Australia: Penalty, Ref?... No… FWC reduces Sunday and Public Holiday rates in 6 modern awards

Penalty rates for irregular hours of work have become a hotly-contested issue in recent years. As the Australian economy continues to evolve into a '24/7' service model, it has been argued that the system of penalty rates no longer reflects the reality of working arrangements in many industries.

In this article, we examine the recent Fair Work Commission (FWC) Full Bench decision to reduce penalty rates for work on Sundays and public holidays in six modern awards. We also consider the FWC's rationale as to the necessity of these penalty rate reductions, and explore the decision's broader implications – including its practical impact for employers.

THE FULL BENCH'S DECISION

On 23 February 2017, the Full Bench of the FWC decided1 to reduce Sunday and public holiday penalty rates in a number of awards relevant to the hospitality and retail sectors.

The decision formed part of the 4-yearly review of modern awards under the Fair Work Act 2009 (Cth) (FW Act).

In reaching this decision, the FWC determined that the penalty rate provisions of the affected awards did not achieve the modern awards objective to provide 'a fair and relevant minimum safety net' of wages and conditions (as set out in s 134(1) of the FW Act).

The six modern awards affected by the decision are the:

  • Fast Food Industry Award 2010 (the Fast Food Award);
  • General Retail Industry Award 2010 (the Retail Award);
  • Hospitality Industry (General) Award 2010 (the Hospitality Award);
  • Pharmacy Industry Award 2010 (the Pharmacy Award);
  • Registered and Licensed Clubs Award 2010 (the Clubs Award); and
  • Restaurant Industry Award 2010 (the Restaurants Award).

WHAT ARE THE NEW PENALTY RATES?

The new Sunday and public holiday penalty rates for the affected awards (as adjusted by the FWC's decision) are set out in the tables below.

The FWC also decided to alter the hours during which late night penalties apply in the Fast Food and Restaurants Awards. The 15% late night loading in both awards will only apply between midnight and 6.00 am (instead of until 7.00 am), and the 10% loading for evening work in the Fast Food Award will only apply from 10.00 pm to midnight (instead of from 9.00 pm).

The Full Bench decided that there was insufficient evidence to support a change to Sunday or public holiday penalty rates for the Clubs Award, or Sunday penalty rates for the Restaurant Award. The FWC has offered a further opportunity to interested parties to establish a merit case that these awards do not presently provide a fair and relevant minimum safety net.

WHEN WILL THE RATE CHANGES COME INTO EFFECT?

The Full Bench did not set an implementation date for the new Sunday penalty rates and is yet to determine the transitional arrangements that will apply to these changes.

The FWC expressed a provisional view in favour of a 'phase-in' scheme, with the reductions to Sunday penalty rates gradually introduced through a series of annual adjustments on 1 July each year. A hearing will be scheduled in early May 2017 to decide on this issue. Interested parties have until 24 March to file submissions.

The changes to public holiday penalty rates will take effect from 1 July 2017. The variations to the late night penalty loading periods in the Fast Food and Restaurants Awards will commence on 27 March 2017.

THE FULL BENCH'S REASONING

In reaching its decision, the FWC observed that penalty rates traditionally served a 'compensatory' purpose (additional payment for working outside regular hours) and a 'deterrence' purpose (preventing employers from scheduling work outside normal hours). However, the deterrence element is no longer relevant to the setting of weekend and public holiday penalty rates.

The Full Bench was required to consider s 134(1)(da) of the FW Act, a provision inserted into the modern awards objective by the former Labor Government. The FWC stated that when assessing the 'need to provide additional remuneration' for employees working on weekends or public holidays, the following three factors should be taken into account:

  • the impact or disutility of working at such times or on such days for the employees concerned;
  • the terms of the relevant award, in particular, whether it already compensates employees for working at such times or on such days (e.g. through 'loaded' minimum rates or industry allowances); and
  • the extent to which working at such times or on such days is a feature of the industry regulated by the particular award.

In relation to Sunday penalty rates, the FWC drew two conclusions from the extensive evidence presented in the proceedings:

  1. 'There is a disutility associated with weekend work, above that applicable to work performed from Monday to Friday. Generally speaking, for many workers Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past.'
  2. As the Productivity Commission (PC) had found in its Workplace Relations Review Final Report (2015):2 'there are likely to be some positive employment effects from a reduction in penalty rates, though it is difficult to quantify the precise effect. Any potential positive employment effects from a reduction ... are likely to be reduced due to substitution and other effects.'

On the second point, the Full Bench accepted that a reduction in penalty rates would be likely to lead to:

  • increased trading hours on Sundays and public holidays;
  • a reduction in the hours worked by some owner operations;
  • an increase in the level and range of services offered on Sundays and public holidays; and
  • an increase in overall hours worked.

However, the FWC cautioned that these changes would not apply uniformly across all businesses and that the actual impacts on employers would depend on the particular circumstances affecting their business.

The Full Bench also drew attention to the 'distinguishing characteristics' of the hospitality and retail sectors. In particular, it noted that the proportion of employees in these industries who worked on weekends was generally much higher than in other sectors.

In relation to public holiday penalty rates, the FWC found that the disutility of working on public holidays was greater than that of working on Sundays ('relative disutility'). However, the extent of that disutility had been alleviated in recent times with the introduction of the statutory right for employees to refuse to work on public holidays on reasonable grounds.

Furthermore, the Full Bench found that lower public holiday penalty rates would be likely to lead to some additional employment, as well as an increase in the level and range of services offered by some hospitality and retail enterprises. However, it qualified this conclusion by noting that, as a group, it was improbable that existing workers' hours would rise sufficiently to offset the income effects of the penalty rate reduction.

The FWC acknowledged that employees in the hospitality and retail sectors were relatively low paid, and that a reduction in Sunday and public holiday penalty rates would have a negative impact on employees' living standards and their capacity to meet their needs.

While this weighed against reducing penalty rates, the Full Bench emphasised that the primary purpose of penalty rates is to compensate employees for the disutility associated with working on Sundays or public holidays, rather than to address the needs of the low paid. Nevertheless, it was noted that the impacts of the changes on employees would be taken into account when determining the transitional arrangements for the new penalty rates.

THE BROADER IMPLICATIONS OF THE FULL BENCH'S DECISION

In many respects, reductions in penalty rates in the hospitality and retail industries became almost inevitable once the PC recommended reducing Sunday rates to Saturday levels for permanent employees in its 2015 report.

The PC reached the conclusion that, in these industries, 'social trends and community norms have shifted so that the historically distinctive role of Sundays as a time when people did not shop or engage in other consumer-oriented activities has changed'.

Similar conclusions were reached by the Full Bench, based on its consideration of extensive economic and expert evidence (in addition to the PC's findings).3 As noted above, the FWC also adopted the PC's view about the potential employment benefits arising from penalty rate reductions.

Nevertheless, those views are by no means universally accepted, and the FWC's decision has been met with considerable hostility from unions and the Labor Opposition. Labor quickly sought, unsuccessfully, to introduce legislation into federal Parliament overriding the decision.4 The union movement is considering various responses to the decision, including mobilising consumer support to persuade retail and hospitality businesses not to implement the penalty rate reductions, and political protest action.

Prime Minister Turnbull has indicated that the Government would support a phasing-in of the changes to penalty rates over a period of years to alleviate the effects of the reductions on take-home pay.

It is clear that the issue of penalty rates will now form a major focus of the political debate over workplace relations in the lead-up to the next federal election.

Further, the FWC has foreshadowed the potential review of penalty rates in other modern awards relevant to the hospitality and retail industries, in particular the Amusement, Events and Recreation Award 2010 and the Hair and Beauty Industry Award 2010.

4 STEPS EMPLOYERS SHOULD TAKE NOW

Employers with operations in the sectors covered by the six retail and hospitality awards will need to consider the practical implications of the Full Bench's penalty rates decision and take the following four steps:

  1. Closely monitor further developments, especially the transitional arrangements for implementation of the penalty rate reductions.
  2. If you do not have an enterprise agreement which varies the applicable award penalty rates, keep in mind that you may be able to implement Sunday penalty rate reductions in accordance with the FWC's proposed phase-in timetable (yet to be finalised), and public holiday reductions from 1 July 2017. However, remember to check the wording of the employment contracts of relevant employees, as this may preclude any unilateral variation of existing conditions.
  3. When negotiating a new enterprise agreement for your business (or a renewal of an existing agreement) keep in mind that the reduced penalty rate levels (once operational) will form part of the basis for comparison with the applicable award when the FWC applies the 'better off overall test' in considering whether to approve the agreement.
  4. Consider that there may be opportunities to reduce operating costs to allow businesses to open or open for longer hours during periods of high demand on Sundays and public holidays, not only for SMEs but also for larger employers operating (for example) hotels, resorts and casinos on a 24/7 basis.

Footnotes

1 4-Yearly Review of Modern Awards – Penalty Rates [2017] FWCFB 1001.

2 See: Reports of the Productivity Commission and Trade Unions Royal Commission will set the Workplace Reform Agenda in 2016

3 See [2017] FWCFB 1001 at [444]-[610].

4Fair Work Amendment (Protecting Take Home Pay) Bill 2017.

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.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.