There are a number of factors an employer can consider when determining what is reasonable or unreasonable.
Why is this important?
While some employers include clauses in employment contracts that allow employees to work “reasonable additional hours”, there are steps that all employers should take to ensure these hours are reasonable.
Where to start?
The National Employment Standards (‘NES’) in the Fair Work Act 2009 (Cth) (‘FW Act’) are the 12 minimum terms and conditions of employment that form a ‘safety net’ for all employees in the national workplace relations system.
The very first standard establishes the maximum weekly hours of work for employees as 38 ordinary hours per week.
What are the maximum weekly hours?
In accordance with FW Act section 62, employers must not request or require a full-time employee to work more than 38 ordinary hours per week unless the additional hours are reasonable.
If the employee is not a full-time employee (e.g. part-time), their maximum weekly hours are the lesser of 38 hours and the employee’s ordinary hours of work in a week.
Some Enterprise Agreements and Modern Awards (collectively, ‘industrial instruments’) contain averaging provisions that allow employers to average employees’ hours over a set number of weeks. For example, Clerks – Private Sector Award 2020, clause 13.2 allows the employee to work an average of 38 hours per week over a period of up to four weeks, or another rostered period agreed between the employer and the employee.
If an employer were to request an employee work additional hours or roster them to work additional hours, the employee may refuse to work the additional hours if they are not considered reasonable.
What are ‘reasonable’ additional hours?
There is no value defined in legislation that equates to ‘reasonable additional hours’.
Employers need to work out, on a case-by-case basis, whether the hours are reasonable under the circumstances. The FW Act at section 62 outlines criteria that must be taken into account when determining whether additional hours are considered reasonable or not.
These are:
- “any risk to employee health and safety from working the additional hours;
- the employee’s personal circumstances, including family responsibilities;
- the needs of the workplace or enterprise in which the employee is employed;
- whether the employee is entitled to receive overtime payments, penalty rates or other compensation for, or a level of remuneration that reflects an expectation of, working additional hours;
- any notice given by the employer of any request or requirement to work the additional hours;
- any notice given by the employee of his or her intention to refuse to work the additional hours;
- the usual patterns of work in the industry, or the part of an industry, in which the employee works;
- the nature of the employee’s role, and the employee’s level of responsibility;
- whether the additional hours are in accordance with averaging terms included under section 63 in a modern award or enterprise agreement that applies to the employee, or with an averaging arrangement agreed to by the employer and employee under section 64;
- any other relevant matter”.
What about a 50 hour working week?
A decision of the Federal Court of Australia in Australian Meat Industry Employees Union v Dick Stone Pty Ltd [2022] found the employer’s requirement an employee work 50 hours per week was considered unreasonable having regard to the particular circumstances.
In this case, the Federal Court of Australia considered the following to determine the hours were not “reasonable”:
- The hours worked included starting at 2:00 am and such hours were “unsociable”,
- The number of additional hours required represented an additional 31.5% on top of a normal working week,
- 12 additional hours were worked every week,
- The hours of work deprived the employee of a weekend because they exceeded the ordinary five-day working week.
In addition, whether some of the company’s employees preferred to work a 50-hour week did not make the hours objectively reasonable.
When do I need to pay overtime and when are they reasonable?
From an employer’s perspective criteria (a) and (d) above are generally a good starting point, they can answer themselves before rostering the employee to work the ‘reasonable additional hours’ and will quickly answer whether they are reasonable or not.
Criteria (a): any risk to employee health and safety from working the additional hours.
Questions to ask when trying to answer this criterion:
- Has the employee had an adequate break between shifts and during their working hours? Some industrial instruments will prescribe this amount.
- How many hours has the employee worked this week?
- Is there a risk of physical, or psychological, fatigue?
- What are the environmental conditions these hours will need to be worked in?
Criteria (d): whether the employee is entitled to receive overtime payments, penalty rates or other compensation for, or a level of remuneration that reflects an expectation of, working additional hours
As an employer, it is important to ensure you are aware of any entitlement’s employees may be due. If an employee is covered by an industrial instrument and paid the minimum rate, then you must pay, in addition to their salary or hourly rate, any applicable overtime payments, penalty rates, allowances or other compensation, prescribed by in it.
Some employers may decide to pay an over-award amount to compensate for any entitlements the employee may attract by working reasonable additional hours. Employers need to ensure they do not fall into the trap of believing an over-award payment will cover all amounts of remuneration the employee is entitled to. For over-award payments to be regarded as compensation for reasonable additional hours the employment contract requires a specific and detailed clause. Read on to understand this in more detail.
For example:
Bob is paid his applicable Modern Award minimum salary of $60,000.00 per annum as a full-time employee working 38 ordinary hours per week. Bob’s employer asked him to work two reasonable additional hours per week, in which he is not paid additional money for.
If Bob agrees to work these two additional hours, he will need to be paid for those additional hours because his salary does not compensate for the additional hours and if applicable, the overtime penalty under the applicable Modern Award.
Callum is in the same situation as Bob, except Callum is paid $70,000.00 per annum, which is $10,000.00 over the minimum salary in his applicable Modern Award. Callum is asked to work two reasonable additional hours per week and is not paid any additional remuneration. In this scenario, Callum’s contract of employment includes a very specific and detailed off-set* clause stipulating that the over-award payment is recognised as compensation for the additional hours.
Where employers need to be careful in Callum situation is for every hour, penalty, and allowance they are not paying, this will reduce the amount that the employer is being paid over the minimum salary. Eventually, the $10,000.00 over-award payment Callum is paid will be used up and the employer may fall into a situation where they are underpaying the employee.
*If you pay your staff over award and do not have an off-set clause in your contract, contact our Workplace Advisory Services team as we can help you to address this gap.
How do you stay compliant?
Your best protection as an employer is ensuring your employees are keeping timesheets, regardless of whether they are covered by an industrial instrument or not. These timesheets will include start, finishing and break times. Keeping timesheet records ensures employers have correctly assessed the hours their employees have worked and whether they have paid their employees their full lawful entitlements.
Business Chamber Queensland’s Business Record Keeping and Pay Slips Fact Sheet outlines the records, including details of hours worked, employers are legally required to keep.
Timesheets are also your biggest protection in the case of a claim of underpayment as the onus of proof is on the employer. The onus of proof being on the employer means if an employee has alleged they have been underpaid due to all the ‘reasonable’ additional hours that they have worked, the employer must provide the evidence to:
- Prove that they have not been underpaid; and
- That the additional hours were reasonable, having regard to the FW Act.
If you would like to discuss this with one of our experienced team, please reach out to the Workplace Advisory Services team.
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