Australia: Weekend penalty rates reduction in the Restaurant Industry Award

A recent decision of a Full Bench of the Fair Work Commission has, for the first time in a long series of cases, accepted a claim for a reduction in penalty rates, in this case affecting the Restaurant Industry Award.

Employers in the hospitality, retail and restaurant and café industries have, for some time, been arguing that weekend penalty rates inhibit businesses operating, and limit opportunities for additional employment on Sundays especially.

Weekend penalty rates have been a feature of Australian industrial regulation, and the award system, for many years. Sunday rates in particular were intended to compensate employees for the disadvantage of having to work on Sunday, which was seen as a day of religious and sporting commitments. Penalty rates were developed in an age when standard employment involved a single male breadwinner working 5 days a week, so that working Sunday as well would involve significant disadvantage.

In this case, the employers contrasted this with a 21st century situation in which:

  • religious observance and active participation in sport (as opposed to viewing sport by "audio visual means") was much reduced,
  • typical employees engaged in weekend work in restaurants and cafes were not career employees in the industry,
  • these employees often preferred to work on weekends as they were involved in caring responsibilities or education during the week
  • the penalties applied to many employees who had not already had 5 days employment so that they potentially had opportunities for family and social time at other times in the week
  • Sunday was now not much different to Saturday, so there was no justification for higher Sunday penalties.

On the other hand, the union argued that many of the employees affected were amongst the lowest paid, and relied on penalty rates as a significant component of their income.

The Full Bench split 3-2, with the majority deciding that while Sunday was still a day for much family and social activity, a case had been made out for some reduction in some penalties to achieve the modern award objective of encouraging participation in employment, but that the impact should be restricted to the two lowest levels of classification (therefore excluding career employees), and should take effect by reducing a 50% Sunday loading to 25%, so that it would not exceed a total 50% loading in combination with casual loading of 25%. (The minority decision favoured a slightly smaller reduction, implemented in 2 stages so as not to immediately prejudice current employees, but applying to all classification levels.)

As employers have had a difficult process to obtain this limited reduction, this case does not foreshadow broad-based reduction to penalty rates. This was expected to be an area of interest to the Abbott Government, but whether that is politically possible (in light of the memory of Workchoices, the reaction to the budget, and the situation in the Senate) remains to be seen.

However, with the ACCI and other business groups gearing up for a campaign on the issue, and raising the issue in, for example, the pharmacy and retail award reviews, and with the ACTU in the opposing corner, it seems that this is an issue which will get a higher profile in the next few months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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