A Full Federal Court decision handed down earlier this year has created considerable flexibility for some employers to reduce labour costs and enhance overall profitability through the allocation of overtime on fixed rotating rosters.
In May this year Justices Collier, Bromwich and Wheelahan dismissed the Union’s appeal in United Voice v Wilson Security Pty Ltd that the security company had underpaid a security guard following its change in rostering practice.
Employer discretion in allocating overtime
Wilson Security implemented a fixed rotating roster of 168 hours to be worked over a four-week cycle. Clause 21.1 of the Security Award provides employers discretion to operate a roster that provides an average of 38 ordinary hours of work per week on one of the following:
(i) 76 hours within a roster cycle not exceeding two weeks;
(ii) 114 hours within a roster cycle not exceeding three weeks;
(iii) 152 hours within a roster cycle not exceeding four weeks; or
(iv) 304 hours within a roster cycle not exceeding eight weeks.
The roster Wilson introduced had 16 hours of overtime to be allocated. Prior to October 2016, the 16 hours in excess of the ordinary hours worked were allocated to the last two shifts of the roster cycle which were a Thursday and Friday.
Wilson Security changed its roster practices from 31 October 2016 choosing to allocate all overtime hours to Sunday, incurring a 100 per cent loading. In doing this, Wilson eliminated payment of 100 per cent Sunday penalty rate as the Award provided for a 100 per cent penalty rate on Sunday.
The Award does not require employers to pay a penalty on a penalty meaning Wilson could save the cost of paying the Sunday penalty rates and also reduce superannuation costs.
Courts dismiss unions case
United Voice claimed that Wilson Security was taking advantage of Award provisions and had underpaid a security guard around $2000 in overtime after it changed its rostering practices.
Justice Richard Tracey held the Award provides employers with the discretion to operate rostering arrangements and it does not contain any express restrictions on an employers’ discretion to exercise that power. Specifically, Justice Tracey held it is open to an employer to “decide whether overtime hours can be included in the roster at a point before which all ordinary hours have been worked”.
The union appealed maintaining, under the Award, overtime hours are those worked “after the completion of ordinary hours” and the operation of a four-week roster cycle meant overtime penalties were payable on hours in excess of 152 hours being worked.
The bench dismissed the union’s appeal and held that overtime means “an amount of time that is over the ordinary hours, not necessarily after the ordinary hours, even if it more commonly, or even invariably, takes place after those ordinary hours will be, or have been, worked”.
The bench said the unions argument was seeking to impose a chronological limitation on the meaning of overtime that “is the product of historic usage and application, rather than inherent meaning.”
The full bench “properly considered “overtime” as meaning no more than it states and has been long understood on the authorities provided – over, or more, than ordinary hours, in relation to the period of time for which ordinary hours apply.”
“That overtime might, when in relation to a single working day, be more likely to be performed after that working day is a function of when extra hours are more likely to be needed, not a function of when they can be required to be performed,” the bench said.
Implication for employers
This Full Federal Court decision creates significant flexibility for some employers to reduce labour costs through the ability to allocate overtime. Employers seeking to decrease labour costs by eliminating penalties and reducing superannuation payments against times attracting those penalties should consider potential risks.
It is likely that operating rosters that allows this practice will likely attract disputation in the workplace and could include Award variations and potential litigation seeking recovery of unpaid wages and entitlements.
AREEA’s experienced team of workplace relations consultants are available for advice on industrial relations strategies which allow businesses to remain competitive in challenging market conditions. For more information contact your local AREEA office or email the consulting team at [email protected].