Australia: Monthly Update - Australian Labour & Employment - February 2017

Last Updated: 23 March 2017
Article by Adam Salter and Claire Goulding

MESSAGE FROM THE EDITOR

In this edition of the Update, we discuss two significant developments that are likely to have far-reaching impacts for employers and employees across Australia. First, we discuss the proposed changes to the Fair Work Act 2009 (Cth) that would impose increased liability on franchisors in relation to the conduct of franchisees as well as harsher penalties for serious contraventions. If enacted, these amendments will necessitate major changes to the way in which franchisors manage their franchise relationships. We then examine the long-awaited Fair Work Commission decision on weekend penalty rates and discuss how the various retail and hospitality awards will be affected by the changes.

IN THE PIPELINE—HIGHLIGHTING CHANGES OF INTEREST TO EMPLOYERS IN AUSTRALIA

Sluggish Wages Growth in the Private Sector Continues

The December quarter 2016 Wage Price Index released by the ABS on 22 February 2017 shows that wages growth in the private sector continues to be sluggish, increasing just 1.8 percent in the year to December 2016. This figure reflects another record low in wages growth, breaking the previous record low of 1.9 percent growth in the September and June 2016 quarters. Total wages growth from the September to December 2016 quarter increased by 0.5 percent. The Wage Price Index measures changes over time in the price of labour services, with the "headline" measure being the total hourly rates of pay excluding bonuses.

Amendment to Workplace Laws Introduced to Target Underpayment of Vulnerable Workers

The Federal Government is seeking to pass significant amendments to the Fair Work Act 2009 (Cth) ("Act") that would have the effect of making franchisors directly accountable for contraventions of the Act by their franchisees. The changes respond to recently uncovered evidence that suggests widespread misconduct in a number of retail and fast food chains using the franchise model.

Extended Liability for Franchisors. The cornerstone of the amendments is that they will extend the liability of franchisors for breaches of the Act by their franchisees. Under the current accessorial liability provisions in section 550 of the Act, franchisors with no knowledge of their franchisees breaching the Act will not be liable for their franchisees' breaches. The new amendments will extend such liability to capture franchisors who have "a significant degree of influence or control" over their franchisee's conduct if they know or could reasonably be expected to know that a franchisee was contravening the Act.

The amendments include a defence if a franchisor takes "reasonable steps" to prevent contraventions. In deciding whether reasonable steps are taken, the amendment requires the Fair Work Commission ("Commission") or court to take into account the size and resources of the corporation and the franchise relationship itself.

The Explanatory Memorandum to the amendment specifies that "turning a blind eye to contraventions is not an option". Whether this turns out to be true will depend on how far the courts and Commission will require corporations to go in order to find out about violations of the Act which they could reasonably be expected to have known.

Harsher Penalties for "Serious Contraventions". The amendments would also increase the maximum penalties for contraventions of the Act fivefold, to $108,000 for individuals and $540,000 for corporations. Importantly, this applies per offence and per employee. That would be available where the contraventions involved are both "deliberate" and part of a "systemic pattern". For corporations, deliberate conduct includes "expressly, tacitly or impliedly authoris[ing] the contravention". This broad definition of "deliberate" conduct means that franchisors will need to be wary about not tacitly encouraging breaches of the Act, such as when responding to complaints that franchisees have breached the Act.

Express Prohibition on "Cash Back" Schemes. The amendments would also prohibit employers from requiring employees to hand back money, in so-called "cash back" schemes. Under the amendments, employers cannot "directly or indirectly" require an employee "to spend, or pay ... an amount of the employee's money" if it is "unreasonable". The amendments would also make void any terms of employment contracts which require "unreasonable" payments. This will reduce the scope of allowable deductions under section 324 of the Act. The test of unreasonableness is vague, so it will take time to see how the Commission and the courts approach such provisions.

Increased Evidence-Gathering Powers of the Fair Work Ombudsman. To complement the new provisions, the amendments will also give the Fair Work Ombudsman ("Ombudsman") new investigative powers, where the Ombudsman "reasonably believes" a person or corporation has information or documents relevant to its investigation. These powers are in line with bodies that investigate serious white collar crime in Australia. Additional penalties have been inserted for people and corporations that hinder the Ombudsman or its staff in their investigations.

Conclusion. The above amendments have received wide popular support as well as bipartisan support in Parliament. If they are passed, franchisors will be required to make substantial changes to their existing franchise arrangements, including conducting regular spot checks and providing contact numbers for franchisee employees to report potential underpayments. Franchisors should also consider updating franchise agreements to require franchisees to comply with the new workplace laws.

HOT OFF THE BENCH—DECISIONS OF INTEREST FROM THE AUSTRALIAN COURTS

Fair Work Commission Delivers Long-Awaited Decision on Penalty Rates

Factual Background. As part of its four-yearly review of modern awards, the Full Bench of the Commission has handed down its decision on penalty rates in a range of awards in the hospitality and retail sectors, namely: the Fast Food Industry Award 2010, General Retail Industry Award 2010, Hospitality Industry (General) Award 2010, Pharmacy Industry Award 2010, Registered and Licensed Clubs Award 2010 and Restaurant Industry Award 2010.

The Commission considered proposals by a number of employer bodies to vary weekend penalty rates and, specifically, to reduce Sunday penalty rates to bring them in line with Saturday penalty rates. There were also proposals to reduce public holiday penalty rates across the various awards. Generally speaking, no reductions were sought to Saturday penalty rates.

The review process was a mammoth undertaking, with the Commission receiving more than 5,900 submissions from the various parties, including employees, employers and other interested organisations. After 39 days of hearings involving evidence from 143 witnesses, the final written submission was received in early February this year, with the Commission handing down its decision on 23 February 2017.

Legal Background. As part of its modern award review, the Commission is required, under section 134 of the Fair Work Act 2009 (Cth) ("Act") to consider whether each award is achieving the modern awards objective. The modern awards objective requires that the Commission "ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions", taking into account matters including (relevantly) "... the need to provide additional remuneration for ... employees working on weekends or public holidays...".

Reasons for Decision. The Commission noted that while the traditional rationale for setting penalty rates has been to deter employers from scheduling work outside regular working hours, the "deterrence" element should no longer be a relevant consideration in the setting of weekend and public holiday penalty rates. Rather, the sole determinant should be how best to compensate employees for the inconvenience of working on weekends and public holidays. This requires consideration of: (i) the extent of the inconvenience (in particular the impact on heath and work-life balance); (ii) the terms of the particular modern award, including whether it already compensates employees for working on such days; and (iii) the extent to which working on such days is a feature of the particular industry.

After examining the evidence before it, the Commission concluded that while there is still a higher level of inconvenience associated with weekend work (compared to weekday work) and Sunday work (relative to Saturday work), the extent of inconvenience has reduced in recent times such that the sizeable gap between Saturday and Sunday penalty rates is no longer justified. The Commission noted that the same principles should apply to public holidays, though in doing so it acknowledged that public holidays still serve an important community purpose.

The Commission concluded that there would be a clear benefit in achieving consistency in penalty rates across Saturdays, Sundays and public holidays (and across various awards, where appropriate), in light of lay evidence that current penalty rates were leading employers to impose operational limitations on Sundays and public holidays (including reducing trading hours, lowering staff levels and restricting the range of services provided).

Decision. The Commission determined that Sunday penalty rates in four of the six modern awards (the Fast Food, Hospitality, General Retail and Pharmacy Awards) do not provide a "fair and relevant minimum safety net" as per the modern awards objective and therefore should be reduced. The Commission's approach to casual penalty rates was to keep the rate 25 percentage points higher than the rate for non-casual workers. The Commission chose not to make any changes to penalty rates in the Registered and Licensed Clubs Award 2010 or Restaurant Industry Award 2010.

The reductions in Sunday penalty rates for each award (for full-time and part-time employees), to be implemented by way of a series of annual adjustments commencing on 1 July 2017, are as follows:


(a) Hospitality Award—175% to 150% (no change for casual employees);

(b) General Retail Award—200% to 150% (175% for casual employees);

(c) Fast Food Award (Level 1 Employees only)—150% to 125% (175% to 150% for casual employees); and

(d) Pharmacy Award—200% to 150% (175% for casual employees).

The Commission also reduced the public holiday penalty rates for full time employees in respect of the following awards (with the changes also due to commence on 1 July 2017):

(a) Hospitality Award—250% to 225% (275% to 250% for casual employees);

(b) Restaurant Award—250% to 225% (remaining at 250% for casual employees);

(c) General Retail Award—250% to 225% (250% for casual employees);

(d) Fast Food Award—250% to 225% (250% for casual employees); and

(e) Pharmacy Award—250% to 225% (250% for casual employees).

Finally, the Commission also varied provisions in the Restaurant and Fast Food Awards that offer higher penalty rates for those undertaking early/late night work. Specifically, it amended the provision that provides a 15 percent loading for work performed between midnight and 7.00 a.m., reducing the time span to 6.00 a.m. It did so on the basis that the existing provision was overcompensating employees for work performed between 6.00 a.m. and 7.00 a.m., which it viewed as inconsistent with the modern awards objective (because it was neither "fair" to employers nor "relevant" to the prevailing circumstances in the industry). These changes are to come into effect, after a period of consultation, on 27 March 2017.

The Commission stressed that the decision to change penalty rates was determined in light of characteristics unique to the Retail and Hospitality sectors, so it should not be seen as justifying similar amendments in other awards. For instance, the Retail and Hospitality sectors are particularly important sources of entry-level jobs for young workers (who are more likely to work on weekends). In addition, consumer expectations regarding access to services in those sectors have increased over time.

The Commission also expressed provisional views on transitional arrangements for the Sunday penalty rate reductions and invited public submissions (particularly on the question of whether take-home pay orders might be an available option). However, the Commission expressed opposition to the idea of a 12-month transitional period before the changes came into effect. It also did not think that preserving current penalty rates for all existing employees was a viable option (as it would lead to different employees being employed on different terms and conditions).

Impact on Employers. This decision has been warmly welcomed by employers and employer organisations, which see the alignment of penalty rates as an important first step in increasing productivity and overall competitiveness. While the Commission anticipates that the changes are likely to have a positive impact on employment, it remains to be seen whether they will ultimately lead to more jobs or longer trading hours. As expected, there has been strong opposition to the Commission's decision from unions and other employee bodies. Consequently, it appears highly likely that one or more political parties will seek to introduce legislation to prevent the amendments from coming into force or at least delay their commencement. The Government has also indicated it is open to possible measures to offset any reductions in pay so that workers are not left worse off as a result of the changes.

We thank associate Claire Goulding and law clerk Bowen Fox for their assistance in the preparation of this Update.

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.

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
Adam Salter
 
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.