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Penalty Rates and the FWC

A presentation at The College of Law on 16th October 2014, discussing the decision in Restaurant and Catering Association of Victoria [2014] FWCFB 1996

In a recent decision of the full bench of the commission penalty rates on a Sunday in the restaurant industry were reduced by 25% for a certain class of employees.  On the face of it, this seems quite minor change, but in terms of what is going to happen over the next year or two this decision may be highly significant across a range of industries.

The modern awards which commenced in 2010 are subject to a 4 year review process in 2014-2015.  This decision was part of an interim two year review, in which there were supposed to be no major changes unless there were ‘cogent’ reasons for the change

What happened?

A number of groups, led by The Restaurant and Catering Association of Victoria, brought an application to FWC at first interest in relation to penalty rates and other issues.   Unsuccessful at first instance, the application covered a wide range of ambitious suggestions, including the complete abolition of penalty rates across the award.  It was never likely to succeed.  But sensibly there was an appeal in relation to a couple of key issues.  One of the points of appeal, amongst a huge volume of evidence, was that there should no longer be a difference between Saturday and Sunday rates.   Ultimately, this argument was successful in having the Sunday penalty for Introductory Level and Grade 1 employees reduced to by 25% (to the same as the Saturday rate).   Historically, the protection of penalty rates has been of prime importance across the union movement and not surprisingly the United Voice immediately lodged an appeal with the Federal Court.  The appeal was dismissed, and the Commission’s decision was upheld.

One of the interesting aspects of the case is the evidence that was given value to by the Fair Work Commission.  All sorts of highly expensive reports commissioned by the parties relating to economic trends and elasticity of labour were rejected by the commission.  But what they were interested in was the largely unchallenged evidence of the actual business owners.  This evidence outlined what changes could be made in their business if there was a reduction in rates, and many suggested that a reduction would allow them to be able trade on Sundays profitably for the first time.   Evidence was also put forward by the business owners about the difficulties, both in compliance terms and in terms of business flexibility.  This evidence was given weight by the Commission, and was one of the reasons for their decision.  The fact that this evidence was given so much weight, signals some degree of movement in relation to penalty rates.

Implications for restaurants and cafes are relatively straightforward.  Vast majority of employees in that industry are paid according the award – there are very few Enterprise Agreements.  Therefore the decision simply means a reduction of the cost of opening on a Sunday.  Implicaitons on employees was not ingnored.  One of the reasons for narrowing of type of employees was an acknowledgement that to career hospitality employees the penalty rate system formed a core part of their earnings.  But there was also evidence that a great number of employees in that part of the sector were either students, or people with family responsibilities that actually had a preference to work at those times.  The evidence of café and restaurant owners was that a reduction in Sunday rates would lead to more businesses being open, which would in turn lead to more work being available.  It is therefore arguable whether maintaining the Sunday rates at this level would truly be beneficial to employees in this class.

 

Impliations more broadly:

We are embarking on a process of reviewing all of the modern awards.  Some industry groups made a submission that penalty rates should be looked at across all awards as one complete issue.  This was rejected by the commission although they indicated that these same issues may be relevant to a number of the Group 4 awards.

The Award modernization process, as well as grouping and consolidating some of the awards, will look at issues such as compliance costs, penalty rates, and practical difficulties that employers are experiencing with the awards.  It is very much worth business owners and employers taking the time to make submissions to the Fair Work Commission in relation to their award.  The Commission will not necessarily agree with every submission, but they have demonstrated that they are genuinely interested in individual experiences.

The message I take from this decision is that is that broad, cynical or hard line attempts to reduce employee rights will comprehensively rejected by the Fair Work Commission, however sensible and practical submissions in relation to difficulties imposed by the Awards on business compliance and flexibility will be taken seriously.

* Helen Carter is the Director and founding solicitor at PCC Lawyers, a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training.  They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.

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