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Agreements to Average Hours of Work - Act Part 4, Section 37

Last updated on August 24, 2021

Contents:

Summary
Text of Legislation
Policy Interpretation
Related Information

Summary

This section allows an employer and an employee to enter into a written agreement to average hours of work over a one to four week period. The eligibility and related calculations for overtime and rest periods are included in this section. 

Text of Legislation

37. (1) Despite sections 35, 36 (1) and 40 but subject to this section, an employer and employee may agree to average the employee's hours of work over a period of 1, 2, 3 or 4 weeks for the purpose of determining the employee's entitlement, if any, to overtime wages under subsections (4) and (6) of this section and wages payable under subsection (8) or (9) (b).

(2) An averaging agreement under subsection (1) is not valid unless

(a) the agreement

(i) is in writing,

(ii) is signed by the employer and employee before the start date provided in the agreement,

(iii) specifies the number of weeks over which the agreement applies,

(iv) specifies the work schedule for each day covered by the agreement,

(v) specifies the number of times, if any, that the agreement may be repeated, and

(vi) provides for a start date and an expiry date for the period specified under subparagraph (iii),

(b) the schedule in the agreement under paragraph (a) (iv) is in compliance with subsection (3), and

(c) the employee receives a copy of the agreement before the date on which the period specified in the agreement begins.

(3) A work schedule in an agreement under this section must not provide for more than the following hours of work for the employee:

(a) 40 hours, if the agreement specifies a 1 week period under subsection (2) (a) (iii);

(b) an average of 40 hours per week, if the agreement specifies more than a 1 week period under subsection (2) (a) (iii).

(4) An employer under this section who requires, or directly or indirectly allows, an employee to work more than 12 hours a day, at any time during the period specified in the agreement, must pay the employee double the employee's regular wage for the time over 12 hours.

(5) An employer under this section who requires, or directly or indirectly allows, an employee to work more than an average of 40 hours a week within the period specified in the agreement must pay the employee 1 1/2 times the employee's regular wage for the time over 40 hours.

(6) An employer under this section who requires, or directly or indirectly allows, an employee to work more than the hours scheduled for a day during the period of the agreement must pay the employee

(a) 1 1/2 times the employee's regular wage for,

(i) if fewer than 8 hours were scheduled for that day, any time worked over 8 hours, or

(ii) if 8 or more hours were scheduled for that day, any time worked over the number of hours scheduled, and

(b) double the employee's regular wage for any time worked over 12 hours that day.

(7) For the purpose of calculating average weekly hours for an employee under subsection (5),

(a) only the first 12 hours worked by the employee in each day are counted, no matter how long the employee works on any day of the week, and

(b) if subsection (6) applies, the time that the employee works beyond the scheduled hours and for which the employee is paid in accordance with that subsection, is excluded

(8) Section 36 (1) applies in relation to an averaging agreement if the period specified in the agreement is 1 week.

(9) If the period specified in an averaging agreement is more than 1 week, the employer must either

(a) ensure that for each week covered by the agreement, the employee has an interval free from work of 32 consecutive hours, whether the interval is taken in the same week, different weeks or consecutively any time during the weeks covered by the agreement, or

(b) pay the employee 1 1/2 times the regular wage for time worked by the employee during the periods the employee would otherwise be entitled to have free from work under paragraph (a).

(10) At the employee's written request, the employer and employee may agree to adjust the work schedule referred to in subsection (2) (a) (iv) provided that the total number of hours scheduled in the agreement remain the same.

(11) The parties to an averaging agreement under this section are bound by that agreement until the expiry date set out in the agreement or a later date provided in an agreement to repeat the averaging agreement, as the case may be, and the provisions of the averaging agreement apply for the purpose of determining the employee's entitlement, if any, to overtime wages under subsections (4) and (6) and wages payable under subsection (8) or (9) (b).

(12) Subsections (2) to (11) are deemed to be incorporated in an averaging agreement under this section as terms of the agreement.

(13) An employer must retain an averaging agreement under this section for 4 years after the following, as applicable:

(a) the expiry date set out in the averaging agreement, unless paragraph (b) applies;

(b) the expiry date set out in one or more agreements to repeat the averaging agreement, whichever date is the latest.

(14) The application and operation of an averaging agreement under this section must not be interpreted as a waiver described in section 4.

Policy Interpretation

Subsection (1)

An agreement to average hours of work under this section allows an employer and an employee to agree to a work schedule of up to 40 hours in a one-week work schedule or an average of up to 40 hours in a 2 to 4 week work schedule without weekly overtime. A daily work schedule in an averaging agreement results in daily overtime when scheduled hours worked exceed 12.

  • An agreement to average hours of work is voluntary and between an employer and an individual employee, not groups of employees. (See examples below)
  • A week for the purposes of s.37 is a period of 7 consecutive days beginning on Sunday (See s.1 of the Act “week”), therefore, one to four week agreements can only begin on Sunday at 12:01 am and end at midnight on the following Saturday. Only time worked within this 7-day period can be considered for the purposes of overtime. Therefore, if a shift straddling midnight ends on a Sunday the time worked on Sunday will be applied to the time worked on Saturday.
  • Sections 35, 36(1)* and 40 of the Act do not apply to an averaging agreement under this section. This section contains calculations for overtime and rest periods applicable to an averaging agreement.
    *subject to 37(8)

Examples:

  • An employer enters into individual agreements with the majority of the employees and then informs the employees that did not sign that they are now included under the agreement that the majority signed. This is not permissible since the majority cannot determine the wishes of the minority.
  • An employer calculates overtime for all employees based on s.37 when not all employees entered into an agreement with the employer. This is a contravention of s.40 since employees who did not sign an averaging agreement under s.37 are entitled to overtime calculated under s.40 of the Act.

Note:

Overtime wages earned when working under a s.37 averaging agreement can be banked pursuant to s.42 of the Act.

Under s.37.8 of the Employment Standards Regulation an employee working for a high technology company who is not a high technology professional, may enter into an agreement that results in the modification of the provisions of s.37.

There is no requirement to notify the Employment Standards Branch when the parties enter into an averaging agreement. Also, the Branch does not supply examples of averaging agreements nor does Branch staff have authority under this section to approve an averaging agreement.

An employer and employee may enter into an averaging agreement unless the Employment Standards Regulation excludes the parties from s.37 of the Act.

Example:

A “manager is excluded from Part 4 of the Act pursuant to Employment Standards Regulation s.32(1). A “manager” and their employer cannot enter into a s.37 averaging agreement since managers are excluded from Part 4 of the Act in its entirety.

When an employee is excluded by Regulation from s.40 of the Act, and the Regulation specifies overtime requirements to replace those in s.40, an employer and employee may still choose to enter into a s.37 averaging agreement. In this case, s,37 of the Act takes precedence over the overtime requirements in the Employment Standards Regulation.

Example:

A “short haul truck driver”, as defined in s.1 of the Employment Standards Regulation, is excluded from ss.35, 40, and 42(2) of Part 4 of the Act. Section 37.3(3) of the Employment Standards Regulation requires the payment of overtime after specified hours of work.

The “short haul truck driver” may enter into an averaging agreement since the Regulation does not exclude them from s.37 of the Act. If the parties enter into an averaging agreement, the provisions of s.37 of the Act determine overtime calculations and eligibility. In this case the s.37 agreement acts to exclude the driver from the overtime provisions in the Regulation.

Subsection (2)

This subsection sets agreement conditions. Unless an agreement meets all of the conditions noted in s.37(2), the Director will find that the averaging agreement is not valid and s. 40 of the Act will apply to determine overtime entitlement and pay (See Example below) and s.36(1) of the Act will also apply to determine premium pay owing for work performed during a 32 hour rest period.

37(2)(a):

      i. The agreement must be in writing. Verbal agreements are not valid (see Example 1 below).

     ii. The agreement is an individual agreement between an employer and an employee and once signed does not apply to any time worked prior to the signing of the agreement.

    iii. The agreement must specify a 1 to 4 week period. The agreement must not exceed 4 weeks, unless varied by the Director. (See section 72(h.1) of the Act).

    iv. The agreement must contain a daily schedule of hours and cannot exceed a total of 40 hours in a 1-week period or an average of 40 hours in a 2 to 4 week period. (See 37(3) and example 2 below). If an agreement contains more than 12 scheduled hours in a day, all time worked over 12 is payable at double-time the employee’s regular wage. (See section 37(4)).
Although this subsection restricts the total hours that can be scheduled in an agreement, the number of days per week and daily hours scheduled is not restricted by this section. (See example 3 below)

     v. If the agreement is to repeat in a 1 to 4 week scheduling period, the number of times to repeat or the date of the last day of the last week to be repeated must be stated in the agreement.

    vi. The expiry date can be for any period of time however the expiry date must be specified in the agreement.

37(2) (b):

The daily work schedule in an averaging agreement must not provide for more than 40 hours in a one-week schedule, or an average of 40 hours in a 2 to 4 week schedule, as noted in s.37(3).

37(2) (c):

The employee must receive a copy of the agreement before the work schedule in the averaging period begins.

Example:

1.     An employer enters into a verbal agreement with an employee to work three 12- hour days per week. Since the agreement is not in writing as per s.7(2)(a)(i) all the conditions of s.37(2) have not been met and therefore the agreement is not valid and s.40 applies to the calculation of overtime.

2.     The employer and employee enter into a two-week averaging agreement with a work schedule totalling 90 hours. The agreement is not valid since the average hours of work exceed 40 per week. Therefore s.40 of the Act would apply to the calculation of overtime.

3.     An averaging agreement specifies a schedule of 12 daily hours and one day a week. If all other agreement conditions are met in s.37(2) this would be a valid agreement.

Subsection 37(3):

A work schedule under this section must not provide more than:

  • 40 hours if the agreement specifies a one week period
  • An average of 40 hours a week if the agreement specifies 2 to 4 weeks.

Subsection 37(4):

  • Regardless of the number of hours scheduled if the employer requires or allows the employee to work more than 12 hours a day daily overtime applies at double the employee’s regular wage.
  • The calculation of daily overtime is based on hours worked

    Example:

    An employee signs an averaging agreement that provides for a work schedule of 2-13 hour days per week. The employee is entitled to receive straight-time for all time worked up to 12 and double time for all time worked over 12 hours a day. In this example if the employee worked the 2-13 hour days scheduled daily overtime is payable for 2 hours at double time.

Subsection 37(5):

  • Establishes weekly overtime entitlement and pay at 1.5 X regular wage when a change to a work schedule in an agreement results in more than an average of 40 hours of work in a week.
  • Regardless of the number of hours scheduled, if the employer requires or allows the employee to work more than 40 hours in a one-week agreement, or an average of 40 in a 2 to 4 week agreement, weekly overtime applies (See Examples)
  • The calculation of weekly overtime is based on the total hours worked, excluding all daily overtime [See ss.37(6) and (7)].

Example: One week schedule

 

SUN

MON

TUES

WED

THURS

FRI

SAT

Scheduled

 

10

10

10

10

 

 

Worked

 

10

10

10

10

5

 

Employee is scheduled for 40 hours in a one- week agreement. The 5 hours worked over 40 are calculated as weekly overtime at 1.5 X regular wage.

Example: Two to four week schedule

Employee is scheduled 120 hours over a 3-week averaging period (the maximum hours that can be scheduled over a 3 week schedule; 3 weeks X 40 hours = 120) but works an extra day for a total of 125 hours. The 5 hours are calculated as weekly overtime at 1.5 X regular wage.

Subsection 37(6)

  • An employer who requires or allows an employee to work more than the scheduled hours in an agreement is required to pay daily overtime at time and one half regular wage for unscheduled time worked over 8
  • An employer is required to pay daily overtime at double time regular wage for all time worked over 12
  • Unscheduled hours worked totalling 8 or fewer a day do not qualify for daily overtime

Example: One week schedule

 

SUN

MON

TUES

WED

THURS

FRI

SAT

Scheduled

 

10

12

8

4

 

 

Worked

 

11

13

9

5

 

 

Employee was scheduled to work a total of 34 hours. However on each day the employer required the employee to work an extra hour.

The extra hour added to the schedule on Monday and Wednesday must be paid at 1.5 X regular wage since they are unscheduled hours worked over 8 in a day.

The extra hour worked on Tuesday is paid at double time regular wage since all time worked over 12 is paid at 2 X the regular wage.

The extra hour worked on Thursday is paid at straight time since only unscheduled time worked over 8 results in daily overtime.

Subsection 37(7)

  • The calculation of weekly overtime under s. 37(5) excludes time worked over 12 daily and unscheduled hours of work paid as daily overtime under s.37(6)

Example: One week schedule

 

SUN

MON

TUES

WED

THURS

FRI

SAT

Scheduled

 

10

10

10

10

 

 

Worked

 

10

10

10

12

4

 

The calculation to determine weekly overtime hours:

Total hours of work

46

Less daily overtime

2 (2 -unscheduled daily overtime hours worked on Thursday)

Subtotal:

44 weekly hours

less

40 hours (maximum hours of work in a one week schedule)

Total

4 hours of weekly overtime, payable at 1.5 X regular wage.

Under s.37(5) all time worked over 40 in a one week schedule or an average of 40 in a 2 to 4 week schedule, are payable at 1.5 X regular wage.

Subsection 37(8)

  • When an employee is working under a one week schedule an employer is required to pay an employee 1.5 X regular wage for all time worked during the 32 hour period the employee would otherwise have had free from work as noted in s.36(1) of the Act.

Subsection 37(9)

  • Allows the intervals of 32 consecutive hours free from work to be taken in the same week, different weeks, or consecutively any time within the averaging agreement.
  • Any time worked during the 32- hour rest period must be paid at 1.5 X regular wage.

If the time worked during a 32-hour rest period has been paid at overtime rates the employee is not entitled to additional pay under this subsection.

Subsection 37(10)

  • This subsection allows the schedule in an agreement to be adjusted by mutual agreement, if requested in writing by the employee, provided the total hours remain the same (see Example below).
  • If a schedule is changed under this subsection daily overtime that would normally be owing under s.37(6) would not apply.

Daily overtime would only result if time worked exceeded 12 hours in a day. (See s.37(4)).

Example: Norma worked the following changed schedule of hours.

 

SUN

MON

TUES

WED

THURS

FRI

SAT

Scheduled

 

10

12

8

 

 

 

Worked

 

 

12

8

10

 

 

Norma requested, in writing, a change to the schedule moving hours scheduled on Monday to Thursday. Overtime pay does not result from such a change to the schedule. If the employer had moved the hours without Norma’s written request the 2 non-scheduled hours over 8 on Thursday would qualify as daily overtime pursuant to s.37(6).

Subsection 37(11)

This subsection binds the parties to an agreement until it expires, whether that is at the end of the scheduling period or at the end of the agreement to repeat the schedule.

Cancellation of agreement due to employment termination

If employment terminates part way through a scheduling period (1 to 4 weeks) the calculation for weekly overtime in s.37 will apply as if the employee had remained employed until the end of the scheduling period and daily overtime will also be calculated in accordance with this section.

Example:

Employment ends 2 weeks into a 4 -week averaging period. A total of 90 hours were worked. Weekly overtime would not be owing since the total hours worked did not exceed 160 hours (4 weeks X maximum of 40 hours per week)

Cancellation of agreement due to notification by either party

Cancellation of an averaging agreement can only occur at the expiry date of the averaging period in the agreement (1, 2, 3, or 4 weeks) or, in the case of an agreement with a repeating averaging period, when either party advises that the agreement will conclude at the end of a specified averaging period.

Example:

An averaging agreement specifies a 4-week averaging period to be repeated 13 times. During the second week of the 10th repetition of the averaging period the employer advises the employee that the agreement is to be cancelled. The earliest it can be cancelled is at the end of the 10th repetition of the averaging period.

It is recommended that the parties provide cancellation notice in writing and with as much notice as possible to allow the other party to prepare for the change in working hours.

Subsection 37(12)

This section ensures that s.37(2) to (11) is part of the terms of the averaging agreement.

Subsection 37(13)

The averaging agreement, including any changes to the agreement under s.37(10), must be retained by the employer for  4 years after the agreement expires. If the averaging agreement has been repeated, records must be kept for 4 years after the last expiry date.

Subsection 37(14)

The operation and application of an averaging agreement under this section is a minimum requirement under the Act and as such is not a waiver described in s.4 of the Act.

Employees covered by a collective agreement

If a collective agreement contains any provisions about hours of work or overtime that meet or exceed the requirements of Part 4, those provisions of the collective agreement replace the Act’s requirements for employees covered by the agreement.

Where there is a collective agreement, disputes respecting the application, interpretation or operation of Part 4 must be resolved through the grievance procedure, not through the enforcement provisions of the Act.

Certain employees are exempt from this section, or Part 4 entirely, under the Employment Standards Regulation.

Related Information

Related sections of the Act or Regulation

ESA

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