It comes as no surprise that more workplaces are embracing more flexible work arrangements with their employees. While the flexibility is seen as an attractive tool for promoting work life balance and good corporate culture, it risks imposing some significant liability on the employer, namely with respect to the payment of overtime.

Overtime in Alberta is governed by the Employment Standards Code, RSA 2000 C e-9 (the “ESC”). An employer must pay an employee overtime pay at a rate that is at least 1.5 times the employee’s wage rate. Unless your industry is subject to an exemption, an employee’s overtime is calculated based on the greater of the total hours of work in excess of 8 hours on each work day in the work week, or the total hours of work in excess of 44 hours in the work week. [1] An employer does not have the ability to choose between the daily limit and the weekly limit, instead overtime is calculated based on whichever entitles the employee to a greater benefit.

Averaging Arrangements

An averaging arrangement is an arrangement between an employee and employer that allows the employee to work a modified schedule. Such an arrangement can be well-suited for employees with work schedules outside the normal Monday to Friday, 9-5 work week and is a useful tool to maintain flexible and fair work schedules, while keeping overtime costs in check.

An averaging arrangement allows the employer to average out an employee’s hours across multiple weeks, for the purpose of determining the employee’s entitlement to overtime. While it does not do away with the requirement to pay overtime entirely, it can minimize how much overtime an employee is entitled to. Under this type of arrangement, an employee is entitled to overtime if, on average, as determined over a set multi-week period, their hours of work exceed 44 hours a week. It can be implemented across the whole workforce or can be limited to a single employee.

These arrangements are tightly controlled by the ESC, which sets out strict parameters an employer must abide. An employer must provide their employee two weeks’ notice before an averaging arrangement starts, unless otherwise to in writing.  To be valid, the following specific requirements must be met:

• the arrangement must be in writing;
• it must specify the number of weeks over which hours will be averaged (up to a maximum of 52 weeks);
• include a schedule setting out the daily and weekly hours of work for the averaging period;
• specify whether daily overtime will apply; and
• specify the manner which overtime pay and/or time off with pay will be calculated.

In determining whether to implement an averaging arrangement, an employer should strongly consider consulting with a lawyer to ensure the terms of the arrangement meet requirements under the ESC. The employment lawyers at Getz Collins and Associates can help with answering any questions you have and can determine specific considerations unique to your company and employees when deciding whether an averaging arrangement is in your best interests.

[1] A work day means a 24‑hour period ending at midnight or a 24‑hour period as established by the consistent practice of an employer. A work week is defined as the period between midnight on a Saturday and midnight on the following Saturday, or 7 consecutive days as established by the consistent practice of an employer.