Reasonable pay for employees

Can you require your employees to be available outside their normal hours of work?

This was the question considered in a recent decision of the Employment Court, Postal Workers Union Aotearoa Inc v New Zealand Post.  The outcome of the case may have significant implications for how employers structure their workforce. The Court made it clear that employees must be provided with reasonable compensation if their employer requires them to be available to accept work over and above their guaranteed hours of work.

The requirement to provide reasonable compensation to employees   

In 2016, a series of legislative changes were introduced to protect employees, largely in response to "zero-hour" contracts, which required that employees be available to accept work without guaranteeing any minimum hours of work.
 
Included in these changes to the Employment Relations Act 2000 was section 67E, which states that an employee is entitled to refuse to perform work in addition to their guaranteed hours if their employment agreement does not contain an availability provision which provides reasonable compensation to the employee for making themselves available.
 
Prior to the Employment Court's decision in Postal Workers Union Aotearoa Inc v New Zealand Post, there was an assumption that the requirement to provide reasonable compensation applied only to employees who were employed on zero-hour contracts.  These were contracts that required an employee to be available to the employer but did not guarantee the employee any actual hours of work.  This was one of the arguments put forward on behalf of NZ Post.
 
However, the Court confirmed that the availability provisions did not merely apply to zero hour contracts and applied to any employment agreement where an employee was required to make themselves available to their employer outside their normal guaranteed hours of work.  The Court emphasised that employees' time is a valuable commodity and employers should not be able to encroach upon employee's otherwise private time without providing reasonable compensation.  The Postal Workers Union case is an illustration of how this may work in practice.

Postal Workers Union Aotearoa Inc v New Zealand Post  

The Postal Workers Union brought a claim in the Employment Court claiming that their members were being required to work additional hours without reasonable compensation being provided to compensate them for their availability.
 
Clause O20 of their collective agreement simply provided that delivery agents may be required to work reasonable overtime in excess of their standard hours, which were set by roster. The questions for the Court to resolve were:

• Is Clause O20 an availability clause?
• If Clause O20 is an availability clause, is it valid and enforceable under section 67E?

The Court had no difficulty finding that clause O20 was an availability clause as it required delivery agents to accept work (in the form of overtime) when required by NZ Post and the performance of that work was conditional on the employer making that work available.
 
However, the Court held that Clause O20 was unenforceable because it did not provide employees with reasonable compensation for making themselves available, despite the fact the agreement provided for guaranteed minimum hours of work of 37 hours and 40 minutes and the NZ postal workers were paid overtime for any hours they did in excess of these hours.  The result was the NZ Postal workers were therefore allowed to refuse to perform work outside of their guaranteed hours.  So how might this decision affect you as an employer?

Implications for employers  

This decision may have significant implications for a number of employers. Employers will need to assess whether their employment agreements require employees to be available to accept work over and above their guaranteed hours of work. They will then need to consider whether their employees are provided with "reasonable compensation" for being available.
 
Unfortunately, we are yet to have a case which comprehensively deals with what constitutes "reasonable compensation" but the Act provides the following factors which will be taken into account when making this assessment:

1. the number of hours the employee is required to be available:
2. the proportion of the hours referred to in paragraph (a) to the agreed hours of work:
3. the nature of any restrictions resulting from the availability provision:
4. the rate of payment under the employment agreement for the work for which the employee is available:
5. if the employee is remunerated by way of salary, the amount of the salary. 

We therefore strongly encourage employers to review their employment agreements in light of the above decision and get in touch with our Employment Law Team if they have any concerns.