Averaging of Hours of Work Provisions - 802-1-IPG-053

Effective Date: November 5, 1998

1. Subject

The application of provisions allowing the averaging of hours of work contained in subsection 169(2) of part III of the Canada Labour Code and section 6 of the Canada Labour Standards Regulations .

2. Issue

There is a need to communicate a national approach in the administration of averaging.

Averaging is provided for in subsection 169(2) of the Canada Labour Code which states:

"Where the nature of the work in an industrial establishment necessitates irregular distribution of the hours of work of an employee, the hours of work in a day and the hours of work in a week may be calculated, in such manner and in such circumstances as may be prescribed by the regulations, as an average for a period of two or more weeks."

The Canada Labour Standards Regulations prescribe that averaging may be adopted for periods of two or more consecutive weeks when the irregular distribution of hours results in either (a) no regularly scheduled hours, or (b) regularly scheduled hours where the number of hours differs from time to time (s. 6(1)).

While the requirement to pay overtime is reviewed at the end of an averaging period, there are two types of flexibility allowed by averaging, both of which may be available to an employer:

  1. removal of the requirement to pay overtime after eight hours in a given day or 40 hours in a given week, or both, and,
  2. removal of the limit of 48 hours of work in a given week.

Labour Affairs Officers (LAOs) ascertain whether the criteria that qualify an employer to adopt averaging have been met and whether averaging provisions are being correctly applied. These criteria are:

  • there must be operational necessity (i.e., the nature of the work must necessitate an irregular distribution of the hours of work of an employee); and
  • there must be an absence of regularly scheduled hours or regularly scheduled hours must differ from time to time.

3. Questions and Answers

A. What is meant by the phrase "the nature of the work necessitates" (operational necessity)?

The type of activity in which the enterprise is engaged must require an irregular distribution of hours of work. There must be a substantial need. In the context of part III of the Canada Labour Code, necessity is something other than an "exceptional" or "emergency" condition because these situations are covered by sections 176 and 177 of the Code.

The need for irregular distribution of hours is normally caused by external factors over which an enterprise has little or no control, most commonly climate and seasonal demands. An example is the working of long hours during the summer season to make equipment repairs that cannot be easily carried out in the winter months.

Other examples of external factors are:

  • tour bus operators work long hours in the summer and other holiday seasons;
  • non-driving employees of moving companies have hours of work that fluctuate because the estimated time of a move may vary due to unpredictable factors and the number of moves varies from one day to another, and from one season to another;
  • pilots and mechanics of small air operators also have irregular working hours, which are usually connected to climatic conditions; and,
  • the distribution of television production work may also vary depending on factors such as availability of equipment, production facilities, technicians and interviewees, as well as weather when shooting outside events.

Economics may also induce necessity. For example, in seed cleaning operations the grain seeds must be taken from the field within a short period of harvesting or the quality will deteriorate. Similarly, businesses operating in remote locations are subject to economic factors that may affect the scheduling of work.

B. What are some illustrations of situations where the nature of work necessitates irregular distribution of hours with the result that the employees have no regularly scheduled hours of work?

These situations occur frequently in the transport industry, e.g., furniture moving (non-driving personnel). It is common practice to require an employee to check to see whether work is available at specified times. If work is available, the employee is assigned to a job. If work is not available, the employee does not come in to work, or if already at the workplace, goes home.

These employees have scheduled reporting times but they do not have regularly scheduled daily or weekly hours. Consequently, their employer may average whatever hours the employees actually work.

In addition, when employees have no regularly scheduled daily or weekly hours, but are called in as required, averaging is also appropriate.

The work of other employees, such as pilots of charter and non-scheduled operators in remote areas, despite receiving a salary or special premium for being available on-site to work as demand requires, may also be eligible for averaging.

C. In which cases of regularly scheduled hours can averaging be adopted?

A situation where employees have regularly scheduled hours, but the number of hours actually worked differs from time to time would not qualify for averaging. For example, a bus driver may have a regular schedule, but may work longer hours on occasion because of heavy traffic. The following schedule illustrates this situation (numbers shown in parentheses are the number of hours actually worked and RDO means regular day off):

Schedule 1
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
RDO

(0)
8

(8)
8

(8)
8

(12)
8

(8)
8

(8)
RDO

(0)
40

(44)
8

(8)
8

(8)
8

(8)
8

(8)
RDO

(0)
RDO

(6)
8

(8)
40

(46)
RDO

(0)
8

(8)
8

(8)
8

(8)
8

(8)
8

(8)
RDO

(4)
40

(44)
8

(4)
8

(8)
8

(8)
8

(8)
RDO

(8)
RDO

(0)
8

(8)
40

(44)

In this situation, averaging would not be permitted because the number of hours scheduled do not differ from time to time. The number of hours scheduled are eight hours every working day, and 40 hours every week. The number of hours actually worked differ from day to day and from week to week, but this does not alter the fact that the operation does not meet the averaging criteria.

In contrast, the following schedule would qualify for averaging if required for reasons of operational necessity (numbers shown in parentheses are the number of hours actually worked and RDO means regular day off):

Schedule 2
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
RDO

(0)
12

(12)
12

(12)
4

(6)
4

(4)
8

(8)
RDO

(0)
40

(42)
RDO

(4)
4

(4)
4

(4)
12

(12)
12

(12)
8

(8)
RDO

(0)
40

(42)
8

(8)
10

(10)
10

(10)
RDO

(4)
RDO

(0)
12

(12)
RDO

(0)
40

(44)
12

(10)
4

(4)
4

(4)
8

(8)
4

(4)
4

(4)
RDO

(10)
36

(44)

In this situation, averaging would be permitted because the number of hours scheduled differs from time to time. As with the first example, the number of hours actually worked differ from the hours scheduled, but this factor has no bearing on whether averaging can be adopted.

The Appendix provides further examples.

D. What is meant by regularly scheduled hours that differ "from time to time"?

Averaging may be adopted where there is an irregular distribution of hours that results in regularly scheduled hours that differ from time to time. The number of scheduled hours may differ on a daily or a weekly basis, or both.

A variance in regularly scheduled hours must occur within a cycle of two or more weeks if the averaging period is adopted pursuant to section 6 of the Canada Labour Standards Regulations.

Variances in regularly scheduled hours do not refer to changes in scheduling. They refer to variations in the number of hours scheduled on a daily or weekly basis (or both) within schedules. The variation in the number of hours scheduled must be based upon operational necessity.

Averaging may be adopted if only the daily hours vary, but the pattern of daily scheduled hours must vary from one week to another. The averaging period must cover at least two weeks (see Example 5 in the Appendix).

Averaging is not intended to cover hours worked in excess of eight per day or 40 per week in order to change shifts. This is covered by section 7 of the Canada Labour Standards Regulations which states:

"Notwithstanding the requirements of these Regulations, section 174 of the Act does not apply in circumstances where there is an established work practice that:

  • requires or permits an employee to work in excess of standard hours for the purposes of changing shifts;
  • permits an employee to work in excess of standard hours as the result of his exchanging a shift with another employee."

E. What are the criteria for determining whether hours of work qualify for an averaging period?

The Canada Labour Standards Regulations require that an employer who wishes to average hours of work or change the number of weeks in the averaging period must post, at least 30 days before, a notice of the employer's intention and provide a copy of the notice to the Labour Regional Head and every trade union representing affected employees who are subject to a collective agreement. (s. 6(3)).

The Regulations also require an employer who has adopted an averaging plan and wishes to alter the number of weeks or cease to use averaging must post, at least 30 days before, a notice and provide a copy to the Labour Regional Head and every trade union representing affected employees who are subject to a collective agreement. (s. 6(12)).

In most instances, the appropriate point to begin an averaging period is halfway between the high and low period, so that peaks and valleys are balanced within an averaging period. The averaging period adopted must be long enough to accommodate any fluctuations in the hours of work but should not be longer than necessary to balance the peaks and valleys.

Establishments in some industries may have regular schedules where the hours of work do not vary from month to month throughout the year, except for unusually high peaks, for instance, at the time of planting or harvesting or, in the case of non-driving staff in the household moving industry, in the summer months. Where the additional hours worked in these periods create peaks that cannot be absorbed and leveled out, a longer averaging period is warranted.

For example:

If a 13-week averaging period is not sufficient, a 26-week period may provide ample space for seasonal fluctuations to be averaged over two 26-week periods.

In some situations, where there is one extreme peak period whose starting point cannot be predicted, a 52-week period may be necessary.

One way to establish that the duration of a period is not sufficient is to balance a company's peak periods against periods when fewer hours of work are available by analyzing the historical data contained in the company's time and payroll records for the preceding year. This will give an indication of the company's needs.

F. Can averaging apply to casual, part-time and seasonal employees?

Part III of the Canada Labour Code and the Canada Labour Standards Regulations do not distinguish between types of work arrangements. Averaging may be adopted for a class of employees that includes different types of work arrangements (full-time, scheduled or unscheduled, permanent, part-time, casual or seasonal), provided the criteria for averaging are met. These employees, who are in non-standard work situations, are subject to the same maximum and standard hours as the full-time employees in the same averaging situation.

G. For workers subject to averaging, how are standard hours, maximum hours and overtime calculated?

The standard hours of work of an employee subject to averaging are 40 times the number of weeks in the averaging period; maximum hours of work are not to exceed 48 times the number of weeks in the averaging period. For example, in a two week averaging period, standard and maximum hours are 80 hours and 96 hours, respectively.

At the end of each averaging period, overtime is paid to employees who work hours in excess of the standard hours, excluding those hours for which overtime has been paid already, in the averaging period. The calculation of overtime owing is based on standard hours that are reduced, pursuant to section 6(7) of the Canada Labour Standards Regulations, by 8 hours for each day in the averaging period which is a day:

  • of bereavement leave with pay;
  • of annual vacation with pay;
  • of leave of absence with pay under subsection 205(2) of the Code;
  • general or other holiday with pay; or,
  • that is normally a working day in respect of which the employee is not entitled to regular wages (for example, when an employee is off on unpaid sick leave).

Under paragraph 6(7)(e) of the Canada Labour Standards Regulations, it is important to note that, in general, every day for which an employee is scheduled to work is "normally a working day".

It is usually the case that an employee receiving a base salary is considered to be "entitled to regular wages" for the purposes of paragraph 6(7)(e) of the Regulations. Therefore, no reduction is made in standard hours for the averaging period for an employee, who is absent from work on paid sick leave.

Averaging provisions under section 169 of Part III of the Canada Labour Code and section 6 of the Regulations are meant to address hours of work for both scheduled and non-scheduled workers.

  • Scheduled workers who can average are workers whose schedules vary, such as airline pilots who may be scheduled for flights of varying durations.
  • Non-scheduled workers are those for whom work is sporadic and unreliable such as non-driving workers employed by a moving or trucking company where employees work only as work becomes available.

H. What happens if employment is terminated during an averaging period?

If the termination is at the employee's choice, the employee is entitled only to be paid at the regular rate for the hours worked during the completed part of the averaging period.

On lay-off or termination of employment by the employer, the employee is entitled to overtime pay for all hours worked in excess of 40 times the number of weeks in the completed part of the averaging period.

If the employee has already received overtime pay for any hours in the averaging period, these hours are not counted in determining the overtime to be paid to the employee on termination of employment.

I. What happens when an employee begins employment after the averaging period has commenced?

In order to integrate this employee into the averaging period, the employer must refer to subsection 6(7)(e) which requires that the standard and maximum hours of work be reduced by eight hours for every day during an averaging period that, for the employee, is a day that is normally a working day for which the employee is not entitled to regular wages. Subsection 8(e) limits the weekly reduction to 40 hours. Therefore, the hours of an employee, who begins work at the beginning of the 11th week of a 16-week averaging period, would be reduced by 400 (10 × 40) for the period before the employment relationship began.

4. Examples

The following are a few examples to demonstrate how standard hours are reduced in particular situations.

  • Scheduled hours which vary with a regular weekly, monthly or annual base salary (e.g. $4,000 per month every month):

    Mary is an airline pilot who has a base salary and works scheduled hours that vary. Her base salary is considered regular wages. Over a two week averaging period she has one holiday, one day of bereavement leave with pay, one day on which airplanes were grounded due to inclement weather, and on the other day Mary was absent due to illness. Mary's standard hours for the two week period are reduced by 16 hours for the holiday and bereavement leave. Her standard hours are not reduced for the two days of absence due to grounded airplanes and illness, respectively, because her base salary ensures that she is entitled to regular wages and paragraph 6(7)(e), therefore, does not apply.

    Mary's standard hours for the two week period are reduced by 16 hours of the holiday and bereavement leave. Her standard hours are not reduced for the two days of absence due to grounded airplanes and illness, respectively, because her base salary ensures that she is entitled to regular wages and paragraph 6(7)(e), therefore, does not apply.

  • Scheduled hours which vary without a regular weekly, monthly or annual base salary:



    Joseph is an employee of ABC Trucking and has scheduled hours that vary. He is paid by the hour for the hours actually worked. His two week period, like Mary's, includes a holiday, one day of bereavement leave with pay, one day for which he was told not to come in for lack of work, and one day on which he did not report for work because he was ill.

    Joseph's standard hours are reduced by 32 hours for the period. Like Mary, Joseph's hours would be reduced by 16 hours for the holiday and bereavement leave. As no base salary is received by Joseph and therefore no regular wages are in effect, paragraph 6(7)(e) applies. The hours are further reduced by 8 each for the day on which Joseph was told not to come in for lack of work, and for the day on which he was ill. These two days were normally working days but for which he was not entitled to regular wages. Such cases are rare since most employers with scheduled workers normally do not have scheduled hours of work that vary and therefore do not qualify for averaging.

  • Non-scheduled hours:

    Rob is an employee of ABC Trucking and has no scheduled hours. He reports each morning and occasionally works several hours for the day. His two week period, like Mary's, includes a holiday, one day of bereavement leave with pay, one day for which he reported but did not receive work, and one day on which he did not report for work because he was ill.

    Rob's standard hours for the period are reduced only by 16 hours for the period for the holiday and bereavement leave. Rob's standard hours are not reduced under paragraph 6(7)(e) for the day on which there was no work and the day on which he was ill. Rob does not have any normal working days as his work is unscheduled. Consequently, the hours for these two days are not reduced as they were not normally working days.

Appendix - Examples of Irregular Distribution of Hours Where Employees Have Regularly Scheduled Hours

If the nature of the work necessitates this irregular distribution of daily and weekly hours, then the operations meet the criteria for averaging.

Example 1
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
3 0 0 8 8 8 0 27
0 10 10 10 10 10 0 50
0 8 8 8 8 8 3 43
n/a n/a n/a n/a n/a n/a n/a 120
Example 2
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
8 0 0 9.5 9.5 9.5 0 36.5
0 8 8 8 8 8 0 40
2 9.5 9.5 7.5 0 7.5 7.5 43.5
n/a n/a n/a n/a n/a n/a n/a 120

In Examples 1 and 2, scheduled hours vary on a daily and on a weekly basis.

Example 3
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
11 6 6 0 0 0 3 26
11 11 4 0 0 0 0 26
n/a n/a n/a n/a n/a n/a n/a 52
Example 4
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
0 10 4 6 10 10 0 40
0 9 9 4 9 9 0 40
n/a n/a n/a n/a n/a n/a n/a 80

In Examples 3 and 4, scheduled hours vary on a daily basis but weekly hours do not vary.

Example 5
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
10 0 0 0 0 10 10 30
10 10 0 0 10 10 10 50
n/a n/a n/a n/a n/a n/a n/a 80
Example 6
Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total
0 11 11 11 11 11 11 66
11 0 0 0 0 0 0 11
n/a n/a n/a n/a n/a n/a n/a 77

In Examples 5 and 6, scheduled hours vary on a weekly basis only.

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