Lawyer calls it 'a really good case study of the various ways you can make mistakes with employment law'
A recent Federal Court decision resulted in a $93,000 fine for Australian meat wholesaler Dick Stone Pty. Ltd. after Justice Anna Katzmann ruled that the work requirements for an immigrant employee were unreasonable under the Fair Work Act 2009.
The claimants were Ghanaian immigrant Samuel Boateng and the Australasian Meat Industry Employees Union. They claimed that Boateng was routinely required to work a 50-hour week, at a standard hourly rate, without the appropriate clauses in his contract, overtime payment, or assessment of his health and safety.
The company introduced this contract to Boateng three weeks after he had arrived in Australia. According to the National Employment Standards, the maximum “ordinary hours” for full-time staff is 38 hours per week.
Commenting on the case, Associate Director at Australian Business Lawyers and Advisors (ABLA), Julian Arndt, remarked: “The employee in this case certainly worked long hours in tough conditions, but it was the employment contract itself that was deficient. It did not identify pay rates, and it didn’t have a ‘set-off clause’.”
“In lay terms, a ‘set-off clause’ is a clause in a contract which states that ‘because we are paying you a loaded rate which compensates you for additional hours, we will not be paying you overtime for hours over 38 per week’. The agreement is then that the employee is happy to earn that higher rate for every hour that they work, and forego overtime loadings’,” he said.
Due to this lack of a set-off clause, Arndt noted, “[Boateng] never agreed to forego his overtime payments, and therefore they were owed”.
Two thresholds for ‘additional hours’
The court also ruled that the work requirements on Boateng were in contravention of the Fair Work Act 2009, in that the additional 12 hours per week Boateng was required to work were not “reasonable additional hours.” The court came to this view after considering the nature of the job and the industry — with the employee regularly handling sharp knives and commencing work shifts at 2 am.
“The 50-hour-a-week standard, in another set of circumstances, may well be reasonable. It depends on a whole range of factors as listed in the act: the nature of the job, the nature of the employer and the industry, safety concerns, personal circumstances and pay rates. The fact that 50 hours per week may be reasonable somewhere else doesn’t mean that the hours required of Boateng were reasonable,” Arndt explained.
“When an employee is working lots of additional hours, the first question is: ‘Are you paying them enough to satisfy any overtime entitlement and does your contract allow you to pay them in that way?’ The second question is ‘Regardless of pay, are the additional hours reasonable?’ At a certain point, no matter how much someone gets paid, the nature of the requirements of the work may pose such a risk to their health and safety that it is no longer reasonable to require those hours” he said.
The court did not contend that the hours required were unreasonable from a business point-of-view but ruled that the employment agreement did not account for Boateng’s personal circumstances or health and safety.
Employers have until June 6, 2023, to ensure that they are compliant with the new legislative changes with regards to the Fair Work laws in Australia.
Taking care of contracts
When discussing lessons for other employers, Arndt encouraged businesses to review each of their employment contracts to ensure that an appropriate set-off clause is implemented. Companies should also regularly assess anyone working arduous hours to ensure the hours remain “reasonable” and that their pay is sufficient to satisfy minimum standards.
“If you have a set-off clause and you’ve paid enough money such that the employee is at least in receipt of what they would have got under their award, you can rely on the fact that you’ve paid them enough,” Arndt remarked.
“If you don’t have a set-off clause, the employee may well claim that they didn’t get their payment of overtime, a particular allowance or loading — and it simply won’t be enough to say, ‘Well, we paid you enough overall’. You need an express agreement that deals with that issue,” he said.
Justice Katzmann also found that both the defendant and claimant had incorrectly allocated Boateng’s award classification, highlighting the difficulty faced by parties in this area.
Arndt noted that other businesses needed to be aware of these intricacies to mitigate issues ahead of time.
“Boateng’s is a really good case study of the various ways you can make mistakes with employment law. If you are not experienced with modern awards, there is a good chance you’ll get the classification of the employee wrong. If you get the employment contract wrong and you fail to put in a pay rate or set-off clause, the consequences of that can be extremely costly,” he said.
“And if you’ve got an operation which is working long and arduous hours, you might get an unreasonable additional hours claim coming in over the top as well. It's a great advertisement to speak to someone about getting these answers right before you start off.”
