Smiths City – Employment Court confirms the obligation to pay employees for all hours worked

Smiths City – Employment Court confirms the obligation to pay employees for all hours worked

Posted by: Andrea Twaddle

For many years, we have been advising employers that requiring employees to participate in unpaid meetings and undertake “before work” tasks such as health and safety checks, or the requirement to cash up after hours, amounts to work, and should result in an employee being paid. The Employment Court recently confirmed that view. Employers should be aware of the potential legal issues that flow from the Smiths City decision.

In Labour Inspector v Smiths City Group Limited, the Court held that expected attendance at pre-work sales meeting was work for which employees were entitled to payment.

Smiths City were found by the Court to have incorrectly treated relatively informal daily shop meetings as not being work for which their waged employees must be paid. Smiths City implied that the meetings were balanced by the flexibility applied to allowing employees having time off to attend appointments, or if the shop was quiet. The company also pointed to no disciplinary action being taken for non-attendance by an employee.

The Court disagreed. It held that the company had breached its obligation to pay at least the minimum wage and to keep proper wage and time records. Smiths City was ordered to undertake an audit to determine the scope of non-compliance and to pay arrears to current and former employers, dating back 6 years. Because of its approach, it had not kept wage, nor time records, in addition to not paying staff for their attendance.

Key to that determination, was the finding that the meetings were an integral part of the principal activities of the sales employees. The Court also considered the following factors in determining whether the meetings were work:

• Constraint – staff were expected to attend the meetings and to engage.
• Responsibilities – staff were obliged to listen and take in information presented at the meetings.
• Benefits to the employer – Smiths City obtained the benefit of a cost-free opportunity to prepare staff for the working day.

A factor of the decision was consideration of the Minimum Wage Act (“the Act”). The Act does not include a definition of work. However, the Court has provided guidance in numerous cases, such as in considering sleepover shifts and on-call requirements.

Reaction to the decision has been swift, both from employers concerned about potential compliance, and employees, seeking to clarify their rights and entitlements. In some sectors, such as retail, hospitality and early childhood education, tasks set outside the “ordinary working hours” is not uncommon. The approach to payment of staff in these circumstances varies, and employers are now on notice of the risks associated with taking a narrow view of “out of work” activities and obligations to pay minimum wage.

Prudent employers should be reviewing their practices and payment of staff, to ensure that minimum wage obligations to employees are being met, and that staff are being fairly paid for all hours worked. Employment agreements should be reviewed to clarify expectations regarding hours of work and pay.

For advice on working arrangements, whether requirements of the job are likely to be deemed “work”, or any other questions regarding compliance, rights and obligations under the Minimum Wage and Employment Relations Acts, the DTI Lawyers team of specialist employment lawyers are well placed to assist.