Last week, the Court of Appeal unanimously upheld the Employment Court's earlier decision that sleepovers by workers in care residences for the disabled constituted "work" under the Minimum Wage Act 1983 (Idea Services Limited v Dickson). This meant that the statutory minimum wage should apply for the entire period of the sleepovers.

Further, the Court held that the Act required an hourly paid worker to receive the minimum wage for each hour worked. This meant that Idea Services could not average Mr Dickson's hourly working pay rate and sleepover pay rate over his two week pay period.

Implications for employers

The decision is likely to extend to other employees required to spend the night at work, such as night caretakers required to deal with alarms, as well as "stand by" and "on call" workers who are subject to sufficient constraints.

The more onerous any constraints and responsibilities imposed on an employee, and the greater any benefit derived by the employer from the role in question, the more likely the employee will be considered to be working for the purposes of the Minimum Wage Act 1983. For example, an employee is likely to be considered to be working during a shift where their presence and availability at the workplace is required throughout, even if they are allowed to rest or sleep. However, the Court of Appeal specifically distinguished the situation of on-call doctors who are subject only to minor constraints, being allowed to leave the workplace and see friends and family during on-call periods without their employer's permission.

It is possible that employees who are not required to attend at work but are subject to other constraints could be considered to be working. For example, in an English Court of Appeal decision, employees who operated a telephone booking service overnight from home were found to be "working" throughout their entire shift because they were required at all times to be available to answer telephone calls.

Care is required in relation to hourly and daily waged employees who also receive a flat payment or allowance for inactive periods or shifts which amount to "work" under the Act. Such inactive pay rates or allowances must comply with the statutory minimum hourly wage (currently $12.75, and increasing to $13 with effect from 1 April 2011).

Further, given that the Court has ruled out the practice of averaging applicable pay rates over an employee's pay period for the purpose of the minimum wage requirements, employers may want to review employees' pay packages. In particular, an employee who receives more favourable pay rates during working hours (exceeding the statutory minimum), and below statutory minimum rates for other inactive periods which nevertheless count as "work" under the Act, could claim the shortfall up to the statutory minimum wage in respect of inactive "working" hours in addition to enjoying the higher rates for active work. In certain circumstances it could be an option to move from an hourly or daily pay rate to a weekly rate, in which case the legislation provides for minimum wage entitlements to be calculated by reference to the week (or in other words averaged over the week) rather than the hour. As a contractual term, any change to pay rates would of course require the employee's agreement.

Currently, it is not permissible to contract out of the Minimum Wage Act 1983. This means that any contractual arrangements in breach of the legislation, including any agreement that a specified function does not amount to work, will be ineffective. Interestingly, the Government has signalled that it may consider amending the minimum wage legislation following this decision.

Facts and figures

Mr Dickson worked for Idea Services, providing care and support for people with disabilities living in community houses. Frequently, he was required to stay at a community home overnight to deal with any issues that arose. Mr Dickson's employment agreement provided for an hourly wage rate of $17.66, plus a flat allowance of $34 for each sleepover. If Mr Dickson was required to attend to occupants during a sleepover, he would be paid at the hourly rate for actual time worked in addition to the $34 allowance. Otherwise, he would simply receive the allowance, which equated to only $3 or $4 per hour depending on the length of the sleepover.

When performing a sleepover, Mr Dickson was allowed to sleep or engage in quiet activities provided that it did not disturb the service users. He was subject to a number of constraints. He was not permitted to leave the home or have visitors without consent, he was not permitted to consume or be affected by alcohol or drugs; and he had to be readily available to residents even when asleep. Further, during sleepovers, he retained important responsibilities for security at the home and the safety and wellbeing of residents.

What is "work"?

The Court of Appeal endorsed the following three factors formulated by the Employment Court for determining whether sleepovers constitute work under the 1983 Act:

  • Constraints placed on the freedom the employee would otherwise have to do as he or she pleased;
  • Nature and extent of responsibilities placed on the employee; and
  • Benefit to the employer of having the employee perform the role.

The greater the extent to which each factor applied, the more likely it was that the activity in question would be considered as work.

Minimum wage for each hour worked - no averaging

The Court of Appeal went on to find that under his employment agreement, Mr Dickson was paid by the hour and not by the shift, even though the sleepover allowance was paid by the session. His pay period was a fortnight.

The Court held that as an hourly waged employee, he was entitled to the minimum wage for each hour worked, including sleepover hours which ranged from 8 to 10 hours per session (and for which he was only being paid $34). The Court rejected the company's submission that compliance with the Act could be tested by looking at the average rate of pay over the two week pay period.

Incidentally, had Mr Dickson been paid at a rate other than by the hour or by the day, under the legislation his minimum wage entitlements would have been tested on a weekly (rather than hourly) basis.