Employee entitlement to overtime wages under the British Columbia Employment Standards Act (the “ESA”) is often misunderstood. Common mistakes include assuming that entitlement to overtime wages is based on how an employee is paid (hourly, monthly salary, annual salary, etc.) or that employees that have not been expressly asked or authorized to work overtime are not entitled to overtime wages.
The failure to pay overtime wages in accordance with the ESA can result in significant employer liability for unpaid wages as well as other penalties. For that reason, we are here to set the record straight!
Entitlement and calculation
In general, an employee will be entitled to overtime wages where the employee has worked more than standard work hours. That is, where the employer has required, or directly or indirectly allowed, the employee to work more than 8 hours in a day or 40 hours in a week. This is regardless of how the employee is paid but subject to certain exclusions, discussed below. The ESA is interpreted as imposing the obligation on employers to control hours of work. Where an employer “directly or indirectly allows” an employee to work overtime hours, overtime wages will be owed, regardless of whether the employer expressly required or authorized the overtime.
Overtime wages are calculated based on a multiplier of the employee’s regular rate of pay with daily and weekly amounts calculated separately. An employee is entitled to overtime wages at a rate of:
- 1.5 times for time worked over 8 hours, up to 12 hours in a day;
- 2 times for time worked over 12 hours in a day; and/or
- 1.5 times for time worked over 40 hours in a week.
For the purposes of calculating weekly overtime, only the first 8 hours worked each day are counted and a “week” is a period of 7 consecutive days beginning on Sunday at 12:01am and ending at midnight the following Saturday.
A variety of employees are excluded from the ESA generally or the ESA hours of work and overtime requirements specifically, pursuant to the Employment Standards Regulation (the “ESR”). These exclusions are generally based on the employee’s position or profession. For example, a commonly encountered exclusion is for those employees that meet the definition of “manager” contained in the ESR.
While certain employees, such as managers, may be excluded from ESA overtime requirements, employers should review relevant employment agreements carefully. An employee may have a claim to additional compensation based on the specific wording of their employment agreement, such as where the wording supports that the parties agreed to a salary in exchange for a specified number of hours of work.
Employers seeking to reduce the risk of liability for errors related to the payment of overtime wages may consider: clearly communicating expectations to employees with respect to working overtime hours, ensuring accurate recording and monitoring of hours worked, and consulting legal counsel to clarify applicable exclusions and contractual obligations.
Lastly, we note that the ESA permits employers and employees to enter into overtime averaging agreements and to establish overtime time banks. Employers interested in further information on these options are encouraged to consult with legal counsel.