Overtime: to pay or not to pay
This Employment Update examines a recent and significant decision involving a wage theft class action in the Federal Court, which was brought by a group of employees seeking payment for overtime they worked “regularly and extensively” without formal authorisation from their employer.
While the decision dealt with an interpretation of the text of the employer’s two enterprise agreements, it will have impacts for many employers who seek to rely on a contractual clause to limit an employee’s entitlement to payment for additional hours (including at overtime rates) to circumstances where the additional hours are ‘authorised’ by the employer.
Australian Salaried Medical Officers’ Federation v Peninsula Health  FCA 939
A group of junior doctors employed by Peninsula Health brought a claim in which they alleged they were not paid overtime entitlements between 2015 and 2021. In particular, the lead applicant claimed she had consistently worked unpaid overtime in order to undertake ward rounds, prepare patients for medical procedures and undertake the required handovers to staff. Such overtime ranged from five minutes to 60 minutes per day. The other applicants made the same or similar claims.
Peninsula Health argued that its two enterprise agreements provided that overtime was only payable for ‘authorised hours’ and noted that it had detailed protocols in its workplace policies for obtaining authorisation. Peninsula Health argued that authorisation was only able to be given by the express and prescribed method that was known to employees.
The Federal Court found that the agreements did allow for overtime authorisation to be implied. The Court noted that the enterprise agreement could not have intended that the work performed by doctors, which had not been rostered but nevertheless had been worked as required by the employer, would not be payable as overtime. The Court then determined that a requirement of the employer that an employee work in excess of their rostered hours, would suffice to “authorise” the hours.
In summarising the Court’s view on the mode of authorisation, Justice Bromberg said:
“ As both parties accepted, cl 36.2 must be construed in a way that makes industrial sense. As I said in Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (MV Portland Case) (No 2)  FCA 1138 at , quoting Kirby J in Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at , “the construction to be given to a clause in an industrial instrument ‘should not be a strict one but one that contributes to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement’”.
 An industrially sensible construction of cl 36.2(a)(ii) would not conclude that an employer should be required to pay for work performed in excess of rostered hours where the employer had not requested, required or approved of that work. An industrially sensible construction of cl 36.2(a)(ii) would similarly not conclude that work in excess of rostered hours requested, required or approved of by the employer is not payable as overtime under that clause. So construed, cl 36.2(a)(ii) sensibly balances the employee’s right to be paid for work the employer has requested with the employer’s right to not be obliged to pay for work it has not asked for at all, or has not requested or required be performed as overtime. (emphasis added)”
Having determined it was possible for the ‘authorisation’ of overtime hours to be impliedly given, even where an employer has prescriptive requirements for the express authorisation of overtime hours, the Court was then required to assess whether Peninsula Health did, in fact, impliedly authorise the overtime hours. That question, Justice Bromberg found, was one answered by an objective analysis of Peninsula Health’s communications (express or implied) rather than the “subjective uncommunicated intent or understanding of [Peninsula Health]”.
The facts relied upon by the Court to find that Peninsula Health impliedly authorised the overtime work were:
- the fact that the duties and responsibilities of an employee included each of the tasks performed outside of their rostered hours;
- communications made by or on behalf of Peninsula Health as to how and when particular tasks were to be performed;
- the fact that it was necessary for an employee to perform the work outside of their rostered hours due to the rostering and work structure in each of the rotations and, in the case of the completion of medical records, the fact that there was insufficient time during rostered hours to complete the required work;
- Peninsula Health’s knowledge (both constructive and actual) that there was insufficient time during an employee’s rostered hours to complete the work, or that an employee was performing the work outside of the rostered hours; and
- Peninsula Health’s failure to direct an employee not to perform the work outside of their rostered hours.
In particular, the Court noted there was a disconnect between the Peninsula Health’s policies and the practices that had been adopted by their lead employees and members of the work group. The Court specifically acknowledged that the employer had protocols in place which required the employees to seek authorisation for overtime and that the employees failed to follow those protocols. However, because the employer gave “implied” authorisation for the employees to perform overtime given the role requirements, the employees were entitled to have their underpayments back paid.
In awarding the lead applicant over $8,000 in unpaid overtime wages, the Court has opened the door to compensation for the rest of the junior doctors who have yet to have their claims assessed, each of which range from $5,000 to $50,000. The decision supports arguments which underpin a number of class actions currently in progress against other health services in Victoria.
Key take-aways for employers
This decision has broad implications for employers and sheds some light on how the courts will interpret underpayment claims concerning overtime, particularly where the overtime worked was not “formally authorised” by the employer.
One of the key lessons for employers is to have detailed procedures and protocols for the authorisation of overtime, and then ensure those processes are communicated and, most importantly, applied in practice. The importance of this lesson is summarised in the following paragraph from Justice Bromberg’s decision:
“ Where an employer has clearly and unequivocally communicated to its employees that it will hereafter only authorise the working of overtime through a particular process, and uniformly only authorises overtime work through that process, there will likely be little room to imply from other conduct and relevant circumstances that the employer has requested, required or otherwise approved the working of overtime which has not been authorised under that process. However, the greater the ambiguity of the process itself or the communication regarding the significance and application of the process, the greater the room for such an implication. Likewise, the further from uniformity the actual practice or application of the communicated intent of the employer to only authorise overtime through the process, the greater the room for an implication that, from other conduct and circumstances, the employer has requested, required or otherwise approved the working of overtime which has not been authorised under the process. That is because a process that is unclear, uncommunicated or rarely applied is unlikely to have much force in conveying the employer’s intent in any assessment made against countervailing conduct or circumstances which support an implied authorisation given by the employer otherwise than under the process. Such a policy is therefore unlikely to diminish or negate an authorisation implied from other conduct or circumstances.”
The decision highlights that employers should have clear instructions to regulate overtime, and the approval of overtime, either through its employment contracts or policies. Employers who allow working from home arrangements, or who have employees who are largely unsupervised, should give this case and its implications careful consideration.
Once appropriately drafted contractual clauses or policies are in place, it is essential that they are adhered to and enforced, otherwise, an employer who allows employees to work overtime in circumstances contrary to the written process, runs the risk of an argument along the lines of that which was accepted in this case.
For any assessment of your overtime clauses or policies, contact one of our specialist employment lawyers at Aitken Legal.
Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.