P&C advisors’ class action certified against insurer over vacation/holiday pay

P&C insurance advisors for RBC Insurance Agency Ltd. have won a certification motion for a class action lawsuit against the insurer over how their vacation and holiday pay were determined.

Also, the court conditionally certified a similar class action against Aviva General Insurance Company over the calculation of vacation and overtime pay, but only if a new representative plaintiff can be found in 100 days. The original representative plaintiff’s claim missed the legal time limit to launch a suit, the court found.

Class certification does not consider the merits of the lawsuit.

At issue is whether insurers are allowed to include vacation and public holiday pay as part of a variable compensation package (for example, broker commission) under provincial Employment Standards Acts. Alternatively, P&C advisors said vacation and holidays should be calculated based on, and paid out on top of, the total compensation amount (i.e., the sum of base pay plus variable compensation).

The certified class includes P&C insurance advisors who worked for RBC General Insurance Company from Nov. 1, 2012 to June 30, 2016. Aviva Canada closed its deal to acquire RBC General Insurance Company in July 2016. It also includes P&C advisors who worked for RBC Insurance Agency from July 1, 2016 until the date notice was provided to class.

Class counsel withdrew a claim based on RBC Insurance Agency and Aviva General being a “joint employer,” since Aviva Canada’s acquisition of RBC General did not include RBC General’s insurance sales and distribution business, which was transferred to RBC Insurance Agency, a wholly owned subsidiary of RBC. Aviva Canada only acquired the insurance underwriting and claims handling business of the former RBC General, which was renamed as Aviva General. Ontario’s Superior Court only conditionally approved the class action against Aviva General.

Essentially, the P&C insurance advisors’ lawsuit takes aim at RBC Insurance Agency’s compensation agreement (and Aviva General’s, by virtue of its acquisition of portions of RBC General).

P&C advisors in the class earned both salary and variable compensation. All were subject to the same compensation policy, which states: “All variable compensation components of the plan have been established at a level that includes both vacation pay and statutory holiday pay.”

“The P&C advisors allege that they were not paid vacation and public holiday pay on top of their variable compensation, in breach of the employment standards legislation (ESL) of each of the seven provinces where they were employed: Alberta, Ontario, Quebec, Newfoundland and Labrador, New Brunswick, Nova Scotia, and Prince Edward Island,” as the court framed the dispute. “The plaintiff alleges that the terms of the [insurer’s] compensation policy violate the ESL, which requires that variable compensation be treated as wages for the purposes of calculating the required vacation and public holiday pay.”

For their part, the defendant insurers noted they paid their advisors more vacation/holiday time than they were required to pay under the ESL (three weeks instead of two). Therefore, their compensation policy paid out more in vacation/holiday time than the advisors would have received had their vacation/holiday pay been calculated at the ESL minimum of two weeks based on total pay (including base pay and variable compensation). In other words, the advisors suffered no loss.

Without deciding the issue at the class certification level, which it cannot do, the court provided examples of how the different calculations affected the advisors’ pay, based on what the different parties were arguing.

The court’s hypothetical example is based on the average 2019 earnings of a P&C advisor statutorily entitled to two weeks’ vacation. It found the average P&C advisor earned $46,617.67 in base salary in 2019 ($896.49 per week), plus $9,861.77 ($189.65 per week) in variable compensation, for a total of $1,086.14 per week.

“Under the plaintiff’s approach, the salary and wages would be combined for purposes of calculating vacation pay, for total wages of $56,479.44,” Ontario Superior Court Justice Benjamin Glustein wrote.

“Consequently, an average P&C advisor who worked 52 weeks would be entitled to two weeks’ vacation pay (at 4% of $56,479.44) for $2,259.18. Public holiday pay would be paid on the combined wages, and as such be included in the $56,479.44 amount (assuming the P&C advisor did not work on the public holidays). Under this approach, the total amount earned by the P&C advisors over the 54-week period would be $58,738.62.

“If the [insurer] provided an additional week of vacation, then the P&C advisor would be entitled to an additional $1,086.14, based on one week’s total wages. Consequently, the total compensation earned over the 55-week period for that P&C advisor would be $59,824.76.”

Under the insurers’ approach, the court found, “the P&C advisor is entitled to the statutory minimum of two weeks holiday pay. The [insurers] submit that under the plaintiff’s claim, a P&C advisor would be entitled to $2,259.18 for two weeks’ vacation (based on 4% of total wages).

“The insures’ submit that since they provided three weeks of vacation based on salary, the P&C advisor received $2,689.48 (three weeks’ salary based only on annual base pay of $46,617.67) over that period, so the P&C advisor received an additional $430.30 ($2,689.48 less $2,259.18) on top of their statutory entitlement and did not suffer a loss.

“The compensation earned by the P&C advisor over the 55-week period (52 weeks of work and 3 weeks of vacation) would be $46,617.67 in salary plus $9,861.77 for variable compensation and $2,689.48 for three weeks of vacation. Public holiday pay would be based on salary and as such would be included in the $46,617.67 amount (assuming the P&C advisor did not work on the public holidays).

“Consequently, the total compensation under the [insurers’] approach, for the same 55-week period would be $59,168.92, which is $655.84 ($59,824.76 less $59,168.92) less than the total compensation paid under the plaintiff’s approach.”

The court observed it would take a trial to test the assumptions of these examples and to consider other factors and adjustments that might be raised during the trial process.

Feature image courtesy of iStock.com/inside-studio