Recent cases brought before the Employment Relations Authority around this matter have prompted us to provide a short succinct refresh for our clients.
Requiring staff to be available or 'on call' in addition to the normal hours of their employment is referred to as an 'availability period', and the Employment Relations Act 2000 sets out what the legal requirements are regarding the issue of employee 'availability'.
An agreed availability provision must form part of an employee's written Employment Agreement, which must also include guaranteed hours, and it must be explicit on:
- what the period of availability is in addition to the normal guaranteed hours, and;
- the genuine business reasons based on reasonable grounds for the inclusion of the availability provision, and;
- provide for the payment of reasonable compensation to the employee for making themselves available.
When it comes to 'reasonable compensation' there is no mathematical formula, the law leaves it simply as “reasonable”. Every scenario is different, but the following considerations are important when evaluating reasonableness of an availability provision in terms of compensation:
(a) the number of hours for which the employee is required to be available
(b) the proportion of the hours referred to in paragraph (a) to the agreed hours of work
(c) the nature of any restrictions resulting from the availability provision
(d) the rate of payment under the employment agreement for the work for which the employee is available
Generally we see a dollar figure being paid for simply being 'on call' (regardless of a call out or not), and then an incentivised or preferential rate for any hours actually worked (called out).
An interesting consideration to potentially avoid any problems with determining how much “reasonable compensation” is, could be to put your employee(s) on a salary, rather than on waged hours. Because an employee who is remunerated for agreed hours of work by way of salary may agree with the employer that the employee’s remuneration includes compensation for the employee making himself or herself available for work under an availability provision.
If you do this, though, you may be required to demonstrate how such a provision is remunerated more than an equivalent arrangement without the same provision. Further, a salary close to minimum wage would be difficult to prove 'reasonable compensation' for extra availability - even if it had initially been agreed upon. An employer should not use low remunerated salary arrangements as an avenue to avoid the law regarding 'availability'.
Alternatively, the legal complexity and risk regarding the issue of 'availability' can be avoided entirely, simply by managing any additional hours worked by an employee over & above their guaranteed hours by agreement. However, this means an employee is free to decline additional hours, i.e. overtime, without any repercussions in terms of their employment.
Availability issues can be challenged in the Employment Relations Authority and higher. Not only do we see employers having to justify attempts to enforce an employee's availability provision, but also the defence of claims of disadvantage against poorly written or invalid clauses.
The Employment Agreement templates in all our products including the
Employers Toolbox have always had availability clauses with the various legal options included, along with guidance commentary to help employers with legal compliance. Availability provisions aren't included by default, so you do need to opt them in, if you use our wizard in the employment agreement builder this is one of the questions during the process.
If you use availability provisions with your staff and are worried, please contact us for a review and recommendations.