When does overtime become unreasonable?

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Employment agreements for salaried staff often state that a reasonable amount of overtime may be required – but just how much is too much? Here, a leading industry lawyer offers her insight.

“In New Zealand, hours of work must be agreed between the employee and the employer and recorded in an employment agreement,” says Laura Scampion, a partner with DLA Piper.

“Where the agreement states that a ‘reasonable amount’ of overtime is also required, this is often paired with a clause that stipulates that the employee's salary fully compensates the employee for those additional hours worked,” she explains. “On that basis, employers should provide reasonable remuneration for the role if regular overtime is the expectation.”

Scampion also says that the perception of overtime has changed in recent years, with many employees happily accepting – and even embracing – the measure.

“Nowadays, many salaried employees accept that working late nights or working weekends is part of what is expected,” she tells HRD. “In fact, for some employees this is not so much 'overtime' but beneficial for flexibility – they can pick their children up from school but log on for a couple of hours later that night to get a project finished.”

While employers aren’t legally required to pay overtime to salaried employees, Scampion does say it’s important to discuss what is reasonably expected as well as offer advice on what staff should do if they feel that the amount of overtime worked is becoming unreasonable.

What will be considered unreasonable will vary depending on a number of factors, says Scampion. These include pay rate, workplace needs, prior discussions about personal circumstances or family commitments, notice given by the employer, and standard patterns of work within a given industry.

If the level of overtime does become unreasonable, employees are entitled to refuse – however this is subject to the terms agreed in the employment agreement.

If their refusal seems unreasonable, Scampion says employers should raise the issue with the employee.

“An employer has the right to run their business in a commercially viable way, and an employee has a duty to perform their duties, and responsibilities in accordance with the terms of their employment agreement,” she tells HRD. “Failure to do so could lead to disciplinary action being taken - potentially on the basis of failure to follow the employer’s instruction.”

However, while employers can expect some work out-of-hours, there are countless reasons not to push staff too hard – primarily, health and safety.

“It is important an employer does not require an employee to work such an unreasonable amount of overtime that it may affect the health and safety of employees,” says Brittany Moore, a solicitor on Scampion’s employment team.

“Even where an employer feels that they are generously compensating the employee; the employees' health and safety at work is paramount,” she stresses, pointing to common mental health problems like stress, anxiety and burnout.

“There are potential fines for failing to ensure the health and safety of employees at work,” she adds.

Moore also says employers must be wary when expecting overtime from employees who earn close to the minimum wage.

“Where employees on a lower salary are working overtime, the employer needs to be acutely aware of the risk of employees dropping below the minimum wage when their pay is averaged out across their hours,” she warns.

“If there is any prospect that an employee's average rate may drop below the minimum wage (even if they are salaried) due to the number of hours they are working, the employer must keep accurate records to ensure this does not happen,” she stresses.


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