Be careful what you wish four: Australian considerations of a 4-day work week

By Ryan Murphy, MINTERELLISON

Aurora borealis (the Northern Lights). Stunning landscapes. Outdoor hot-tubs, year-round. All of these, you will find in Iceland. And yet, recently this country has been in the headlines not for these things, but for its work practices? The 4-day work week. It is the talk of the town. From Reykjavík to Randwick, there has been an unmistakable uptick in talk of workers working 4 days but being paid for 5.

Although, as it turns out, the Icelandic trials did not trial a 4-day work week at all. Employees in those trials reduced their working hours, but mostly to 35 or 36 hours. Still, they raise the question: what barriers and risks are faced by Australian employers that might consider introducing a 4-day work week?

Defining the “4-day work week”

The barriers and risks facing Australian employers can depend on the way “4-day work week” is defined, as the phrase can have several meanings. Firstly, a 4-day week can refer to a full-time employee working 4 days of ordinary hours, where the employer retains a discretion to require the employee to be recalled to work the 5th day, as Perpetual Guardian did in New Zealand recently. This might be called a “Discretionary 4DW”.

Secondly, an employee’s contract might set ordinary working hours at 4 days per week, say 30 hours, without a reduction in salary. This is essentially a part-time employment arrangement, albeit where the employee is paid well for those hours. Let’s call this a “Contractual 4DW”.

Thirdly, “4-day work week” can refer to a compressed work week, where an employee works full-time hours, squashed into 4 longer days. Let’s call this a “Compressed 4DW”.

Each of these arrangements operate differently and face unique risks and issues under Australian law. Some of the risks and issues that may be faced by employers include:

• Maximum weekly hours: The National Employment Standards provide for maximum weekly hours of work and provides that a request for a full-time employee to work hours more than 38 hours per week must be reasonable in light of the factors in s 62(3) of the Fair Work Act 2009 (Cth). This is more likely to be an issue for Compressed 4DW who effectively work 38 hours within 4 days, meaning many additional work hours, say on the fifth day, will need to be carefully considered.
• Remuneration considerations: Employees in Australia must be paid in accordance with any applicable industrial instrument or minimum wage. This can include penalties or overtime pay for additional hours or for hours worked outside an ordinary span. This could be an issue for employees working a Contractual 4DW (who are effectively part-time employees), or a Compressed 4DW (who are likely to work longer days, and potentially outside of any ordinary span of hours) - it is less likely to be an issue for Discretionary 4DW employees, unless the employer directs them to work a 5th day plus additional hours in a given week.
• Accrual of employment entitlements: 4-day work weeks may impact the way that employment entitlements accrue. Employees who work a 4-day week might tend to be better rested (at least in theory), and less in need of using their annual leave entitlements. Could this result in larger balances of accrued annual leave, which has a negative impact on an employer’s balance sheet?
• Flexible working arrangements: If an eligible employee meets the requirements to request a Flexible Working Arrangement (FWA), the employer may only refuse the request on reasonable business grounds. If an eligible employee requests a FWA in which they would work a 4-day week, say in the form of a Compressed 4DW, could the employer refuse such a request on reasonable business grounds? There are a few, recent, diverging decisions by workplace tribunals which show that the facts of the particular case are key.
• Work Health and Safety: The model Work Health and Safety Act 2011 (Cth) imposes a duty on any person conducting a business or undertaking to ensure, so far as is reasonably practicable, the health and safety at work of workers engaged or caused to be engaged by the business or undertaking. Could the introduction of a 4-day work week in a workplace pose an increased risk to health and safety? If so, what reasonably practicable steps would be needed to eliminate, or if that’s not possible, to mitigate that risk?
• Workers’ compensation: At a high level, workers' compensation schemes around Australia require employers to be insured to cover injuries suffered by employees arising out of or in the course of their work, even potentially if the employee performs work on a 5th day when they would not usually be working.
• Consultation obligations: A proposal by an employer to introduce a 4-day work week, whatever the form, could trigger consultation obligations under any applicable industrial instrument before the employer makes a final decision.

The future

With leaps forward in technology, the question must be considered: does the future involve a 5-day working week in Australia? Australia’s industrial history demonstrates that, should a persuasive body of evidence emerge which links greater productivity to fewer working days per week, a case might be presented for legislative change to follow. Of course, Australian employers could introduce a four-day work week in their own organisation now, provided the associated risks and issues are fully considered.

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