Employment Court rulings define what is paid work

26 Jul 18

Column written by Dunedin Partner John Farrow, published in the business section of the Otago Daily Times on Wednesday 25 July.

Two recent decisions of the Employment Court have redefined what it means to be ”at work”, in separate employment issues scrutinised at Smiths City and Timaru’s hospital.

South Canterbury District Health Board v Stuart Sanderson involved six anaesthetic technicians (ATs) working at Timaru Hospital. The particular issue in question was whether they were at work when on-call.

Theatre services at the hospital were potentially available for 24 hours each day. The hospital achieved this by a call-back roster for theatre staff outside of business hours. When on call, they were required to attend the hospital within 10 minutes of being called. The hospital provided free accommodation on-site for on-call staff.

The Employment Court applied the tests developed in the ”sleep over” case of Idea Services v Dickson. In that decision the Court of Appeal outlined three factors when assessing whether someone is at work:

  • The constraints placed on the freedom of the employee.
  • The nature and extent of responsibilities placed on the employee.
  • The benefit to the employer of having the employee perform the role.

In terms of constraints on freedom, the ATs ended up having to share hospital-provided accommodation when on-call. Some of the ATs slept poorly.

Some described having to share bathroom and toilet facilities. They were not able to enjoy a social drink, spend time with family or plan social outings during the on-call period. Family members could not stay at the shared accommodation.

The court found that the issue was less to do with the quality of the accommodation provided and more to do with the fact that the employees had to reside away from their own homes and families. Also relevant was the quality of the ATs’ sleep which was compromised because of the possibility of being called back to an emergency.

The court found that the nature and extent of the ATs’ responsibilities were significant and, at times, very significant. It also found that the ability to call back appropriate staff, such as ATs, enabled the hospital to deliver 24-hour emergency health care. That amounted to a significant benefit to the hospital in complying with its legal obligations.

The decision has significant financial consequences for Timaru Hospital. The collective employment agreement provided that on-call staff would be paid an allowance of $4.04 per hour. The allowance was payable for all hours the employee was rostered on-call, including time covering an actual call-out.

Each year minimum wage orders are issued. These provide for minimum adult rates. The court found that the ATs were entitled to payment of $12.75 per hour (as per the relevant Minimum Wage Order).

The court has the ability to order payment for underpaid wages for up to a six-year period. Six employees requiring reimbursement for each on-call hour over a six-year period, soon adds up.

The other decision involved Smiths City Group. This was a case brought by the Labour Inspector.

For at least the last 15 years, Smiths City stores held a meeting of sales staff each morning before opening for business. Sales staff who were on duty in the morning were expected to attend. Sales staff were not paid for their time at the meetings. They were paid from when the stores opened.

The meetings were usually conducted by store managers and discussed store-related business. This included sales targets, monthly promotions, upcoming late nights, customer feedback, company announcements and staff achievements.

Despite what was discussed, the meetings were relaxed to the point of being informal. One staff member was described as ”eating breakfast”, two were reading newspapers and one was texting on a phone. Staff members would leave the room to take phone calls and make coffee. A couple of late-comers arrived after meetings finished.

Despite this, it was clear that Smiths City expected sales staff to attend and made sure they knew that.

In early 2016 the Labour Inspector issued Smiths City with an improvement notice. An improvement notice requires an employer to comply with any provision the Labour Inspector believes that it is not complying with.

The Labour Inspector claimed that all sales staff were disadvantaged by being required to attend a meeting without being paid. Nationwide, this affected about 450 employees.

The notice required Smiths City to comply with its statutory obligations by starting to record the actual hours worked by the employees on each day, including before and after store opening hours. Smiths City was required to conduct an audit and identify where wages had been paid below the statutory minimum.

The audit was to cover all current and previous employees for the last six years. Smiths City was to calculate the arrears of pay below the minimum wage and reimburse those arrears. Holiday pay was to be calculated and paid, as well.

Smiths City objected to the improvement notice and successfully applied to the Employment Relations Authority. The notice was rescinded. The Labour Inspector challenged that determination in the Employment Court.

The court firstly focused on whether or not the meetings fell within the definition of ”work”.

The Court rejected Smiths City’s claim that its employees were not under constraint while attending morning meetings. The expectation to attend and pressure placed on staff to do so was direct and forceful.

The expectation involved the exercise of power in a relationship with an imbalance of power. While staff had some limited freedom, they were not entitled to be disruptive and had to listen.

The benefit of the meetings was exclusively enjoyed by Smiths City because it had a cost-free opportunity to prepare its staff for the working day.

Smiths City argued that they had paid the minimum hourly rate determined by the Minimum Wage Order. It did so by top-up payments each fortnightly pay period.

The court found that this method of payment was unlawful. It averaged payments over a fortnightly period, rather than paying the employee the minimum hourly rate for each hour worked.

Smiths City was required to work out the magnitude of its non-compliance, and remedy this. Fifteen minutes each day for about 450 staff over a six-year period equals a very costly remedy.

These cases both highlight the absolute importance of correctly analysing what is and what is not ”work”. If it is ”work”, it must be properly paid.

Link to ODT article here.


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