Personal grievances and claims for wage arrears are just two consequences of poorly worded employment agreements when it comes to overtime.
Employment agreements often detail that the employee must work such hours that are necessary for the requirements of their position, or until their tasks are completed. However, this wording raises issues around whether the employer may in fact lawfully require an employee to work overtime/additional hours.
This is a tricky area of the law and turns on the wording in employment agreements, especially the Hours of Work Clause and the expectations of employers. Please reach out to our team if you have any questions, or would like advice on this area.
Costly consequences
Breaching the Employment Relations Act 2000 (Act) could lead to employers facing a personal grievance for unjustified actions causing disadvantage. Employees could also raise claims for breach of contract, breach of good faith, wage arrears and a penalty for breach of the Act.
It is worth noting that we see the issue arising more frequently in the following industries: hospitality, professional services, healthcare, retail, transport, manufacturing and production industry.
As an example, if an employee is guaranteed a minimum number of 40 hours of work each week, but more hours of work are available or need to be worked, the employer can either:
- Offer the additional hours of work to the employee, which they can choose to accept or decline. This is a practical way to avoid the need for an availability provision but there must be no requirement for employees to work additional hours and the business needs to be prepared for this; or
- Require the employee to work the additional hours – but only if their employment agreement contains a valid availability provision.
Among other things, Section 67D of the Act says a valid availability provision must:
- Relate to a period that the employee is required to be available, that is in addition to their guaranteed (minimum) hours of work. For example, if the employee’s guaranteed (minimum) hours of work are normally worked between Monday and Friday, 8.30am – 5pm, but may require additional work afterhours or on the weekend, this must be clearly stated in the employment agreement; and
- Provide for the payment of reasonable compensation to the employee for making themselves available to perform work under the provision. What amounts to ‘reasonable’ compensation is a fact-specific enquiry. The Act specifies the factors that should be considered. For salaried employees, an employer and employee can agree that their remuneration includes compensation for the employee making themselves available under an availability provision. But there is no equivalent for waged employees.
- The employer must also have genuine reasons based on reasonable grounds for including the availability provision, and the number of hours of work specified in that provision, for the requirement to be available.
The reasoning behind this is that Parliament has recognised that employees’ time is a commodity which has a value. The statutory protections therefore ensure “that reasonable compensation is payable to employees who, by agreement, hold themselves available for the employer’s benefit, thereby making themselves unavailable to accept other work or engage in personal activities which could otherwise prevent them from being at the employer’s beck and call”.[1]
$6,000 in compensation paid to employee
In Holly Bell (née) Melville v Inkdrop Ltd, Holly was paid a salary and had 37.5 guaranteed hours of work per week between 8am to 5pm, Monday to Friday. But she worked an extra 2.57 hours of work per week, totalling an extra 254.21 hours of work during the period in question. She raised a personal grievance for unjustified actions causing disadvantage on the basis that her employment agreement was not compliant with the Act, and because she was required to work over and above her guaranteed hours.
The Employment Relations Authority found that Holly’s employment agreement required her to “work such hours as are necessary for the effective discharge of your duties and in order to meet deadlines”. However, the employment agreement failed “to specify the period for which she is required to be available for her employer that is in addition to her guaranteed hours of work”. The employment agreement therefore contained a non-compliant availability provision.
Consequently, Holly had been disadvantaged as this impacted her personal relationships: “A compliant availability provision would have provided Holly the opportunity to plan with greater certainty her outside work events with her partner, family and friends”. Holly was awarded $5,000 compensation for humiliation, loss of dignity and injury to feelings, under section 123(1)(c)(i) of the Act for her disadvantage grievance. She was also awarded $1,000 for the lost benefit in not having an availability provision that complied with the Act.
If you have any questions arising from this tricky area please reach out to a member of our team.
[1] Postal Workers Union of Aotearoa Inc v New Zealand Post Ltd [2019] NZEmpC 47
