Is It Legal For Employers To Refuse Their Employees Overtime Payments?
Find out whether it is legal for employers to refuse to pay their employees overtime penalty rates.
It isn’t uncommon for employees to work overtime at least once in their career. In fact, according to new statistics revealed by Hays, overtime increased in 32 per cent of organisations over the past year, and 57 per cent of Australian workers were not paid for overtime work. With these statistics in mind, an important question must be asked: Is it legal for employers to refuse their employees overtime payments?
If you require advice on how to manage employment matters in your business, LawPath recommends getting in touch with an employment lawyer.
What Is “Overtime”?
The National Employment Standards (NES) states any work in excess of 38 hours in a week or work outside the ordinary hours being listed in the award or agreement is considered overtime.
Generally, employees are covered by a modern award, enterprise agreement or other registered agreement that applies depending on the type of industry the business operates in, and the duties and work the employees are allocated. As employer, it is important that you familiarise yourself with the minimum pay and conditions of employment contained in the modern award or registered agreement.
Is It Legal For Employers to Refuse Their Employees Overtime Payments?
The answer is not a simple yes or no. Ultimately, there are numerous factors that must be considered:
1. Look At Your Employee’s Award Or Agreement
Technically, it is not exactly illegal for employers to refuse their employees overtime payments, particularly if the award, enterprise agreement or other registered agreement sets out that overtime rates do not apply. For example, consider the Retail Award. If .an employee works full-time then he or she gets overtime rates if they work. However, if an employee works on a casual basis, then he or she will not receive overtime rates. Instead, they get paid their ordinary pay rate and casual loading. Therefore, you must take account of what type of employee your workers are, which will determine if they are entitled to overtime rates.
Overall, if you are unsure about when overtime is paid, you should refer to the Modern Award, which will provide specific details of:
- How overtime is paid;
- Payment for overtime worked on weekends;
- Required rest periods after employee has worked overtime; and
- Whether time off in lieu of overtime is available.
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2. An Employer Can Only Request An Employee To Work Overtime If It Is Reasonable
Overtime is allowed under the Fair Work Act 2009 (Cth). An employer can force an employee to work overtime so long as the request, duration and time is not unreasonable. The FWO confirms overtime can be reasonable so long as the following are observed:
- Health and safety risks;
- The employee’s personal situation;
- The needs of the workplace;
- If the employee is entitled to receive overtime payment rates;
- If they are paid at a higher rate if they work overtime;
- If the employee was given enough notice;
- If the employee has informed they can never work overtime; and
- The usual patterns of work in the industry.
3. If An Employee Is Required To Work Overtime, You Must Give Notice
Be aware as the employer you must give a reasonable amount of notice as well. If a request to work overtime is unreasonable, then the employee does not have to accept. As a result, you cannot legally penalise an employee for refusing an unreasonable request.
Finally, if you pay your employee overtime or penalty rates, don’t forget to authorise it otherwise he or she will not be entitled to any payments.
In summary, it is not illegal to refuse making overtime payments but this is dependent on whether or not your employees’ modern award or agreement sets out overtime rates do not apply. Otherwise, you must pay your employees overtime or penalty rates, which you must legally do so.
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Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.