January 31, 2023

What is reasonable overtime?

With a recent employer being fined $90,000 due to unreasonable number of hours, we explore what is considered reasonable overtime

It has recently come to light that an Australian employer has been fined $90,000 after the Federal Court found it had asked its employee to work an unreasonable number of hours.

The case against the meat industry employer found that they had required an employee to work 50 ordinary hours per week and "reasonable" additional hours as requested. This was considered unreasonable and as a result, the employer was fined $90,000 by the Federal Court.

According to the Fair Work Act 2009, employers must not require an employee to work more than 38 hours per week, unless additional hours are deemed reasonable. This begs the question - what is considered 'reasonable' overtime?

In order to satisfy Fair Work requirements, when determining whether additional hours are in fact “reasonable” employers should consider if the additional hours are suitable and necessary in light of all relevant factors. This includes:

  • Risks to health and safety
  • Employee’s personal circumstances
  • Relevant needs of the workplace
  • Entitlement to receive additional compensation – overtime/penalty rates must be paid in addition to ordinary rates or incorporated into the employee’s salary in accordance with the applicable Award
  • Was notice given by the employer of the request/requirement? – The expected working hours can be outlined in the employee’s letter of engagement
  • Did the employee give notice of their intention to refuse to work the additional hours?
  • Usual patterns of work in the industry
  • Nature of the employee’s role/level of responsibility – E.g. It may be more reasonable to expect a senior manager to work some overtime
  • Were the additional hours in accordance with averaging terms? – Some Awards allow an employee’s ordinary hours to be averaged out over 2, 4 or 8 weeks or example

If it is determined that the additional overtime is reasonable, the applicable Award will outline the applicable overtime and or penalty rates where an employee works outside the ordinary hours. These provisions are intended to make sure employees are compensated adequately and fairly for the extra hours they work.

Overtime and penalty rates must be paid in addition to ordinary hourly rates or can be incorporated into the employee’s salary calculation in accordance with the applicable Award. If you are incorporating overtime and penalties into the employee’s salary you need to regularly review the salary to ensure the actual hours worked are being compensated correctly.

It is important for employers to be mindful when asking or requiring their employees to complete overtime hours, as failing to comply with the relevant legislation can result in hefty fines such as in this recent case highlighted above. Therefore it is crucial that any overtime requests adhere to Award requirements and have due consideration as to what could be considered reasonable in relation to particular workplace conditions.

Bianca from HR Dynamics

Article by Bianca Brattoli

If you need any advice and need help, please reach out at hello@hrdynamics.com.au or 1800 877 747

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