normal pay rate – for every hour they work in excess of 44 hours in a week. 

Some employees are exempt, including most of the regulated professions, many employees in healthcare jobs, IT workers and managers among others. For a full list of job types that are not entitled to overtime see the Ministry of Labour’s Guidance.

The manager exemption can be a tricky one and we will address that in Part 2 next week. 

Averaging Agreements

One way employers can address overtime for employees who work somewhat irregular hours is with Averaging Agreements. Normally, when calculating overtime, hours are averaged over the course of a week. However, employers and employees can average hours over a longer period of time if they enter into an Averaging Agreement

Averaging Agreements can cover up to four weeks and can help an employer avoid overtime liability when an employee’s schedule may be variable – heavy some weeks and lighter others. Averaging Agreements are agreements so they cannot be imposed on employees – they have to agree. They also must be made in writing (electronically in writing is OK).  

Lieu Time

Employers and employees can also agree that instead of getting overtime PAY an employee will take the equivalent amount of time as paid time off. In order to do this, employers and employees must enter into a written Lieu Time Agreement. The time off needs to be equivalent to overtime pay, so it will be at a rate of 1.5 hours off for every 1 hour of overtime worked. 

Lieu time must be taken within three months of it being earned, unless the employer and the employee otherwise agree. The maximum window in which the lieu time must be taken is 12 months. If an employee does not take their lieu time within 12 months they will need to be paid out the overtime.

Trouble Brewing

Overtime trouble can be brewing when employers do not have a good handle on how much employees are working. It’s important for employers to keep track of employees’ hours of work – in fact it’s a legal requirement under s.15(1) of the ESA. If an employee is keeping track of their own hours, and an employer has nothing to contradict their records, the employee’s evidence regarding how much they worked will likely rule. Which means employers can get hit with claims for overtime pay that they didn’t see coming. Employees are entitled to be paid for hours worked, even if those overtime hours were unauthorized. 

Employers also need to enter into written averaging and lieu time agreements and ensure compliance with timelines. 

Next week we will tackle the manager exemption to overtime. 

If you have questions about how your company is managing overtime, get in touch for a consultation.  

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