Do you employ staff on shifts?
If so, from time to time you may find yourself having to juggle shifts to accommodate the needs of your business.
In some cases, you may want to cancel a worker’s shift.
But be aware that from 1 April, you may not be able to cancel a shift without paying your employees what they would have earned if they had worked that shift, unless you comply with a change to the Employment Relations Act 2000.
The new law states that you will only be able to lawfully cancel a shift if you have a clause in your employment agreement that specifies two things:
- what reasonable notice will be given to cancel the shift; and
- what compensation you will pay your employee if you cannot give that notice.
Of course, you must also act in accordance with the terms of that clause when you do cancel the shift – that is, you must either give notice or pay compensation.
So what is reasonable notice, and what sort of compensation must you specify?
REASONABLE NOTICE TO CANCEL
The Act does not specify what reasonable notice will be in every case. Rather, it says that “all relevant factors” must be taken into account, which will include at least the following:
- the nature of your business, including whether you have the ability to control or foresee the circumstances that gave rise to the need to cancel the shift;
- the nature of the employee’s work, including the likely effect of the cancellation on the employee; and
- the nature of the employee’s employment arrangements, including whether there are agreed hours of work in their employment agreement and, if so, what number of guaranteed hours of work (if any) is included among those agreed hours.
Clearly, the greater your ability to control or foresee when a shift will be cancelled, the more notice you will be expected to provide. It would not be fair for you to give only short notice if you could have influenced whether the cancellation occurred.
Likewise, the greater the effect the cancellation will have on the employee, the more notice will be required. Assessing the effect a cancellation will have on an employee before they have started work may be difficult. Presumably, however, if the employee is paid minimum wage and works just a handful of shifts, the effect of being deprived of payment for work may be significant for them.
On the other hand, if you have guaranteed a minimum number of hours of work to the employee, then you may not need to give as much notice, because the employee will get the guaranteed hours in any case. The effect of the cancellation will be reduced by the certainty of income they will get as a result of those agreed guaranteed hours you must provide.
So how much notice will be reasonable in your case?
Some employers will be able to give seven days’ notice of a roster change or shift cancellation, while others may only be able to give 24 hours’ notice.
However, the Act is clear that cancelling on the commencement of a shift, or after a shift has commenced, will never be regarded as reasonable – because that is no notice at all.
REASONABLE COMPENSATION FOR CANCELLATION
Sometimes you may not be able to give notice as specified in the agreement. The urgent need to cancel may arise unexpectedly, meaning you have to give a lesser period of notice.
In such cases, you can avoid paying the employee their full wages for the shift by compensating them. But the compensation must be reasonable.
Reasonable compensation is to be determined by taking into account “all relevant matters”, including at least the following:
- the period of notice you were supposed to give the employee of the cancellation of a shift;
- what you would have paid the employee if they had worked the shift; and
- whether the employee may have incurred costs in preparing themselves to undertake the shift.
As with the new requirement to compensate staff for being available to work, the concept of what fair compensation may amount to is uncertain. But we may make some stabs at guiding principles.
The reference to what you would have paid the employee if they worked the shift may suggest it would be reasonable to compensate the employee by paying them a percentage of that amount. For example, the compensation could be calculated as 50% of what the employee would have otherwise received.
Further, if you had committed to giving the employee a large period of notice but were unable to do so, then the expectation may be a greater amount of compensation for having deprived the employee of that notice. That may drive up the percentage you pay.
Whatever the case, the compensation must at least cover the costs an employee might have incurred in making themselves available for the shift. That may include partial payment for travel or accommodation costs if they had to travel at your request to undertake the shift. If those costs can be identified at the outset, you may want to specify them as a separate component of the compensation payable. If, however, there are no costs, then you need not factor this into your specified compensation.
Here is some basic wording for a clause you could adapt to suit your own situation and include in the employment agreements of workers who carry out shift work:
You are required to work rostered shifts. We may cancel any rostered shift on at least 48 hours’ notice. If we cancel your rostered shift without giving you that period of notice, we will pay you 50% of what you would have received if you had worked that shift.
You will need to adapt the above wording to suit your own situation, by changing the compensation and notice period to whatever is reasonable in your circumstances.
WHAT IF YOU DON’T COMPLY?
Let’s say you cancel a shift and provide a fair amount of notice or otherwise compensate your employee, but you just don’t have a clause in the employee’s employment agreement that specifies what the notice and compensation should be. What happens then?
In that case, even though you may think you have complied with the spirit of the law, your employee will still be entitled to the full amount they would have otherwise received, had they worked a cancelled shift (and possibly in addition to what you paid them as compensation).
That underscores the importance of ensuring you have a clause that covers cancellation of shifts in your employment agreements, if you have staff on shift work.
And even if you do have a clause specifying notice and compensation in the employee’s employment agreement, you still cannot cancel the shift at the start of the shift, or after it has started.
If you do, you will again be obliged to pay that employee what they would have otherwise earned for that shift – just paying the compensation in that case will not be sufficient.
If you roster your staff to work shifts, from now on be sure that your employment agreements specify both:
- what reasonable notice you will give to cancel a shift; and
- what compensation you will pay them if the shift gets cancelled and you cannot provide that notice.
Only by including a reasonable clause to that effect, and acting in accord with it, will you be able to avoid paying the employee for that cancelled shift.