What is the meaning of "reasonable additional hours" under the Fair Work Act? So far, there has been very little case law in this area, which has led to a level of uncertainty for employers in this space.
The Federal Court recently gave some guidance to employers about the Fair Work Act's limits on working hours that will set the tone for disputes in respect of employees (in particular, in non-managerial roles) who work significant additional hours.
While the Court's decision specifically related to an employer and employee in the meat industry, the judgment provides critical takeaways and reminders for all employers.
This article provides an overview of some of the key aspects of Australasian Meat Industry Employees Union v Dick Stone Pty Ltd,(1) to assist employers in understanding their obligations at law and identifying any key areas of risk across all levels of an organisation.
Employers should review their practical and contractual arrangements with employees in light of this case and consider whether changes are required moving forward.
"50-hour week contract"
Samuel Boateng was a Ghanaian immigrant who was employed by Dick Stone Pty Ltd, a large meat wholesaler, as a labourer in a role covered by the Meat Industry Award (the Award).
The employee's written contract required him to work 50 "ordinary work hours" per week, pursuant to what the Court accepted were "unsociable" rostering arrangements (with shifts commencing at 2 o'clock in the morning and including weekends). However, and as the decision put it "curiously", the written contract did not specify what the employee would be paid or make any reference to the Award.
The employee routinely worked a 50-hour week, and generally received a "blended rate" of pay under the contract for this work. The blended rate was calculated by Dick Stone to "load up" the hourly rate to include payment for some (but not all) overtime provisions under the Award.
The employee was only paid overtime rates for specific early morning work and where his hours exceeded 50 per week. Further, his pay slips referred only to overtime when he surpassed 50 hours per week.
Was the employee underpaid?
A dispute arose in relation to the above employment arrangements, with the employee and his union, the Australasian Meat Industry Employees Union, claiming Dick Stone had contravened both the Award and the Fair Work Act. The key questions that arose and that were in dispute were whether:
- the number of hours that the employee was required to work each week was unreasonable (please see "Section 62 and unreasonable hours" below);
- Dick Stone failed to pay the employee overtime rates for hours worked in excess of 38 hours per week as required by the Award, and whether Dick Stone could rely on a "set off" argument because the employee was paid the blended rate (please see "Overtime and award underpayments" below); and
- Dick Stone failed to provide the employee with certain information required by the Fair Work Act and the Award, including the Fair Work Information Statement (FWIS) (please see "Provision of Information Issues" below).
This article focuses on the above three key aspects of the decision.(2)
Section 62 and unreasonable hours
Section 62 limits the number of hours an employee may be asked or required to work. Subsections 62(1) and (2) provide that, for a full-time employee:
- an employer must not request or require an employee to work more than 38 hours in a week unless the additional hours are reasonable; and
- an employee may refuse to work hours over 38 per week if they are unreasonable.
The question of what is reasonable can be a difficult one for employers and will depend on all the facts and circumstances of the employment. Relevantly, subsection 62(3) provides that a number of matters must be taken into account, including:
- any risk to employee health and safety from working additional hours;
- the employee's personal circumstances;
- the needs of the workplace or enterprise where the employee is employed;
- the employee's remuneration, including whether the employee is entitled to receive overtime payments, penalty rates or other compensation for working additional hours; and
- any notice given by the employer of any request or requirement to work the additional hours – for example, in a written contract.
In the case at hand, the question was whether the requirement to work an additional 12 hours a week (over and above the 38 stipulated by the Award and the Fair Work Act), was unreasonable having regard to the considerations under section 62.
The Court accepted the specific operational demands of the meat industry, and further accepted that the employee's 50-hour working week aligned with Dick Stone's business needs.
Despite this, and critically for employers, this was not the end of the inquiry – the Court ultimately determined that the employee's working hours were unreasonable. This finding was made for reasons including the following:
- the nature of the employee's role, which did not involve any managerial, supervisory or other additional responsibilities;
- the unsociable pattern of the employee's working hours, which regularly required him to start work at 2 o'clock in the morning and work on weekends;
- the risk posed to the employee's health and safety in working the additional hours while using knives and lifting heavy weights, even though that risk did not in fact materialise (through an injury) in this case;(3)
- the employee's remuneration, having regard to the fact that although he was paid a higher, blended rate for work up to 50 hours per week, he was not paid overtime in accordance with the Award (please see "Overtime and award underpayments" below); and
- the employee's personal circumstances – namely that, on commencement of employment, he was a very recent immigrant, and this was a matter known to Dick Stone. The employee's had no knowledge of Australian law, and this issue was compounded by Dick Stone's failure to provide him with information as required under the Fair Work Act (see "Provision of information issues" below).
Overtime and award underpayments
Dick Stone was further unsuccessful in arguing that, because the employee was paid an "above-Award" rate for hours up to 38 per week, the excess amounts should be "offset" or "set off" against requirements to pay overtime under the Award on the additional 12 hours.
Dick Stone submitted that, although the employee's pay slips did not record payments for overtime, because the blended rate was greater than the Award rates, Dick Stone was entitled to set off the payments that it had made to the employee's against the Award rates. In other words, it claimed that the amounts it had paid as wages satisfied its obligations under the Award or could be brought into account in satisfaction of the Award entitlements.(4)
Justice Katzmann disagreed, finding that because the employment contract was silent as to remuneration arrangements (ie, Dick Stone failed to "communicate its intention to allocate part of Mr Boateng's wages to its obligations to pay overtime rates"), a set off argument was not available to the employer.
Provision of information issues
Section 125 requires an employer to give each employee the FWIS published by the Fair Work Ombudsman before, or as soon as practicable after, the employee starts employment.
There has, so far, been little guidance on what it means to "give" employees the FWIS (although some guidance is provided in the Fair Work Regulations).
Justice Katzmann was clear in this case in stating that "giving" the FWIS requires actual delivery, and not constructive delivery. In other words, while the FWIS can be delivered electronically, it must in fact be delivered and an employer displaying the FWIS in a common area (eg, a noticeboard or lunchroom) will not satisfy the Fair Work Act requirements.
On the facts of this case, Dick Stone was unable to give evidence showing it had given the FWIS to the employee and was further unable to establish it had made additional material available to the employee, as required under the Award.
The recent Federal Court decision provides important reminders to employers in respect of work arrangements and rostering, as well as the imperative for appropriate written contracts being signed by employees at all levels of an organisation. Given the context of the above case, the key takeaways are that:
- it is not possible to "contract out" of the National Employment Standards under the Fair Work Act, including section 62, which places limits on employees' working hours. In other words, the fact of a full-time employee agreeing to work in excess of 38 hours in a written contract will not provide complete protection for employers in a later claim by an employee that the excess hours were unreasonable. What is reasonable will depend on all the facts and circumstances of the employment, and "blanket rules" should not be applied in this context;
- it is critical to have appropriate contractual documentation in place for all employees, that accurately and fulsomely reflects their working and pay arrangements. Where appropriate, such documentation should include a well-drafted "offset" or "set-off" clause in respect of any payments made over and above the minimum requirements at law. Individual flexibility agreements and other provisions under a modern awards for the "loading up" of wages or annualised salaries should also be considered; and
- obligations under the Fair Work Act and modern awards to provide employees with information in relation to their legal rights are not to be overlooked or minimised to the level of "technical" compliance issues. In many situations, such as the employment of the employee in the above case, an employer's failure to comply with the Fair Work Act in one respect (eg, the failure to give an employee the FWIS) may compound other matters relating to an employee's role. Documentary evidence of the FWIS and other material having been provided to each employee should be retained in the event of future disputes.
For further information on this topic please contact Alina Kaye at The Workplace Employment Lawyers by telephone (+61 2 8999 3300) or email ([email protected]). The Workplace Employment Lawyers website can be accessed at theworkplace.com.au.
(1)  FCA 512.
(2) This article does not address the other questions arising for determination by the Court – namely, whether:
- Dick Stone's establishment was a meat processing establishment or meat retail establishment (with the issue going to the quantum of entitlements payable to the employee under the Award);
- Dick Stone had properly classified the employee under the Award (ie, whether Dick Stone had applied the correct classification level to his employment); and
- Dick Stone, as a result of its failure to pay overtime to the employee in line with the Award, had also underpaid superannuation and was therefore in further breach of the Award.
The judgment should be referred to for information about how the Court considered and determined these other matters.
(3)  FCA 512 at .
(4) Dick Stone cited in support of this position, for example, WorkPac Pty Ltd v Rossato  FCAFC 84.