Global Compliance Desk – Alberta, Canada

Amendment to Flexible Averaging Agreements

Employment Standards (Flexible Averaging Agreements) Amendment Regulation, AR 71/2019 was introduced on July 18, 2019. This regulation amends the Employment Standards Regulation and effective September 1, 2019, employers and employees will no longer be able to enter into new FAAs. 

Historical Background

Previously, compressed workweek arrangements were used to allow for fewer workdays in a workweek, but more hours of work on a workday paid at the employee’s regular wage rate. Additionally, overtime agreements were previously used to allow an employer and an employee to enter into an agreement whereby an employee would take time off with pay at their regular wage rate, in place of overtime. This time would be taken at a time the employee otherwise could have worked and received regular wages from that employer.

Current Scenario of Work Arrangement

As of January 1, 2018, compressed workweek arrangements was renamed “Averaging Agreements”. Any banked time was earned and taken at a time and a half, rather than straight time if there is not an averaging agreement in place. Employers and employees were allowed to agree to average work hours over a period of 1 to 12 weeks for the purpose of determining overtime eligibility. Workweeks could also be compressed as part of these agreements with employers that require longer cycles requiring a permit. There are two types of averaging agreements that existed as of January 1, 2018: 

• Hours of work averaging agreements (HWAA) – HWAAs can be between groups of employees and an employer or an individual employee and employer. The agreements provide predictability in scheduling for employees.
• Flexible averaging agreements (FAA).

These agreements allow employers to schedule an employee, or group of employees, to work longer hours per day paid at the employee’s regular wage rate. The employer will average an employee’s hours of work over a period to determine overtime pay or time off with pay.

Employers would use hours of work averaging agreement (HWAA) for any averaging agreement between 1 and 12 weeks. Conversely, FAAs between the employer and employee could be entered into only at the employee’s request and could only be used for a two week period.  Currently, employers and individual employees who work at least 35 hours weekly may at the employee’s request enter into an FAA that allows the employer to average the employee’s hours of work over a period of up to two weeks in order to determine overtime pay or time off with pay.  FAAs also allows the employer and employee to:

• Establish a daily overtime threshold, which cannot exceed 10 hours; and
• Provide paid time off at the employee’s straight-time rate when the employee works more than their scheduled hours in a day, but not overtime hours.  This concept, called “flexible time”, is unique to FAAs.

Upcoming Changes

Effective September 1, 2019, employers and employees will no longer be able to enter into new FAAs. Rather, they will have to enter into Hours of Work Averaging Agreements (“HWAAs”). An FAA authorized employees and employers to agree to a short-term straight overtime banking arrangement. Hence, FAAs will no longer be needed because employees will be able to bank time and take it off with pay on a 1 for 1 basis instead of being paid overtime. 

The FAA Amendment Regulation provides for a transitional period. For employers and employees who currently have an FAA in place, the FAA will remain valid until the earliest of the following:

• The date the FAA is canceled;
• In the case of an FAA made as part of a collective agreement, the date a subsequent collective agreement is entered into;
• Or two years after the date the FAA Amendment Regulation comes into force (September 1, 2021).

Note that there have been no changes or proposed changes to the Hours of Work Averaging Agreement provisions in the Employment Standards Code.