Time’s up for “free” compulsory overtime

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This article was first published in The Kaipara Lifestyler on 12 November 2019.

Employment law changed in 2016 to ensure staff get paid more than their usual hourly rate if they are required to work overtime (rather than just offered it). The changes were intended to deal with “zero hours” contracts, giving employees certainty about their hours of work or fair compensation for more flexible arrangements.

Until now, it was ambiguous whether ordinary full-time or part-time contracts fell under the rules, or only contracts with no guaranteed hours (“zero hours” contracts). However, the recent court decision Postal Workers Union of Aotearoa Inc v New Zealand Post has confirmed that the law applies to any employment agreement where an employee is required to work overtime. 

The extra compensation is not for the hours worked, but an additional amount for the hassle/uncertainty of having to remain available. The Court gave an example of an employee who couldn’t plan a range of family/community obligations outside his normal work hours because he never knew if he would be required to work.

It is important to note that the provisions only apply if an employer needs to require the employee to work. There is nothing stopping an employer offering, and an employee accepting, extra work at their usual rate so long as the hours are safe.

Plenty of businesses will have employment agreements which still say “we can require you to work additional hours at your usual rate”. This is risky. If an employee raises a claim the employer could find themselves counting back additional pay for a number of years.

The Postal Workers decision underlines the fact that a “one size fits all” employment agreement is simply no longer enough for the modern workplace. Thought needs to go into the hours and overtime requirements of each employee.

If you’re unsure about whether the overtime rules affect your employment agreement(s), now could be a good time to seek legal advice.

If you’d like to get a better understanding of how this employment rule applies to you or your business, please give Simon or David in our employment law team (details below) a call.

Our thanks to Simon Davies-Colley for writing this article