How many hours can I make my employees work in a week? What the law says about overtime!

In Australia, an employee’s employment arrangements are typically governed by the following legislative instruments:

(a) modern Awards (Awards);
(b) the Fair Work Act 2009 (Cth) (the FW Act);
(c) the Fair Work Regulation 2009 (Cth) (the FW Regulations); and
(d) the National Employment Standards (the NES).

Awards do not apply when an employer has an Enterprise Agreement or other Registered Agreement, and the employee is covered by that agreement.

In terms of how many hours an employee can work per week, the starting position, as set out in section 62(1) of the FW Act, is that an employer cannot request or require a full-time employee to work more than 38 hours per week unless those hours are ‘reasonable’.

The FW Act sets out the various factors that must be considered when determining whether the overtime is reasonable. Some of those factors include:

1. any risk to the employee's health and safety in working the additional hours;
2. the employee's personal circumstances, including family responsibilities;
3. the needs of the workplace;
4. whether the employee is entitled to receive overtime payments, penalty rates or other
5. compensation for working additional hours;
6. any notice given by the employer of any request or requirement to work the additional hours;
7. any notice given by the employee of their intention to refuse to work the additional hours; and/or
8. the nature of the employee's role, and the employee's level of responsibility.

The laws surrounding overtime are tricky and complex. If an employee’s role requires them regularly work beyond the usual 38 hours per week, the employer should obtain comprehensive legal advice as to how to best implement this within the workplace – this is particularly important when determining an employees’ payment entitlements for the overtime hours, as this can become rather complex when employees are expected to regularly work overtime.

Employers will often account for this in an increased salary or hourly rate, as compensation for the overtime hours that are sometimes worked. Employers should ensure that this amount is continually monitored against the overtime worked, to ensure that it remains above what the employee would otherwise be entitled to. If overtime hours become consistent, then some options as to how to best manage these types of arrangements include Individual Flexibility Arrangements and Enterprise Bargaining Agreements. In any case, what will be the best option will be specific to an employee and employer’s circumstances, and the use of any option is by no means a ‘silver bullet’ to overcome an employer’s legal obligations.

Individual Flexibility Arrangements

According to the FW Regulations, an Individual Flexibility Arrangement (IFA) is used to make alternative arrangements to suit the needs of the employer and the employee.

In Awards, an IFA can be used to vary clauses about:

1. arrangements for when work is performed, such as working hours;
2. overtime rates;
3. penalty rates;
4. allowances; and
5. leave loading.

An IFA does not replace the Award, rather, it varies certain clauses of the Award. An IFA sits ‘alongside’ an Employment Agreement and is capable of being brought to an end without the employment being ended.

An important feature of IFA’s is that they must pass the ‘Better Off Overall Test’; that is, an IFA cannot be used to reduce or remove an employee’s entitlements, and must only be used provided that, in doing so, an employee is ‘better off overall’.

1. When deciding if an employee is better off overall, the employer should consider the following questions:
2. Who initiated the request?;
3. What entitlements are being changed? (For example, hours, overtime, penalty rates, etc.);
4. What is the value of these entitlements under the Award or registered agreement?;
5. Does changing the employee’s span of hours change their penalty rates?;
6. Is the employee better off financially?;
7. Are there any situations where the employee wouldn’t be financially better off?; and
8. Are there any other circumstances or characteristics unique to the employee that should be considered? (For example, factors such as the employee’s family commitments, their health, whether they have a second job, study or other interests.)

There are certain characteristics attributable to IFA’s, including:

1. the IFA must be in writing and signed by the employer and the employee;
2. both the employer and the employee must genuinely agree to the terms of the IFA; and
3. the IFA can be made at any time after the employee commences working for the employer (and importantly, it can be withdrawn at any time by either party).

Enterprise Agreements or an Enterprise Bargaining Agreements

An Enterprise Agreement (EBA) is an agreement made at the enterprise level that contains terms and conditions of employment, including wages, for a period of up to 4 years from the date of approval.

The FW Act sets out requirements for bargaining for a proposed EBA. An
EBA is an agreement that is proposed to be negotiated, or is being negotiated, with a view of it being approved by the FW Commission as an enterprise agreement.

There are three types of Enterprise Agreements:

1. Single-Enterprise Agreement: made between one or more single interest employers (employers with shared interests i.e. in a common enterprise, joint venture or related corporations, or who are authorised to be single interest employers by the FW Commission) and employees to be covered by the agreement;
2. Multi-Enterprise Agreement: made between one or more employers who may not have a single interest and employees to be covered by the agreement; and
3. Greenfields Agreement: made in relation to a new enterprise before any employees are hired. This agreement can be a single-enterprise or multi-enterprise agreement and is between employers and employee associations or other bargaining representatives (usually a union).

Although Awards cover minimum pay and conditions for an industry, enterprise agreements can cover specific arrangements for a particular enterprise.

Enterprise Agreements can benefit employers because they can negotiate for more flexible working conditions provided employees are, similar to the requirements of an IFA,‘better off overall’. Likewise, employees can bargain for higher wages and extra benefits that the Award may not offer.

Normally, everything that is in an Award is also a minimum standard in an EBA. EBA’s are never allowed to offer less than what is contained in the base standards provided by the National Employment Standards.

Unlike IFA’s, when an EBA is in operation, the Award no longer applies and it is replaced by the EBA.

Workplace Health and Safety Considerations

Employers also have separate obligations under the Workplace Health and Safety Act 2011 (Qld) (WHS Act). It is important that employers consider these obligations carefully when determining whether they can require an employee to work beyond 38 hours per week on a regular or consistent basis.

Some Awards contain specific requirements that an Employer must have in place for requiring employees to work certain hours (for example, some Awards allow for 12-hour shifts provided certain health and safety monitoring is in place). However, it is important to understand that those provisions of an Award do not replace any obligations an Employer might have under the WHS Act (and the WHS Act imposes obligations on Employers regardless of the hours of work an Employee works).

What Happens if You Don’t Comply with the Award or Enterprise Agreement?

It is imperative that employers understand their rights and obligations regarding their employees’ employment arrangements. If an employer fails to comply with the relevant Award or Enterprise Agreement, the NES or the FW legislation, this may lead to an employee bringing a claim against the employer and seeking compensation (amongst other things).

How Enterprise Legal Can Assist

Enterprise Legal has extensive experience in employment law, both from the ‘front end’ of preparing and reviewing existing agreements and employment arrangements, through to resolving employment disputes.

We can assist your Business with assessing your current employment arrangements, reviewing your employees’ Employment Agreements (or creating new Agreements to ensure that they are fully compliant) and providing you with tailored and comprehensive legal advice as to how to best implement the relevant legislative requirements within your business.

If you require our help with any of the above, please contact our team today and we will be happy to assist you.