By Harry Cui

The law’s inadequate coverage of the limitations of overtime opens the door for potential abuse and perpetuates the overwork culture. Limitation and clarification on reasonable overtime would promote a healthier employment relationship by aligning the interests of employers and employees. 

 

Background

The “40-hour 5-day week” provision is the law’s prima facie rule pertaining to the maximum number of work hours that an employer can impose. [1] An employer typically cannot require an employee to work for longer than 40 hours per week. This is subject to two exceptions: 

·      Firstly, the parties may agree, through contract, to exceed the maximum number of hours. [2]

·      Secondly, the maximum number of hours in the general rule is “exclusive of overtime”. [3]

Overtime is intuitively understood to encompasses any amount of time worked beyond the normal hours of a contract. [4] There is no comprehensive definition of overtime in New Zealand law. As such, there are no guidelines on the permissibility of specific overtime clauses. 

Employment contracts that contain overtime clauses are fashioned to give either party the initiative to commence additional work. Some businesses do not require overtime and their contracts may provide the mechanisms with which a worker can negotiate for overtime. Those types of contracts give employees the initiative. Alternatively, a contract can instead be constructed to give employers the discretion to enforce additional working hours. In such instances, a worker may be requested to work “reasonable overtime”. 

Issues 

i)              Abuse of power

The primary issue for the absence of comprehensive overtime law is the potential for abuse. Contract clauses which contain the provision of reasonable overtime are not required to define the limits of reasonableness. In the case Tuapawa v AFFCO New Zealand Ltd, the Employment Court insisted that the meaning of reasonable overtime “is a question of fact to be decided according to all the circumstances of the case”. [5] While it is fair to granularly inspect each case on its merits, the Court’s definition does not help those who seek direction on whether their employer has breached the boundaries of reasonable overtime hours. 

The potential for abuse clearly stems from the disparity in the employment relationship. Legislative uncertainty in this area favours the employers. In the absence of clearly formed principles, workers who are affected by unreasonable overtime hours are less likely bring a dispute to mediation or court. As there is a paucity of information in the Minimum Wage Act (the Act governing the 40-hours rule) regarding reasonable overtime, situations may arise in which a person is not aware that they are being exploited. The onus is unreasonably on the worker to examine analogous common law cases or acquire costly legal advice to understand whether they have the right to decline the request for overtime. By contrast, an employer does not require legal assistance to set additional hours. 

The refusal of a request to work additional hours can lead to formal consequences. If the request is reasonable and provided for in the contract, a worker cannot decline. Refusing to work overtime can be a ground for dismissal. [6] Additionally, in the Tuapawa case, the plaintiff received two written warnings for not complying with the reasonable overtime clause – her decision to not work an extra hour was described as “disruptive” by her employer. [7] The formal consequences attached to the refusal is a potent deterrence.  

ii)            Overwork Culture

The secondary issue for the law’s silence on overtime is the perpetuation of the overwork culture. In 2017, overtime increased in 28% of organisations in New Zealand. [8] The “first-in-last-out” ethic is not unique to New Zealand hence its adverse effects are well-researched. Longer working hours lead to deterioration of mental health and an increase in anxiety which is exacerbated by the erosion of the work-life balance. [9]

Without the intervention of the law, the overwork culture is expected to worsen. From the OECD countries, New Zealand was ranked the 8th highest in the percentage of workers who worked 50 or more hours per week. [10] The percentage has steadily increased since 2013. [11]

Salaried workers do not receive overtime pay provided that they are paid more than minimum wage for the number of hours worked. They are incentivised to stay for long hours to compete for bonuses and promotions. The effects can be examined through the lens of an Australian worker. It is estimated that Australians work an additional two-months of unpaid overtime per year – which is dubbed as “time theft”. [12]

Parliament’s endorsement for the “40-hour 5-day week” rule is unequivocally targeted at promoting a healthy work-life balance. However, the willingness to leave unregulated exceptions to the rule contradicts that philosophy. 

 

Potential Solutions 

i)              Time-and-a-half pay 

A potential solution is to enforce a minimum time-and-a-half pay for any overtime worked. While many employment contracts already provide additional compensation, such as time-and-a-half or double-time, it is not currently legally required. The added pay threshold acts as a pecuniary deterrence against excess overtime. An example of this can be observed in the United States federal Fair Labour Standards Act, which stipulates that overtime pay must be above regular pay. [13]

 

ii)            Clear terms

A comprehensive description of what reasonable overtime entails helps facilitate a healthy working relationship. In Australia, the Fair Work Act enumerates 10 factors to consider when determining whether the request for overtime is reasonable. [14] Factors to consider are: 

a)     Risks to health and safety;

b)    Personal circumstances;

c)    The needs of the workplace;

d)    Whether the remuneration is suitable for the additional hours worked;

e)    Whether notice was given;

f)     Whether notice of refusal was given;

g)    Industry standards;

h)    The level of responsibility;

i)     Whether the request for overtime complies with other statutory provisions;

j)      Other relevant matters.

It is not necessary to borrow the factors verbatim from the Australian legislation. A robust guideline that uniquely applies to the New Zealand work environment would be suffice. In that respect, the law should seek to codify existing common law examples. 

 

iii)           Industry standards and Absolute Maximum

A more controversial solution could be to enforce an absolute maximum number of overtime hours that an employer can require an employee to work per month. The implementation of this process would require an inquiry into the different standards in each industry. The number would be mutable – subject to the recommendation of the inquiry. 

Some industries require work to be completed notwithstanding regular hours. For instance, in the 2019 case Postal Worker Union v New Zealand Post, it was accepted that the operational needs of the postal service are largely contingent on factors outside the control of the employer. [15] Within such industries it is perhaps more appropriate to establish the maximum average rather than the maximum aggregate. 

The absolute maximum is a difficult standard to apply and not without challenges. Long overtime hours have become entwined with the work in some industries. In the legal industry, the use of billable hours contrasts with the previous example. Compensation is predicated on the amount of time spent rather than amount of work completed. But how quickly a case is resolved is also dependent on the number of hours a firm can allocate to it. Some in the industry may view a maximum limit as an impediment to the efficiency of their operation. Alternatively, employers may bypass the solution by contracting for longer hours. 

The UK’s approach in limiting overtime hours is the “working time directive”. [16] A person cannot be required to work longer than 48 hours on average per week – averaged over 17 weeks. To work longer, an employee must choose to opt out. An employer cannot treat the employee unfavourably for refusing to do so. It is an example of how an absolute maximum system could function in New Zealand without needing to interpret what “reasonable overtime” means. 

The proposed solutions use international examples to demonstrate how each solution could be implemented. However, the circumstances in the domestic working environment differs from the global norm. It is therefore significant to recognise the differences when deciding whether to integrate the solutions. 

 

Conclusion 

 

Employees are ultimately the ones that suffer the most due to ambiguous overtime laws. There is no definitive prescription for understanding when it is appropriate to challenge an overtime request. As such, workers are incentivised to comply with the requests to keep or advance their careers. It is empirically clear that impartiality on the part of the law does not address the issues. Hence, Parliament should be proactive in drafting overtime laws which prevent possible abuse in the future.  

 The views expressed in the posts and comments of this blog do not necessarily reflect those of the Equal Justice Project. They should be understood as the personal opinions of the author. No information on this blog will be understood as official. The Equal Justice Project makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The Equal Justice Project will not be liable for any errors or omissions in this information nor for the availability of this information.

[1]Minimum Wage Act 1983, s 11B.

[2]S 11B (2). 

[3]S 11B (1). 

[4]Community Law. (2019). Overtime Pay. Retrieved: https://communitylaw.org.nz/community-law-manual/chapter-19-employment-conditions-and-protections/your-pay/overtime-pay/.

[5]Tuapawa v AFFCO New Zealand Limited[2011] NZEmpC 114, at [33].  

[6]New Zealand Herald. (2005). Postie sacked for refusing overtime. Retrieved: https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10334569.

[7]Tuapawa, above n 5, at [36]. 

[8]Hays. (2017). Overtime rises in one third of NZ workplaces. Retrieved:  http://www.scoop.co.nz/stories/BU1708/S00716/overtime-rises-in-one-third-of-nz-workplaces.htm.

[9] Krook, J. (2019). Our culture of overtime is costing us dearly. Retrieved: https://eveningreport.nz/2019/02/25/our-culture-of-overtime-is-costing-us-dearly-110566/.

[10]OECD Better Life Index. (2019). OECD Better Life Index. Retried: http://www.oecdbetterlifeindex.org/topics/work-life-balance/.

[11]OECD. Stats. (2017). Better Life Index. [Employees working very long hours]. Retrieved: https://stats.oecd.org/index.aspx?DataSetCode=BLI.

[12]Karp, P. (2018). ‘Epidemic of time theft’: Australians work two months’ unpaid overtime a year. Retrieved:  https://www.theguardian.com/australia-news/2018/nov/21/time-theft-australians-work-two-months-unpaid-overtime-a-year.

[13]Office of Financial Management. (2019). Fair Labour Standards Act (FLSA). Retrieved: https://ofm.wa.gov/state-human-resources/compensation-job-classes/compensation-administration/fair-labor-standards-act-flsa.

[14]Fair Work Act s62(3).

[15]Postal Workers Union of Aotearoa Inc v New Zealand Post Limited[2019] NZEmpC 47, at [32].

[16]GOV.UK. (2019). Maximum Weekly Working Hours – GOV.UK. Retrieved: https://www.gov.uk/maximum-weekly-working-hours.