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'Taking care of business’ or ‘money for free’?

In recent months the Employment Court has decided several cases on what it means to be ‘working’. The court’s decisions may surprise many employers’ and challenge understandings of when employees are working and must be paid.

Smiths CitySouth Canterbury DHB v Sanderson [2017] NZEmpC 127

Six anaesthetic technicians (ATs) who work for the South Canterbury DHB at Timaru Hospital claimed that while on call they were legally ‘working’ and should be paid the minimum wage.

The ATs were frequently on call so that surgery could be carried out at any time. If an AT is required while on call they must attend the hospital within 10 minutes. Accordingly, while the ATs were on call they had to stay in accommodation at or adjacent to the hospital.

In deciding whether the ATs were ‘working’ while on call the Employment Court looked at:

a) the constraints placed on the freedom the employee would otherwise have to do as they please;

b) the nature and extent of responsibilities placed on the employee;

c) the benefit to the employer of having the employee perform the role

The ATs said that while on call they could not be with their families or friends, have a glass of wine, or do errands or housework. They felt the pressure of waiting for emergency calls which prevented them from relaxing and caused them to sleep poorly.

The court found their freedom was restricted and their time was not their own. The ATs were responsible for responding quickly and appropriately on every single call-back and failure to do so could be very serious and even endanger life. This was a significant responsibility. The DHB benefited from having the ATs on call as it enabled them to maintain the required health services.

Judge Corkill found that while on call the ATs ought to be regarded as ‘working’ for the purposes of the Minimum Wage Act 1983.

The ATs were paid an annual salary and had been receiving allowance of $4.04 per hour while on call. The Employment Court decided that the ATs should instead be paid the standard adult minimum wage (then $15.75 per hour) while they were on call.

Labour Inspector v Smiths City Group [2018] NZEmpC 43

Every morning before Smiths City Group Ltd opened its stores to customers it conducted a 15 minute meeting with sales staff. While attendance at these meetings was expected, staff were not paid to attend. They were only paid once the store’s doors opened.

The Labour Inspector asserted that the employees needed to be paid for attending the meetings. Smiths City claimed the employees were not working and should not be paid.

Again, to decide whether the employees were ‘working’ the court looked at the constraints on the employees, the responsibilities of the employees, and the benefit to the employer.

Direct and forceful pressure to attend the meetings was put on sales staff. They were constrained as they had to attend the meetings and were not free to do as they wished.

Some staff were responsible for presenting in the meetings and the others were required to listen and absorb the information. Smiths City certainly benefited from the cost-free opportunity to prepare its staff for the working day. Accordingly, the court concluded that the employees were ‘working’ during the meetings.

Many of the Smiths City workers were paid an hourly rate. The court rejected Smiths City’s reasoning that if their employees’ wages (including commissions and incentives) were averaged over the fortnight most employees were receiving the minimum wage. Smith City had not satisfied the Minimum Wage Act for those workers.

The Court ordered Smith City to comply with the Labour Inspector’s notice to pay employees on an hourly rate, rather than a salary, the minimum wage for the time spent in those meetings.

While these cases are important, their meaning should not be overstated. There is certainly not a blanket rule that employees on call are ‘working’ and must be paid. Many workers on call will have more freedom and fewer responsibilities than the anaesthetic technicians and are unlikely to be considered to be ‘working’.

Similarly, while the Smith City case has important ramifications for many retail workers or similar who are required to attend unpaid meetings, the ripple-on effects of that case apply only to employees on an hourly rate.

That said, these cases are important. Many employers may well restrict their employees and put responsibilities on them for the employer’s benefit. Whether it is requiring them to attend meetings before work, keeping employees working after their shifts end, or requiring them to be on call, it is important that the employer considers whether the employees are ‘working’ and should be paid. Employers who have required employees to work but have not paid them may be required to back-pay employees for several years’ worth of work.