This morning the Full Court of the Federal Court rejected the SDA and United Voice's applications to quash the Fair Work Commission’s determinations to reduce Sunday penalty rates (Penalty Rates Decision).

The five judge Full Court Bench (consisting of Judges Tony North, Richard Tracey, Geoffrey Flick, Jayne Jagot, and Mordy Bromberg) rejected all grounds for quashing the Penalty Rates Decision and held that they had not identified any errors of law in the decision.

The Full Court, amongst other things, held that the Commission had not fallen into error in terms of the construction or application of the modern awards objective in section 134 of the Fair Work Act 2009 (Cth) (FW Act). In particular, the Full Court held that the Commission had taken into account the relative living standards and the needs of the low paid as required by section 134(1)(a) of the FW Act and said that these considerations weighed against a decision to reduce penalty rates but, on balance, did not prevail.

The Full Court also held that there was no jurisdictional error in the Commission's interpretation of section 156 of the FW Act. Accordingly, the Full Court held that there did not need to be a material change in circumstances in order for the Commission to enliven its discretion to vary a modern award.

The Full Court also refused to accept the proposition put by the SDA and United Voice that the Penalty Rates Decision was plainly unjust or unreasonable and should be overturned on this basis.

Where to now?

It is expected that the cuts to penalty rates will continue to proceed in line with the Commission’s transitional arrangements.

This means that the reduction to public holiday rates from 250% to 200% and the reduction to Sunday penalty rates from 200% to 195% under the General Retail Industry Award 2010, which took effect on 1 July this year, will continue to apply. Sunday penalty rates will then fall by 15% each year from 2018 until they reach 150% in 2020. We discussed the transitional arrangements in more detail in our eBulletin.

Daniel Proietto, partner and leader of Lander & Rogers' Retail & Supply Chain Sector team, explains, "The long transition period in fully implementing the Penalty Rates Decision will add complexity to an already difficult bargaining scenario for employers engaged in enterprise bargaining. Further complications may arise if the current government is replaced at the next federal election as the opposition has stated that it will legislate to re-instate the former penalty rates".