Many employers require employees to work additional hours without a second thought. If you are an employer and your employees are working overtime, or you are an employee who regularly works overtime, then a recent decision of the Employment Court may have far reaching implications for you. The recent Employment Court decision of Postal Workers Union of Aotearoa Inc v New Zealand Post  held, in brief, that New Zealand Post could not require its employees to work above their agreed hours without an availability provision and reasonable compensation over and above their hourly or overtime rate.
In 2016 a number of sections were introduced into the Employment Relations Act 2000 (‘the Act’) to address exploitative practices by employers lacking mutuality particularly for vulnerable workers with little bargaining power. These sections were at issue for the Employment Court.
In this decision, delivery agents working for NZ Post were on a collective employment agreement and the Court found that they were guaranteed 37 hours and 40 minutes per week. However, on any given week NZ Post would get so busy that it required the delivery agent to work overtime. As a result, delivery agents had no idea what days they would be required to work overtime and what time they would finish work. When they worked overtime they were paid an overtime rate which was higher than their hourly rate.
NZ Post relied on the following clause in the collective employment agreement when requiring delivery agents to work overtime:
‘Delivery agents may be required to work reasonable overtime in excess of their standard hours (subject to safe operating procedures), provided that work is voluntary on days which are otherwise non-rostered days for an individual employee.’
Whether NZ Post could require its delivery agents to perform extra hours of work in addition to their standard hours, without compensating them for their availability, hinged on s 67E of the Act:
‘An employee is entitled to refuse to perform work in addition to any guaranteed hours specified in the Individual Employment Agreement if the Individual Employment Agreement does not contain an availability provision that provides for the payment of reasonable compensation to the employee for making themselves available to perform work under the availability provision.’
The Court had to determine whether the clause in the collective employment agreement was an availability provision in accordance with section 67D. The Court held that the clause was an availability provision because it purported to require a delivery agent to accept overtime work when required by NZ Post and performance of that overtime work was conditional on NZ Post making the overtime work available.
It was argued that performance was not conditional on NZ Post making work available because the delivery agents were not on standby. Rather, they were working as rostered and asked to do work at the end of the day as dictated by operational demands. However, the Court considered that this argument relied on qualifiers being read into the legislation that were not present. There was no exclusion for employees that were already at work.
It was also argued that the provisions introduced in 2016 only applied to zero-hour contracts. The Court rejected this argument as it appeared the legislation had general application to all employment agreements.
The Court held that employment agreements which purport to reserve the employer the unilateral ability to require employees to work past their usual hours constrain an employee’s ability to plan their life away from work. If an employer requires an employee to work overtime, as opposed to it being a voluntary exercise, it must comply with the Act by including an availability provision and providing reasonable compensation for the employee’s availability. What is reasonable compensation will depend on the each unique set of circumstances.
When the requirements of the Act are not met, an employee is entitled to decline to be available.
As the clause relied on by NZ Post was an availability provision and no compensation was given to the delivery agents, the clause was unenforceable and the delivery agents were entitled to decline to work above their agreed hours.
Whilst the Court appreciated that it was difficult for NZ Post to know what hours would be required this did not assist in determining whether the legislation has been met. The same could be said for many employers, in particular in the hospitality industry where staff may be asked to work overtime when a restaurant or bar is busy. Although an employer may not know when overtime is required, this does not detract from their obligations under the Act.
The Court appeared to acknowledge that where overtime was mutually agreed to by the parties, then compensation was not necessary. For example, employers could ‘request’ rather than ‘require’ their employees to work overtime without having to pay compensation. In this situation the employee has the right to decline this overtime work and the employer would be at the mercy of the employee’s decision. Nonetheless, ‘requesting’ may provide an option for employers if compensation for availability is not financially viable and would rely on a good relationship between the parties.
It is worth noting that the legislation makes a distinction between waged and salaried employees in this situation. Section 67D(7) provides that the parties may agree that reasonable compensation for availability is incorporated into an employee’s salary. A distinct provision in an employee’s Individual Employment Agreement is likely necessary. However, for employers with salaried employees this does minimise a lot of risk and uncertainty if overtime is necessary.
If you think this case affects your business or your current employment make sure you discuss the same with your employment specialist.