FWC rules on hospitality & retail penalty rates

Key takeaways

• The Full Bench of the Fair Work Commission has handed down its decision on its review of modern award penalty rates in the hospitality and retail sectors, reducing Sunday and public holiday rates in a number of awards.
• For employers in retail and hospitality industries, the impact of the Full Bench’s decision will depend upon the industrial arrangements that are in place and how employees are remunerated.
• Clients who are unsure of the effect of the decision on their arrangements should seek specific advice.

FWC Review

Under the Fair Work Act 2009, the Fair Work Commission is required to conduct a four-yearly review of modern awards to ensure that each award meets the “modern awards objective”.  The “modern awards objective” is for the awards to “provide a fair and relevant minimum safety net of terms and conditions”.  As part of the first of those reviews in 2014, a number of employer bodies made applications to the Commission to vary the penalty rate provisions in the following modern awards:

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

Implications for employers

For employers in retail and hospitality industries, the impact of the Full Bench’s decision will depend upon the industrial arrangements that are in place and how employees are remunerated.

The decision will have the most immediate impact in respect of employees who are employed under the terms and conditions of one of the relevant awards and who are paid according to that award (as opposed to being paid an annualised salary or loaded rate).  For those employees, the minimum rates which they are entitled to be paid for working on Sundays and/or public holidays (as the case may be depending on the applicable award) will reduce with effect from 1 July 2017 (subject to the Full Bench’s final determination on the implementation of the reduction to Sunday rates). 

However, in implementing those reduced rates, employers should be mindful of the terms of an employee’s employment contract. For example, if an employee’s contract expressly states that an employee will be paid a particular rate for work performed on a Sunday, reducing the rate paid to the employee is likely amount to a breach of the employee’s contract, regardless of whether the reduction is in line with changes to the underlying modern award.

For employees who are covered by an enterprise agreement, there will be no immediate impact unless:

• the enterprise agreement states that Sunday and/or public holiday rates are to be paid according to the relevant award; or
• the enterprise agreement incorporates the relevant award and is silent as to the issue of Sunday and/or public holiday penalties.

Whilst the Fair Work Act provides that the base rate of pay for an employee under an enterprise agreement cannot be less than the applicable base rate of pay under an award, any Sunday or public holiday rates which are specified in an approved enterprise agreement will be unaffected. However, the new penalty rates will be relevant in determining whether new or replacement enterprise agreements (for which approval is sought on or after 1 July 2017) pass the “better off overall” test.

Sunday rates

The Full Bench found that the Sunday penalty rates in the Fast Food (for level 1 employees only), Retail, Hospitality and Pharmacy Awards were no longer a “fair and relevant” safety net, reducing those rates as set out in the table below.  It declined to reduce Sunday penalties in the Restaurant or Club Awards (but has provided interested parties with a further opportunity to convince the Commission that the weekend penalty rates in the Restaurant Award should be varied).

Award	Employee type	Current rate	New rate
Fast Food Award (Level 1 employees only)	Full-time and part-time Casual	150% 175%	125% 150%
Retail Award	Full-time and part-time Casual	200% 200%	150% 175%
Hospitality Award	Full-time and part-time Casual	175%	150%
		No change
Pharmacy Award (7.00am - 9.00pm only)	Full-time and part-time Casual	200% 200%	200% 200%

 

The Full Bench has not yet determined how the changes to Sunday rates will be implemented.  It is seeking submissions from interested parties in respect of its provisional views that the reductions should take place over a series of at least two (but not more than five) annual adjustments on 1 July each year, commencing 1 July 2017.   Submissions are also being sought on the question of whether “take home pay orders” are an available option to mitigate the impact of the changes on employees.

Public holiday rates

The Full Bench also reduced public holiday penalty rates in all of the modern awards the subject of the proceedings except for the Clubs Award, effective 1 July 2017, as follows:

 

Award	Employee type	Current rate	New rate
Fast Food Award	Full-time and part-time Casual	250% 275%	225% 250%
Retail Award	Full-time and part-time Casual	250% 275/250%	225% 250%
Hospitality Award	Full-time and part-time Casual	250% 275%	225% 250%
Pharmacy Award	Full-time and part-time Casual	250% 275%	225% 250%
Restaurant Award	Full-time and part-time Casual	250%	225%
		No change

 

Early/late night work loadings

In addition, the Full Bench decided to vary certain penalty provisions in relation to early/late night work in the Restaurant and Fast Food Awards, as follows:

• Clause 34.2(a)(ii) of the Restaurant Award will be amended so that the 15% loading is payable for work performed between midnight and 6:00am (instead of between midnight and 7:00am);
• Clause 25.5(a)(i) of the Fast Food Award will be amended so that the 10% loading is payable for work performed between 10:00pm and midnight (instead of between 9:00pm and midnight).

 Those changes will take effect from late March 2017.

Next steps in the proceedings

In addition to seeking submissions on the implementation of the reduced Sunday penalty rates, there are a number of further matters to be addressed in these proceedings, including:

• the potential for further review of some of the awards, including a proposal to revoke the Clubs Award and extend the coverage of the Hospitality Award accordingly;
• the potential for “loaded rates” (i.e. a rate which is higher than the relevant minimum hourly rate in the award which is paid for all hours worked in lieu of certain penalty rates) to be introduced into the awards.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).