Bill 32 reduces workers' overtime choice and pay

This blog previous appeared on the Canadian Law of Work Forum.

Alberta is proposing changes to its Employment Standard Code that would permit employers to evade paying overtime (OT) premiums to workers by stripping workers of their right to refuse to participate in overtime averaging agreements. This has the potential to move hundreds of millions of dollars in OT pay from workers’ pockets to employers’ profits.

Background

Like all Canadian jurisdictions, Alberta has set limits on hours of work. In most cases, Alberta restricts work to a 12-hour window (ESC, s.16(1)). Alberta also normally requires that employers pay an overtime premium (1.5 times wage rate) if workers work for more than 8 hours in a day or 44 hour in a week (ESC, s.21). The policy rationale for limiting hours of work and requiring OT premiums centre on ensuring workers’ quality of life, reducing the safety risks associated with worker fatigue, and incentivizing additional hiring.

Alberta also allows employers and workers to enter into overtime averaging agreement (ESA, s.23.1(1)). Averaging agreements allow an employer to average the hours worked by a worker over a period of time when calculating whether the worker has met the weekly OT threshold and is entitled to the OT wage premium. Presently, overtime agreements can specify averaging over a period ranging from one to twelve weeks. Averaging agreements allow for workers and employers to agree to compressed work weeks (e.g., four ten-hour days instead of five eight-hour days) without triggering the OT premiums.

Any overtime paid out at the end of the averaging period is paid at a rate of 1.5 times normal wages. Although the legislation is slightly unclear on this, government policy asserts that time off taken in lieu of OT is paid at straight time. Here is the government’s existing summary of the average agreement device.

Proposed OT Changes in Bill 32

Bill 32 (Restoring Balance in Alberta’s Workplaces Act) was introduced in the legislature in early July. If passed, this bill will make a large number of changes to both the Employment Standards Code and the Labour Relations Code. Relevant to this post, Bill 32 will allow employers to impose OT averaging agreements on workers with two weeks notice (Bill 32, s.1(11)) unless there is a collective agreement in effect. Presently, workers must agree to overtime averaging.

Bill 32 will also increase the period of time over which OT can be averaged from 12 weeks to 52 weeks and do away with the two-year limit to such agreement and loosen the rules around changes in work schedules (which otherwise require 24-hours of notice).

These changes provide employers with oppportunities to evade paying OT premiums. For example, the weekly overtime threshold is 44 hours. If a worker works a 60-hour week (say six 10-hour days), they would normally be eligible for 16 hours of pay at over-time rates. Under an overtime averaging agreement, those 16 hours could be averaged (i.e., spread across) up to 52 weeks (roughly 20 minutes per week). This would spread the OT far enough not to engage the 44-hour weekly OT threshold (the daily OT threshold can be evaded under averaging agreement).

Under such an agreement, a worker could work up to 208 OT hours a year (i.e., more than five extra weeks) and the employer would never have to pay any OT premiums. The changes effectively guarantee that very few, if any, non-union Alberta workers will ever receive overtime pay, unless the employer agrees to pay it as an act of altruism or a job perk. Further, when a worker is entitled to be paid OT under an averaging agreement, that pay may be delayed until the end of the averaging period (now as long as 52 weeks).

Bill 32 also compounds 2019 changes to how banked OT is paid out. Under those changes, a worker who enters into an OT banking arrangement (which is notionally voluntary, but practically up to the employer) and wishes to take banked time as time off with pay (instead of being paid out), does so at straight time.

Analysis

The amendments proposed in Bill 32 will enhance employers’ opportunities to avoid paying OT premiums. When the government makes it easier for to require over-time work without paying workers the over-time premium (as it is with Bill 32), the government is effectively transferring money from workers’ pockets to employers’ profits. Statistics Canada data from 2018suggests that there is roughly $3.3 billion in over-time premiums annually.

Rationally, every employer should enter into an OT averaging agreement. Not every employer will be able to do so. Unionized employers will remain subject to whatever their collective agreement says (this covers about 20% of the workforce in Alberta). Other employer may not be sophisticated enough to operate an agreement. There is no credible way to estimate the value of the transfer from workers to employers, but the annual amount is likely to be in the hundreds of millions of dollars.

Minister Copping framed these changes as “expanding choice for workers”in a Calgary Herald op-ed, noting:

…some workers may prefer to work four 10-hour days, instead of five eight-hour days. Then, they could receive three-day weekends. But changes made by the previous NDP government effectively made it difficult for employers to set up these schedules… .

This is the precise spin that conservative governments across the country have used to justify legal rules that permit employers to avoid overtime pay. In this framing, Copping fails to note that (1) under the present system, workers (as a group) have the opportunity to choose (or refuse) flexible schedule, and (2) Bill 32 takes away that choice by vesting decision-making with the employer. He also ignores that employers can manipulate this system to evade paying overtime premiums and that that long shifts increase the risk of injury to workers.

-- Bob Barnetson