Overtime and Lieu Time – Risks and Merits

Risks and Merits

By: John Platz

The concept of lieu time related to overtime is a potential powder keg. Lieu time is a subject that I have encountered over the years with a variety of clients. 

Firstly, one should distinguish exempt from non-exempt employees.  Non-exempt employees under all legislation in Canada, have protection related to hours of work and overtime entitlement.  It is important to note that whether salaried or hourly does not determine non-exempt status.  It is determined by not having supervisory/managerial control.  As an example, a salaried accounts payable clerk will likely be considered a non-exempt employee entitled to overtime rights.

Therefore, for non-exempt employees, you should be guided by overtime rules including a protocol and documentation of authorization.  This can be further complicated based on the normal hours of work either daily or weekly.  Legally, the premium rate applies only those that exceed the respective minimum provincial standards provided the policy is clearly stated.

As an example, in Ontario, overtime applies only after 44 hours in a week.   If the normal hours of work are 40, then the policy could be straight time for 4 hours and the premium only after 44.

The real problem with lieu time applies to exempt employees who do not have hours of work protection and overtime entitlement.  The general principle of time worked is technically captured in the salary paid to the supervisor/manager.  There is no further obligation.

But, the problem surfaces with managerial resistance related to additional hours to be worked.  It may produce unwanted turnover or even difficulty with recruitment, especially where the employee does not perceive the salary adequately recognizes the assault on personal time off that is sacrificed.

If there is to be a lieu time policy for managerial/supervisory personnel, it should be clearly defined and strictly enforced.  The problem of lieu time owing customarily arises when an employee is terminated.  The terminated employee asserts that 10 or 11 days of lieu time are owed.  More often, there was never an intended cash conversion of lieu time but more often there is no proper policy to address this.

Here are some points that an employer should consider when constructing a lieu time policy.

  1. Distinguish entitlement between exempt and non-exempt employees;
  2. Non-exempt will be entitled to authorized overtime pay for any time worked exceeding the normal hours and subject to labour legislation;
  3. It is best to not characterize this work as lieu time and instead reference an overtime policy;
  4. The lieu policy will then apply to certain levels of the organization and if considered for management, then limited to junior managerial/supervisory roles;
  5. Senior managers and executives should not have entitlement;
  6. The policy should be easily administered and therefore should be restricted to certain events, such as an individual supervisor works an evening shift or a regular day off; in such a case these should be recorded.
  7. There should be strict controls associated with when an employee is expected to take time off preferably in a subsequent month; accrual should therefore be limited.
  8. The policy should clearly state there is no cash value for lieu time, in particular at time of termination.
  9. Department heads should not be allowed to construct informal policies.

By considering some of these points, you can portray yourself as a fair employer and not unwittingly produce additional and likely unbudgeted payroll costs.