Overtime, employment contracts and legal 'opting out' – employment lawyer weighs in
With flexible working quickly becoming the norm and not necessarily an added benefit, calls for more radical changes to the way we work are increasing. Not least, the emergence and surge in popularity of the four-day week.
And while it may seem like a dream come true to employees, for employers is poses a lot of potential challenges – especially regarding legal compliance. But, firstly, how do four day work weeks actually work?
Breaking down the four day week
“There are two separate angles to this question – a legal side and an operational side,” says Eduard Matei, employment lawyer and legal counsel at Peninsula. “From a legal perspective, a four-day workweek is surprisingly similar to a five-day workweek. Where an employment contract would previously have listed work hours being 37.5 hours making up 7.5 hours per day Monday through Friday, it would now say 36 hours, four days per week, as agreed between the employer and employee.”
However, while some people may worry that a five-day workweek is “full-time” and a four-day workweek is “part-time”, this would have little effect.
“The commonly understood difference between “full-time” and “part-time” is not generally a legal distinction insofar as employee or employer rights are concerned. All employment is contractually based. Employers and employees agree to all the different parts of the employment terms, including how many hours are worked per week and when, as well as what benefits accompany that work.
“An employment contract may stipulate that an employee works one hour per week or 100 hours per week, neither employment legislation nor common law attributes any real difference to this so long as minimum standards such as minimum pay and overtime are satisfied.”
Employers should, however, keep in mind employer group insurers and benefits providers may have rules or regulations that define these terms and specify how many hours an employee must work to be eligible for a given plan, according to Matei.
“The biggest legal hurdle that may be faced by employers, is if they try to pay employees less by moving them to four days a week or otherwise modifying the compensation portion of their contracts.”
Four-day week’s impact on employment contracts
That aside, the single biggest issue for employers is how the four-day week would change intrinsic employment contracts.
“Leaving aside the issue raised above about insurers or benefits providers potentially having their own definitions of “part-time” and “full-time”, the issue that may arise is not with changing existing employment contracts to specifically a four-day work week, but simply changing them at all,” adds Matei.
“It may be attractive to an employer to move employees to a four-day work week and cut respective employees’ salary by 20%, but rather than saving money, this may end up being a very costly decision.
“Employment is contractually based, and where an employer unilaterally changes the contract, say by making it ultimately pay 20% less by only having four days of work instead of five, an employee may choose to interpret this change as the employer repudiating and rejecting the employment contract. Should a court or tribunal agree with the employee, this is what is called constructive dismissal.”
How does the four-day week impact overtime?
This obviously becomes even more complicated in light of questions surrounding overtime, Matei tells HRD. For example, if an employee is constructively dismissed, they would be entitled to notice and severance. Even with an otherwise enforceable employment contract, this particular situation may give rise to that contract not being enforceable on the employee.
In Ontario, the threshold for overtime pay is 44 hours a week. Any time worked above this must be paid at 1.5x the normal rate, according to Matei.
“The biggest danger to affecting overtime is if employees no longer hit that 44-hour threshold,2 he tells HRD. “If, as a consequence of the transition employees are no longer capable of realistically getting overtime pay, it may well form grounds for triggering claims of constructive dismissal.
“However, as mentioned before, this is an incredibly fact-driven analysis that cannot be addressed by blanket answers. It’ a good rule of thumb that, if as a consequence of the change of policy or operations, an employee ends up getting paid significantly less, these concerns arise.”
Can employees legally refuse to partake in a four-day week?
The four-day week isn’t for everyone. While advocates often say that an employee’s workload shouldn’t be increased to make up for the lost 5th day – in reality that’s not always possible. This could lead to employee anxiety around burnout and elongated hours.
So, with that in mind, can an employee opt out if the company insists on a shorter work week?
“Employees typically have three options when faced with a change to their contract: accept and condone the change, reject the change, and claim that they have been constructively dismissed, or resign,” clarifies Matei.
“Generally speaking, employers are allowed to make reasonable operational changes to the business or organization without triggering constructive dismissal by affected employees. However, whether a proposed change is reasonable is not always clear.
“While employees can always resign if they do not like a job, their ability to resist proposed changes by their employer is limited to circumstances where those changes that are not reasonable operational ones. Ultimately it will be up to a court or tribunal to assess which category a given change falls into, so preparation and guidance on implementation is important to minimize risk.”
Importantly, employers should remember to abide by their disconnect policies. In other words, if employees are moving to a four-day work week, they cannot call and email employees expecting responsiveness as though it was a workday.
Will the four-day week work for all employers?
While the shorter model is tempting, some nay sayers believe that the four-day week won’t work for their sector. Matei disagrees.
“There’s nothing stopping the universal implementation of a four-day work week assuming proper implementation,” adds Matei.
“The biggest issue with its implementation is generally making sure that a business's critical functions are not impacted by staff not being there 20% of the time. However, this can be mitigated by way of having employees’ “off days” not always falling on the same day. For example, some employees can work Monday, Tuesday, Thursday, and Friday, while other employees take Monday as their off day.”
The reality of such changes is that they require forethought, planning, and generally some concessions to the expectation of immediate responsiveness.
“Despite this, some industries will clearly have a more difficult time transitioning to a four-day workweek than others,” says Matei. “Any industry that depends on established workweek industry standards may not be able to serve its customers as well as it could before. Legal and Financial services, for example, often operate at the mercy of institutions that operate on fairly immutable and well-established timetables.”