Below is a summary of a company’s overtime obligations in respect of employees under the jurisdiction of the Alberta Employment Standards Code.
A. The general rule is 8/44
The Code states that overtime hours are those in excess of either 8 hours in each work day or 44 hours per week, whichever is greater. A work week begins and ends on Saturday at midnight. Further, it is important to emphasise that overtime is not calculated weekly and not per pay period. The following are examples of how to apply the 8/44 rule:
|0||8||8||8||8||8||8||48||4 hours||This employee had no daily overtime because they did not work more than 8 hours a day. However, they worked 48 hours for the week. The employee therefore has 4 hours of overtime: 48-44 = 4.|
|0||5||7||0||0||11||0||23||3 hours||This employee worked much less than 44 hours per week and so they have no weekly overtime. However, they are still entitled to 3 hours of overtime because they worked three hours over the daily maximum of 8 on Friday.|
B. Determining an employee’s wage rate for the payment of overtime
Overtime hours are paid to employees at a rate not less than 1.5 times that employee’s wage rate. The wage rate means the “hourly rate of pay for wages”.
(i) Hourly employees
The wage rate of an employee paid hourly is simple. For example, if an employee is paid $20 per hour, then their wage rate is $20 per hour, with their overtime rate being 1.5x this amount or $45 per hour.
(ii) Salary employees
Salaried employees are just as entitled to overtime as hourly employees. The following is how an employer calculates the wage rate of a salaried employee:
- Calculate the average number of weeks in a month: 4.333
- Calculate the employee’s weekly wage: monthly salary / 4.333; and
- Calculate the employee’s hourly rate of pay: Employee’s weekly wage / 44 hours or by the number of hours that make up the employee's regular work week.1
For example, if an employee is paid $60,000 and works 44 hours per week then their wage rate would be as follows: $5000 / 4.333 = $1153.93 / 44 = $26 per hour. Their overtime rate would then be $39.34.
Similarly, if an employee is paid $50,000 and works 40 hours per week then their wage rate would be as follows: $4166.66 / 4.333 = 961.61 / 40 = $24.04 per hour. Their overtime rate would then be $36.06.
Of course, if an employee always works a different number of hours per week, then the calculation in the 3rd step is more difficult. The Code provides no guidance on this and is one of the reasons I always recommend paying non-managerial employees hourly rather than by salary.
(iii) Employees paid only by commission or other incentive pay
If an employee is paid only by commission or other incentive pay, and does not receive any sort of salary or hourly wage, then their wage rate is deemed to be minimum wage for the purposes of overtime. Their overtime rate would then be minimum wage x 1.5x.
(iv) Employees paid by a combination of salary and incentive pay
If an employee is paid by a combination of hourly wage/salary and incentive pay, then their wage rate will be as follows:
- If the salary/hourly wage is greater than minimum wage, then their wage rate will be calculated in the same way as B (i) and (ii) above; and
- If the salary/wage rate is equal to or less than minimum wage, then their wage rate will be minimum wage.
C. Overtime on general holidays
If the hours worked on a general holiday are paid at 1.5 times their regular wage rate, the hours of work for that day are not used when calculating overtime hours. If the employee is instead paid straight time on that general holiday plus a day off, the hours worked on that day are used for calculating overtime.
D. Exception: overtime agreement
The only exception to paying an employee overtime at a rate of 1.5 times their regular wage rate is where the overtime is accumulated under an overtime agreement between an employer and employee. Under an overtime agreement:
(i) Time off with pay instead of overtime pay will be provided, taken and paid at the employee’s regular wage rate at a time that the employee could have worked;
For example, if an employee earns $20 per hour, and accumulates 4 hours of overtime, then they will be paid at $20 per hour for 4 hours of paid time off. However, this paid time off, must be taken when the employee could have worked. For example, if an employer is only open for business from 7:00am until 6:00pm, then an employer can only provide that employee with paid time off between these hours. While not stated in the Code, this is likely to prevent employers from placing an employee’s paid time off during hours at night or when they should be sleeping.
In your case, I understand that you do not have regular business hours like the times above. While the Code provides no guidance on this issue, I would nonetheless recommend only placing their paid time off between hours of they day they are normally expected to work.
(ii) The total of hours worked plus banked hours cannot exceed 8 hours in a day or 44 hours per week
To determine how many banked hours can be used in a day or week, the following rules apply:
- The total hours worked in a day plus banked hours taken (with regular pay) cannot exceed 8 hours; and
- The total hours worked in a week, plus banked hours taken (with regular pay) cannot exceed 44 hours.
For example, if an employee has 10 banked hours from week 1, and then works 44 hours in week 2, then the employer can’t use any of the banked hours in week 2. This is because, using any of the banked time in this week would violate the second bullet above.
(iii) Time off with regular pay instead of overtime pay must be provided, taken and paid to the employee within 3 months of the end of the pay period in which it was earned
This means that the employee’s banked overtime hours can’t be held forever. They must use them within three months of the end of the pay period in which the banked time was earned. Employers are free to establish their own pay periods, though section 7 of the Code states that pay periods must not be longer than one work month. The following are examples of when banked time must be used by:
|Overtime Worked||Pay period ends||Banked time must be used|
|June 1||June 30||September 30|
|August 11||August 12||November 12|
|September 15||September 15||December 15|
With that said, there is one exception to this rule: employers can apply to the Director of Employment Standards to extend the three-month time period that banked time must be used by, to a maximum of 6 months. The application must include:
- The employer’s name and address;
- The reason for the application;
- A description of the roles of the employees who would be subject to the extension; and
- The employee’s written consent who will be adversely affected by it. This consent must also include the employee’s name, signature and phone number.
If a company requires such an extension, please let us know and we can help you draft the application.
(iv) If the employee does not take their banked time as paid time off within the 3 months, then the employer must pay that employee their overtime pay
If the employee has banked time, but the employer is unable to provide that employee with those banked hours as paid time off within the 3 month time period stipulated in (iii) then the employer must pay the employee those overtime hours at 1.5x their regular wage. If the employer has a permit to hold those banked hours for 6 months, then this rule would obviously only apply at the end of the 6 month period.
(v) Example 1: banked overtime
A group of employees have entered into an overtime agreement with their employer, who pays overtime after 8/44. The business is open 5 days per week, Monday to Friday, from 9:00am to 9:00pm. In a week, an employee works:
In the first week, the employee only worked 40 hours and so they have no weekly overtime. They do however have three hours of daily overtime (1 on Monday and two on Wednesday). The employer can provide the employee with two hours of paid time off on Friday. This is permitted because two hours on Friday will bring the employee up to 8 hours that day, with only 42 hours worked that week. The remaining banked hour will be carried forward to subsequent weeks.
This week, the employee has 9 weekly overtime hours and 13 daily. Because overtime is the greater of the two, 13 overtime hours will be banked. With the one hour from week 1, this brings the total banked overtime to 14.
None of the banked hours can be used this week for a few reasons:
- The employee has already reached their weekly maximum of 44 hours per week;
- The employer is unable to place banked time from Monday-Friday because the employee has already worked 8 hours or more on those days; and
- None of the hours can be placed on Saturday or Sunday because the business is not open these days. As such, placing paid time off on these days would offend the rule that banked time can only be used “at a time that the employee could have worked”.
This week the employee accumulated no weekly and no daily overtime: they worked less than 44 hours per week and 8 or less hours per day. The employer can use 10 of the banked hours: 8 on Tuesday and 2 hours on Wednesday. This will bring both of these days up to the maximum of 8 hours. The employee’s weekly time plus banked time also equals only 40—less than the maximum of 44.
The employer is unable to place any more banked hours between Monday and Friday because the daily maximum of 8 (time worked + banked time) has been reached. Like week 2, no overtime hours can be used on Saturday or Sunday because it would offend the rule that banked time can only be used “at a time that the employee could have worked”. Because 10 of the 14 banked hours have been used, 4 hours will be carried forward.
(vi) Example 2: banked overtime
A group of employees have entered into an overtime agreement with their employer who pays overtime after 8/44. The business is open 6 days per week, Monday to Saturday from 8:00am to 6:00pm. In the first week, the employee works:
The employee has no weekly overtime hours, but they do have four hours of daily overtime—one on Monday and Friday and two on Wednesday. The employer can give the employee 1 hour of paid time off on Saturday to bring their weekly total up to 44. Saturday is permitted in this example because the business is open on this day. As such, the employee could have worked. The three hours that remain will be banked for subsequent weeks.
This week the employee has 2 hours of daily overtime but 5 of weekly. We are unable to use any banked time this week because the employee has already hit 44 hours this week. As such, the employee will now have 8 hours in the bank—5 from this week and 3 carried forward from week 1.
E. Record keeping obligations applicable to overtime agreements
Each employer has an obligation to keep the records described in section 14 and 15 of the Code. In respect of an overtime agreement, the Code states that the employer must keep records of (i) the number of overtime hours banked; as well as (ii) the number of hours taken off with pay by the employee. In addition, the employer must also provide the employee with a pay statement showing the number of banked overtime hours taken with regular pay for each pay period.
The employer must keep these records, as well as all records required to be kept under section 14 and 15, for three years.
These sections specifically state the following:
Records to be maintained
- 14. (1) Every employer must keep an up-to-date record of the following information for each employee:
- (a) regular and overtime hours of work;
- (b) wage rate and overtime rate;
- (c) earnings paid showing separately each component of the earnings for each pay period;
- (d) deductions from earnings and the reason for each deduction;
- (e) time off instead of overtime pay provided and taken.
- (2) At the end of each pay period, an employer must provide a written statement to each employee setting out, in respect of the employee,
- (a) the information described in subsection (1), and
- (b) the period of employment covered by the statement.
- (3) The hours of work of an employee, maintained by an employer under subsection (1)(a), must be recorded daily.
- (4) An employer must keep an up-to-date record of the following additional information for each employee:
- (a) name, address and date of birth;
- (b) the date that the present period of employment started;
- (c) the date on which a general holiday is taken;
- (d) each annual vacation, showing the date it started and finished and the period of employment in which the annual vacation was earned;
- (e) the wage rate and overtime rate when employment starts, the date of any change to wage rates or overtime rates, and particulars of every change to them;
- (f) copies of documentation relating to maternity and parental leave;
- (f.1) copies of documentation relating to reservist leave;
- (f.2) copies of documentation relating to compassionate care leave;
- (g) copies of any termination notice and of written requests to employees to return to work after a temporary layoff.
- (5) On request, an employer must give to an employee a detailed statement of how the employee’s earnings were calculated and the method of calculating any bonus or living allowance paid, whether or not it forms part of wages.
Keeping employment records
- 15. Employment records must be retained by an employer for at least 3 years from the date each record is made.
While the above appears to be a lot of record taking, employers greatly benefit from making diligent records. This is because, employees often argue that they were not paid correctly or were paid for less hours than they actually worked. If, after they make a complaint under the Code, the employee’s hours of work are unclear due to poor record taking, Employment Standards is more likely to give the employee the benefit of the doubt. This is because it’s the employer’s duty, rather than the employee’s, to take records in accordance with the above sections.
F. Overtime on termination
Any banked time not provided and taken with pay by the end of an employee’s last day of work must be paid out at 1.5 times the employee’s regular rate of pay at the time it was earned. With that said, there are ways to use up some or all of an employee’s banked time as part of their “notice” under both the Code and common law. For advice on how to best use an employee’s banked time at the end of their employment please:
- contact us immediately after an employee submits notice in the event of resignation; and
- in the case of a termination, before a company provides any notice to the employee.
G. Exceptions to the general overtime rules
(i) Employees where the overtime rules do not apply at all
While the above overtime rules pursuant to the Code applies to the vast majority of employees, there are some exceptions. Specifically, the Code’s overtime rules do not apply to:
- Managers, supervisors and those employed in a confidential capacity;
- Farm workers;
- Professionals, including agrologists, architects, certified or chartered accountants, chiropractors, dentists, denturists, engineers, information systems professionals, lawyers, students-at-law, optometrists, podiatrists, psychologists and veterinarians;
- Salespersons of automobiles, trucks, buses, farm machinery, road construction equipment, heavy duty equipment, manufactured homes or residential homes;
- Salespersons who solicit orders, principally outside of the employer’s place of business, who are fully or partly paid by commission (this does not apply to route salespersons);
- Licensed salespersons of real estate and securities;
- Licensed insurance salespersons who are paid entirely by commission income;
- Salespersons who are at least 16 years old and are engaged in direct selling for licensed direct sellers;
- Licensed land agents;
- Extras in a film or video production;
- Counselors or instructors at an educational or recreational camp that is operated on a charitable or not-for-profit basis for children, persons with disabilities, or religious purposes; and
- Domestic employees
In other words, if the above employees work 10 or 11 hours per day, then they are not entitled to either overtime or banked time. For these employees, you can pay them a salary and actually state that the salary alone compensates them for all hours worked.
With that said, it is important to note that the first category, managers and supervisors, is confined to individuals who actually manage or supervise other employees. It does not apply to employees who manage a business’ operations or a segment of it. To determine if an employee is a true manager or supervisor under the Code, it is best to canvass this with an employment lawyer.
(ii) Employees who are subject to different overtime rules
In addition to employees who are exempt all together from the Code’s overtime rules, there are some employees that, while not exempt, are subject to something other than the 8/44 rule. All other overtime rules apply to these employees in the same way that they otherwise would. The only difference is when overtime starts to accumulate. The table below shows the various industries daily, weekly and in some cases monthly hours of work before overtime becomes payable/banked:
|Industry||Daily hours||Weekly hours||Monthly hours|
|Logging and lumbering||10||N/A||191|
|Highway and railway construction and brush clearing||10||44||N/A|
|Road maintenance activities||10||N/A||191|
|Taxi cab industry||10||60||N/A|
H. A brief note on the common law
While this memorandum focused on a company’s obligations pursuant to the Code, this is not the only way an employee can become entitled to overtime. Specifically, the Code sets the minimum standards that each employer must comply with. However, it does not stop employers from granting employees with greater benefits than the Code requires. When an employer does grant an employee with greater benefits, it is likely to become a part of their employment agreement at common law.
One example is as follows: As discussed above, the Code does not require employers to pay true managers overtime. However, if an employer provided a true manager with overtime notwithstanding the Code, then the benefit of overtime forms a part of that employee’s employment contract. If the employer determines it does not want to pay that employee overtime any longer, and unilaterally ceases payment of such overtime, the employee could argue that they have been “constructively dismissed” and entitled to notice or pay in lieu of notice (severance).
If you are an employee who thinks your employer may not be complying with Alberta overtime obligations, or you are an employer who wants to get organized regarding employee overtime pay, please contact Taylor Janis LLP at your earliest convenience: 1 (844) 224-022.
Sit down with us in a confidential one-on-one consultation, and let us simplify matters for you.
Disclaimer: The above information is for general purposes only. It is not a substitute for legal advice concerning the specific facts of your situation. It is important that you seek the advice of an Employment Lawyer to determine how the law applies to your case.
1 Note. You would only do the latter if the employee works less than 44 hours a week.
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