News & Views

6th March 2017

(24/02/17) Cuts to penalty rates for Sunday

Cuts to penalty rates for Sunday, holiday work to be phased-in after landmark decision by Fair Work Commission
Unions to fight to protect ‘take home pay’ in new push against Turnbull Government


  • Changes do not extend to restaurants and cafes
  • Reducing penalties ‘to have some positive effects’
  • FWC provides roadmap for employers
  • Existing weekend and public holiday penalty rates no longer a “fair and relevant minimum safety net”
  • Disutility for working weekends less than in the past
  • Deterrence "is no longer a relevant consideration" in setting weekend and public holiday rates

The ACTU is declaring war on the federal Coalition Government.  As is so often quoted ‘The first casualty, when war comes, is truth’.  With more than a touch of hyperbole, the President of the ACTU yesterday said “the Fair Work Commission’s decision to radically cut Sunday and public holiday pay will give almost one million Australian workers a huge pay cut”.  In reality, the decision impacts upon approximately 200,000 workers.

“Struggling workers won't be able to survive on a 25 or 30 per cent pay cut” says Ged Kearney.  “We are on the way to seeing a whole class of working poor in this country".

As unions look to broaden their campaign against the Turnbull Government in the wake of the re-establishment of the ABCC, Kearney warns “this decision now leaves the door open for pay cuts for all Australians who rely on penalty rates and public holiday pay to support themselves and their families, including nurses and all other frontline emergency service workers”.

The ACTU is calling on the Turnbull Government and all political parties to immediately act to “protect working people from any cuts to their take home pay, as the cuts are due to come into effect on 1 July, 2017”.
The Full Bench Decision
In the decision handed down yesterday the Fair Work Commission announced Sunday penalty rates in retail, fast food, hospitality and pharmacy industry awards will be reduced from the existing levels, which, in some cases, are as much as "double time".  Most of the pay cuts take effect from July, and some will be phased in over a longer period.

Full-time and part-time workers in retail will have their Sunday penalty rates dropped from 200 per cent to 150 per cent of their standard hourly rate, while casuals will go from 200 per cent to 175 per cent.

Hospitality employees will face a reduction in Sunday pay from 175 per cent to 150 per cent, while casual hospitality workers' pay will remain unchanged.
Transitional Arrangements

The full bench concluded that "appropriate transitional arrangements are necessary to mitigate the hardship caused to employees who work on Sundays."

"Many of these employees earn just enough to cover weekly living expenses, saving money is difficult and unexpected expenses produce considerable financial distress."

The Commission will hear submissions on transitional arrangements but has outlined its provisional views, which include not favouring reducing penalty rates in full in the 12 months after yesterday’s decision.
FWC provides roadmap for employers

Whilst rebuffing the Sunday penalties claims by clubs and restaurants employers, saying they had not established cases on the merits, the bench has provided a roadmap to guide clubs and restaurant employers, and employers more generally, should they wish to mount applications to vary penalty rates in the future.
The bench put forward two options for the clubs award:

  1. Absorbing the clubs award into the hospitality award and then amending its coverage to extend to the class of employers and employees currently under the clubs award; or
  2. Providing an opportunity for clubs employers to argue a "properly based merit case" for changes in Sunday penalty rates.

It expressed a "provisional view" that the first option "has merit and warrants further consideration".

The bench asked parties to provide their views on the matter and to provide submissions by March 24, ahead of a mention hearing on March 28.

The bench asked restaurant employers to provide submissions by March 24, ahead of a March 28 mention, to indicate whether they wish to continue to press for changes to Sunday penalties.

It helpfully said that any such party wishing to take up the invitation would have to address the deficiencies the bench identified in the case, and in particular would need to:


  • Provide material to enable the tribunal to assess the effects of proposed variations;
  • Produce material on the employment and service level effects of cutting Sunday penalty rates flowing from the 2014 reduction in Sunday penalties in the industry;
  • Provide a "cogent argument" for the Commission to depart from the Restaurants 2014 Penalty Rates decision on Sunday penalty rates; and
  • Address the Productivity Commission's submissions on payment of casual loading in addition to weekend penalty rates.

Public holiday penalties changes taking effect in July

The bench also cut public holiday penalty rates in five awards (hospitality, restaurant, retail, fast food and pharmacy) for full-time and part-time employees from 250% to 225%.
It maintained public holiday penalties in the clubs award at 250% for both full-and part-time and casual employees.

It also standardised public holiday penalties for casuals across the six awards at 250%.

The bench noted that, with the exception of fast food, it had not reduced Sunday penalties to the same rate as Saturdays.

The changes to public holiday penalty rates will take effect on July 1 this year and the variation of the early morning and late night work loadings in the restaurant and fast food awards will take effect late next month.

‘Disutility’ for employees working on weekend lessened 

Justice Ross said the "disutility" for employees working on Sunday was higher than on Saturday, although this was less so than in the past.

The bench also concluded that deterrence "is no longer a relevant consideration" in setting weekend and public holiday penalty rates.

"We accept that the imposition of a penalty rate may have the effect of deterring employers from scheduling work at specified times or on certain days, but that is a consequence of the imposition of an additional payment for working at such times or on such days, it is not the objective of those additional payments".
Reducing penalties to have ‘some positive effects’ but phasing-in warranted

The full bench agreed with the finding by the Productivity Commission that reducing Sunday and public holiday penalty rates was like to have "some positive effects" on employment, although this was difficult to quantify.

Quoting an observation from the Productivity Commission that there was "no case for common penalty rates across all industries", Justice Ross stressed that the hospitality and retail industries had distinguishing features and each ruling on penalty rates had to made on the merits of each case.

Unions’ ‘material change’ threshold rejected
The full bench ruling reveals that it sided with the employers on a crucial point of law rather an interpretation put forward by the SDA and United Voice.
The unions argued the Commission first must be satisfied there has been a material change in circumstances such that the modern award is no longer meeting the modern awards objective (the "material change in circumstances test").

The full bench said the proposed "material change in circumstances test" sought to place an unwarranted constraint on the discretion conferred by s156 of the Fair Work Act.

It rejected the proposition advanced by the unions on the basis that the adoption of the proposed test would "obfuscate the Commission’s primary task in the (Annual Awards) Review, determining whether the modern award achieves the modern awards objective."

The full bench recorded its agreement with the employers that the variation of a modern award "may be warranted if it was established that there was a 'material change in circumstances' since the modern award was made, but the establishment of such a change is not a condition precedent to the variation of a modern award in the review."

Despite the dire warnings of the ACTU, the full bench said its decision on the changes to the hospitality and retail awards "provide no warrant for the variation of penalty rates in other modern awards".
NECA is considering the Full Bench decision and its implications for the electrical contracting industry.
Sources: Workplace Express, 23 February 2017
Anna Patty, Penalty rate cuts: Who gains, and who will be hit the hardest, Brisbane Times, 23 February 2013
The ABCC confirmed today that contractors seeking to undertake Commonwealth funded building work have greater clarity with respect to the impact of their enterprise agreements following amendments to the Code for the Tendering and Performance of Building Work 2016.

As many building industry participants would be aware, amendments were made to the Building and Construction Industry (Improving Productivity) Act 2016 with respect to the transition period for enterprise agreement content.

The Code amendments align the 2016 Code with those amendments and provide transitional exemptions to assist building contractors with the transition to compliance.

In coming days, the ABCC will introduce a two-step assessment process and detailed guidance material to enable building industry participants to undertake a preliminary review of their enterprise agreement before submitting it to the ABCC for consideration.

To obtain an ABCC fact sheet, click here.
Should members have any queries, please do not hesitate to contact our Workplace Relations team by telephone on 1 300 NECA IR.
Andrew McIlroy
Head of Workplace Relations & Legal Services