| FWC 6636|
|FAIR WORK COMMISSION|
Fair Work Act 2009
s.157–FWC may vary etc. modern awards if necessary to achieve modern awards objective
Award flexibility–Hospitality and Retail Sectors
JUSTICE ROSS, PRESIDENT
MELBOURNE, 10 DECEMBER 2020
Industrial relations reform working groups – letter from Minister – award flexibility – loaded rates – exemption rates – classification structures – General Retail Industry Award 2020 – Hospitality Industry (General) Award 2020 – Restaurant Industry Award 2020 – Registered and Licenced Clubs Award 2010.
 On 9 December 2020, I received a letter from the Minister for Industrial Relations. A copy of the letter is attached. The Minister expresses the Government’s view that:
‘…in the extraordinary circumstances that have been caused by the COVID pandemic that it would be in Australia’s economic best interest for the Fair Work Commission to use its powers under s.157(3)(a) of the Fair Work Act 2009 (the Act) to undertake a process to ensure several priority modern awards in sectors hardest hit by the pandemic be amended. The process would be envisaged, if you considered it appropriate, to maintain a focus on key changes that could potentially support Australia’s economic recovery. The Government would obviously provide every available assistance to ensure the timely and comprehensive conduct of this process.’
 The awards identified by the Minister as the key awards in distressed industry sectors (“priority modern awards”) are:
• General Retail Industry Award 2020
• Hospitality Industry (General) Award 2020
• Restaurant Industry Award 2020
• Registered and Licenced Clubs Award 2010
 Three of the priority modern awards fall within the Accommodation and food services industry, the other modern award falls within the Retail trade industry.
 Section 157(3)(a) of the Fair Work Act 2009 (Cth) provides, relevantly, that the Commission may make a determination varying a modern award ‘on its own initiative’.
 In my Statement of 31 August 2020, I noted that it is likely the direct economic and social impacts of the pandemic will be felt for some time to come and that there will be a continuing need for flexible work arrangements to assist employers and employees in adapting to the changed conditions and to support the recovery. A draft award flexibility schedule was attached to the statement which included provisions for:
• an agreement between an employer and an employee for the employee to work from home.
• full time or part time employees to request to compress their working week so that their usual weekly ordinary hours are worked over a reduced number of their usual work days.
• employees to take twice as much annual leave at half pay with the agreement of their employer.
• employees to purchase additional leave with the agreement of their employer.
• a change in the span of hours in a workplace or section of a workplace with the agreement of 75% of employees.
• an agreement to share a reduction in working hours in a workplace or section of a workplace with the agreement of 75% of employees, in circumstances where an employer cannot usefully employ all of the full time and part time employees in a workplace or section of a workplace.
• an employer direction to an employee to perform all duties within their skill and competency.
• an employer direction to an employee to work at a different workplace (including the employee’s home).
• an employer direction to employees to stagger starting and finishing times of work.
 The Minister’s letter identifies the following additional award related flexibility measures that ‘could prove critically important for providing businesses in the most distressed part of the economy with the confidence to increase hiring during the recovery’:
• Potentially simplified pay arrangements in the form of ‘loaded rates’ and/or ‘exemption rates’ designed to reduce the cost of administrative burden and address concerns about perceived risks arising from existing pay rate complexities and complexity risks that may lead to, particularly small business, mistakenly underpaying employees.
• Further streamlining of present classification structures so that they are clearer, easier to understand and simpler to apply. This might involve reducing the number of classifications through a broad-banding exercise with no reductions in pay and minimal increases in pay accompanied by greater variety and higher value work.
 The Minister requests that I consider the above matters in the exercise of the Commission’s powers. He notes that a Commission process would provide parties and the Commonwealth with an opportunity to make submissions focussing on the need for:
• changes to be made in the first instance to key awards in distressed industry sectors - namely the General Retail Industry Award 2020, the Hospitality Industry (General) Award 2020, the Restaurant Industry Award 2020, and the Registered and Licenced Clubs Award 2010 - to maximise the benefits of increased flexibility as the economy recovers.
• any changes to simplify pay arrangements or classifications being available on an 'opt in' basis, to avoid imposing unnecessary changes on businesses that do not wish to adopt them.
• providing that payment by loaded rates are subject to agreement between employers and employees as a protection against disadvantage; and
• administrative simplicity, and the need to avoid the complex process requirements that have caused significant difficulty in relation to annualised salary arrangement.
 The Minister has requested that any changes arising out of a Commission process should be made as expeditiously as possible, preferably no later than 31 March 2021.
 It is appropriate that the Commission properly consider the Minister’s request. Ultimately, it will be a matter for the Commission to determine the process by which the issues raised in the request are considered and whether any variations to modern awards are necessary having regard to the provisions of the Act.
 Loaded rates in modern awards have been considered by the Commission in the 2012 Transitional Review and again in the Penalty Rates Case in the 4 yearly review of modern awards. 1 In both of these cases, the Full Bench noted that there was merit in considering the insertion of loaded rates into the Hospitality and Retail awards. In the Penalty Rates Case the Full Bench indicated that it envisaged the development of loaded rates to be an iterative process undertaken in consultation with interested parties once the transitional arrangements in respect of the reductions in Sunday penalty rates was complete. The transitional arrangements have now been completed. Consistent with the view expressed in the Penalty Rates Case it is appropriate that consideration now be given to the insertion of loaded rates into the Hospitality and Retail Awards.
 I propose to commence a process on the Commission’s own motion to consider the inclusion of loaded rates and exemption rates clauses in the priority modern awards identified at  above. The process will also consider whether any changes can be made to simplify the classification structures in the priority modern awards and any other changes proposed by any interested party.
 The process will commence with conferences of interested parties on 17 and 18 December 2020.
 A conference in respect of the three hospitality sector awards will take place at 1:00 pm on Thursday 17 December 2020. A conference in respect of the Retail Award will take place at 10:00 am on Friday 18 December 2020.
 The purpose of each of these conferences will be to:
1. Canvass the issues raised in the Minister’s letter and examine (in broad terms) any proposals for variations to the key modern awards.
2. Explore whether there is any consensus about the nature of any award variations relating to loaded rates, exemption rates or classification structures.
3. Discuss whether there is any additional data or research the parties might require to properly consider these issues.
4. Discuss future programming.
 Any party who wishes to attend the conference should send an email to Chambers.Ross.firstname.lastname@example.org specifying a name and contact telephone number by 4pm on Tuesday 15 December 2020.
 The Minister has advised that if the Commission determines to undertake the process requested in its letter, the Government would be able to support the process by sourcing evidence, economic data and other material the Commission needed. The Attorney-General’s Department is therefore asked to advise the Commission and the parties by 4pm on Tuesday 15 December 2020 as to the data and evidence that it may be able to access to support the process, and to attend the conferences on 17 and 18 December 2020.
 The impact of the COVID-19 Pandemic was set out in a Statement issued on 31 August 2020. Further detailed and updated information is provided in the Commission’s COVID-19 situation update information note 2 and Information note-Government responses to COVID-19 pandemic.
 On 1 December 2020, the Reserve Bank of Australia (RBA) governor noted that ‘In Australia, the economic recovery is under way and recent data have generally been better than expected. This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support.’ 3
 Further information including industry profiles and the impact of COVID-19 on the Accommodation and food services industry and the Retail trade industry is provided in the following documents.
• Accommodation and food services
• Retail trade industry
 Commission staff have also prepared a number of background documents to provide context and facilitate the discussion at the conference. The following documents set out some background to both loaded rates and exemption rates including previous consideration of these provisions in modern awards:
• Loaded rates
• Exemption rates
 The following documents set out the classification structures in each of the priority modern awards, including consideration of the classification structures during award modernisation:
• Classification structure in the Hospitality Award
• Classification structure in the Restaurant Award
• Classification structure in the Clubs Award
• Classification structure in the Retail Award
 The following documents provide some analysis of the types of loaded rates contained in enterprise agreements:
• Enterprise agreements in the Hospitality sector
• Enterprise agreements in the Retail trade industry
 The Commission has established a dedicated Major Cases webpage for this matter.
 The Commission’s award subscription service will be used to notify interested parties of updates during this matter such as deadlines for the filing of submissions and evidence, notices of listing and when any decisions or statements are issued. A dedicated subscription service called ‘Award flexibility–Hospitality and Retail Sectors’ has been established. Interested parties are encouraged to subscribe to receive notifications on the subscription services page on our website. Any questions about the subscription service can be sent to email@example.com.
Printed by authority of the Commonwealth Government Printer
1  FWCFB 1001
2 Last updated on 23 November 2020.
3 Statement by Philip Lowe, Governor: Monetary Policy Decision, 1 December 2020.