Employers should ensure they are covering Award entitlements and payments. This may require changes to the wording of employment contracts.
One Minute Summary
- ALDI employees will receive a significant back payment due to regularly working 10mins without pay before their shift start time.
- Employers should examine their work practices and whether over Award payments cover such practices.
- A significant number of Awards also cover supervisors and management who are often expected to work extra time.
- Employment contracts should be worded correctly to enable over Award payments to cover Award entitlements.
- Employers using flat rates should also review whether the employee receives at least the same under the flat rate payment system versus Award entitlements.
- This case highlights the tension between attempting to run a lean business cost model and a rigid hours of work system imposed by most Modern Awards.
ADLI has recently been in the news with a very expensive back pay settlement. The agreed settlement is subject to final Federal Court approval.
This follows similar multimillion dollar cases against Coles and Woolworths for staff working well in excess of their base Award hours without additional compensation.
The ALDI matter originated following a test case involving several employees at an ALDI Distribution Centre in Prestons in NSW. Employees were required arrive 10 mins early for each shift and undertake tasks before their shift start time. They were not paid for this time. The tasks included safety checks on forklifts, check coms devices and undertaking a ‘group warm up activity’ prior to starting their shift.
At first ALDI refuted that employees were required to come in and stated they were only expected to commence at the official start time. The Federal Court Judge did not accept this, stating there was a ‘clear implied direction’ to attend early and that a failure to arrive early would lead to disciplinary action – based on evidence provided. The work undertaken by employees before their start time was for the benefit of the employer and therefore constituted as ‘work’.
Having employees arrive early to undertake ‘pre-shift’ tasks is not an uncommon practice with employers.
Once the above rule had been legally established in the Federal Court the union (the Shop, Distributive and Allied Employees' Association) placed a wider claim across other Distribution Centres and ALDI retail stores where similar practices occurred. In some cases, employees worked both unpaid pre and post shift overtime.
The proposed $55million settlement, which is waiting for formal approval in the Federal Court, involves over 32,000 current and former ALDI employees. It covers employees at all levels up to and including store managers. An additional $1.5m will be paid to the union to cover their legal and related expenses in this action. The proposed settlement has been agreed to without any admissions by ALDI.
Fair Work Commission utilises new powers to amend ALDI Enterprise Agreement.
Deputy President Slevin has amended an Enterprise Agreement despite strong objections by ALDI. The Fair Work Commission imposed the changes to guarantee fixed rosters for part-time employees.
The Commission determined that part-time employees at three Distribution Centres would not be better off with the Agreement as presented as their hours would be too unpredictable to plan their life around.
Normally Enterprise Agreements are required to follow the underlying Award in specifying a predictable roster (including starting and finishing times) for part-time employees.
Under the proposed ALDI enterprise agreement presented to Deputy President Slevin, part-time employees could be rostered any day of the week and were only told of their expected finish times on the day – which could then still change.
While the employees had voted for higher rates of pay with this variable arrangement the Commission did not accept the payment was adequate compensation for the uncertainty. Rather than stop the approval process the DP used a fairly new power under the Fair Work Act to amend the Agreement. ALDI was then required to reach agreement with each part-time employee on their regular pattern of hours that locks in days, hours as well as start and finish times.
ALDI strongly opposed the Fair Work amendments stating that the flexibility was essential to a just in time business model. However, evidence provided by the union and employees showed their hours of work were very haphazard making it difficult to plan any personal life. Despite having personal appointments employees felt pressured to stay beyond their finish late.
The new Fair Work power had been inserted into the Act by the Government in 2022 and had not been seen significant usage. The usual process is for the Commission to approve an Agreement or seek Undertakings from employers to make amendments prior to approval. If employers did not provide the amendment Undertakings the Agreement would not be approved.
Under these changes the Commission can amend a proposed Agreement after hearing submissions from all parties.
In this case it appears as though ALDI paid employees a higher hourly rate (which they accepted via a vote) but it has not received the expected flexibility it sought in return for this payment.
Commentary
Having employees arrive early to undertake ‘pre-shift’ tasks is not an uncommon practice among employers.
Firstly, employers should check their applicable Award. Does it cover supervisory or management level employees. Do not assume an Award only covers lower levels of employees.
Secondly, how close to the Award level payments are employees being paid.
Where it is the intention to use over Award payments to cover entitlements it is strongly recommended that these are specified in the employment contract which is then accepted and signed by employees.
Other areas to watch out for include lunch breaks. Are all employees, including Award covered managers, taking lunch breaks. Quite a number of Awards specify the payment of double time if a lunch break is missed.
Flat rate payments may be convenient provided that if the same hours were paid at the Award rate of pay the flat rate still exceeds the Award rate. Additionally, the flat rate of pay should be explained in the employment contract.
Calculations for any underpayment can go back up to 7 years. Consider the above ALDI example of 10mins unpaid work. A rough back of the envelope calculation on a 5 day week (assuming an Award rate of $30 ph) comes to about $10,000 overtime backpay after 5 years. Interest may also apply.
Hunter Employee Relations can assist employers to check whether employees are paid correctly in accordance with any Enterprise Agreement, Award or the National Employment Standards.
Kind Regards
Michael Schmidt
M 0438 129 728
www.hunteremployeerelations.com.au
Guiding senior managers through complex employee relations issues
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