Federal Court Clarifies Sleepover Shifts Under SCHADS Award

On 8 July 2025, the Federal Court of Australia handed down a landmark decision in Jats Joint Pty Ltd v Fair Work Ombudsman [2025] FCA 743, providing well-overdue clarity on the interpretation of sleepover shifts and entitlements under the the Social, Community, Home Care and Disability Services (SCHADS) Award 2010 (the Award).

Namely, the Court addressed whether sleepover periods should be considered part of a continuous shift for penalty rate purposes, a question that has caused significant confusion across the sector and relevant industries.

Key Facts

The case arose after the Fair Work Ombudsman (FWO) issued a compliance notice to Jats Joint Pty Ltd, alleging that it failed to pay a 15%-night shift loading under clause 29.3(b) of the Award for time worked immediately before and after sleepovers. The FWO, argued that these periods should have been treated as one continuous shift, which would attract night shift loadings and potentially overtime under the Award.

Decision

However, Justice Stellios ruled against the FWO and in favour of Jats Joint. The Court found determined that:

• Sleepovers are not part of a shift: They are regulated separately under clause 25.7 of the Award, and attract a fixed allowance, not shift loadings.
• Sleepovers can serve as a rest break between shifts under clause 25.4(b) of the Award.
• Time worked before and after sleepovers are separate shifts. In other words, hours worked before and after a sleepover do not combine into one continuous shift.
• Night shift penalties apply only to actual periods of work. Clause 29.3(b) of the Award provides a 15% loading penalty rate for shifts involving work between midnight and 6:00am (Night Shift). An employee simply being on sleepover duty during those hours does not immediately qualify the employee for the Night Shift penalty rate.
• The Sleepover Allowance (4.9% of the standard rate per night) remains payable under clause 25.7 (d) of the Award.
• Where an employee is required to perform work during the sleepover period, “the employee will be paid for the time worked at the prescribed overtime rate with a minimum payment as for one hour worked” as per clause 25.7(e) of the Award.

While the FWO argued that clause 25.7 of the Award operates within the broader Award context, this was not accepted by the Court. The Court clarified that the terms of clause 25.7 of the Award provides separate and detailed provisions which imply that sleepover terms are largely self-contained, except where expressly qualified. The Court made orders cancelling the FWO’s compliance notice issued to Jats Joint Pty Ltd and confirming that it was not required to backpay any impacted employees.

This interpretation overturns the FWO’s position that sleepovers and adjacent work formed one continuous shift. The practical impact is significant: penalty rates and minimum engagement rules now apply to each separate period of work, not as a single extended shift.

Why It Matters

For employers and employees covered by the SCHADS Award, this decision clarifies:

• Sleepovers are not counted as “time worked” as in being part of a continuous shift. Time worked is only counted during sleepover periods when the employee is actually required to work during the sleepover period.
• Minimum engagement and overtime entitlement rules apply separately and individually to each shift.
• Overtime applies only if active work occurs during the sleepover.
• Sleepover allowances remain payable.
• Night penalties apply only to actual work within night hours.

Most importantly, employers must immediately prioritise a review of its rostering procedures to ensure compliance with minimum breaks between shifts and avoid inadvertently breaching maximum hours.

What’s Next?

The Fair Work Ombudsman has appealed the decision which was filed 11 August 2025, and the outcome could change the current interpretation (Appeal). Contrarily, employer groups and unions such as the Australian Services Union, the Australian Industry Group and Parkerville Children and Youth Care Incorporated have lodged applications to the Fair Work Commission seeking amendments to the SCHADS Award to codify the Courts decision.

Until the Court makes a determination in the FWO’s Appeal, employers can look to this decision for guidance and treat it as authoritative.

How can Chamberlains help?

Our Workplace Team at Chamberlains Law Firm will be closely monitoring the Appeal and will continue to publish updates.

The SCHADS Award is one of the most complex modern awards in Australia. These provisions often interact in ways that create significant compliance risks for employers. Misinterpretation of the Award can lead to underpayments, penalties, and reputational damage especially given the FWO’s active enforcement in this sector. As the Court has ruled against the FWO’s longstanding advice and guidance, employers should be aware that when it comes to the SCHADS Award, expert legal advice is not optional, but rather essential.

We provide clear, practical solutions that protect your business and your workforce.

Our Workplace Law Team have extensive experience in advising employers on award interpretation, particularly those who are covered by the SCHADS Award and in the SCHADS industries. We help SCHADS employers navigate these complexities with confidence. Our services include:

• Award interpretation and compliance audits;
• Advice on rostering and shift structures;
• Managing Fair Work investigations and disputes;
• Drafting employment contracts and policies aligned with the Award; and
• Training HR teams on practical compliance strategies.

Contact our Workplace Law Team on 02 6188 3634 to discuss sleepover shift entitlements, or to learn more about how we can assist your business.