Following a two year review period, the Fair Work Commission (FWC) has, in a landmark ruling, reduced Sunday penalty rates in the hospitality, retail, fast food and pharmacy industries and pared-back public holiday penalties in five awards.
There will be reductions in Sunday penalty rates under four awards (hospitality, fast food, retail and pharmacies) to be phased in over a period of at least two years.
The detail of the implementation remains to be decided.
There will be reductions in public holiday penalties under those same awards to take effect from 1 July 2017.
There are also some variations to early morning and late night work loadings in the restaurant and fast food awards to take effect in late March 2017.
The proposed detail of these latter changes will be published shortly with a seven day exposure period (allowing for comment by interested parties).
The Fair Work Act 2009 (Cth) (FW Act) currently requires the FWC to conduct four yearly reviews of modern awards to determine (among other things) whether they are achieving "the modern awards objective" – ie, to provide a fair and relevant minimum safety net of terms and conditions of employment. 1
As part of the current review, various employer bodies made applications to vary the penalty rate provisions in a number of modern awards in the hospitality and retail sectors.
One of the arguments for change is that a reduction in penalty rates is likely to lead to increased trading hours and increases in the level and range of services offered on Sundays and public holidays.
Historically, industrial tribunals have determined that penalty rates are necessary to compensate employees for working outside normal hours and to deter employers from scheduling work outside normal hours. However, the FWC concluded that this measure of deterrence is no longer a relevant consideration in the setting of weekend and public holiday penalty rates. Although accepting that the imposition of a penalty rate may have the effect of deterring employers from scheduling work at specified times or on specific days, the Commission determined it is not the objective of these additional payments.
In its reasons for the changes, the FWC stated that while it understood there is "disutility"2associated with weekend and public holiday work, the extent of that disutility is much less than in times past. 2
The FWC also acknowledged there are likely to be some positive employment effects from a reduction in penalty rates. 4
What's not changed?
The FWC was satisfied that the existing Saturday penalty rates in the fast food, hospitality, restaurant and retail awards achieve the modern awards objective and so made no change.
The FWC rejected the Sunday penalties claims by club and restaurant employers, leaving Sunday penalties in their award unchanged.
The decision does not affect other awards, and the FWC said expressly that no similar variations were being considered to other awards.
The impact of the decision will also vary in individual workplaces according to the industrial arrangements in them. It is very likely that many employers and their employees will not be affected, at least in the short term, because of the terms of applicable enterprise agreements and employment contracts.
Will eventually drop as per this table:
The timing for the reductions to take effect is subject to further proceedings. There will be at least two – and, potentially, up to five – annual adjustments in line with annual wage adjustments.
A claim for similar reductions by clubs and restaurant employers was rejected. The FWC thought that they had failed to establish a case for change. However, ongoing proceedings in relation to both awards and potential changes to the clubs award have been specifically flagged for further consideration.
Public holiday penalty rates
Will also drop as per this this table:
Again, no change to the clubs award.
The modern award review process is ongoing. The immediately relevant next steps include the FWC addressing the following matters:
- the implementation of the Sunday penalty rate reductions;
- the potential further review of the clubs, restaurants and other retail awards;
- the potential for loaded rates in retail modern awards.
The FWC has also flagged a desire to review Sunday and casual penalty rates in the hair and beauty industry award.
1See further section 134 of the FW Act.
2We had to look it up too. To save you the trouble, dictionary.com defines "disutility" as a noun meaning "the quality of causing inconvenience, harm, distress, etc".
3 See FWC decision at 
4 See FWC decision at 
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