Penalty rates in Hospitality and Retail modern awards cut

Employment Update Australia

Employment Update

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Summary

In a landmark ruling, the Fair Work Commission Full Bench has reduced Sunday penalty rates in the hospitality, retail, fast food and pharmacy sectors and reduced public holiday penalties in those sectors and, additionally, in the restaurant sector. The Full Bench has also varied some of the penalty provisions in relation to early/late workers in the restaurant and fast food sectors.

The changes to public holiday penalty rates will take place from 1 July 2017, while the changes to early and late night loadings take effect in late March 2017. The implementation date and transitional arrangement for the reduced Sunday penalty rates has not yet been decided.

What should employers be doing?

Employers of workers covered by the relevant awards need to review the terms on which their employees are engaged and should not automatically assume the reductions in rates can be applied to current employees or to those engaged before the transition period ends. An employee may have a contractual right to maintain the existing rates, notwithstanding the award reduction. This will depend on the wording of any letter of offer or employment contract that applies.  

More detail

Penalty rates were flagged as an issue for review in modern awards in January 2014 when the Commission commenced its four yearly review of modern awards under the Fair Work Act 2009 (Cth). 

The Full Bench's decision addresses the following modern awards:

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

The Full Bench heard the case over 39 days and received over 5,900 submissions from interested parties. 

The decision in detail

The Full Bench determined the Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not achieve the modern awards' objective. The effect of its decision and rates payable by employers is as follows:

Award

Sunday penalty rates (% of permanent base rate)

Full and Part time

Casual

Existing Rate

New Rate

Existing rate

New Rate

Hospitality Award

175

150

No change

Retail Award

200

150

200

175

Fast Food Award*

*Level 1 Employees only

150

125

175

150

Pharmacy Award

200

150

200

175


Changes to Sunday penalties for employees covered by the Restaurants and Clubs Awards were rejected on the basis no case for change had been made out. The Full Bench also rejected changes to Saturday penalty rates.

The Full Bench made the following changes to public holiday rates: 

Award

Public holiday penalty rates (% of permanent base rate)

Full and Part time

Casual

Existing Rate

New Rate

Existing rate

New Rate

Hospitality Award (cl. 32)

250

225

275

250

Restaurant Award (cl. 34)

250

225

250

No change

Clubs Award (cl. 29)

250

No change

250

No change

Retail Award (cl. 29)

250

225

275

250

Fast Food Award (cl. 30)

250

225

275

250

Pharmacy Award (cl. 31)

250

225

275

250


As the Fast Food Award presently does not prescribe the late night penalty span of hours during which loading is paid, the Full Bench decided to align the span of hours in the Fast Food Award with that provided in the Restaurant Award.

Additionally, at present, the Restaurant Award provides additional payment of 15 per cent of the standard hourly rate for work performed 'between midnight and 7.00am'. The Full Bench amended this period to 'between midnight and 6.00am', aligning it with the majority of the 109 modern awards which provide for a start time of 6.00am.

Next steps and timing

The changes to public holiday penalty rates will take effect from 1 July 2017, while the changes to early and late-night work loadings come into operation in late March 2017.

The Full Bench has not reached a concluded view as to the form of transitional arrangements for implementing the reduction in Sunday penalty rates, and has called for submissions.  It has expressed the provisional view that the reduction should take place in a series of at least 2 annual adjustments on 1 July each year, commencing 2017, to coincide with any increase in modern award minimum wages arising from Annual Wage Review decisions.

While no variation to the Clubs Award was made, subject to further submissions,  the provisional view expressed was that the Clubs Award be revoked and instead the Hospitality Award coverage be varied to include the affected employees. Sunday penalty rates changes in the Restaurant Award were rejected but a further opportunity will be provided to establish that such changes are warranted.

The Full Bench did not decide on all-inclusive or loaded rates however and discussions about this will commence once transitional Sunday penalty rates have been determined.

The decision noted that the draft variation determinations regarding late-night penalty provisions in the Fast Food and Restaurant Awards will be published shortly, after which interested parties will have 7 days to comment. The Full Bench is similarly seeking submissions regarding the appropriateness of penalty rates in the  Amusement, Events and Recreation Award 2010 and the Hair and Beauty Industry Award 2010.

Significantly, the Full Bench noted that given the unique nature of the Hospitality and Retail sectors, the decision did not guarantee the variation of penalty rates in other modern awards. It stressed that each case must be determined on its own merits.

For further information please contact the authors.