Updated: Dec 18, 2019
Our workload requirements are very changeable. We operate a weekly roster system to cater for this but sometimes staff requirements can change at short notice. We feel that we are sometimes overstaffed. We don’t want to under-roster because it is really important we have sufficient staff there if we need them. But we want to ensure staff are as fully utilised as possible in case workload needs reduce. Is it lawful for us to cancel shifts that we have rostered without needing to pay staff?
It potentially is, but there are a number of things that will need to be in place to allow you to do to this. You would need to address this issue in your employment agreements and set a minimum reasonable period of notice of cancellation and comply with that notice period to avoid having to pay compensation for cancelling a shift.
If you would like to have the ability to cancel shifts at any time it is necessary for the employment agreement with your employees to specify certain matters in relation to such cancellation. Under the Employment Relations Act 2000 (the Act) it is unlawful for an employer to cancel a shift unless the employment agreement specifies the following:
a reasonable period of notice that must be given before the cancellation of a shift, and
reasonable compensation that must be paid to the employee if the employer cancels a shift without providing the specified notice (s 67G(2)).
Therefore if you want to be able to cancel shifts you will need to have it set out in your employment agreement, and you will need to comply with the terms you set out in that agreement (s 67G(3)).
The requirements under the Act focus on reasonableness and do not give a specific number for what constitutes reasonable notice or compensation. Rather the Act focuses on a number of principles to determine these issues. What constitutes reasonable notice and reasonable compensation don’t appear to have been tested yet, which is likely because the legislation has only been in effect since April 2016. On the one hand, the lack of clarity is unhelpful. On the other hand, it is helpful that you are not faced with rigid inflexibility which could have been the case if a specific notice period and amount of compensation had been specified under the legislation.
The Act sets out a range of principles to determine what will constitute reasonable notice, which must be based on all relevant factors including the following:
the nature of the employer’s business, including the employer’s ability to control or foresee the circumstances that have given rise to the cancellation
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 the employee’s employment agreement and, if so, the number of guaranteed hours of work (if any) included among those agreed hours (s 67G(4)).
Therefore as to what constitutes reasonable notice for cancelling a shift will vary vastly among different workplaces and different jobs. The greater control you have over foreseeing the need to cancel shifts in advance the longer the notice must be for it to be “reasonable”. Also, the impact on the employees of the cancellation affects what constitutes reasonable notice. For example, it is foreseeable that more highly paid employees may be less impacted than more lowly paid employees. It is also foreseeable that employees who are consistently provided with a large number of hours per week would be less impacted by a shift cancellation than employees who are provided with a smaller number of hours per week.
It is difficult to know precisely how much would constitute reasonable notice until the matter has been tested. To hazard a guess, it is difficult however to foresee many circumstances where notice of less than 24 hours would be adequate without paying any compensation. In other instances, it might be that a longer period of notice could be required.
Reasonable compensation for not providing the full notice is determined on the basis of all relevant factors including the following:
the period of notice specified in the employee’s employment agreement
the remuneration that the employee would have received for working the shift, and
whether the nature of the work requires the employee to incur any costs in preparing for the shift (s 67G(5)).
Again the amount of payment of compensation does not appear to have been tested at this stage. However, based on the above criteria it is clearly relevant what sort of costs the employee would incur in preparing for the shift and what the employee would have earned. It is likely given the above criteria that employers would need to pay any costs the employee might incur at a bare minimum. It is also likely that, in most instances, employers would need to provide additional compensation over and above that amount given that the employer must also consider what the employee would have been paid. Therefore the more an employee would have earned during the shift in question the higher the compensation would need to be in order to be reasonable. As what constitutes reasonable compensation is tied to what the employee would have earned an employer should likely base the reasonable compensation on some sort of formula relating to what the employee would have earned, such as a proportion of what the employee would have earned. Small and arbitrary amounts, like $50 for example, are not likely to constitute reasonable compensation when the shift was going to be an 8-hour shift at $20 an hour.
Consequences for breach
It is important that you comply with the above requirements as if the employee’s shift is cancelled and the employment agreement does not comply with the above requirements an employee is entitled to full payment of what the employee would have earned during the shift (s 67G(6)). An employee is also entitled to full payment if the shift is not cancelled until the commencement of the shift.
In addition, an employee is entitled to raise a personal grievance where the employee has been disadvantaged by the employment agreement failing to comply with the above requirements regarding shift cancellations (s 103(1)(g)).
Reproduced with the permission of Wolters Kluwer NZ