Inside the Penalty Rates case

March 2, 2017

The Informant: Issue 1

UNITY, FUNDING and QUALITY – Nick Tindley, Executive Manager, FCB shares his journey leading the case to reduce penalty rates under the General Retail Industry Award 2010.  A decision that will affect thousands of retailers and lead to job creation and growth in the retail industry.

The Outcome

On Thursday, 23 February 2017 a Full Bench of the Fair Work Commission (FWC) issued its decision in the Penalty Rates case.  In an historic ruling, the Full Bench determined that the Sunday and Public Holiday penalties in a number of modern awards would be varied.  The table below sets out those variations, and their operative dates:

General Retail Industry Award 2010
Category	Previous	New	Operative Date
Permanent Sunday	200%	150%	TBD – transition
Casual Sunday	200%	175%	TBD – transition
Permanent Public Holiday	250%	225%	1 July 2017
Casual Public Holiday	275%	250%	1 July 2017
Hospitality Industry Award 2010
Permanent Sunday	175%	150%	TBD – transition
Permanent Public Holiday	250%	225%	1 July 2017
Casual Public Holiday	275%	250%	1 July 2017
Pharmacy Industry Award 2010
Permanent Sunday	200%	150%	TBD – transition
Casual Sunday	200%	175%	TBD – transition
Permanent Public Holiday	250%	225%	1 July 2017
Casual Public Holiday	275%	250%	1 July 2017
Fast Food Industry Award 2010
Permanent Sunday (Level 1)	150%	125%	TBD – transition
Casual Sunday (Level 1)	175%	150%	TBD – transition
Permanent Public Holiday	250%	225%	1 July 2017
Casual Public Holiday	275%	250%	1 July 2017
Restaurant Industry Award 2010
Permanent Public Holiday	250%	225%	1 July 2017

There were also some minor changes around the commencement and ceasing time of late night penalties in the Restaurant and Fast Food Awards.

Background

Success in these types of award cases by employer parties are rare, and wins of the magnitude of that achieved in relation to the General Retail Industry Award 2010 are even more so. So what was different this time? FCB acted on behalf of the Australian Retailers Association (ARA) and the retail industry, and we are therefore able to provide an insight into the how the case unfolded. And we put the win down to three things – unity, funding and quality.

The retail union, the Shop, Distributive and Allied Employees Association (SDA), has historically dedicated significant resources to defend changes to retail awards, and have consistently out-spent employer groups and, quite simply, run better cases. FCB and ARA put it to the retail industry that if we weren’t able to fund a single, unified case, with high quality representation in the 2014 Review the existing Sunday penalty rate structure would be entrenched.  The industry, and all of the retail associations, agreed, and we commenced planning.

Case strategy

When planning these cases, and indeed in planning any litigation, the key is to start with the evidentiary contentions, which are the findings you want your evidence to support, that you want the Court or Commission to accept.  These are drawn from the elements of the relevant legislation and case law. In the Penalty Rates case our contentions needed to assist the FWC with their role in balancing the impact of a reduction in penalty rates on retail employees against the benefits in terms of employment and the performance of the retail industry.

What we wanted the FWC to accept (based on our evidence), was that existing Sunday Penalty Rates were the key reason retail employers limit available hours, and therefore, employment opportunities. Our evidence would support the contention that a reduction in the rates would allow retail employers to overcome these limits and could align Sunday operations more closely to other days. We also wanted the FWC to accept that people work on Sundays for a variety of reasons, and that despite the fact that reducing Sunday penalties would have a negative impact on employees, the existing penalty was overcompensating them for the disabilities associated with Sunday work.  Finally, we needed to convince the FWC that at least part of the reduction in Sunday rates would be offset by existing employees being offered additional hours. To make these arguments we needed evidence, and traditionally it has been difficult to find enough employers prepared to step forward to provide it. To counter this challenge we would develop common threads between expert, survey and individual employer evidence to enable us to put our contentions to the FWC in a compelling way.

Case conduct

We commenced with an expert report identifying what retail employers were currently doing with Sunday rostering and how this would change if the penalty rate was reduced.  Next we collaborated with other parties to present survey evidence to support this report and presented direct evidence from retail employers across a variety of geographical locations, size and retail categories.  Armed with this we presented our evidentiary contentions based on the common threads arising from this evidence, and in the main the FWC accepted them.

FCB and ARA also needed to address the issue of employee preferences and the problems employees associated with Sunday work, knowing the unions would present a vast amount of evidence regarding this.  In addition, we needed to convince the FWC that reducing the Sunday penalty rate would not cause the industry difficulties in sourcing sufficient employees prepared to work on Sundays at that reduced rate.

While our retail specific expert report, survey results and focus group findings identified some of the disabilities associated with Sunday work, it also showed that employees were prepared to work for lower penalty rates and had chosen to work on Sundays because it suited them, with very few being forced to work on Sundays.  This was crucial in countering evidence presented by the unions about employee choice and preference. We were able to put to the SDA expert and lay witnesses in cross examination contentions regarding the freedom they had to accept or reject Sunday work, and their preparedness to continue to work on Sundays at a lower penalty rate.  Almost across the board those witnesses confirmed the contentions.

But it isn’t over

While the win for the retail industry is unprecedented, there are a number of matters to be resolved before the case is finalised.  First there is the matter of how and when the Sunday rate changes transition.  The FWC appears to favour a two-step annual transition, commencing on 1 July 2017, for those penalty rates that are reducing by 25%.  For the Retail Award permanent Sunday penalty the FWC expressed a view that a two-step transition may be too short.

The FWC also raised the question of whether Take Home Pay Orders, which were available but rarely used when the Modern Awards came into effect, are available in relation to the Sunday penalty reductions.  If they are, the FWC commented that this might favour a shorter transitional period.

The FWC has called for submissions on this issue (due late March), and Hearings will be conducted in May 2017.  We can expect an outcome in late May or early June 2017.

There is also the question of whether the SDA, or any other union or body, will lodge an appeal.  The general consensus is that an appeal is inevitable, although at this stage no union party has confirmed their intentions.  If we assume an appeal is lodged there will be a question of whether a stay of the decision is granted (we consider this unlikely) and the timing for the conduct of the appeal.  We expect the appeal to take approximately 4 – 6 months from filing to determination.

Finally, there is the sting in the tail of the decision which creates the risk that Saturday casual rates under the Award may be increased.

FCB’s retail experts are available for consultations to discuss the impact on your business.  To arrange a meeting, please don’t hesitate to contact us on 03 9098 9400.