The Employment Appeal Tribunal (EAT) has confirmed that employment contracts do not include an implied term that employees should receive pay for work carried out outside contracted hours, before contractual overtime kicks in. The ruling made it clear that implied terms should not override clear, express contractual provisions, particularly when it comes to overtime and pay for extra hours worked.
Background
Mr Hudek, employed by Brake Bros Ltd, had a contract specifying five shifts per week, with an average shift length of 9.4 hours. The contract stated that Mr Hudek’s role required him to work “such hours for each working shift as are necessary for the proper performance” of his duties. It also contained overtime provisions, under which Mr Hudek would receive overtime pay if he worked an additional full or half shift, with a half shift defined as 4.5 hours or more. Between February 2021 and December 2022, his actual average shift length was more than 10 hours. Mr Hudek argued that he was entitled to be paid for these extra hours, claiming an implied term in the contract requiring payment for hours worked beyond the intended average.
Employment Tribunal
Mr Hudek brought a claim for unlawful deduction from wages, seeking payment for the additional hours he had worked, based on a pro rata payment of his annual salary.
The Employment Tribunal (ET) ruled in Mr Hudek’s favour, concluding that the contract contained an implied term for additional pay when hours exceeded the “intended weekly average”.
Employment Appeal Tribunal
The EAT upheld Brake Bros’ appeal, holding that the ET was wrong to imply this term. The contract clearly stated that Mr Hudek’s basic salary covered five shifts per week, irrespective of whether those shifts exceeded the intended average.
The EAT noted that the flexibility in the working hours, as outlined in the contract, was intentional and Brake Bros was not obliged to pay for hours worked beyond the average unless the specific overtime conditions were triggered. The EAT further emphasised that if the intended shift lengths were regularly exceeded, the appropriate course of action would have been to renegotiate the terms of the contract, as was done in 2014 when an addendum was introduced to reflect longer shifts.
There are two alternative tests for whether to imply a term into a contract: (i) where it is necessary to give business efficacy to the contract; and (ii) where it was the obvious but unexpressed intention of the parties. The EAT was satisfied that neither test justified the implication of a term that Brake Bros would pay Mr Hudek for hours worked over and above his normal working hours, except where the express overtime provisions kicked in.
Key takeaways
The case highlights the importance of clear contract terms, especially when dealing with flexible working hours and overtime provisions. It is reassuring for employers to know that they can build in flexibility, by using wording that requires employees to work “such hours as are necessary for the proper performance” of their duties. It is perhaps unusual for a contract to contain that type of flexibility and an entitlement to overtime. Where your contracts do contain both, it is particularly important to set out clearly when entitlement to overtime pay will kick in to manage employees’ expectations and avoid potential disputes.
