Published on January 7, 2014
Posted in: Blog
The first Canadian class action involving overtime pay for commission-based investment advisors (IAs) has been given the green light from the Ontario Divisional Court.
Back in August 2013, Rosen v. BMO Nesbitt Burns. was certified by the Ontario Superior Court, but Nesbitt appealed the decision. In a ruling released just before the holidays, Justice Harriet Sachs of the Ontario Divisional Court denied Nesbitt’s appeal, confirming certification of a potential 1,600-member class of current and former IAs against Nesbitt for unpaid overtime.
The plaintiffs claim that they are entitled to unpaid overtime under Ontario’s Employment Standards Act ( “ESA”),which stipulates that employees are entitled to overtime pay even though they are commission-based, which is how IA’s at the firm are paid. However, Nesbitt argues that IAs fall under statutory exemptions to overtime.
An interesting wrinkle is that although BMO, the parent company, is subject to federal employment legislation, its investment subsidiary falls under provincial employment law. Federal employment legislation was amended in 2006 to exclude overtime for “commission-based sales people” employed in federally regulated banks but provincial legislation never followed suit.
At Nesbitt – as well as at other investment firms – IAs put in long hours, spending their own time and money to develop their book of business. The representative plaintiff, Yegal Rosen, estimates that he works between 60 and 80 hours a week. On the other hand, IAs can determine when, where and how they work. Nesbitt describes its IA’s compensation structure “pay for performance” because it is supposed to reward success. Nesbitt does not track the number of hours worked by IAs.
Since IAs have the opportunity to earn high incomes and work autonomously, Nesbitt argues that this more than compensates them for not receiving overtime pay. At stake is millions of dollars worth of overtime pay if the brokerage firm is incorrect in its interpretation of the exemptions under ESA.
Two other class actions against banks for unpaid overtime by tellers and personal bankers also have been given the go-ahead by the Supreme Court of Canada. How these employment lawsuits will impact the industry will unfold in the coming years . Moreover, if the plaintiffs in the Nesbitt action are successful when the case comes to trial, the outcome would have a ripple effect throughout the industry.
Sotos litigator Jennifer Pocock may be reached by phone at 416.977.0007 or by email at JPocock@Sotosllp.com