Under Ontario’s Employment Standards Act, 2000 (ESA), most employees are entitled to overtime pay after working more than 44 hours in a week. The overtime rate is at least 1.5 times their regular rate of pay — commonly called “time and a half.”
The ESA puts it plainly: an employer shall pay an employee overtime pay of at least one and one-half times the employee’s regular rate for each hour worked in excess of 44 hours in a work week.
Many employers either overpay out of caution or, more commonly, underpay without realising it — both of which create legal and operational risk. Here is what you need to know.
It is calculated weekly — not daily
This is a common source of confusion. Overtime in Ontario is based on a weekly threshold, not a daily one. An employee who works 10 hours on Monday is not automatically entitled to overtime for those extra two hours — what matters is the total for the week.
Example: An employee works Monday to Friday — 10, 9, 9, 9, and 9 hours respectively, for a total of 46 hours. They are entitled to overtime pay for 2 hours (the hours beyond 44), not for the long Monday shift on its own.
Who is exempt from overtime?
Not every employee is covered. The ESA exempts several categories from overtime rules entirely, including:
Managers and supervisors whose work is primarily managerial
IT professionals who perform certain higher-level technical work
Certain professionals, including lawyers, doctors, and engineers
Residential care workers in certain live-in settings
Important: Simply giving an employee a manager title does not exempt them. Courts and the Ministry of Labour look at what the employee actually does, not what they are called. If a so-called manager spends most of their time doing the same work as their team, they may still be entitled to overtime.
Time off instead of overtime pay
Instead of paying overtime, an employer and employee can agree in writing to bank overtime hours as paid time off. This is known as a “time off in lieu” or “banked time” arrangement. The rate must still be 1.5 hours of time off for every overtime hour worked.
Banked time must be taken within three months of the week in which it was earned — unless the employee agrees in writing to take it within 12 months. If the employment ends before the time is used, the employer must pay out the banked time.
Overtime averaging agreements
Ontario law allows employers and employees to enter into an overtime averaging agreement, which averages the employee’s hours over a period of two or more weeks. This can be useful for businesses with irregular scheduling, such as retail or hospitality.
Example: An employee works 50 hours one week and 38 hours the next — a two-week total of 88 hours. Under a valid averaging agreement, overtime would only be owed on hours beyond 88 (44 x 2), rather than on the 6 overtime hours in the first week alone. The agreement must be in writing and approved by the Director of Employment Standards.
What happens if you get it wrong?
Failing to pay overtime correctly exposes your business to ESA complaints, Ministry of Labour investigations, and orders to repay outstanding wages — plus potential penalties. Employees have up to two years to file a complaint, which means liability can accumulate quickly if the issue goes unnoticed.
Courts have also found that systemic overtime violations — where an employer knowingly avoids paying overtime across a group of employees — can result in class action liability and significant reputational damage.
Three things to do right now
(1) Audit your hours tracking. Make sure you have an accurate, reliable record of the hours every employee works each week. If you cannot prove hours worked, you cannot defend an overtime claim.
(2) Review your exempt employees. Check whether any employees you treat as exempt from overtime actually qualify. Job titles alone are not enough — the work itself must meet the legal test.
(3) Get written agreements in place. If you use banked time or overtime averaging, make sure those arrangements are properly documented and legally compliant. A verbal understanding is not enough.
