Your firm recently advised the Canadian partnership KPMG LLP in its settlement involving more than 10,000 potential claimants. What legal issues did the case involve?

As initially framed, the class action involved a dispute over whether former employees of the Canadian partnership KPMG were entitled to compensation on the basis that they had not been paid overtime in accordance with the applicable employment standards legislation across Canada.  In August 2007, a class action was filed in Ontario by a former employee of KPMG, who had worked for the firm between 2000 and 2004.  In June, 2008, an amendment was made to the Statement of Claim so that the potential claimants included both former and current employees of KPMG.

KPMG decided to implement its own voluntary overtime redress plan (ORP) with respect to how it proposed to settle the action, without first asking for the court's permission or consulting with plaintiff class counsel. Why did KPMG follow this strategy?

KPMG’s ORP, initiated in February, 2008, covered both current employees, who were not proposed members of the class, as well as former employees.  There was no impediment to contacting former KPMG employees provided the communications were in no way misleading.

Following the commencement of the action, KPMG determined that both current and former employees should be able to avail themselves of the redress provided for in the ORP, without having to wait for the class proceeding to run its course.  The ORP was entirely voluntary.

From a public and employee relations point of view, it was critical that KPMG act promptly in addressing any case where a current or former employee was not paid what he or she was entitled to according to the relevant provincial legislation as interpreted by the Courts, regulatory and government agencies.

What did KPMG's ORP involve, and who helped develop the ORP?

The essence of the ORP was that KPMG, armed with the categories of employees who were eligible to receive overtime pay in accordance with the applicable employment standards legislation, reviewed the time and billing records of the current and former employees to determine whether any employee was entitled to overtime – i.e. an eligible employee worked overtime but had not been paid overtime or provided with time in lieu. 

Once a determination had been made regarding an employee’s eligibility and entitlement, a Determination Letter was sent to the employee by Crawford Class Action Services - an experienced class action claims administrator retained by KPMG - providing the employee with the opportunity to accept or reject the proposal set out in the Determination Letter. 

If the employee rejected the proposal set out in the Determination Letter, Crawford would independently review the Determination Letter and, on a balance of probabilities standard, decide whether the Determination Letter should be revised or affirmed and send the employee a Reconsidered Determination Letter.

In the event the employee rejected the proposal set out in the Reconsidered Determination Letter, the employee could mediate his/her claim.  In the event the employee’s claim was not satisfactorily resolved through mediation, the employee could have his/her claim resolved through binding arbitration.  The services of the independent mediators and arbitrators were paid for by KPMG.  The mediations and arbitrations were administered by The ADR Institute of Canada.

The ORP was developed as a collaborative effort among the office of KPMG’s General Counsel, Fraser Milner Casgrain LLP (FMC) - KPMG’s external counsel - with input from KPMG Forensic, members of KPMG’s Human Resources Department and Crawford.

How did the current and former employees, the class action claimant, and other firms, respond to the Overtime Redress Plan?

The two law firms with carriage of the proposed class action initially challenged KPMG in unilaterally initiating the ORP.  Following an attendance before the class action Judge shortly after the initiation of the ORP, certain agreed upon information was added to the ORP website administered by Crawford.  Shortly thereafter, following arms-length negotiations, a settlement was entered into, subject to Court approval, the essential feature of which was that the ORP would be “rolled” into the class action as the mechanism by which the claims of the prospective class members would be resolved. 

No prospective class member filed objections with respect to the proposed settlement.  Judgment for Certification and Settlement Approval was granted on consent on 7August 7, 2008.  Three prospective class members opted out of the class following the issuance of the Judgment by the opt-out deadline. 

In total, approximately 30 cases proceeded to meditation, the vast majority of which settled at or shortly after mediation.  Three cases proceeded further to arbitration.

Following the initiation of KPMG’s ORP, the other big three accounting firms in Canada introduced their own redress programmes to deal with the overtime issue.

Operationally, how was the ORP managed?

Weekly meetings, later replaced by conference calls, were held among a working group including the Office of General Counsel of KPMG, FMC, KPMG Forensic, KPMG HR and Crawford.  Detailed agendas were circulated in advance of each meeting.  Prior to the initiation of the ORP, the focus of the meetings was to design and develop (a) the ORP, (b) the ORP website, (c) FAQs to include as part of the ORP website, (d) the templates for the Determination Letters, Reconsidered Determination Letters and various other matters of an administrative nature.

Once the ORP was initiated, it basically ran itself.  The focus of the weekly meetings accordingly shifted to monitoring the progress of the ORP (i.e. keeping track of the claims that were resolved following acceptances of Determination Letters, which claims would move to the Reconsidered Determination Letter stage, which claims would move to the mediation stage, which claims would move to the arbitration stage and matters of this nature).

In this way, each member of the working group was keep apprised of exactly how the ORP was operating.  Proceeding in this organized fashion worked very well.