Unpaid overtime at home fuels underpayment claim fears

There’s no doubt that 2020 has been crowned "the year of working from home", but a 2019 decision by the Fair Work Commission means employers need to take care.

New research from The Centre for Future Work has found that employees worked an average of 5.25 hours of unpaid labour each week during the COVID-19 pandemic – an increase from 4.62 in 2019 – raising concerns of underpayment claims. The situation was worse for full-time workers, who reported working an extra 6.21 unpaid hours per week.

To put this into perspective, the report outlines that "based on a standard 38-hour workweek, this is equivalent to more than seven weeks of unpaid work per worker per year. Extrapolated across Australia's workforce, this implies total unpaid overtime worked of some 2.9 billion hours per year."

With many workers set to continue working from home into the future, this report's finding should put HR practitioners on alert.

Background on time worked and amounts paid

Last year, the Fair Work Commission conducted a four-yearly review of modern awards. This review introduced annualised wage arrangements into 22 modern awards, including the Clerks Private Sector Award.

The introduction of annualised wage arrangements into these awards, as well as recent media coverage of companies underpaying staff, brought into the spotlight a harsh reality. While many employers paid salaries to their employees, did those salaries "cover" the hours worked, and other award entitlements, that employees were entitled to be paid for?

It goes without saying that, irrespective of the FWC's annualised wage arrangements, employers must ensure that an employee's wage or salary actually meets or is above that of the employee's award entitlements, including the applicable hourly rate of work.

The common employer practice of paying an "all-inclusive" wage or salary, which purports to cover all of the employee's potential entitlements, may in fact short-change the employee of their overtime and other award entitlements. This was a practice which the FWC referred to when introducing annualised wage arrangements.

Long days in the home office

The Centre for Future Work's research contains some startling results, showing COVID-19's impact on the Australian workforce in what is the first comprehensive research paper into this area since the pandemic began. Some of the key insights are as follows:

Unpaid overtime

Hours of unpaid overtime varies across groups, with the largest factor being the classification of employees. Full-time employees worked the most unpaid overtime, with an average of 6.21 hours a week. Self-employed and part-time workers followed closely, with 4.25 and 4.16 unpaid hours a week respectively. Unsurprisingly, casual workers worked the least amount of unpaid overtime, at 2.71 hours per week on average.

Age

Age played another large factor in the working of unpaid overtime, with young workers (18–24) disproportionately working longer than their older colleagues. The 18- 24 age range averaged 6.9 hours of unpaid overtime weekly – that's 30 per cent more than the overall average.

Gender

Despite men working longer hours of unpaid overtime (6.09 hours compared to women at 4.24 hours), women lost out in other ways, such as disproportionately being denied time allowances for caring responsibilities and being far more likely to work in part-time or casual roles (24 per cent compared to 15 per cent of men).

Cost and numbers

The total unpaid hours worked by employees are staggering, sitting at 273 hours per year, per worker, or just over seven full work weeks. Cumulatively, this represents $100 billion dollars of lost income across the Australian workforce – the report refers to it as "time theft".

"This has damaging effects for individuals, adding to their stress, disengagement, and social alienation," the report reads.

The impacts

With one third of the respondents answering that they will continue to work more from home than they did pre-COVID-19, and the report concluding that the findings represent "a further undermining of the system of minimum standards, including standard hours and overtime provisions", this issue doesn’t look like it's going away anytime soon.

In addition, under the Work Health and Safety Act 2011 (Cth) employers must, as far as is reasonably practicable, ensure the health and safety of employees at work, which extends to the home workplace. If employees are working excessive hours of work at home, an employer will need to consider what measures it has in place, or is taking, to eliminate or minimise the risk to an employee’s health and safety such as work fatigue.

What does this mean for employers?

According to McCrindle research, more than three in five working Australians (65 per cent) agree that there is greater flexibility on where and when they work, with 51 per cent viewing remote working as the default instead of a workplace perk, even when restrictions lift. This hybrid of working environments will require employers to meet the challenges presented, such as hours of work and compensation for such work.

Other recommendations for tackling this issue include:

• Firstly, employers must be aware and understand their obligations under the relevant awards, particularly those obligations about span of hours and overtime.
• Employers should consider having policies in place about hours of work when working remotely and work-life balance to ensure that span of hours worked can be properly monitored; and that employers are meeting their work health and safety obligations.
• Determine what systems your organisation has in place to monitor and record hours of work, span of hours and meal breaks for employees working from home. This should also be extended to those in the traditional workplace.
• Employers will need to assess how confident they are in ensuring employees are being paid what they would be entitled to under the relevant award for the actual hours they are working. This includes ensuring there are systems in place for the reporting and recording of breaks.

Given the significant unpaid overtime numbers identified in the report, it's not far-fetched to believe that numerous underpayment claims may well be on the horizon.

With that said, a number of industrial relations reforms are expected to be introduced very soon, including further simplification to modern awards. Many will be looking forward to seeing whether the working from home and unpaid work quagmire is addressed in the anticipated reforms.

This article is part of a regular employment law column series for HRM Online. It was first published in HRM Online on 25 November 2020.