The consequence of this interpretation was that other shift allowances for shiftworkers (under clause 29) such as the 15% night shift allowance, would be payable for ‘the entire shift’, which would include periods during which the employee was not performing work.

These articles are now under review following the decision of the Federal Court in Jats Joint Pty Ltd v Fair Work Ombudsman [2025] FCA 743 (Jats Joint). In short, in Jats Joint, the Court found that sleepovers are separate and distinct from ordinary shifts, and consequently, do not attract shift penalties. 

The FWO’s guidance states that the Jats Joint decision is now subject to appeal. There are also three applications currently before the Fair Work Commission to vary the sleepover provisions in the SCHADS Award, including seeking retrospective variations. All of these decisions may ultimately come to a different decision to that of Jats Joint and we will continue to monitor them.

Jats Joint decision 

In Jats Joint, the FWO issued a compliance notice to Jats Joint, an employer in the youth care industry, alleging that it had contravened clause 29(3)(b) of the SCHADS Award because it did not pay an employee a 15% night shift loading for the ‘whole of each night shift worked’ throughout sleepover shifts she had worked throughout 2020 and 2021. In other words, the notice required Jats Joint to rectify alleged underpayments arising from not treating sleepovers as if they formed part of the employee’s shift.

The relevant employee, Ms Richards, worked part-time as a Social and Community Services Level 2 employee. She was also a shift worker covered by clause 29.1 of the SCHADS Award. She was rostered to sleep overnight on 123 occasions during the period covered by the compliance notice.

The court considered that Ms Richards’ sleepovers were rostered in three different ways, two of which were related to the question to be determined by the court, as set out in the table below:

At no time during the relevant period did Jats Joint pay Ms Richards the additional 15% penalty rate – ordinarily applicable to night shift in relation to any of the time she worked immediately before or after a sleepover. As set out above, Ms Richards did receive afternoon loadings for those ordinary hours that she worked preceding a sleepover.

In 2024, following an inquiry from Ms Richards, the FWO undertook an investigation and served a compliance notice on Jats Joint, requiring them to conduct an audit and repay Ms Richards what it said were underpayments of night shift penalties throughout 2020 and 2021.

Jats Joint applied for a review of the compliance notice, arguing that they had not contravened the SCHADS Award provisions. Jats Joint argued that they were not obliged to pay a night shift loading under clause 29(3)(b) because ‘shifts for the purposes of clause 29 cannot include time spent on sleepover’ and ‘the SCHADS Award does not treat a sleepover as constituting work, rather it constitutes a break from work within the meaning of clause 25.4’.

In that context, Justice Stellios of the Federal Court considered the interpretation of the various provisions of the SCHADS Award and agreed with Jats Joint, finding:

While the position is not free from doubt, and should be clarified by amendment to the SCHADS Award when the opportunity arises, I accept Jats Joint’s submissions that a sleepover period does not form part of a shift. That is the interpretation that is most cohesive with the SCHADS Award when understood as a whole.

Flowing on from the above finding, the court indicated that, given the employee’s shifts were not rostered to contiguous sleepovers, those periods had no impact on the applicable rates of pay under clause 29.3 for adjacent shifts of ordinary working hours. As a result, the Court found that Jats Joint was under no obligation to pay Ms Richards at the night shift rate for adjacent shifts on either side of a sleepover period. 

The Court concluded by noting that Ms Richards was not rostered to work, and did not work ordinary hours (because she was undertaking a sleepover period) between 12am midnight and 6am Monday to Friday, Jats Joint was able to prove that it did not contravene clause 29.3 of the SCHADS Award by not paying her a night shift rate.

Therefore, the Court found that on a proper construction of the SCHADS Award, a sleepover under clause 25.7 of the Award does not form part of a shift, and as such, shifts immediately before and immediately after a sleepover could be rostered as ordinary hours (so long as they fall within the scope of hours of the SCHADS Award).

Of course, we note that His Honour did not make a conclusive finding and it is now subject to appeal. We also note (as set out above) that the sleepover provisions of the SCHADS Award are currently the subject of a significant review before the Fair Work Commission, so this position may change in the future.

Payroll compliance 

Earlier this year, the FWO released its Payroll Remediation Program Guide (Guide). This update is particularly timely, noting recent large underpayment cases in the media.

The Guide is intended to help employers to identify and correct underpayments of employee entitlements under the Fair Work Act 2009 (Cth). It has been prepared for larger employers who suspect, or are aware of, underpayments within their organisation (the FWO recommends alternative guidance for small businesses).

To summarise the key changes: 

These are set out in more detail below. 

• Scope and Review

  In terms of scope and depth of review, the FWO advises employers to review the longest period possible, ideally going back beyond six years. The six-year statutory limitation under the FW Act is considered a minimum – not a cap. The FWO will want to understand the basis for any decision to limit remediation to the six year minimum.

• Methodology and Evidence

  The FWO expects employers to apply a clear, well-explained methodology when calculating underpayments. This includes:

  • relying on actual work patterns, not just theoretical or generic assumptions;
  • using alternative evidence, such as IT systems, swipe card data or service delivery records when payroll or attendance data is missing or incomplete.

  The FWO will want to know about what Fair Work instruments apply to the workforce, namely, awards, enterprise agreements or transfer of business instruments. It will also want to understand how the employer has applied job classifications, and if a classification or role mapping exercise has been conducted to validate the classifications of employees.

  The FWO also expects employers to use employee-friendly assumptions to fill gaps – assumptions that risk disadvantaging employees are unacceptable. In particular, where there is evidence to show that an employee did perform particular work, employees should be given the benefit of the doubt, particularly if the employer’s record keeping practices have been deficient. 

  The FWO has also indicated that overpayments cannot be used to offset underpayments and each pay period. This aligns with the recent decision in FWO v Woolworths Group Limited; FWO v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092). In addition, each entitlement must be considered separately. For example, if an employer pays an employee a higher base rate of pay, the amount more than the minimum can’t be applied to satisfy an entitlement under an award to annual leave loading. 

  In relation to overpayments, the FWO recommends seeking specific advice. 

• Communication and Consultation

  Employers should adopt a comprehensive communication plan and the remediation process clearly and early where possible. Communication about the underpayment should reach both current and past employees and other bodies such as unions. The FWO recommends using multiple channels such as letters, emails and text messages. Employers should also ensure that there are secure ways for employees to raise questions or provide corrections. 

  Employers are encouraged to not be averse to letting employees know if more information is still required, or some answers are not yet known, and to provide a best sense of when those matters might be known or when further updates are to be expected. 

  Communication with employees should not require that they keep information about individual remediation payments confidential or be contingent on signing a release agreement or deed. Releases or deeds are not binding on the FWO and the FWO may investigate or take enforcement action, including seeking information from employees notwithstanding the existence of a deed.

• Locating and Paying former employees

  The FWO expects employers to make reasonable and repeated efforts to contact past employees who are owed wages. If people cannot be located, unclaimed wages must be dealt with through the appropriate government processes.

• Backpayments and interest

  The FWO expects back payments to employees to include interest. Adding interest to payments, even if not legally required, is viewed by the FWO as a positive step showing sincerity and accountability. Interest can be calculated using a simple method, for example, the Federal Court’s pre-judgment rate (RBA rate + 4%).

  The payment of interest for underpayment amounts and the specific interest rate applied are factors that the FWO considers when deciding whether compliance or enforcement action is appropriate. Alternatively, employers can demonstrate an approach to remediation that is more favourable to an employee, for example by adding an ‘uplift’ or making repayments at a higher pay rate. 

• Corrective actions and preventing recurrence

  Once aware of payroll non-compliance, employers must implement immediate interim measures (manual checks, enhanced oversight etc) if longer-term solutions are not yet in place. These steps should also be documented.

• Sustaining future payroll compliance

  The FWO urges employers to strengthen systems, governance and culture through audits, training and upgrades, monitoring and embedding payroll accuracy into workplace governance. 

• Self-reporting

  While there is no mandatory obligation to report, early self-disclosure to the FWO is encouraged in certain circumstances. Reporting at early stages can be structured through ‘checkpoints’ which gives employers scope to update the FWO as more information emerges. A failure to self-report may mean lost opportunity for favourable regulatory treatment. Of course, we always recommend seeking advice prior to self-reporting to the FWO.

Award interpretation and compliance remains on the radar for many of our not-for-profit clients.