SCHADS Award Sleepovers: Emergency Changes from the Fair Work Commission Effective 1 June 2026

Update April 2026:

The Federal Court has now dismissed the Fair Work Ombudsman’s appeal, confirming that sleepovers are separate from shifts. The Fair Work Commission has since issued a determination varying the SCHADS Award, introducing changes to how sleepover related work is structured and paid, with an operative date of 1 June 2026. While this provides direction, it also introduces a more complex framework for employers to navigate. 

Have questions about how the 1 June 2026 sleepover changes affect your business? Effective HR is running a free Q&A webinar on Thursday 4 June 2026 at 1pm AEST. Bring your scenarios. Get answers from our SCHADS specialists, live. Register free for the 4 June Q&A

On 8 July 2025, the Federal Court handed down its decision in Jats Joint Pty Ltd v Fair Work Ombudsman [2025] FCA 743. This decision found that under the provisions of the SCHADS Award, sleepovers are separate and distinct periods of time that do not form part of a shift. The FWO filed a notice of appeal against this decision on 11 August 2025, which has now been dismissed by the Federal Court on 20 March 2026.

In reaching its decision, the Federal Court also highlighted the lack of clarity in the drafting of the SCHADS Award, noting the difficulty in reconciling how sleepovers should interact with shiftwork provisions. This lack of clarity has been a key driver of the differing interpretations adopted by the Fair Work Ombudsman, employers, and the Commission itself.

While the appeal outcome provides clarity at a legal level, the process to make any changes following this decision needs to be dealt with correctly, and planned out with professional support.

The decision is contrary to the FWO's long-standing position. The appeal of the decision may impact:

• how work performed either side of a sleepover is classified for shift allowance purposes

• whether sleepovers are treated as part of a shift or as separate engagements

• payroll configuration and historical compliance positions across the sector

  
  

In response to the ambiguity created by the decision and the appeal, the Fair Work Commission had issued proposed variations to the SCHADS Award aimed at clarifying how work performed either side of a sleepover should be paid. At the time of writing, those variations have now progressed to a formal determination as part of a broader review of the Award with the FWCs amendments enforced from 1 June 2026.

Timeline of Key Developments

• July 2025: Federal Court decision (Jats Joint) finds sleepovers are separate from shifts

• August 2025: Fair Work Ombudsman files appeal

• December 2025: Fair Work Commission proposes Award variations

• March 2026: Federal Court dismisses appeal

• April 2026: Fair Work Commission issues determination confirming variations

• 1 June 2026: Changes commence

The Fair Work Commission itself has acknowledged the impact of the shifting interpretation, noting that “many employers had changed rostering practices to align with advice provided by the Fair Work Ombudsman which has now been found to be wrong by the Federal Court. There is some urgency in ensuring that the operation of the SCHADS Award is clarified going forward.” - [2026] FWCFB 79

What the Appeal Outcome Means

The Full Court has confirmed that, under the current wording of the SCHADS Award, a sleepover is a separate period and does not form part of a shift.

This means that work performed before and after a sleepover is not automatically treated as a single continuous shift for the purpose of applying shift penalties. However, subsequent Fair Work Commission variations introduce a more nuanced position, where work performed either side of a sleepover may be treated as part of the same shift for some purposes, while being treated separately for others.

Payment for Work Performed Either Side of a Sleepover 

In accordance with the sleepover provisions of the SCHADS Award, when rostering an employee to work a sleepover, an employer must roster or pay an employee for a minimum of four hours immediately before the sleepover period, or immediately after the sleepover period. Provided four hours work is provided or paid at one end of the sleepover period, there is no requirement to provide any work to the employee at the other end of the sleepover period (although an employee may be rostered to work on both sides of a sleepover period where award requirements are met).

When determining how an employee should be paid for work performed either side of a sleepover, the Fair Work Ombudsman (FWO) has traditionally held that a sleepover and any work performed either side of it will be considered as one shift. The FWO's position has therefore been that all work performed Monday to Friday immediately before or after a sleepover should be paid at the night shift penalty rate, on the basis the employee is working a shift that finishes after midnight.

However, in July 2025, a Federal Court decision found that under the SCHADS Award, sleepovers are separate and distinct periods of time that do not form part of a shift. On this basis, the Federal Court expressed a view that work performed Monday to Friday immediately prior to a sleepover period should likely be paid at afternoon shift rates (provided the shift finished after 8.00pm and before 12 midnight) and work performed Monday to Friday immediately following a sleepover period should likely be paid at ordinary rates (provided the shift commenced at or after 6.00am).

This contradicted the FWO's longstanding position on the payment of work immediately before and/or after sleepovers, and as a result the FWO subsequently appealed this decision.

In light of the July 2025 Federal Court decision and subsequent appeal, the Fair Work Commission (FWC) identified that there is ambiguity in relation to how work performed either side of a sleepover period should be paid and is now considering how to vary the award terms to remove this ambiguity. 

The variations by the Commission appear to align with the Federal Court’s position in relation to shift loadings. However, they also introduce provisions which treat work performed immediately before and after a sleepover as part of the same shift for other purposes, adding further complexity to how these arrangements operate in practice.

The variations also introduce the ability, by agreement between an employer and employee, for shifts spanning a sleepover period to extend up to 12 hours, with limits on the amount of work that can be performed before or after the sleepover. This represents a structural change to how sleepovers may be rostered moving forward.

Practical Position for Employers Conducting Sleepovers 

The position for employers conducting sleepovers has now shifted from uncertainty to implementation.

The Fair Work Commission has introduced changes to the SCHADS Award, with effect from 1 June 2026. While the Federal Court clarified how the previous wording should be interpreted, the Commission has moved to amend the Award to address long-standing ambiguity, resulting in a more complex framework for how sleepovers are treated in practice.

For employers, this is not a simple update. The way these changes apply will depend on how sleepovers are currently rostered, how employees are engaged, the existing employment agreements, and how payroll systems are configured.

The Fair Work Ombudsman has also acknowledged that its previous guidance is no longer aligned with the Court’s interpretation, and is currently under review.

As a result, there is no one-size-fits-all position. Different approaches may be appropriate depending on an organisation’s workforce model, systems, and risk profile.

It is also relevant that the Fair Work Commission has indicated that these changes will operate prospectively, which may provide some reassurance to employers who have followed previous guidance in good faith.

Given this, employers should ensure they understand how the updated provisions interact with their current arrangements and be prepared to make changes where required ahead of 1 June.

Where sleepovers form a material part of an organisation’s operations, it may be appropriate to seek specialist advice to ensure compliance with the updated Award provisions.

Payment for Work Performed During a Sleepover 

In accordance with the sleepover provisions of the SCHADS Award, where an employee is required to perform work during a sleepover period (such as toileting), the employee must be paid at the prescribed overtime rate.

The overtime rate that applies will depend on various factors including the length of time worked during the wake up, and the day of the week. The Fair Work Commission has also clarified how overtime applies where work spans across calendar days, ensuring employees are not disadvantaged where shifts cross midnight.

SCHADS Award Sleepovers Rest Breaks Between Shifts 

There are lots of issues with businesses not complying here. The Fair Work Commission has now clarified that a sleepover period does not constitute a break between shifts, and that work performed immediately before and after a sleepover may form part of the same shift. This has implications for how rest breaks are assessed in practice.

Where a minimum 10 or 8 hour rest break is not provided, the shift could be considered a broken shift, which can easily trigger double time payment (OTE), and put the company at risk of Award breaches.

What This Means for SCHADS Award Employers

The recent Fair Work Commission determination and broader Award review process may:

• Clarify how work either side of a sleepover is classified for shift allowance purposes

• Introduce new frameworks for how sleepover-related shifts are structured and paid

• Reduce some areas of ambiguity while introducing new layers of complexity

• Impact staffing costs depending on how the variations are implemented in practice

• Prompt review of payroll, rostering, and compliance approaches across the sector
  

Regardless of how your organisation has historically rostered or paid sleepovers, employers who engage staff on sleepover arrangements will need to take action ahead of 1 June 2026 to ensure ongoing compliance with the updated Award provisions.

The Fair Work Commission has confirmed that these variations will commence on 1 June 2026.

What Employers Should Be Doing Now

In light of the Fair Work Commission’s determination, employers who engage staff on sleepover arrangements should consider:

• Determining what changes are required within their organisation, and whether any formal consultation obligations are triggered

• Reviewing employment contracts and existing agreements, particularly in relation to how work is categorised and expectations around breaks during and after a sleepover

• Reviewing and, where required, adjusting rostering practices to align with the updated provisions 

• Issuing variation letters to employees engaging in sleepover shifts where required

• Auditing payroll system configurations to ensure correct payments before, during, and after a sleepover from 1 June 2026

• Reviewing employment agreements to ensure any offset clauses remain enforceable in light of potential changes to payment structures

  
  

The practical risk for employers is not just about paying the correct allowance. It is about payroll configuration, award interpretation consistency, broken shift exposure, rest break compliance, and ensuring internal rostering systems align with the award as interpreted at the time.

If you operate in the SCHADS sector, this is a clause to watch closely. We will continue to monitor developments and provide updates as further clarification emerges.

Effective HR are specialists in the SCHADS Award and support organisations across the disability, community, and home care sectors. Our team regularly assists employers with award interpretation, classification reviews, and payroll system configuration to ensure complex SCHADS rules are applied correctly in practice.. Read more here

Where uncertainty exists, getting the foundations right early can prevent costly compliance issues down the track.