When Reasonable Overtime Becomes Unreasonable

It is the age-old question of what is considered ‘reasonable overtime’. Many employment contracts will state that, due to the nature of the business, there may be a requirement for an employee to work reasonable additional hours. But what is considered reasonable? When do additional hours pass the point of being reasonable?

Can additional hours be deemed reasonable or even expected simply by paying employees well above the Award? Or is it that the business operations simply require additional hours to be worked by its employees? Perhaps the employee was notified and agreed to the overtime by signing their contract, which stated usual hours are 50 per week, so yes, the overtime is reasonable.

In the case Meat Industry Employees Union v Dick Stone Pty Ltd [2022] FCA 512 (6 May 2022), we see the term ‘reasonable’ put under the microscope. In this particular case the employee had signed a contract and agreed to a working week of 50 hours. The employee was paid above the Award with their hourly rate high enough to potentially offset the reasonable additional hours. Further it was arguable that a 50 hour week was necessary in order to meet the needs of the business. So, why were the additional hours found to be unreasonable?

In making its decision the Federal Court of Australia referred to section 62(3) of the Fair Work Act 2009 (Cth) (the Act) which sets out the various factors that must be considered when the determining whether additional hours are reasonable or not. Some of the factors include:

• any risk to employee health and safety from working the additional hours
• the employee’s personal circumstances, including family responsibilities
• the needs of the workplace or enterprise in which the employee is employed
• 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
• any notice given by the employer of any request or requirement to work the additional hours
• the nature of the employee’s role, and the employee’s level of responsibility.

When deciding whether in the above case the hours were ‘reasonable’ the Court took into consideration that the employer had provided notice of the requirement to work additional hours by providing so in the contract of employment. However, the employer’s request was deemed unreasonable due to their failure to:

• pay the employee overtime payments – despite the employee being paid above the Award minimum, the contract was not clear or specific as to the intention of the employer and purpose of the above Award rate. It was found the employer could not offset the above Award payment as it could not be found that there was a clear understanding that the loaded or blended rate included payment for overtime.
• eliminate risk to employee health and safety – the nature of the work the employee performed was physically demanding with the expectation of standing for 9.5hours per day and, given they were working with knives, the work was deemed high-risk of injury, posing a risk to the employees’ health and safety.
• consider the nature of the employees’ role – the employee held a non-managerial or supervisory position which held no additional responsibilities which may require him to work more than 38 hours per week. Therefore, there was no evidence that the employer could provide to support the need for the employee to work 12 additional hours each and every week.

This case brings to light what must be considered when making the request to employees to work additional hours. Employers should review their overtime practices and not just rely on the fact the employee agreed to work overtime by signing their contract. Further, in light of this case, employers should review their payment practices and ensure that agreements or contracts contain adequate and comprehensive set-off provisions or at least detail what the over Award rates of pay include.

Should you require further advice or assistance in drafting your employment agreements, please reach out to the Master Builders Workplace Relations and Legal team on (02) 6175 5900.