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You would not think that people would complain about working less hours for the same pay, but there are some legal fish hooks for companies wanting to implement such a change.

Date: 21/02/2018

As the working year gets into full swing, many of us are left feeling like the weekend is just not long enough. Well one New Zealand company thinks it has the answer.

Perpetual Guardian recently announced that it is trialling a four-day working week, while continuing to pay its employees for five days. The company has said that if the six-week trial is successful, it will be implemented permanently from 1 July 2018.

While novel in New Zealand, this is not a new idea. In 2016, Amazon launched a pilot where employees were required to work only 30 hours a week. Those employees who chose to work 30 hours received reduced pay, but otherwise got the same benefits as the 40 hour workers.

In Sweden, a pilot was run experimenting with six-hour working days for nurses, with results showing increased productivity and fewer sick days. 

These new ways of working are supported by research, which shows that working less hours can make workers more productive. For example, Germany, which has one of the lowest numbers of working hours in the OECD, also has one of the highest levels of productivity.

You would not think that people would complain about working less hours for the same pay, but there are some legal fish hooks for companies wanting to implement such a change.

For starters, where an employment agreement sets out an employee’s hours of work, an employer is not able to change them without the employee’s consent. This includes situations where an employer advises the employee that they do not need to attend work but will still be paid. This is because the employer has a contractual obligation to provide both work and pay.

As a result, if an employer sought to unilaterally change an employee’s agreed hours of work, the employee could bring a breach of contract claim and ask the Authority to reinstate their previous hours.  

They could also potentially leave and claim constructive dismissal on the basis that they were forced to resign by reason of the employer’s breach of contract.

If the parties are not able to agree on changes to hours of work, an employer may be able to argue that a redundancy situation has arisen. This would require the employer to establish that there are sound financial or commercial reasons for changing the working arrangements, such as increased productivity and efficiency.

An employer would also need to follow a fair process in implementing any such changes. This would involve consulting with affected employees and exploring alternative options.  

While most of us would jump at the chance to work less for the same pay, there is also a growing trend of companies opting for “compressed” working weeks, where employees are still required to work 40 hours per week, but over four days. The proponents of the “compressed” working week argue that there is an increase in productivity, while overheads such as utility costs are decreased.

However increasing the number of hours that an employee works per day raises potential health and safety issues. It also opens up the question as to what is a reasonable number of hours for someone to work. For instance, is there anything to prevent an employer from requiring its employees to work 16-hour days?

In New Zealand, the concept of the eight hour day, 40 hour week dates back to 1840 and continues to apply today as part of the Minimum Wage Act 1983. This means that no employer can require an employee to work more than 40 hours per week (exclusive of overtime). But - and there is a big but here - the maximum number of hours can exceed 40 if the parties agree to it.

Employers tend to dictate business hours according to their business needs. Many companies run through the night, requiring staff to be on-call for designated shifts. Shift work has long been recognised as a potential health and safety hazard in and of itself.

Employers are required by law to take all practicable steps to provide a healthy and safe workplace, and this includes ensuring their staff take reasonable breaks and are not overworked. Conversely, employees are required to take all practicable steps to ensure their own health and safety, and that of others.

There are an increasing number of cases coming before the Courts where overwork and work pressure are cited as stressors resulting in adverse health impacts for employees. The latest Wellness in the Workplace survey found that absenteeism for work-related stress is on the rise, accounting for almost 200,000 lost working days in 2016.

Companies are constantly looking for ways to improve business productivity, and if that means happier, healthier employees, then it is hard to see a downside.

However, the kind of change being trialled by Perpetual Guardian is not necessarily straight forward. The practical and employment law ramifications will have to be carefully considered by other employers thinking of jumping on the band wagon.