In July 2009, the Employment Court made a decision on pay rates that was estimated would cost the residential care sector between $400 million and $500 million in back pay and between an extra $60 million and $70 million a year on an ongoing basis.
The decision will have far-reaching consequences not just for the disability care sector; it has the potential to affect all employees who provide on-call services.
The Employment Court decision related to an employee of IHC subsidiary Idea Services Ltd, Phillip Dickson.
Mr Dickson worked sleepover shifts in a residential care house and was paid a shift allowance of $34 per shift.
He claimed he should be paid his hourly rate for all hours he was at the house, even though he was often asleep for most of it.
The Employment Court agreed.
It was held the services provided by Mr Dickson were work under the Minimum Wage Act 1983 and work must be remunerated at no less than the minimum wage.
In determining Mr Dickson's overnight services constituted work, the court took into account the personal constraints on Mr Dickson while on a sleepover shift, the nature and extent of his responsibilities while at work and the benefit to the employer of having him in the house.
IHC and its subsidiaries said they could not afford the additional expense of paying employees their usual hourly rate for overnight shifts, let alone the multimillion-dollar back-pay bill.
The recent statutory management of two IHC companies therefore did not come as much of a surprise.
Employers in other sectors will no doubt also be feeling uneasy.
Many medical professionals, for example, work on-call overnight but are paid only if they are actually called.
On-call work is also common in many trades and in the firefighting sector.
While the Employment Court decision on Mr Dickson may well be correct in terms of the strict letter of the law, if the result renders an essential service unsustainable, the Government will have no choice but to step in, one way or another.
The decision is on appeal to the Court of Appeal and is due to be heard later this month.
Legislators, unions and employers will be watching with interest.
Sally Peart is a partner with Mitchell Mackersy Lawyers.
