Employers Can Average Hours for Overtime Purposes

By Pushor Mitchell LLP
Categories: Blog, Employment Law

One of the more recent additions to the B.C. Employment Standards Act is the overtime averaging provision. This allows employers to average the hours of their employees to determine whether wages at overtime rates must be paid.

The overtime averaging provisions allow employers to schedule employees to work non-standard shifts without having to pay at overtime rates. The standard workday (for the purposes of the Act) is 8 hours, and the standard workweek is 40 hours, in duration. Without an overtime averaging agreement, employers must pay at overtime rates for exceeding the standard day and week.

The overtime averaging provisions are particularly suited to a situation where employees are regularly scheduled to work a non-standard day. An example would be a consistent workweek comprising 4 shifts of 10 hours duration.

Using an overtime averaging agreement, employers can use this sort of schedule without incurring any obligation to pay at overtime rates. The overtime averaging provisions are not suited, however, to work schedules which are inconsistent or which feature random occurrences of overtime work.

Although there is no mandatory form for an overtime averaging agreement (and the agreement does not need to be filed with the Employment Standards Branch), there are certain requirements to be met.

First, and most important, there must be a written overtime averaging agreement in place. Employers who seek to retroactively establish the existence of a verbal agreement to average hours will receive little sympathy from the Employment Standards Branch.

Hours may be averaged over cycles of 1, 2, 3, or 4 weeks. The averaging agreement must set out the hours scheduled for each workday during the averaging cycle. The number of hours may be different in each day or week during the averaging cycle.

The averaging agreement must also specify a start date and an end date for the agreement. The agreement may provide for repeats of the effective period but must indicate how many times it may be repeated.

In my view, there is little sense in setting the effective period of the averaging agreement for more than 1 year, or for providing more than 1 repeat of that period. Most employees’ work schedules are likely to change within that range of time, requiring a new averaging agreement anyway.

The agreement must indicate the averaging cycle (either 1, 2, 3, or 4 weeks) over which the hours will be averaged. Finally, the averaging agreement must be signed by the employee and the employer (and the employee must be given a copy) before it is implemented.

As long as the employee’s average weekly hours, over the agreed-upon averaging cycle, do not exceed 40 and the employee never works more than 12 hours in a day there is no requirement to pay at overtime rates. So, my example of a workweek comprising 4 shifts of 10 hours’ duration would not attract any overtime pay obligations.

The presence of an averaging agreement does not, of course, completely eliminate the obligation to pay at overtime rates. Employers must pay at the rate of time-and-a-half for hours worked outside of the scheduled day (if it exceeds 8 hours). They must pay at double-time for all hours worked over 12 in a day. And, they must pay at time-and-a-half for all hours worked in excess of an average of 40 per week over the defined averaging cycle.

As an example, an employee scheduled for a workweek comprising 4 shifts of 10 hours’ duration may be subject to an averaging agreement utilizing a 2 week averaging cycle. During the two week averaging cycle, the employee might work an additional 10 hour shift each week, for a total of 100 hours in the cycle. The employer would have to pay this employee at time-and-a-half for the 20 hours exceeding the 40 hour average during the averaging cycle.

The employer and the employee may agree to alter an overtime averaging agreement as long as the total hours scheduled in the agreement remains the same.

The overtime averaging agreement is definitely something that is welcomed by employers. It is intended as a fair way to allow employees to work a non-standard workweek without the employer having to incur premium wage rates. It should be seen as a good step towards recognizing that not all employers’ operations are suited to a standard 8 hour workday.