Some employers in Ontario use averaging agreements to manage work schedules and overtime. When done correctly, averaging can be lawful. When done incorrectly, it can result in unpaid overtime — even if the employer believes they are following the rules.
Averaging overtime hours is one of the most commonly misunderstood areas of Ontario employment law. Many employees are told their hours are “averaged” without ever seeing a valid agreement or understanding how overtime is calculated.
This page explains what overtime averaging agreements are in Ontario, when they are allowed, and when averaging does not eliminate the right to overtime pay.
What Is an Overtime Averaging Agreement?
An overtime averaging agreement is a formal arrangement that allows an employer to average an employee’s hours of work over a set period instead of calculating overtime strictly on a single work week.
If a valid averaging agreement is in place:
- Overtime is assessed based on average weekly hours over the averaging period
- Employees may work more than 44 hours in a particular week without immediate overtime pay
- Overtime may still be owed if the average exceeds legal limits
Averaging agreements are not automatic and can’t be assumed.
When Is Overtime Averaging Allowed in Ontario?
Overtime averaging is only permitted if specific legal requirements are met.
In general:
- There must be a written agreement
- The averaging period must be clearly defined
- The agreement must comply with Ontario employment standards rules
- The arrangement must be lawful at the time it is applied
What a Valid Averaging Agreement Must Include
While details vary, valid averaging agreements typically require:
- Clear identification of the averaging period
- Confirmation that the employee agreed to the arrangement
- Compliance with statutory limits on hours and averaging length
- Proper overtime calculations based on averaged hours
Common Problems With Overtime Averaging
Averaging arrangements frequently become problematic when employers:
Average Hours Without a Written Agreement
Averaging overtime without a written agreement is a common violation. In these cases, overtime may still be owed based on weekly hours worked.
Apply Averaging Retroactively
Employers can’t typically decide after the fact to average hours to avoid overtime that has already accrued.
Use Averaging to Eliminate Overtime Entirely
Averaging does not mean overtime disappears. If averaged hours still exceed overtime thresholds, overtime pay may be required.
Fail to Track Hours Properly
Without accurate records, employers may be unable to justify how overtime was calculated — or avoided.
Averaging Agreements and Salaried Employees
Being paid a salary does not automatically allow an employer to average overtime hours.
Salaried employees may still be entitled to overtime pay if:
- No valid averaging agreement exists
- The agreement does not meet legal requirements
- The employee is not exempt from overtime
When Averaging Leads to Unpaid Overtime
Invalid or misused averaging agreements are a leading cause of unpaid overtime in Ontario.
If averaging was applied incorrectly:
- Overtime pay may be owed retroactively
- Claims may overlap with unpaid wages
- Overtime may affect termination and severance pay
Averaging Agreements and Termination
Overtime issues related to averaging often surface after employment ends.
When employment is terminated:
- Unpaid overtime may need to be included in final pay
- Averaging arrangements may be reviewed more closely
- Improper averaging can significantly affect compensation
When to Get Legal Advice About Overtime Averaging
You may want to speak with an employment lawyer if:
- Your employer says your hours are “averaged” but you never agreed in writing
- You regularly worked more than 44 hours without overtime pay
- Averaging was applied inconsistently or retroactively
- You were terminated and overtime wasn’t included in your final pay
- You’re unsure whether an averaging agreement is legally valid
Key Takeaway
Overtime averaging in Ontario is highly technical and tightly regulated.
If an employer can’t point to a valid, lawful averaging agreement — properly applied — overtime pay may still be owed, regardless of how hours were scheduled or described.
Understanding whether averaging was done correctly is often the key to resolving unpaid overtime issues.
Questions About Overtime Averaging in Ontario?
If you’re unsure whether an averaging agreement is valid — or believe averaging was used to avoid paying overtime — our employment lawyers at Samfiru Tumarkin LLP can review your situation and explain your options under Ontario law.