Can HR insist an employee works overtime?

With a lot of small businesses comprised with shutdowns throughout the last two years, HR leaders were constantly worried about productivity. For employers, this meant requiring employees to work longer hours in the hope that they could make up for lost sales. But lost time is the same as lost sleep – you can’t get it back. So, when it comes to working overtime, can an employer ever really insist?

“Overtime is any work completed outside of the ordinary hours of work or on top of the agreed number of hours of work,” Pooja Kapur, employment lawyer, Owen Hodge Lawyers, told HRD. “For a full-time employee overtime kicks in after 38 hours of work a week. Legally an employer can request that an employee works overtime so long as it's considered reasonable.”

According to the NSW Ombudsman reasonable is described as, “conduct is seen as being ‘reasonable’ if it is perceived to be administratively just, such as lawful, in accordance with accepted standards of conduct, in good faith and for legitimate reasons, unbiased, rational, consistent, what is appropriate for a particular situation,  where the focus is primarily external and objective”.

This can be interpreted by the individual in a number of ways and even the NSW Ombudsman concedes it is ‘fraught with difficulties’.
“For overtime to be reasonable it must account for the employee’s role and level of responsibility, family responsibilities and personal situation, as well as any conditions set out in the relevant award or agreement such as overtime rates,” Kapur stated. “Enough notice must also be given, where practicable, and it must be considered to be a safe number of working hours.”

It is all in the detail

Importantly, Kapur added, “an employee can decline to work overtime if the request is unreasonable”. In today’s ever-present environment, that pretty much covers anything, especially with COVID still looming large. What employers do need to be aware of, however, they can stipulate in a work contract that allocating overtime is within your mandate.

“Often employment contracts will include a clause that stipulates an employee may be expected to work ‘reasonable overtime’ without overtime pay,” Kapur added. “It is rare that an employee not covered under a modern award or enterprise agreement will earn overtime pay.”

On the converse side, employees should understand that there’s no maximum weekly overtime hours set out in any Australian legislation. It is at the discretion of the employer, however, an employee, as stated above, can refuse a request to work overtime if it is unjust/unfair.

“Of course, whether or not a request is unreasonable can be subjective,” Kapur said. “It may be reasonable for an employer to ask an employee to stay back to cover another employee’s absence for example, but if the employee already has a prior family commitment then it is also reasonable for them to refuse. This is where the rules around overtime can be murky.”

Employees, however, can’t accrue additional annual leave through working overtime. Full-time employees are entitled to a minimum of four weeks of paid annual leave for each year with the company unless they are a shift worker in which case the minimum entitlement is five weeks.

“If an employer wants to find a way to compensate employees for additional hours worked, they will need to look at other options other than annual leave,” Kapur said. “For example, it's common for employers to give employees flexibility in return for overtime hours worked such as the option to clock off early on another day. The trouble with this is that it can be abused on both sides of the fence. It’s generally better to have some clear rules set out in the employment contract such as a formal time in lieu scheme.”

Have a proper contract in place

To stop any potential issues between an employer and employee, it is better to have a standard contract in place clearly stipulating the rules around overtime. This way both parties know their legal standpoint.

“It’s best for companies to have clear policies in place, reflected in employment contracts, to mitigate any risks,” Kapur said. “For example, some companies forbid overtime to prevent staff from working additional hours and then expecting paid time off in return. Ultimately it comes down to having reasonable conditions in place for overtime. While it could be argued that overtime rules favour the employer, ultimately the employee can simply walk away from the job if they consider the overtime conditions to be unfair.

“With a tightening labour market in many industries, most employers can’t afford to lose employees right now, so ensuring employees are satisfied with overtime conditions will be important.”