The Penalty Rates Decision, which was handed down on February 23rd of this year, marked a historic moment for Australian legislation. FCB Group, Australia’s top employment law firm, led the case for the ARA, resulting in a victory for retailers and small to medium businesses alike. We caught up with the team at FCB to get the inside story on their path to victory:

Background

Success for employers in these types of award cases are rare, and large wins in relation to the General Retail Industry Award 2010 are next to impossible. So, how did the landmark Penalty Rates reduction decision come to pass? We are able to provide valuable insight into how the case unfolded because we were involved every step of the way. FCB Workplace Law, acted on behalf of the Australian Retailers Association (ARA) and the retail industry, in this historic case. And we put the win down to three things – unity, funding and quality.

The Shop, Distributive and Allied Employees Association (SDA), the retail union, has historically dedicated significant resources to defend changes to retail awards, have consistently out-spent employer groups and, quite simply, have previously run better cases. FCB and the ARA propositioned to the rest of 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 to work together to fund the case, so we commenced planning.

Case strategy

When planning these cases, or 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 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 additional hours offered to existing employees. 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 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.

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 Transition

While the win for the retail industry is unprecedented, there were a number of matters to be resolved before the case is finalised. The Full Bench of the Fair Work Commission (Commission) had to decide how the rates would transition. The Commission determined that Sunday penalty rates will be reduced via a four (4) stage transition for permanent staff, and a three (3) stage transition for casual staff in the Retail industry. The Commission has also confirmed that Take Home Pay Orders are not available to employees impacted by the reductions, and that there will be no “red-circling” or “grandfathering” of existing employees.

The table below sets out the way the Sunday penalty rate reduction will transition:

General Retail Industry Award 2010

Category	Previous	1 July 17	1 July 18	1 July 19	1 July 20
Permanent Sunday	200%	195%	180%	165%	150%
Casual Sunday	200%	195%	185%	175%	-

Hospitality Industry Award 2010

Category	Previous	1 July 17	1 July 18	1 July 19
Permanent Sunday	175%	170%	160%	150%

Pharmacy Industry Award 2010

Category	Previous	1 July 17	1 July 18	1 July 19	1 July 20
Permanent Sunday	200%	195%	180%	165%	150%
Casual Sunday	225%	220%	205%	190%	175%

Fast Food Industry Award 2010

Category	Previous	1 July 17	1 July 18	1 July 19
Permanent Sunday (Level 1)	150%	145%	135%	125%
Casual Sunday (Level 1)	175%	170%	160%	150%

The Commission also confirmed that the reductions in public holiday penalty rates will commence in full from 1 July 2017. Those reductions are:

Award	Permanent Penalty	Casual Penalty Old/New
General Retail Industry Award 2010	225	275/250
Hospitality Industry Award 2010	225	275/250
Pharmacy Industry Award 2010	225	275/250
Fast Food Industry Award 2010	225	275/250
Restaurant Industry Award 2010	225	250 (no change)

What does this mean?

The Penalty Rates Reduction Case was a huge win for small businesses all throughout Australia. Currently, most franchises and large businesses are covered by an Enterprise Agreement, and therefore enjoy reduced penalty rates already. This case seeks to level the playing field, allowing for small businesses to flourish and create more diversity in the marketplace. For employees, we will see increased Sunday and Public holiday employment opportunities, with more businesses with capacity to roster on more hours.

If you would like assistance wth any of these matters, call FCB Group on (02) 9922 5188 or (03) 9098 9400.