Executive Summary: Key Legal and Evidentiary Issues

• Certification of a national class action was sought for breach of contract and breach of duty of good faith regarding statutory pay entitlements for certain Bank of Montreal employees.

• The case examined whether vacation and holiday pay required by the Canada Labour Code were properly incorporated and calculated within variable compensation for Private Wealth Consultants and Mortgage Specialists.

• The sufficiency of the pleadings to disclose a cause of action for breach of contract and breach of duty of good faith was contested.

• The existence of common issues suitable for class-wide determination and whether a class action was the preferable procedure were central procedural questions.

• The appropriate class period, particularly the inclusion of years before 2014 due to payroll record availability, was disputed.

• The adequacy of the representative plaintiff and compliance with the Class Proceedings Act requirements were reviewed.

Facts of the case

Paul Cheetham, a former Private Wealth Consultant with the Bank of Montreal (BMO), filed a class proceeding on February 11, 2020, on behalf of two groups of BMO employees: Private Wealth Consultants and Mortgage Specialists. These employees, who worked throughout Canada, were compensated with a base salary and variable compensation such as commissions and bonuses. Cheetham alleged that BMO systematically underpaid these employees their statutory entitlements to vacation pay (s. 184.01) and holiday pay (s. 196) as required by the Canada Labour Code (CLC) by including these entitlements within the variable compensation structure rather than paying them separately. The class action was certified as a national class proceeding under the Class Proceedings Act, R.S.B.C. 1996, c. 50.

Discussion of policy terms and clauses at issue

The employment contracts for the affected employees consisted of offer letters and compensation plans specific to their roles. These plans set out the types of variable compensation available and, in some cases, referenced vacation and holiday pay. Cheetham alleged that BMO’s pay policies violated s. 184.01 and s. 196 of the CLC, which require that employees be paid additional vacation and holiday pay above and beyond their regular pay, and s. 168(1), which prohibits employees from opting out of CLC benefits unless a greater benefit is provided. The pleadings stated that BMO’s compensation plans included statutory pay within variable compensation and that this practice was contrary to contractual promises to pay statutory entitlements as required by the CLC. BMO responded that its compensation plans provided for total compensation inclusive of statutory pay and that its policies and practices adhered to applicable labour legislation.

Certification proceedings and judicial findings

The chambers judge certified the class proceeding for breach of contract and breach of duty of good faith. The judge found that there was an “ample basis” in the pleadings to support a claim that BMO had contractually committed to pay statutory entitlements in accordance with the CLC, and that the methodology used by BMO to calculate these payments could be addressed as a common issue. The judge determined that, while the pleadings did not sufficiently support a claim for breach of the duty of good faith, Cheetham was permitted to amend the pleadings. The judge also found that a class action would be the preferable procedure, given the standardized nature of the compensation plans and the systemic nature of the alleged underpayment. The judge addressed the class period, noting that BMO lacked payroll records before 2014, but concluded that the issue could be addressed at the common issues trial.

Appeal and outcome

BMO appealed the certification order, challenging the sufficiency of the pleadings, the existence of common issues, the preferability of a class action, and the inclusion of periods before 2014 due to incomplete payroll records. The Court of Appeal allowed the appeal in part. The Court upheld the certification of the breach of contract claim, finding that the pleadings disclosed a reasonable cause of action and that common issues existed regarding the calculation and payment of statutory entitlements. However, the Court set aside the certification of the breach of duty of good faith claim, concluding that the pleadings did not establish a reasonable basis for such a claim, even as amended. The Court confirmed that the certification judge did not err in her analysis of common issues, preferability, or the adequacy of the representative plaintiff. The issue of the appropriate class period, particularly regarding records before 2014, was left to be determined at the common issues trial.

Ruling and overall outcome

The Court of Appeal’s decision resulted in a partial allowance of the appeal. The Bank of Montreal succeeded in having the breach of duty of good faith claim struck from the class action, while Paul Cheetham and the class retained the ability to proceed with their breach of contract claim on a class-wide basis. No specific amount of damages or costs was awarded in this decision, as the matter was at the certification stage and any quantum of damages will be determined at a later trial if liability is established.