Cibc Loses Lengthy Compenstation Lawsuit

TU E S DAY , M ARCH 31, 2020

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CIBC loses lengthy compensation lawsuit Ontario court rules bank is liable for unpaid overtime in class action launched in 2007 JAMES BRADSHAW BANKING REPORTER

An Ontario court has ruled that Canadian Imperial Bank of Commerce broke federal labour law by allowing employees to work unpaid overtime for years, bringing one of the country’s largest class-action lawsuits closer to resolution after it has dragged on for more than a decade. The Ontario Superior Court found CIBC liable for unpaid overtime, but has yet to calculate the damages that will be awarded to the plaintiffs. The class action, launched in 2007, involves about 31,000 CIBC employees who worked as tellers or in other front-line customer service roles between 1993 and 2009. In a decision released Monday, Justice Edward Belobaba found that CIBC’s bankwide policies on overtime failed to record actual hours of work by thousands of front-line staff, and illegally put

People walk in and out of a CIBC branch in Toronto in January. CHRISTOPHER KATSAROV/THE GLOBE AND MAIL

the onus on employees to get overtime hours preauthorized by managers. As a result, some staff worked unpaid overtime, Justice Belobaba wrote, while the bank ignored concerns raised repeatedly in employee surveys. “There is an abundance of evidence … that some of the class action members worked uncompensated overtime,” he wrote in his reasons for the decision. Lawyers for the plaintiffs have cast the suit as the largest em-

ployment class-action lawsuit ever brought in Canada, and had asked the court for $600-million in damages. And while they are claiming victory, and suggesting the ruling sets a precedent that could affect employers across Canada, Justice Belobaba warned that the plaintiffs still face “significant challenges” in establishing what damages or remedies CIBC should be forced to pay. “This is a battle that’s been going on for almost 13 years, and we

don’t have any illusion that it’s over yet. But it’s a huge victory for the hard-working employees of CIBC, and for other employees across the country,” said Louis Sokolov, a partner at Sotos LLP, a law firm representing the plaintiffs. Assessing damages is expected to take months. Lawyers will pore over CIBC records and do statistical sampling, if necessary, to estimate the total unpaid overtime, and must argue over limitations that could curb the number of years the lawsuit would cover. “We’re reviewing the decision and assessing next steps, including the possibility of an appeal,” said CIBC spokeswoman Trish Tervit. “We believe we have effective overtime policies and practices in place, including a clear overtime policy that is easily accessible.” While CIBC’s policies allowed for overtime if employees worked more than eight hours a day or 37.5 hours a week, they required that overtime pay be preapproved, except in “extenuating circumstances.” That was too restrictive and violated provisions in the Canada Labour Code that require employers to pay overtime if they “require or permit” it, according to the court.

“I think it’s a huge precedent,” said David O’Connor, a partner at Roy O’Connor LLP, another of the three law firms representing the plaintiffs. “I think it will influence employers, and should influence employers across the country.” The lead plaintiff, teller Dara Fresco, and other CIBC employees said in affidavits that while overtime was expected at the bank, asking for compensation was discouraged, and that preapproval for overtime wages was difficult to get. An appeal court also previously found that willingness to work overtime was viewed positively in performance assessments, which made employees wary of claiming overtime for fear it might affect their jobs. CIBC also did not have a system for recording the overtime hours employees work, except in exceptional cases, which Justice Belobaba said was a “systemic deficiency.” “If an employer is told of the existence of numerous complaints about unpaid overtime, does nothing in response, and simply ‘looks the other way,’ the employer is effectively permitting the employees to work overtime,” he wrote. “The bank dropped the ball, to be sure.”

Oil FROM B1

The Suncor Energy refinery in Edmonton is seen Monday. While Finance Minister Bill Morneau has promised that a multibillion-dollar aid package for energy companies is in the works, details have yet to be announced. AMBER BRACKEN/THE GLOBE AND MAIL

Time is running short as energy industry waits on the help Ottawa promised JEFFREY JONES OPINION

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he oil patch is getting twitchy as it waits for Ottawa to deliver a much-anticipated aid package while the value of its main oil sands-derived product approaches zero. According to Finance Minister Bill Morneau, a multibillion-dollar aid package, including guarantees that will allow banks to keep lending to energy companies, will be announced any time now – “I’m talking about hours, potentially days,” he said last Wednesday. But five days later, Mr. Morneau’s boss was tight-lipped on substance and timing when asked about it during his daily briefing on the COVID-19 crisis. Prime Minister Justin Trudeau pointed out workers will be eligible for emergency wage subsidies being offered across the economy and acknowledged that the oil and gas industry is particularly hard hit because of the coincidental and calamitous drop in crude prices. He said the government “will be doing more.” But time is growing short. Energy demand is plummeting and oil is quickly filling up any and all available storage, raising the likelihood of deep cuts in production. Cash flows in the industry have dried up as the price of a barrel of Western Canada Select heavy oil has drooped to below US$4 for the first time. This means that most operations, save those hedged at higher prices, are pumping out far more red ink than oil. As the industry waits, energyfocused private equity firm JOG Capital has gone public with its suggestion for lifting the small and medium-sized oil companies that are most vulnerable to the crash from the abyss. It made the

proposal last week after the government made a call for suggestions from the industry. Under JOG’s proposal, the federal government should focus on the $75-billion in tax deductions that junior and mid-sized oil companies have on their books. These so-called tax pools stem from such things as non-capital losses and exploration credits. The deductions are used when profits are fat, which the industry has not generated a lot of in the past half decade.

So far the industry has responded to the twin threat of coronavirus and the oil price collapse with about $6-billion in reductions in planned capital spending and dividend cuts. Some companies have reduced executive pay. Investors generally value tax pools on corporate books at 10 per cent to 20 per cent of face value, which could mean a cost to the government of $7.5-billion to $15-billion, according to JOG. “A financial injection of this magnitude would be a massive positive for the small and midcap sector,” JOG executives Kel Johnston and Craig Golinowski said in their letter to Natural Resources Minister Seamus O’Regan. Meanwhile, the industry could resume being taxable and contributing to the public purse when conditions improve. The proposal, and others on the table, will anger critics who say the industry has already benefited from subsidies in the form of tax breaks over the years, and has not kept its environmental house in order.

But the tax pool buyout could come with conditions to prevent a similar public backlash to the U.S. Treasury bailout of the financial industry in 2008 and 2009, when some executives pocketed lavish bonuses. The energy companies could, for instance, commit to limiting executive pay and keeping workers on the payroll. They could also agree to use, say, 10 per cent of the funds for cleaning up old oil and gas wells, JOG suggests. So far the industry has responded to the twin threat of coronavirus and the oil price collapse with about $6-billion in reductions in planned capital spending and dividend cuts. Some companies have reduced executive pay. So it is not a case of the industry just sitting on its hands and waiting around for a bailout. Last week, Mr. Morneau said aid would include backstops for the banks that lend to oil and gas companies as a way to keep credit available when it is needed most. He mentioned the risk to the smaller players being particularly acute. He has also talked about some form of funding for abandonment and reclamation of aging wells is under consideration. This could address both. Aid for the energy sector is drawing scorn from many Canadians who have said the government should not prop up a polluting industry that is in its twilight years, or that any help should be bestowed only on the condition that companies commit to much deeper emissions cuts. The problem is that this would be negotiated under duress and would use the tens of thousands of livelihoods that depend on the industry as leverage. The result could hardly be a bargain both sides would be happy with. Now it is a matter of survival first, then dealing with the old long-term problems when the ground stops shaking.

The two presidents agreed to have their top energy officials meet to discuss slumping global oil markets, the Kremlin said, as Mr. Trump called Russia’s price war with Saudi Arabia “crazy.” The agreement marks a new twist in global oil diplomacy since a failed deal this month between the Organization of Petroleum Exporting Countries and Russia to cut production ignited the price war between Russia and OPEC’s de facto leader Saudi Arabia. The fallout from the COVID-19 pandemic also helped to send oil prices into a historic tailspin, threatening producers in the United States and Canada with bankruptcy. Prime Minister Justin Trudeau reiterated Monday his government would soon unveil federal assistance for oil and gas, along with other hard-hit sectors, including tourism and airlines. Calgary-based analyst Jeremy McCrea, director of energy research at Raymond James, suspects industry chatter around a support package and potential movement on the Saudi-Russia standoff could have been behind a “peculiar” 12-per-cent uptick in the Canadian energy index Monday. Mr. McCrea said the “crazy day” underscored the resource sector’s roller-coaster ride of the past month. He added it’s not out of the question that WCS prices could continue to fall, perhaps into negative pricing. “It’s a very bizarre situation. I don’t think anyone knows what the correct reaction is here and I think ultimately, when it comes to the stocks, I think everyone’s flying blind,” he said. There’s no energy “There’s no energy company in North America making money company in North America making today.” Take Inter Pipeline Ltd., whose money today. stock tumbled 10 per cent after the company announced a series JEREMY MCCREA of moves to cope with the eco- DIRECTOR OF ENERGY RESEARCH nomic slowdown caused by the AT RAYMOND JAMES COVID-19 crisis, including cutting its dividend by 72 per cent and putting the planned sale of European operations on hold. It is also reducing executive compensation. The Calgary-based company had planned to sell its bulk fuel businesses in Britain, Ireland, Germany, Denmark, the Netherlands and Sweden for proceeds estimated at about $1billion. “All European countries we operate in have recently implemented sensible measures to greatly restrict travel and human contact. Potential purchasers of this business have been significantly affected, which has had a material impact on the execution of our process,” Inter chief executive officer Christian Bayle said in a statement. “This is clearly not the right environment to pursue and complete a major pan-European transaction, though we may revisit this process at a later date.” The company had planned to use some of the proceeds to fund the completion of its $3.5-billion Heartland Petrochemical Complex project in Alberta. Now, Mr. Bayle said, Inter is seeking a partner to help finance the project in a process that began in late 2019. “As such, I am pleased to report that we have interested parties; however, the pace of progress will inevitably be slowed by the impacts of COVID-19,” he said. Last summer, The Globe and Mail reported that CK Infrastructure Holdings Ltd., controlled by Hong Kong billionaire Li Ka-shing, had offered $30 a share for Inter, but was rebuffed. Inter shares hit $7.60 before closing at $7.84 on the Toronto Stock Exchange on Monday. With reports from Jeffrey Jones, Reuters

CENTERRA GOLD RECEIVES OFFER FOR ITS STAKE IN ONTARIO MINE PROJECT THUNDER BAY Premier Gold Mines Ltd. says an offer has

been made to acquire Centerra Gold Inc.’s 50-per-cent stake in the Greenstone Gold Mines Partnership, in a deal it says is worth US$205-million. The partnership’s principal asset is the Hardrock Mine project near Geraldton, Ont. Premier, which holds the other 50-per-cent stake in the project, says the acquirer is a third party that is an assignee of Premier’s rights under the offer letter. Premier did not identify the company, but said it has the financial capacity to both acquire Centerra’s interest and advance the mine through construction. It also says the assignee plans to work with Premier to help in securing the money to fund its share of the mine construction costs. The proposal includes US$175-million in cash and the assumption of all Centerra’s obligations under the partnership agreement, including the remaining earn-in obligation of US$30-million. THE CANADIAN PRESS