Uncertainty casts a shadow over major supermarkets

Penny Vickers with her father Allen Truslove. (Lyndon Mechielsen/The Australian)

The fourth week of August is when Coles and Woolworths announce their results. There is no bigger week in the retail-reporting calendar. Coles reports tomorrow.

But in 2016, there is an elephant in the room which may change the way Australian retail is conducted and impact the profit base of Coles, Woolworths, Bunnings, Big W, Kmart, Target, parts of Metcash and an array of other big retailers.

And the elephant might even change the whole industrial relations system and, as I point out below, when combined with the backpacker tax which will escalate food prices, may lift the Australian inflation rate.

Back in around 2011, many of the above companies accepted a deal offered by the Shop, Distributive and Allied Employees’ Association (SDA). Under the deal, people who worked ‘conventional’ Monday to Friday hours would be paid above the award but many people who worked at weekends and sometimes at night would be paid less than the award stated. There would also be holiday, operational breaks, retrenchment and other benefits not included in the award.

The companies accepted the union offer and, in exchange, did all in their power to maximise union membership and accordingly the SDA became one of the most powerful and richest unions in the land and the major funder of the ALP.

In the case of Coles, the 2011 agreement was replaced by a similar enterprise bargaining agreement in 2014 (Unravelling the Coles and Woolworths penalty rate mess, June 10).

More Australians are now shopping at weekends, so the enterprise agreements that reduce labour costs at weekends are becoming more and more important in the Australian retail profit model and are factors of some importance in this week’s earnings announcements.

And there is no doubt the shift allowance advantage of the big retailers who offered big union membership, has made it tough for smaller retailers and those who did not want to be unionised. Yet, without those agreements, a lot less weekend-work-loving students and part time casuals would be employed.

The retailers would need to reconsider their service levels and opening hours. They might raise prices or lower profits.

The shift workers who are able to show that in cash terms they are being paid less than the award are challenging the enterprise bargaining arrangements that started in 2011. Under the Fair Work structure, no person in an enterprise bargaining agreement can be worse off than under the award.

Coles became the test case earlier this year and the 2014 agreement was set aside by Fair Work because one shift worker was able to show he was worse off. Coles then reverted to the 2011 agreement but adjusted base salaries (however those delivering online orders went onto a different award because they were not covered in the 2011 arrangement).

Now Penny Vickers, a Brisbane mother of two who stacks Coles’ shelves at night, is challenging the 2011 agreement.

Importantly, advising Vickers is her father, Allen Truslove, who is one of Australia’s top actuaries. That means that every claim Coles makes on benefits etc goes through an exhaustive actuarial checking process (The huge consequences of the supermarket wage decision, July 26).

Vickers in her claim says she voted for the 2011 agreement but was never told she would be worse off than the award. Given that at different times union officials, lawyers and executives have made statutory declarations that no one was adversely affected by these arrangements, this makes the case very dangerous for big retailers and their lawyers. And a top actuary is a far more formidable and dangerous opponent than an industrial relations lawyer.

Currently, the case is being delayed by arguments over whether Coles can be represented by lawyers given that Penny Vickers is suing without legal representation as is normal in Fair Work cases.

The people I know that are top experts in enterprise bargaining agreement cases that go before the Fair Work Commission, say that Coles has almost no chance of winning the case, lawyers or no lawyers.

But Coles have a different view and believe they can uphold the 2011 agreement.

If Coles are wrong, then their workers will be entitled to be paid under the award which could see Monday to Friday workers paid about $100 a week less (that will create a difficult situation) and weekend workers, particularly those who work Sundays, paid more.

Vickers is also going for ‘back pay’ which raises different issues and will cause the case to be much longer but, if successful, would result is an enormous bill for Coles which would flow through to all retailers.

Meanwhile, over the next few weeks, the Fair Work Commission is scheduled to make a determination as to whether Sunday penalty rates should be reduced to the level of Saturday.

The retailers also want retail award penalty rates synchronised with those in the restaurant business.

If the award rules are changed and Sunday penalty rates are reduced then the impact of any loss to Penny Vickers would not be as serious going forward.

If Vickers does win and shift allowances on Sunday are not reduced by Fair Work, then all big retailers would need to consider changing opening hours, reducing staff, lifting prices or lowering profits.

It’s almost certain that less shift people would be used.

The retail game in Australia would be transformed and if prices are increased then (combined with the effect of the backpacker tax on Australian food costs) we will see a rise in inflation. That will make the Reserve Bank happy but it will be accompanied by lower employment.