Essential HR

In the Idea Services (IHC) court case, the Appeal Court has come out strongly and unanimously in agreement with the Employment Court, and declared “sleepovers” to be work.

The reason for this Newsflash is the issue on Wednesday night of the Appeal Court judgement in the case of Idea Services (an IHC subsidiary) v Phillip Dickson CA 405/2010. This is widely seen as a test case in relation to the legality of the payment of sleepover allowances instead of at least the minimum wage. The Appeal Court has come out strongly and unanimously in agreement with the Employment Court, and declared “sleepovers” to be work. The potential country-wide implication for organisations who employ sleepovers (many providing intellectual and mental health services) could easily total hundreds of millions of dollars, if back-pay is calculated in full for the last 6 years. Many such organisations could be (at least technically) insolvent. But what may it mean for you? I set out the key aspects of the case and some suggested actions for you to consider.


“Sleepovers” and Work Sleepovers – what would count? The situation considered by this case involved an employee paid an allowance to sleepover on site; have no visitors or leave the premises without permission; conduct no activities that may disturb the residents; and be available at any time during that period to be interrupted and provide care (no locked door). The Court identified three principles to determine whether or not someone is working:
• The extent of constraints to stop them doing as they please;
• The nature and extent of their responsibilities while on a sleepover; and
• The extent to which the employer benefits from their being there.

Because of the extent of these three, in this instance the employee was considered to be working throughout the sleepover whether or not asleep.

Minimum Wage
Because he was working, minimum wage legislation applied – to each and every hour he worked. It was ruled not appropriate to average his pay across his pay period. Of particular relevance here was the fact that he was, otherwise and normally, an hourly-paid worker.

A 9-hour sleepover shift would therefore attract $117 minimum wage (from 1 April) instead of the allowance ($30 – 50).


Payments The Court did not determine the amount of payment due – at this stage it has been left to the parties to reach agreement. This is still not finalised.

Government Action The Court indicated that if the Government is concerned about the ruling they should amend the Minimum Wages Act. They may still act.

Implications if you have people on call If you employ people to be “on call” and restrict them such that they have to be on site and available and are generally not able to do what they want to:
• they will be considered to be working:
• you will need to sort out compensation for the periods where they have already been working like this, but as a result of “a mistake” were not paid as if they were working;
• you will need to consider the implications for ensuring staff have sufficient break between shifts and for ensuring they work within the maximum length for shifts.

Actions you may need to take now Now that there is a definitive ruling, your actions should take this into account. However the dust is not yet settled, so I recommend:
Do not be hasty in reacting – it is still possible that IHC will appeal to the Supreme Court; it is also possible that when Idea Services do settle this claim, the agreed quantum may set a precedent for limits; finally it is possible that the government will change an Act an facilitate some future arrangements..
Do keep your staff informed as to what is happening; what you are doing about present arrangements; and what you are waiting for before making decisions on past arrangements.
Do decide how you will calculate back-pay if it is needed and how you would fund them
Do minimise your ongoing current possible exposure:
o Avoid sleepovers altogether if you can e.g. by using “wakeovers”, or nightshifts – or some sort of remote monitoring;
o Employ sleepover staff on a non-hourly rate for all their employment – so you pay then a monthly salary for clearly indicated shifts that include sleepover shifts (this could be a big challenge with unions!) 

And if you need help contact me!