Independent umpire pays the penalty

A Shorten government could put a straitjacket on the Fair Work Commission’s ability to vary awards.

Hospitality workers stand to lose $2000 a year in penalty payments once the cuts are phased in. Picture: Nigel Hallett

For years, the Coalition and the business lobby have assured sceptical voters that cutting penalty rates would result in employers hiring more workers and giving extra hours of paid work to existing employees.

But after two rounds of Sunday and public holiday penalty rate cuts affecting 700,000 workers, the labour cost reductions have not translated into the weekend jobs nirvana conservatives and employers organisations promised.

“No one has told me it’s made a difference,’’ says Peter Strong, chief executive of the Council of Small Business Organisations Australia. He insists, however, the failure to deliver more jobs is not because of employers hoarding cost savings but because the phased-in penalty rate cuts effectively have been cancelled out by increases in minimum wages.

The national minimum wage and minimum award wages rose by 3.3 per cent in July last year and by 3.5 per cent in July this year, the same dates that penalty rates were reduced.

In dollar terms, the minimum wage rose by $22.20 a week last year and by $24.30 a week this year. The penalty rate decision resulted, for example, in a level three hospitality worker who worked a regular eight-hour Sunday shift receiving an $8 a week cut last year and a $16 a week cut this year. The same worker will lose a further $16 a week next July if the third penalty rate cut proceeds.

Hospitality workers stand to lose $2000 a year in penalty payments once the cuts are phased in.

“The net effect of the first two transitional penalty rate cuts for Sunday hospitality workers has been to make the latest increase in the minimum wage meaningless, effectively trapping low-paid workers in a wage crisis shown by historically low levels of wage growth,” United Voice’s assistant national secretary Helen Gibbons says.

Strong looks at the changes from the perspective of employers. “People are saying the Sunday rates, even with the cuts, are actually higher than they were a year ago,’’ he tells Inquirer. “The minimum wage rises have been above CPI and the penalty rate cuts have been minor so, in actual fact, wages on a Sunday have gone up.

“There’s been no positive difference on business. People aren’t putting anyone on because it’s still no cheaper. You’re better off not opening on a Sunday even with the penalty rate cuts. I think the commission (through the minimum wage) overcompensated people to keep everybody happy.”

Strong says small businesses are further disadvantaged because the big weekend-trading employers struck agreements with the shop assistant union that cut penalty rates paid to Sunday workers.

“The union did all those deals that cut penalty rates,” he says. “The only people that are going to pay penalty rates on a Sunday will be small businesses. The impact will be that a lot of us won’t open. The ones that do open will suffer because they won’t make the money they should be making. They can’t compete with ­McDonald’s or Coles. It’s a double standard.”

Bill Shorten has vowed to reverse the penalty rate cuts if elected. While promising action in Labor’s first 100 days, the penalty rate cut due next July could proceed before parliament passes Labor’s bill reversing the cuts. Opposition workplace relations spokesman Brendan O’Connor tells Inquirer a Labor government’s intention is to pass the bill and ensure penalty rate reductions will be possible only where employers and employees are covered by enterprise agreements.

“We are interfering with the commission,’’ he says. “We always interfere with the commission. That’s what the parliament does. Parliament set parameters. It enacts legislation. It prescribes goals. It sets a whole range of things. It advances national employment standards. Parliament sets up the commission and we see this as an exceptional act by us to an exceptional decision. It’s not going to be commonplace for us to second-guess the commission unless the commission or subsequently a court has interpreted the act or Labor’s labour laws in a manner that was never intended.”

But University of Adelaide law professor Andrew Stewart and industry groups have expressed deep concern the bill goes much further than reversing the penalty cuts.

The bill would insert a provision into the Fair Work Act stating the commission cannot reduce take-home pay. “A modern award cannot be varied in a way that would, or would be likely to, reduce the take-home pay of any employee covered by the award,’’ it says.

It also says “a determination of the commission made on or after 21 June 2017 that would, or would be likely to, have the effect of reducing the take-home pay of any employee covered by a modern award has no effect from the commencement of this section”.

Australian Industry Group chief executive Innes Willox says if the bill passes, the commission will not be able to vary any award in any manner that is likely to reduce the take-home pay of any employee, regardless of the circumstances or merits of the award variation.

“It would remove much of the independence of the independent umpire,’’ Willox says. “What is the point in having an independent umpire to set and maintain award conditions if the umpire is only able to rule in favour of one of the parties? The bill is obviously unfair to employers.”

Stewart says while he understands the politics behind the bill, it was a mistake. He expresses concern it will put the commission in a straitjacket, allow employers to challenge previous decisions and make the commission cautious about making changes beneficial to workers. “I’m hoping that if Labor gets into government it will reconsider,” he tells Inquirer. “In my view, not to reconsider this would create massive uncertainty over the status of various decisions given by the commission on modern award entitlements including decisions that are beneficial to workers.

“You couldn’t rethink casual loadings, you couldn’t rethink annual leave loadings; this potentially affects the payout of entitlements on termination, base rates, shift rates, anything with a financial component.

“This is really almost a recipe for freezing awards. I think it’s easy in opposition to make grand gestures. Governments have to put a bit more time and effort into considering the precise effects and consequences of legislation they put up. I am hopeful that if that happens at least some aspects of this will be reconsidered, even if it’s only the retrospective element.”

Asked to respond to Stewart’s concerns, O’Connor says if Labor wins the election “we would look at redrafting the bill if need be, with the full resources of government at our disposal”.

“Our policy position is restoring penalty rates,” he says. “We will seek advice if we need to tweak the bill.”