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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:
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:
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.
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).
(Level 1 employees only)
Full-time and part-time
(7.00am - 9.00pm only)
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.
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:
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:
Those changes will take effect from late March 2017.
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:
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