7 April 2016
A recent case involving claims made by three individuals (the “Applicants“) against their former employer (the “Company“) has shed further light on what will constitute “reasonable additional hours”.
The Applicants were not covered by any award or enterprise agreement during their employment with the Company and each of the Applicants had signed employment contracts with the following clauses:
Hours of Work
Your hours of work are those that are reasonably necessary to fulfil the requirements of your role, or such hours as are required by the Company. Core business hours are 8.30 am to 5.30 pm Monday to Friday. In addition, you may be requested to work rostered overtime or on-call periods from time-to-time by the Company.
Rate of Pay
Your salary will be […] dollars per annum, inclusive of superannuation. Your salary includes compensation for all hours that you are required to work.
The Applicants were directed to attend the Company’s offices Monday to Friday between 8:30 am and 5:30 pm and provided with a one hour lunch break each day.
Maximum weekly hours under the NES
The National Employment Standards (“NES“) under the Fair Work Act 2009 (Cth) provide that an employer must not require a full-time employee to work more than 38 hours per week unless the additional hours are “reasonable”.
The NES also sets out the factors that must be taken into account in determining the reasonableness of any additional hours of work. One of these factors is “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”.
Claim for overtime
The Applicants claimed they each worked an average of 45 hours per week (including lunch breaks), which is seven hours above the notion maximum of 38 hours per week. The Applicants argued that this arrangement was in breach of the NES and also sought payment for overtime on the basis of seven additional hours per week.
However, the Federal Court found that:
- the Applicants’ unpaid lunch breaks did not count as time worked, and therefore the Applicants in fact worked an average of 40 hours each week;
- the two additional hours (involved in the 40 hours per week) were “reasonable”, having regard to the factors set out in the NES; and
- the Applicants had no entitlement to overtime under their contracts of employment in respect of the additional hours of work.
The Court therefore found that the Company had not breached the NES and dismissed the claim for overtime.
Lessons for Employers
- Unpaid lunch breaks will not generally count as time worked for the purposes of the “maximum weekly hours” provision under the NES.
- Requiring an employee to work two additional hours per week may be “reasonable” for the purposes of the NES.
- Where appropriate, employment contracts should specify that the employee is required to work reasonable additional hours and that the salary paid to the employee includes compensation for such work.