The industrial relations landscape is changing at a rapid pace and employers are hard pressed to keep up.

In case you missed it, here are the cliff notes of two Federal Court decisions determining overtime allocation on a fixed rotating roster and another, determining a workday for the purposes of sick leave.

What is overtime allocation and how is this determined?

In early 2018, the Federal Court heard a case brought by United Voices against Wilson Security regarding the latter’s decision to change the payment for rostered overtime hours from Thursday and Friday to Sunday, which meant that the employer was not required to pay penalty on the penalty rate, thus avoiding payment of overtime loading; as superannuation, annual leave and personal leave are paid against ordinary time. It was a cost saving decision for the business.

The Court had to determine one question: whether overtime could be paid on hours worked before the limit on ordinary hours was reached. It concluded that it could.

Justice Tracey held that, “Overtime hours are hours worked in addition to ordinary hours…rostering arrangements are within the discretion of the employer. Consistently with the existence of this discretion, the (Security) award does not contain any express restrictions on the exercise of that power.”

The union appealed to the Full Court of the Federal Court of Australia, unsuccessfully. The Full Court validated the overtime allocation as implemented by Wilson, and thus establishing the principle that overtime is a flexible entitlement, and far more flexible than previously thought.

This decision of the Federal Court gives employers the leeway to reduce labour costs through Overtime Allocation, however, it would be prudent to first determine if the industrial instrument (Award) relevant to your industry permits this before you implement it.

What is a workday?

The recent Federal Court determination on what an ordinary workday is, isn’t what convention has always dictated – 7.6 hours as a day – or pro-rata for a part-timer.

In the case of Mondelez Australia Pty Ltd v AMWU [2019] FCAFC 138 , Justices Bromberg and Rangiah concluded that a day “Refers to a portion of the 24 hour period that would otherwise be allotted to work (a ‘working day’)”. In essence, the more you work, the more you are owed, regardless of whether overall you are working the same hours.

As an example, John works a 38-hour work in the form of 7.6 hours days, five days a week. He will be entitled to 76 hours of paid personal/carers leave (7.6 hours x 10 days). However, Peter who works a 36-hour week in the form of 12-hour days, four days a week, will be entitled to 120 hours of sick leave (12 hours x 10 days).

One dissenting judge, Justice, O’Callaghan, expressed this concern that the decision could lead to “inequalities between different classes of employees”.

However, the Court has confirmed that where salaries are annualised for shift-workers, that employee does not accrue leave on overtime hours, nor should they be paid for those overtime hours when on leave. An annualised salary would take into consideration overtime, allowances, penalties and leave loading, no less than that offered under the award – this is the model where employees are engaged on a “standard 7.6 hours plus overtime” rather than for example, a shift work model.

Having been determined by the Full Federal Court, this decision is binding – immediately and nationally. However, there is a chance that Mondalez will appeal the decision. It is anticipated that an appeal will clarify any ambiguity brought on by this decision.

See also: Employer can allocate overtime to avoid penalty rates: Court, and Paid sick & carer’s leave, Crunch(ie) time for leave entitlements: Win for Cadbury shift workers could impact leave entitlements for many Australian workplaces

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Please contact Lauren Morrison at Lauren@lmhr.com.au or Mob: 0400 225 499 if you would like to learn more about how LM HR Consulting can assist your business with your HRM requirements.