Penalty rates in the retail sector

Undoubtedly the hottest issue this quarter is the long- awaited decision of a Full Bench of the Fair Work Commission (Commission) regarding penalty rates in the retail, hospitality, fast food, and pharmacy sectors.

The Commission ruled in favour of reducing Sunday and public holiday penalty rates in the retail sector, although the proposed changes to Sunday rates are to be phased in over a number of years—with the exact timing yet to be finally determined.

Sunday penalty rates for full-time and part-time employees under the General Retail Industry Award 2010 (Award) will reduce from 200% to 150%. Sunday penalty rates for casual employees under the Award will reduce from 200% to 175%. The 175% for casuals appears to be the rate inclusive of the casual loading.

Public holiday rates for full-time and part-time employees under the Award will reduce from 250% to 225%, whilst casuals will continue receiving a penalty rate of 250%.

The Commission noted that the relevant issue in arriving at its decision was whether or not the penalty rates in the Award achieved the modern award objectives. The Commission held that, in relation to the Award, the Sunday and public holiday penalty rates did not provide a fair and relevant minimum safety net.

It noted that the impact of Sunday work on affected employees in the retail sector was much less than in times past, although still greater than for Saturday work.

Whilst the Commission reviewed the Saturday penalty rates under the Award, it was satisfied that they achieve the Award’s objective and did not amend them.

The Commission noted that the high Sunday and public holiday penalty rates had led many business owners and operators to restrict their hours of operation and services provided on these days. In the Commission’s view, the reduction in penalty rates is likely to result in a number of benefits to both employees and employers, including increased trading hours.

In light of the fact that the decision is likely to create financial hardship for a number of employees, particularly those who work on Sundays, the Commission concluded that appropriate transitional arrangements will be necessary to mitigate the hardship. It has not reached a concluded view on what these arrangements will be and will seek submissions from interested parties.

However, the Commission has indicated that the transition to the new Sunday penalty rates will be achieved by a series of annual adjustments, commencing on 1 July 2017, over a period of at least two years (but less than five). In this way, the transition will likely occur at the same time as the minimum wage increase is passed on.

The changes to the public holiday penalty rates will take effect from 1 July 2017.

The decision will provide some welcome relief to retailers after what has been a challenging start to 2017. The catch is that there is unlikely to be an immediate dramatic change due to the reduction in Sunday penalty rates being transitioned in over a number of years, commencing in July 2017.

Large retailers with existing enterprise agreements should review their current arrangements as the decision will affect their industrial relations strategy, particularly in light of the Commission’s recent approach to approving these agreements.

In addition to the retail sector, the Commission also ruled in favour  of reducing penalty rates in other areas including the hospitality, fast food, and pharmacy sectors.

Fair Work Commission departures and panel changes

Tensions in the Commission’s senior ranks were exposed with the resignation of Vice President Graeme Watson, effective 28 February 2017. The Australian Financial Review partially reproduced a letter from Vice President Watson to Employment Minister Michaelia Cash in which Watson VP raised concerns regarding the industrial relations system and the Commission, including concerns that the business community increasingly perceives the Commission as partisan, dysfunctional, and divided. Vice President Watson had been a member of the tribunal since 19 June 2006 and had been the head of the major projects and organisations panels. 

The Commission has announced changes to the leadership of some of its panels in light of Watson VP’s departure. Vice President Watson heard complex matters in Melbourne covered by the panels for the government and recreational services industry, the manufacturing and building industry, and the transport, agriculture, mining, and services industry. Those matters will now be handled by Vice President Adam Hatcher. Vice President Joe Catanzariti replaces Watson VP as head of the major projects panel; and Senior Deputy President Jonathan Hamberger on the organisations panel. The panel list no longer includes an expert panel for assessment of default superannuation funds, which has been inactive since mid-2014.

The announcement of Watson VP’s departure was followed shortly by the resignations of Senior Deputy Presidents O’Callaghan and Acton.

Construction Code

There have been further changes to the Building and Construction Industry (Improving Productivity) Act (Cth) (Act). The Act, which finally brought the 2014 Building Code (Building Code) into effect, became law late last year. Before being approved, the original Bill was amended so that the Building Code would no longer apply retrospectively to every enterprise agreement approved since April 2014. Instead, the Act had the effect that:

• if an employer was covered by an enterprise agreement made before the Building Code was issued, which did not comply with the Building Code, that employer had until 29 November 2018 to still submit expressions of interest, tender for and be awarded Commonwealth funded building work (before being required to have a Code-compliant EBA); and

• enterprise agreements made after the Building Code was issued, must still comply with the Building Code.

However, after a backflip by Senator Derryn Hinch, the Act was changed so that, rather than having until 29 November 2018 to have a Code-compliant EBA (for EBAs made before the recent legislative changes), companies will now only have until August this year to renegotiate code- compliant agreements if they want to win Commonwealth government contracts.

Revisions to the paid parental leave scheme —watch this space

On 8 February 2017, the Turnbull Government introduced the Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 into Parliament. The Government is seeking crossbench support in the Senate for its revised paid parental leave scheme, which is embedded in legislation that restructures income and family support.

The Bill’s proposed changes to the paid parental leave regime include an extended maximum parental pay period of 20 weeks (from the current 18 weeks), but are otherwise similar to the changes the Government has been attempting to pass over the past few years.

If passed, the Bill will prevent “double-dipping” by denying government-paid leave to parents who are entitled to receive paid parental leave of no less than 20 weeks’ pay at the National Minimum Wage from their employers. The government will pay the difference where employers’ paid leave schemes are less than 20 weeks’ pay. The Opposition says that approximately 70,000 working mothers will be worse off under the revised scheme.

Commonwealth penalty units

On 16 February 2017, the Crimes Amendment (Penalty Unit) Bill 2017 (Cth) was introduced into the House of Representatives. The Bill proposes to amend the Crimes Act 1914 (Cth) to increase the Commonwealth penalty unit from $180 to $210, with effect from 1 July 2017. It also seeks to delay the first automatic CPI adjustment to the penalty unit from 1 July 2018 until 1 July 2020, to be indexed annually every three years thereafter. We will keep you informed on whether the Bill is passed by the Senate and is enacted into law.