In February 2017, the Fair Work Commission (FWC) handed down a decision which cut penalty rates for employees in the retail, hospitality and fast food industries. In particular, it cut the level of penalty rates for working on Sundays and public holidays by 25% to 50%.
While recognising that the cuts would cause hardship to some employees, the FWC justified the cuts on the basis that:
- there are likely to be some positive employment effects from cuts to penalty rates, although it is difficult to quantify the precise effect. In other words, the reduced labour costs to employers will supposedly lead to employers hiring more staff and opening during hours they would not otherwise open;
- deterring employers from employing workers on Sundays and public holidays is no longer a relevant consideration when setting penalty rates;
- consumer expectations have changed over time.
The decision arose out of applications by employer groups to reduce penalty rates in the award safety net in particular industries. These applications were just the latest in a long line of attempts by employers to reduce penalty rates. On several previous occasions, the employer arguments were rejected due to a lack of evidence however this time were partially accepted despite ample evidence demonstrating little link between wages and employment levels.
At the time of writing, the FWC was determining when the cuts would commence including whether they should be phased in gradually. The Prime Minister and federal government, after initially trying to avoid the issue, later announced it supported the cuts.
The decision has the potential to affect up to 680,000 employees in the affected industries, with cuts to income for individual employees of up to $3,500 per year.
The ANMF is concerned that the decision could flow on to other industries. The FWC stated that its decision was confined to the industries in question, and largely based on particular circumstances of those industries which distinguish INDUSTRIAL
them from other industries.
Legal advice by law firm Maurice Blackburn released to the media following the decision however has noted that several of the reasons given for the decision could equally apply to other industries, including the health and aged care industries. For example, if it is accepted that employment benefits may flow from cuts to wages, then there is little difficulty in applying the same argument to penalty rates in other industries, and even to wages generally.
More broadly, the decision shows that penalty rates can be reduced even where the FWC accepts that there will be significant negative effects on the income of many employees.
For nurses, any future reduction in penalty rates could reduce take home pay significantly because penalty rates contribute a significant proportion of income for many nurses. Soon after the decision Sonic Health, a primary healthcare employer, proposed the reduction of Sunday penalty rates by 25% during negotiations with its nurses for a new enterprise agreement before backtracking after media publicity.
The cuts, and the federal government support of them, comes during the same period as the federal government has been attempting to pass a Bill significantly cutting company tax, again based on the dubious argument that the extra cash accruing to businesses will somehow lead to more employment. Decreased government revenue from tax cuts will in turn undoubtedly lead to calls at a later date for cuts to spending, usually in areas of health and education and social security, on the basis of a claimed ‘budget crisis’.
Similarly, recent employer group and government submissions to the FWC’s annual review of minimum wages urge no or minimal increases, on the basis that an increase would impact employment. This argument that ‘now is not the right time for an increase’ is predictably trotted out every year and the ‘right time’ for an increase is strangely never specified.
What all this leads to is heightened inequality, corporate greed and a sense that enough is never enough. What unions and workers fought for and obtained decades ago, like penalty rates, is constantly under attack and entitlements cannot be taken for granted and have to be fought for all over again.
The federal Opposition and Greens at the time of writing had introduced a Bill into federal Parliament in an attempt to stop the decision taking effect. Several of the crossbench senators who had initially supported the decision (Nick Xenophon Team, One Nation, Derryn Hinch) quickly changed their tune when they realised the widespread opposition to the decision in the community. The Bill is however unlikely to pass due to government control of the House of Representatives.
Federal Industrial Officer