Fair Work Australia opens the door for merits-based review of penalty rates

Fair Work Australia will give business the chance to argue for cuts in penalty rates in the retail and hospitality sector, following a ruling released on Friday evening, but business shouldn’t get too excited.

In the ruling, FWA rejected arguments from the Federal Government that a two-year review of the modernised award system should not consider broad changes such as those to penalty rates.

“We reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority,” the FWA found.

The FWA full bench, led by its president, Justice Iain Ross, said its two-year review would consider the 283 applications to review modern awards in their own right and on their own merit.

The retail and hospitality sectors have both been campaigning for a long time to amend penalty rates and in particular to cut Sunday penalty rates.

FWA found the review was intended to be “narrower in scope” than the four-yearly reviews and it said the Tribunal was unlikely to revisit issues considered as part of the award modernisation process unless there are “cogent reasons” for doing so, such as “a significant change in circumstances which warrants a different outcome”.

FWA said it did not propose to adopt the “high threshold” for the making of variation determinations proposed by government, rejecting the government’s argument that broader changes should not be considered until 2014 and leaving the door open to examine penalty rates.

Daniel Mammone, director of workplace policy and legal affairs at the Australian Chamber of Commerce and Industry, told SmartCompany the ACCI welcomed the decision, which would allow for a merits-based review to assess the impact of penalty rates in modern awards in the services sector.

“[This] is an area where employers are particularly feeling the pressures of increased labour and non-labour costs,” he says.

“The decision has rebuffed the government and unions’ attempts to whittle down the review to little more than removing anomalies and technicalities and imposing an artificial ‘high threshold’ for parties seeking substantive changes to modern awards following their commencing in January 2010.

“It will ultimately be up to employers to prove to Fair Work Australia, through evidence, that changes are warranted and necessary to meet key modern award objectives to enhance productivity, employment, competitiveness, and sustainability.”

Stephen Smith, director of national workplace relations at the Australian Industry Group, says it is still “early days” in the penalty rate debate and this case is “just one decision setting out the key sections of the act which are relevant to the review.”

“This is a decision about the jurisdictional issues concerning the review of modern awards, so even though the decision is made in the context of the full bench proceedings on penalty rates, it has much broader implications,” he says.

“It’s still going to be the subject of a lot of argument.”