Lawyers have launched a $250-million class action lawsuit against Canadian National, alleging the railway misclassified more than 1,000 supervisors as managers to avoid having to pay them overtime.

The lawsuit alleges that more than 1,000 present and former first-line supervisors at CN have been deprived of overtime pay because of the railway's actions. The supervisors are routinely required to put in hundreds of unpaid overtime hours a year, the lawsuit claims.

"The Canada Labour Code requires federally regulated corporations, including CN, to pay overtime to their non-management employees," said Louis Sokolov, a partner at Sack Goldblatt Mitchell LLP, in a statement.

"Employers are not permitted to simply call someone a manager to avoid their obligations under the code."

The plaintiffs' lawyers allege the practice of misclassification got its foothold in the U.S. and is now spreading into Canada. 

"[The lawsuit] addresses a problem that has crept into workplaces across Canada, where employers have labelled employees as managers in order to avoid … their obligations under employment legislation," lawyer Douglas Elliot told CBC News.

"What we've seen in the United States is an effort by employers to push the title of management down lower and lower in the ranks, to attempt to avoid having to pay benefits, to avoid having to pay overtime, and so on."

CN has not filed a statement of defence and the allegations have not been proven.

This is the third class action lawsuit relating to unpaid overtime brought by the two law firms of Sack Goldblatt Mitchell LLP and Roy Elliot O'Connor LLP.

The two firms are co-counsel in lawsuits filed against CIBC and Scotiabank that allege the two banks routinely make staff work unpaid overtime.