In news sure to disappoint many employers, a Full Bench of the Fair Work Commission has refused to reduce penalty rates payable under a number of modern awards. 

What happened?

Since modern awards were established in 2008 and 2009, there has been consistent criticism of the penalty rates an employer is required to pay when employees work ‘unsocial hours’. 

It was hoped by a wide range of employers that the review of modern awards would result in a reduction of some of the more significant penalty rates, especially those payable for work on a Sunday.

A number of employer organisations applied to vary five modern awards, being:

  • Fast Food Industry Award 2010;
  • Food, Beverage and Tobacco Manufacturing Award 2010;
  • General Retail Industry Award 2010;
  • Hair and Beauty Industry Award 2010; and
  • Hospitality Industry (General) Award 2010.

The Commission determined that there was insufficient evidence to justify reducing or removing any of these penalty rates. 

Importantly, however, the Commission did note that the modern awards are due to be reviewed more comprehensively in 2014, effectively inviting employers to renew their application if they can provide evidence to justify a change.

Despite the Full Bench’s decision, the Federal Government has recently proposed amending the Fair Work Act 2009 (Cth) so that the Fair Work Commission pays due regard to the need to provide additional remuneration for employees working overtime, unsociable, irregular or unpredictable hours, and for working shifts on weekends and public holidays.

If this amendment is made it will introduce a further hurdle to future reductions in penalty rates under modern awards.

Where to now?

This decision (along with the Federal Government’s move to include a requirement to provide additional remuneration to employees working ‘unsociable hours’) makes it clear that, at least for the time being, employers relying on modern awards to set the terms and conditions of employment for their employees will be required to make additional payments when their employees work ‘unsociable hours’.

 This will be so unless:

  • employers can provide compelling evidence as to why penalty rates should be reduced during the next review of modern awards; or
  • employers negotiate an enterprise agreement with its employees to deal with penalty rates.

Benefits associated with using an enterprise agreement include:

  • the ability to neatly align regulation and compliance in one document;
  • simplification of regulation of employment terms; and
  • a good tool for enhancing engagement with your workforce.