Mr D was paid a set rate per “sleepover” plus his standard hourly rate if he was required to actively tend to the needs of those in the community home. If he was not required he would simply receive the set fee which, when averaged out over the night, was well below the minimum wage.
Mr D filed proceedings in the Employment Relations Authority (ERA) claiming that he was entitled to be paid the minimum wage for every hour he was rostered on a “sleepover”. Mr D was successful in the ERA with this decision recently being upheld by the Court of Appeal.
One of the main issues the case looked at was the definition of work and whether a “sleepover” fell within this definition, ultimately concluding that it did. The attention this case has received is due to the purported ramifications that such a finding has for the labour market. If a “sleepover” falls within the definition of work then many other activities, such as being on call, may also. However there are a number of factors which can be used to differentiate the situation of Mr D from that of an ordinary employee on call.
1. An ordinary employee who is on call does not have significant restraints on his or her freedom and in general are able to do as he or she wishes until being called in. On the other hand Mr D was required to be at his place of work for the entirety of the “sleepover” and was not allowed visitors without the express permission of his employer.
2. An ordinary on call employee does not have any responsibilities until he or she is called in. This is in stark contrast with Mr D who was required to be readily available at any time to the residence of the community home. He was also required to ensure that the facilities at the community were secure at all times.
3. Although an ordinary on call employee provides a benefit to the employer, because he or she is able to be called into work, this benefit is substantially less than that provided by Mr D during a “sleepover”.
Looking at the three factors above it is clear that Mr D was working during his “sleepover” and was not in the same position as the average on call employee. The case’s impact will be limited to situations where, like Mr D, an employee can actually be said to be doing work .
People to whom this decision may be interesting include motel/ hotel/ hostel managers who are on call during the evening/night or school teachers who are away on school camps or overnight sporting trips and who hold ultimate responsibility for their charges regardless of the time of day or night.
However it should be noted that Idea Services Ltd may still appeal to the Supreme Court and therefore this may not be the end of the matter.
A second significant point arising out of this case which has received far less publicity but is in my view significant, relates to the argument run by the employer in the case that compliance with the Minimum Wage Act could be tested by looking at the average rate of pay over an entire “pay period”.
I am aware that in the past some farmer employers have fallen into difficulty because they have paid workers a salary which during the “busy season” does not result in the worker being paid the minimum hourly wage.
This case confirms that when considering if a worker has been paid the minimum wage the employer cannot take the worker’s total pay over a pay period, if that period is longer than a week (be it a fortnight for example or a month) and divide it by the number of hours worked in order to ascertain if the minimum wage has been met.
The Court in its decision made it clear that the minimum wage has to be assessed against one of three theoretical pay periods/calculation periods being an hour, a day or a week.
It seems permissible, from my reading of the decision, to average the hourly rate over a weekly or daily period so long as the employee is paid the minimum hourly rate for hours worked in excess of eight in a day or forty in a week.
This means, for example, that someone who has their pay calculated on the basis of a week must be paid at least $500.00 (for a 40 hour week, the rate when the decision was issued) and at least $12.50 per hour for each hour in excess of 40 worked in that week. In theory this means that someone who is on a weekly salary of $1,000.00 gross could have worked 80 hours and still been compliant with the Act.
“Averaging” in this way could not be used for someone who was paid fortnightly or monthly as those pay periods are not prescribed by the Act or the regulations.
Employers may overcome the difficulties this decision raises by simply prescribing the units of time for which say a salary is paid into weekly periods or (as seems a more likely) lobby parliament for a change to the regulations and the Act so that the units of time prescribed for the minimum rates are extended to 80 hours (and $1,000.00) per fortnight; 173.4 hours (and $2166.70) per month; or 2080 hours (and $26,000) per year. Any hours worked in addition to those prescribed hours should be paid at the minimum hourly rate. This would allow, in my opinion, averaging to occur.
P.S Just to note, the current minimum hourly rate is $12.75 an hour. This rate increases to $13.00 an hour from 1 April 2011.
