In a recent Federal Court decision that serves as a pertinent reminder about the primacy of the National Employment Standards over contract terms, a large employer has been found liable for contravening the maximum weekly hours requirements set out in section 62 of the Fair Work Act 2009 (Cth) (FW Act), which forms part of the National Employment Standards (NES).
The 6 May 2022 judgement by the Hon Justice Katzmann in the matter of Australasian Meat Industry Employees Union v Dick Stone Pty Ltd [2022] FCA 512 is a rare ruling by the Federal Court on the meaning of the term ‘reasonable additional hours’ found in the NES.
Legislative background
According to section 62(a) of the FW Act, an employer must not request or require a full-time employee to work more than 38 hours in a week “unless the additional hours are reasonable”.
Subsection 62(3) of the FW Act sets out the criteria by which the ‘reasonableness’ of the additional hours is to be measured:
“(a) any risk to employee health and safety from working the additional hours;
(b) the employee’s personal circumstances, including family responsibilities;
(c) the needs of the workplace or enterprise in which the employee is employed;
(d) 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;
(e) any notice given by the employer of any request or requirement to work the additional hours;
(f) any notice given by the employee of his or her intention to refuse to work the additional hours;
(g) the usual patterns of work in the industry, or the part of an industry, in which the employee works;
(h) the nature of the employee’s role, and the employee’s level of responsibility;
(i) whether the additional hours are in accordance with averaging terms included under section 63 in a modern award or enterprise agreement that applies to the employee, or with an averaging arrangement agreed to by the employer and employee under section 64;
(j) any other relevant matter.”
Furthermore, subsection 61(1) of the FW Act explicitly states that the NES are “minimum standards” which “cannot be displaced”.
Case background
The employee in this case was an immigrant from Ghana who secured employment with the employer within three weeks of his arrival in Australia. The employer is a large meat wholesaler and the employee was hired as a knife hand/labourer in the employer’s production area. During the meeting when the employee was offered the job, he was handed an ‘employment form’ and an ‘employment commencement pack’ which contained a letter setting his ordinary hours as 50 hours per week. Neither document stipulated what the employee would be paid, nor did any document reference any overtime entitlements. The employee was also not informed of which modern Award covered his employment and nor was he provided with a Fair Work Information Statement. The employee was told he had to work from 2:00am to 11:30am, Monday to Friday, and 2:00am to 7:00am on Saturdays, despite the usual starting time in the industry being 4:00am according to the relevant Award.
The employee proceeded to perform the job for over 3 years until he was made redundant along with three other employees, following which he initiated legal action with the assistance of his union.
Decision
The Hon Justice Katzmann found that the employer had required the employee to work more than 38 ordinary hours in a week in breach of the NES, despite the employer arguing the employee had freely entered into the employment agreement and that the wages paid to the employee were at a ‘blended rate’ which incorporated overtime rates. Due to the strict wording of subsections 61(1) and 62(1) of the FW Act, Her Honour found it was not open to the employer to attempt to ‘displace’ or ‘contract out’ of the minimum standards, unless the additional 12 hours per week could be shown to be reasonable when taking into account the criteria set at subsection 62(3) of the FW Act.
In weighing up those criteria, Justice Katzmann found that whilst the 50-hour week aligned with the employer’s ‘business needs’, this factor alone did not indicate the additional hours were reasonable. It was also difficult for the employer to overcome the fact that the relevant modern Award set the usual starting time for work at 4:00am, as well as the fact that there were obvious safety risks in the job which would be exacerbated by lengthy shifts.
Whether or not the majority of the employer’s workers ‘preferred’ a 50-hour week was also not a relevant factor in Justice Katzmann’s decision, and ultimately, Her Honour was persuaded that it was “unreasonable of [the employer] to require or request [the employee] to work 12 hours a week every week over and above the 38 stipulated”, and that the employer had breached section 62 of the FW Act (among other breaches).
The matter has been stood down for a further hearing to consider penalties and compensation.
Key Takeaway
Despite recent High Court decisions which indicate that ‘contract is king’, there are certain employment terms that simply cannot be displaced via an employment agreement, such as those set by the NES. Furthermore, it is important for employers to establish in an employment agreement what an employee’s ordinary hours of work are and how the employer will account for overtime hours. Simply relying on a ‘blended’ rate of pay without any specificity as to what exactly the wage or salary pays for raises the risk of a claim for underpayment and breach of the FW Act.
Furthermore, while each case will turn on its facts, it is important that employers appreciate that requiring employees to work excessive overtime runs the risk of breaching the NES (in addition to workplace health and safety risks). Employers should review their “standard” practices and consider whether overtime being worked is reasonable in all the circumstances.
If you are an employer with any questions about reasonable hours of work or the wording of your employment agreements, feel free to reach out to a member of our team on (03) 9448 9600.
The above is general information and should not be taken as legal advice.
Liability limited by a scheme approved under Professional Standards Legislation.
