This month, the Government reached a settlement with IHC and the Service and Food Workers' Union (SFWU) regarding minimum wage payments for disability workers who perform "sleepover" duties.

The settlement, which has since been ratified by IHC employees, is to form the basis of draft legislation.

It concludes four years of litigation, culminating with the Court of Appeal's decision in favour of the union at the beginning of this year (see our February briefing). Supreme Court appeal proceedings set down for hearing last week have been adjourned.

Settlement details

In its current form, the settlement applies to employees in the IHC Group who are SFWU members.

The parties have agreed to increases in sleepover payments in three steps over the next 15 months up to the statutory minimum wage (currently $13 per hour) at the end of 2012, as follows:

  • 50% of the minimum wage ($6.50 per hour at the current rate) backdated in respect of all sleepover hours worked from 1 July 2011;
  • 75% of the minimum wage ($9.75 per hour, plus any statutory increase next April) from 1 July 2012; and
  • 100% of the minimum wage rate from Christmas 2012.

In addition, employees who have lodged claims prior to 2 September this year in relation to sleepovers worked between 1 July 2005 and 30 June 2011 will be entitled to back-pay on the basis of a 9 hour sleepover at the rate of 50% of the difference between the applicable minimum wage rate at the time and what was actually paid. The same treatment applies to employees who filed claims for the period 1 July 2004 to 30 June 2005, and who ceased their employment during that period.

Payments are to be made within 8 weeks of implementing legislation being passed. Draft legislation is anticipated before the end of this Parliamentary term on 6 October.

As to who will pay, the Government has agreed to fund the first two increases in sleepover payments in full and the third increase to the full minimum wage from 1 July 2013. In addition, the Government will finance 50% of back-pay entitlements. The employer will be required to carry the cost of the full minimum wage rate from Christmas 2012 to 1 July 2013, and the remainder of back-pay amounts.

The IHC/SFWU collective agreement will be varied by expressly precluding sleepovers, paid at the minimum wage (or a proportion of it) from 1 July 2011, from being calculated as overtime.

Court of Appeal decision – sleeping over is work

In February this year, the Court of Appeal unanimously held 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 Minimum Wage Act 1983 (the Act) required an hourly paid worker to receive the minimum wage for each hour worked. Consequently, Idea Services (IHC's service subsidiary) could not average Mr Dickson's hourly working pay rate (which exceeded the statutory minimum) and sleepover pay rate ($34 per session) over his two week pay period.

The Court of Appeal identified three factors for determining whether sleepovers constitute work under the Act; namely:

  • the extent of any constraints placed on the employee's freedom;
  • the nature and extent of the employee's responsibilities; and
  • the 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 to be work.

Although Mr Dickson could sleep and engage in quiet activities during shifts, he was subject to various restrictions. He had to remain at the workplace premises and be readily available to residents throughout; he was not allowed visitors without prior permission, and he could not engage in any activities that might disturb residents. During sleepovers, Mr Dickson also had important responsibilities for security at the home and the safety and wellbeing of residents.

What does this mean for employers?

The scope of the draft legislation is presently unclear. Stakeholder employers will want to know whether the new law will be confined to government-funded employers or the disability and health care sectors, or whether it will apply more widely to all employers across industries with employees who are rostered to remain at work overnight. Further, it remains to be seen what the position will be for "standby" and "on call" workers who are subject to constraints during these periods.

What is clear is that the Court of Appeal decision will bind any organisations with employees working sleepovers or other similar working arrangements who are not covered by the new statutory provisions.

For this group of employers (if any), the more onerous any constraints and responsibilities imposed on an employee, and the greater any benefit derived by the employer from the employee's role, the more likely the employee will be considered to be working for the purposes of the Act. If an employee's presence and availability is required throughout a shift, they are likely to be considered to be working (even if they are permitted to rest or sleep). However, the Court of Appeal distinguished the situation of on-call doctors who are subject only to minor constraints, and who are allowed to leave the workplace and see friends and family without the employer's consent.

Given that the Court ruled out the practice of averaging applicable pay rates (for example, normal hourly rate and sleepover rate) over an employee's pay period for the purpose of minimum wage requirements, employers may want to review employees' pay packages in this regard.

In certain circumstances, it might be possible to move from an hourly or daily rate of pay to a weekly pay rate, in which case the Act provides for minimum wage entitlements to be calculated by reference to the week rather than the hour. As a contractual term, any change to pay rates would of course require the employee's agreement.