4 yearly review of modern awards – Penalty rates case

On Thursday 23 February 2017 the Fair Work Commission handed down its much anticipated decision as part of the four yearly reviews of modern awards. The decision dealt with penalty rates.

Background

The Federal award system has been extensively changed in the last 10 – 15 years or so. Literally thousands of awards have been abolished and around 130 modern awards have taken their place. As part of this process, the Fair Work Commission was charged with the obligations to review modern awards.

The decision is a culmination of part of those reviews. This decision deals with penalty rates. Other parts of modern awards are being regularly reviewed.

The hearing

The full bench heard 143 lay and expert witnesses on the issue of penalty rates. The hearing stretched over 39 days of hearing. Just under 6,000 submissions were made to the full bench. In a reflection of the media and public attention the case has drawn the handing down of the decision was available on a livestream from the Fair Work Commission website. The decision dealt with variations to the penalty rates in six awards.

The decision

The decision dealt with the historic basis for penalty rates. Originally penalty rates were introduced to provide compensation for workers who work out of normal hours and to provide deterrence for an employer scheduling work outside normal hours. The full bench found that a deterrence of employers is no longer appropriate and the primary rationale behind penalty rates is to compensate employees for the “disutility” associated with working on weekends and public holidays.

There were no challenges to the penalty rates for working on a Saturday. The full bench held that the following awards should be varied for Sunday work:

Hospitality Award 175% – 150%

Fast Food Award 

• full time and part time employees 150% – 125%
• casual employees 175% – 150%

Retail Award 

• full time and part time employees 200% – 150%
• casual employees 200% – 175%

Pharmacy Award 7am – 9pm only

• full time and part time employees 200% – 150%
• – casual employees 200% – 175%

The full bench were not satisfied that any variation should be made to the Clubs Award and the Restaurant Award at this stage for Sunday work. They may hear further evidence about these later.

The full bench also changed the rates for public holiday penalty rates. Generally speaking there was a reduction of those rates by 25%. There was no variation to the Clubs Award.

The full bench accepted that there is likely to be “some positive employment effects” from the reduction of the penalty rates but found that the extent of this remains to be seen.

The full bench will receive further evidence about how the proposed award changes will be implemented.

A link to the decision can be found [here](https://www.fwc.gov.au/awards-and-agreements/modern-award-reviews/am2014305-penalty-rates-case)

Comments since the decisions

The comments since following the decisions have been relatively predictable. Employer groups have generally welcomed the changes although some have suggested they do not go far enough. Unions indicated their staunch opposition to the decision.

It is important to put the decision in a historical content text. The nature of work is changing in Australia. The nature of most industries is changing. Twenty years ago it was impossible to buy fresh bread on a Saturday let alone a Sunday. Now it is readily available. Mostly Australians have welcomed these changes but they have come at a cost.

Despite the decision and the reduction in some penalty rates there is still some compensation available for employees who work or are required to work on weekends.

All employers should be aware that the awards have yet to be formally varied. It would be inappropriate to seek to impose the award reductions until the full bench of the Fair Work Commission determines the appropriate transitional arrangements.