[2017] FWCFB 1934

The attached document replaces the document previously issued with the above code on 5 April 2017

Paragraph [2] – delete ‘29 submissions’ and replace with ‘30 submissions’

Attachment A – add ‘Australian Chamber of Commerce and Industry’ to table (with hyperlink to submission)

Joanna Richardson

Associate to Justice Ross

Dated 12 April 2017

Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards – penalty rates – hospitality and retail sectors – transitional arrangements

[1] On 23 February 2017 we issued a decision 1 (the Penalty Rates decision) in relation to the penalty rate provisions in a number of awards in the hospitality and retail sectors. Chapter 11 of the Penalty Rates decision outlined a number of options for transitional arrangements. Interested persons were directed to make submissions in relation to the transitional arrangements by 24 March 2017.

[2] 30 submissions were received from various employer organisations, unions, governments, other interested organisations and individuals. A list of submissions is at Attachment A.

[3] Submissions in reply are to be filed by 7 April 2017 followed by a hearing listed for Tuesday 9 May 2017 in Melbourne.

[4] Parties’ attention is drawn to a number of questions on notice contained in Attachment B to this Statement. Parties are asked to address these questions in conjunction with their submissions in reply.

[5] Parties who wish to supplement their written submissions with short oral submissions are to inform the Full Bench by emailing amod@fwc.gov.au by 4pm on Tuesday 2 May 2017. In doing so, parties should outline how long it is expected such oral submissions would take.

PRESIDENT

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 1   [2017] FWCFB 1001

 2   [2017] FWCFB 1001 at [1657]–[1659]

3  Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) Sch 5 Pt 3A item 13A(1), as modified by the TP Regulations, reg 3B.04(2)

 4   Ai Group submission, 24 March 2017 at [43]

 5   ABI and NSWBC submission, 24 March 2017 at [4.6]

 6   See paragraphs [24]-[26] of the NRA submission 24 March 2017

 7   SDA submission, 24 March 2017 at [14]

Attachment A—Initial Submissions regarding Transitional arrangements

Attachment B—Questions on notice

Note: These questions do not limit the issues that may be raised with the parties by the Full Bench or the submissions that parties may wish to make during any hearing in connection with this matter.

1. Impact of the Penalty Rates decision

1.1 Questions for all parties:

[6] It appears to be common ground that the Commission should take steps to mitigate the impact of the Decision on the affected employees.

Does any interested party take a different view?

Each party is asked to provide an estimate of the number of employees affected by the penalty rate reductions determined in the Decision ([2017] FWCFB 1001), by award, and the basis of that assessment.

[7] A number of parties submit that the Commission should reconsider the Decision to reduce penalty rates in the Hospitality and Retail Awards and set aside that Decision. Further, United Voice submit (at [61]) that the Commission should not invite or permit RCI or CAI ‘to re-litigate their failed claims for variation of weekend penalty rates’.

Other interested parties are invited to reply to these submissions.

1.2 Question for the Retail Associations:

[8] The Retail Associations submit that for existing employees the employment benefits of reduced penalty rates ‘have the potential to directly minimise the hardship which is to be mitigated’.

How does this submission sit with the observation in the Penalty Rates Decision at [1657]–[1659]?

‘As stated in the PC Final Report, a reduction in Sunday penalty rates will have an adverse impact on the earnings of those hospitality industry employees who usually work on a Sunday. It is likely to reduce the earnings of those employees, who are already low paid, and to have a negative effect on their relative living standards and on their capacity to meet their needs.

The evidence of the SDA lay witnesses provides an individual perspective on the impact of the proposed changes. For example, witness SDA Retail 1 said that if Sunday penalty rates were reduced to 150 per cent he would be $74.06 worse off each week – a reduction of 7.88 per cent in his current weekly earnings.

The extent to which lower wages induce a greater demand for labour on Sundays (and hence more hours for low-paid employees) will somewhat ameliorate the reduction in income, albeit by working more hours. We note the Productivity Commission’s conclusion that, in general, most existing employees would probably face reduced earnings as it is improbable that, as a group, existing workers’ hours on Sundays would rise sufficiently to offset the income effects of the penalty rate reduction.’ 2 (references omitted)

1.3 Question for ACOSS:

[9] ACOSS propose an option for mitigating the impact of the Decision on affected employees: ‘to ensure that any existing or future employees subject to reductions in penalty rates in the affected Awards are paid “loaded hourly rates” to compensate for potential losses of pay’.

How would such a proposal work in practice?

1.4 Question for all parties:

All parties are asked to comment on the ACOSS proposal.

1.5 Questions for CCIWA

[10] CCIWA submits that ‘we believe that the proportion of employees who are reliant upon existing Sunday penalty rates to meet household expenses is low’.

What is the factual basis for this submission? (Note: expand on the material referred to at [13]–[20] of CCIWA’s submission)

2. Take home pay orders

[11] Take home pay orders are dealt with in several sections of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the TPCA Act), as modified by the Fair Work (Transitional Provisions and Consequential Amendments) Regulations 2009 (the TP Regulations).

[12] Item 9 of Schedule 5 to the TPCA Act provides that if the Commission is satisfied that an employee, or a class of employees, to whom a modern award applies has suffered a modernisation related reduction in take-home pay the Commission may make a take home pay order concerning the payment of an amount(s) to the employee(s) which the Commission considers appropriate to remedy the situation. Item 9 limits the power to make a take home pay order to orders remedying ‘modernisation related’ reductions in take home pay. Item 8(3) sets out the circumstances where an employee suffers a ‘modernisation related’ reduction in take home pay. Item 8(3) requires, relevantly, that the employee be employed in the same position (or comparable position) that they were employed in immediately before the modern award came into operation. Hence persons employed after the commencement of the modern award are not eligible for an Item 9 take home pay order.

[13] Part 3A of Schedule 5 was inserted by amendments to the TP Regulations made by the Fair Work (Transitional Provisions and Consequential Amendments) Amendment Regulations 2010 (No. 1) (the TP Amendment Regulations).

[14] Regulation 3B.04 of the TP Regulations modifies Schedule 5 of the TPCA Act by inserting Part 3A, after Part 3. Item 13A(1) of Part 3A of Schedule 5 to the TPCA Act provides that:

‘A modern award may include terms that give FWA power to make an order (a take-home pay order) remedying a reduction in take-home pay suffered by an employee or outworker, or a class of employees or outworkers, as a result of the making of a modern award or the operation of any transitional arrangements in relation to the award (whether or not the reduction in take-home pay is a modernisation-related reduction in take-home pay).’ 3

[15] Item 13A(1) restricts the type of reduction that it applies to as one that occurs ‘as a result of the making of a modern award or the operation of any transitional arrangements in relation to the award’. Accordingly, it may be that it was not intended that awards would include terms that allow for making of take home pay orders in all circumstances. The purpose of the amendments made by the TP Amendment Regulations is discussed in the Explanatory Statement accompanying the TP Amendment Regulations.

2.1 Question for all parties:

[16] It seems to be common ground that the take home pay order provisions of the TPCA Act are not an available option to mitigate the impact of the reductions in penalty rates set out in the Decision.

Does any interested party take a different view?

2.2 Question for the Australian Government:

Is there any present intention to amend the Fair Work Act 2009 (Cth) (the FW Act) to provide the Commission with a discretion to make take home pay orders that may mitigate the impact upon effected employees of a variation to a modern award?

2.3 Question for the Small Business and Family Enterprise Ombudsman:

[17] The Ombudsman recommends that ‘at the end of the transition period, the Fair Work Commission should consider granting take home pay orders for individuals to mitigate the effects of any gap that remains between the amounts of their earnings with and without application of the Sunday penalty rate’.

What is the source of the Commission’s power to make the take home pay orders proposed?

3. ‘Phasing in’

3.1 Questions for all parties

[18] It appears to be common ground that the Commission has power to make transitional arrangements relating to the staggered introduction of the reduction to existing Sunday penalty rates.

Does any interested party take a different view?

[19] At paragraph [43] of its submission, Ai Group submits that in determining the transitional arrangements for the Sunday penalty rate, the Full Bench must act consistently with:

‘(a) its statutory charter, including the exercise its powers under the FW Act in a manner that is fair and just (see section 577(a) of the FW Act);

(b) its principle that fairness is assessed from the perspective of both employer and employee (and not simply from the perspective of the employee) (see Penalty Rates Decision at [37], [117], [118], [151], [885], [1701], [1877], [1948]);

(c) the objects of the relevant Part (see section 578(a) of the FW Act);

(d) the merits of the matter (see section 578(b) of the FW Act);

(e) its findings and conclusions in the Penalty Rates Decision;

(f) the evidence in the proceedings;

(g) the extent of the reductions in the existing Sunday penalty rates; and

(h) the approach adopted by other Full Benches to the staggered introduction of reductions in penalty rates.’ 4

Does any interested party hold a contrary view?

Is it also relevant that the terms of a particular modern award may limit the incidence of Sunday work (as proposed by the Retail Associations at paragraph [14] of its submission)?

[20] In its submission ABI and NSWBC contend that an appropriate transitional arrangement needs to balance the needs of the low paid and the regulatory burden and disemployment factors referred to at paragraphs 4.2 and 4.3 of their submission. ABI and NSWBC submit that an appropriate way in which to achieve this balance is for the Commission to ask the following question:

‘Which transitional proposal will provide a substantive opportunity to employees to mitigate any adverse effects of the Decision whilst not significantly prejudicing the employment and regulatory benefits associated with the Decision?’ 5

All parties are invited to comment on the question posed by ABI and NSWBC and whether it is the appropriate question for the Commission to direct itself to in these proceedings.

3.2 Question for the Australian Government:

[21] The Government notes that the reductions in certain Sunday penalty rates that occurred during the award modernisation process were phased in in equal instalments over a 5 year period – from 2010 to 2015 – and that the Restaurant Industry Award 2010 Appeal decision reduced penalty rates and no phasing in occurred.

Does the Government have a view on the merits of phasing in the penalty rate reductions we have determined and, if so, what phasing method is appropriate in each award?

3.3 Questions for the NRA:

[22] The NRA submits that lengthy phasing in provisions would impede collective bargaining. 6

If the transitional arrangements are determined why would the length of phasing in have any adverse impact on collective bargaining?

The award modernisation penalty rate reductions were phased in over 5 years, what impact, if any, did that have on collective bargaining?

3.4 Questions for United Voice

[23] At paragraph [15] of its submission, United Voice supports the Productivity Commission’s proposed 12 month delay in implementing the reduction to Sunday penalty rates and at paragraph [19] proposes a two-year delay to the implementation of the reduction in Sunday penalty rates for permanent employees under the Hospitality Award and the public holiday rate for employees under the Hospitality Award and for permanent employees under the Restaurant Award.

Does United Voice agree the submission advanced differs significantly from the Productivity Commission proposal?

If not, in what way does United Voice’s proposal reflect the Productivity Commission’s?

3.5 Question for the ACTU and the SDA

[24] The ACTU and the SDA also propose a 2 year delay to the implementation of the penalty rate reductions.

What justification is advanced in support of the 2 year delay?

4. ‘Red Circling’

[25] At paragraph [14] of its submission, the SDA submits that the Commission should preserve the current Sunday penalty rates for all existing employees by issuing the following variation determinations:

‘(a) Following proper and full determination in proceedings of the annual wage review employers must continue to pay employees the rate of pay prescribed by the relevant Award as at that time for Sunday work (“the preserved rate”) until such time that the rate of pay for Sunday work under the Award equals or exceeds the preserved rate.

(b) Employers will not dismiss, injure in their employment or alter to their prejudice the position of any employee entitled to be paid the preserved rate (including by a reduction in shifts or changes in rosters) by reason of, or for reasons which include, that entitlement.’ 7

4.1 Questions for all parties:

What is the source of the Commission’s power to preserve the current Sunday penalty rates for existing employees as advanced by the SDA?

If the Commission is vested with such a power, what do the other parties say about the merits of the proposal advanced by the SDA?

Other than the SDA’s proposal in relation to the Retail, Fast Food and Pharmacy Awards, are there any other ‘red circling’ proposals being advanced by any other party?

4.2 Question for the Australian Government:

[26] The Government submits that ‘Given the implementation issues that would arise from red circling, the FWC will need to carefully weigh up the costs and benefits and potential impact of such an approach’.

The Government is asked to elaborate on the ‘costs and benefits and potential impact’ of the red circling approach including that proposed by the SDA in respect of the General Retail Industry Award 2010.

4.3 Question for the SDA

[27] The SDA submits (at [12]) that ‘[f]uture employees are, by definition, not subjected to [these] specific forms of disruption and detriment occasioned by the reductions in Sunday penalty rates’.

If the SDA’s red circling proposal is adopted, why is it necessary to phase in the reduction at all?

5. General Retail Industry Award 2010

[28] The Retail Associations submit that the decision to reduce the Sunday penalty rate applies equally to shiftworkers (see [53]–[55] of the Retail Associations submission).

5.1 Question for the SDA:

Does the SDA oppose the submission advanced by the Retail Associations? If so, on what basis?