[2014] FWCFB 1996
The attached document replaces the document previously issued with the above code on 14
May 2014.
The document has been edited to correct a typographical error in paragraph [156] by replacing
the word “RACV” with the word “RCAV”.
Katrine Huynh
Associate to Vice President Hatcher
Dated 7 May 2015
1
Fair Work Act
2009
s.604 - Appeal of decisions
Restaurant and Catering Association of Victoria
(C2013/6610)
Restaurant industry
VICE PRESIDENT HATCHER
VICE PRESIDENT WATSON
JUSTICE BOULTON, SENIOR DEPUTY PRESIDENT
COMMISSIONER ROBERTS
COMMISSIONER MCKENNA SYDNEY, 14 MAY 2014
Appeal against decision [2013] FWC 7840 of Deputy President Gooley at Melbourne on 10
October 2013 in matter number AM2012/180 and others.
DECISION OF VICE PRESIDENT HATCHER, JUSTICE BOULTON AND
COMMISSIONER MCKENNA
Introduction and background
What this appeal is about
[1] The Restaurant Industry Award 20101 (the Restaurant Award) is a modern award that
was made by a Full Bench of the Australian Industrial Relations Commission on 4 December
2009, as part of the award modernisation process, and took effect on 1 January 2010. The
Restaurant Award covers employees in the “restaurant industry”, which is defined in clause
3.1 of the Award to mean “restaurants, reception centres, night clubs, cafes and roadhouses,
and includes any tea room, café, and catering by a restaurant business”, but does not include
fast food outlets or restaurants in hotels or clubs.
[2] Under item 6 of Schedule 5 of the Fair Work (Transitional Provisions and
Consequential Amendments) Act 2009 (the Transitional Act), the Fair Work Commission (the
Commission) is required to undertake a review of modern awards as soon as practicable after
the second anniversary of their commencement. In that review, the Commission must
consider whether each modern award achieves the modern awards objective set out in s.134 of
the Fair Work Act 2009 (the FW Act) and is operating effectively without anomalies or
1 MA000119
[Note: refer to the Federal Court decision dated 25 August 2014 [2014]
FCAFC 121 for result of appeal.]
[2014] FWCFB 1996
DECISION
E AUSTRALIA FairWork Commission
http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2014/2014fcafc0121
http://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2014/2014fcafc0121
[2014] FWCFB 1996
2
technical problems arising from the award modernisation process. The Commission is
empowered to vary the awards in any way considered appropriate to remedy any issues
identified in the review.
[3] It is necessary to recognise that the two-yearly review process required by the
Transitional Act was intended to be a confined exercise, and not an unrestricted process
whereby awards could be the subject of completely fresh reconsideration only two or so years
after they were made. This point was made clear by a Full Bench at the very outset of the two-
yearly review in Modern Awards Review 20122 (the correctness of which was not challenged
in this appeal). The Full Bench described the proper approach to be taken to the conduct of a
review under item 6 as properly construed in the following terms (underlining added):
“[99] To summarise, we reject the proposition that the Review involves a fresh
assessment of modern awards unencumbered by previous Tribunal authority. It seems
to us that the Review is intended to be narrower in scope than the 4 yearly reviews
provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely
to revisit issues considered as part of the Part 10A award modernisation process unless
there are cogent reasons for doing so, such as a significant change in circumstances
which warrants a different outcome. Having said that we do not propose to adopt a
“high threshold” for the making of variation determinations in the Review, as proposed
by the Australian Government and others.
[100] The adoption of expressions such as a “high threshold” or “a heavy onus” do not
assist to illuminate the Review process. In the Review we must review each modern
award in its own right and give consideration to the matters set out in subitem 6(2). In
considering those matters we will deal with the submissions and evidence on their
merits, subject to the constraints identified in paragraph [99] above.”
[4] That proposition has been consistently reiterated and reinforced in Full Bench
decisions since that time.3
[5] In respect of the two-yearly review of the Restaurant Award, the appellant, the
Restaurant and Catering Association of Victoria (RCAV), together with Australian Business
Industrial (ABI) and sixteen individual restaurant businesses (the 18 applicants), lodged an
application for a significant number of changes to the Award. For example, the application
sought that the minimum wage rates for all employees employed by a “small business
employer” (defined to mean, in effect, fewer than 15 full-time equivalent employees) be
reduced to the level of the current national minimum wage. The effect of that proposed
variation, if granted, would have been to reduce minimum wage rates in the restaurant
industry for all employees classified above the Introductory Level; for a Level 1 employee the
2 [2012] FWAFB 5600
3 See e.g. Modern Awards Review 2012 - Transitional Provisions [2013] FWCFB 4539 at [30]-[31]; Modern Awards Review
2012—Apprentices, Trainees and Juniors [2013] FWCFB 5411 at [6]; Modern Awards Review 2012 - Penalty Rates [2013]
FWCFB 1635 at [12].
[2014] FWCFB 1996
3
reduction would have been about 3%, and for a Level 6 employee the reduction would have
been about 21%.
[6] The application also sought changes to the weekend and public holiday penalty rates
prescribed by clause 34.1 of the Restaurant Award. In respect of weekly employees, what was
sought was the abolition of penalty rates for Saturdays and Sundays, but no change to public
holiday penalty rates. For casual employees, it was proposed that they would receive only the
standard casual loading of 25% for Saturdays and Sundays (meaning, effectively, no penalty
rates for working on weekends), and the public holiday penalty rate would be reduced from an
additional 150% to an additional 125% (inclusive of the casual loading). The only penalty
rates proposed to be payable under the applicants’ application would be if an employee
worked a sixth or seventh day in a week.
[7] The application also sought a range of other changes to the Restaurant Award. It is not
necessary to describe them all. They included many changes to the classification structure.
Four of the changes sought were of relevance:
(1) the transition qualification to progress from the Introductory Level
classification to the Level 1 pay grade would be changed from a simple three
month period to “three months’ full time equivalent hours”;
(2) the work function of “receipt of monies” would be included in the definition of
the Food and Beverage Attendant Grade 1 in the Level 1 pay grade;
(3) the work function of “Barista” would be added to the classification definitions
of Food and Beverage Attendant Grades 2 and 3 in the Level 2 and 3 pay
grades respectively; and
(4) the work function of “taking reservations, greeting and seating guests” would
be included in the definition of Food and Beverage Attendant Grade 2 in the
Level 2 pay grade.
[8] The penalty rates aspect of the application made by the 18 applicants was initially
referred to a Full Bench which was constituted to deal with what were perceived to be
common penalty rates issues across a number of awards in the two-yearly review process.
However, the Full Bench ultimately referred the whole of the review of the Restaurant Award,
including the penalty rates issues, to Deputy President Gooley for determination. It did so in
response to a submission made by the 18 applicants to the Full Bench that they had an
extensive evidentiary case which they wished to present before a single member of the
Commission, and that they did not concede that the penalty rates issues which they wished to
raise in the review were common with any other modern award. The substantive hearing
before the Deputy President began on 13 May 2013, during which counsel for the 18
applicants made an opening submission. After outlining the applicants’ position with respect
to penalty rates, counsel foreshadowed an alternative case in the following terms:
“As an alternative proposition what we seek is at least an equalisation of the Sunday
penalty rate to the Saturday penalty rates and to the evening rates. If your Honour
wants a form of order from me to reflect that I will also undertake to do that, but we
[2014] FWCFB 1996
4
say at the very least there remains in almost the end of mid 2013 no justification for a
differential in loadings.”4
[9] Counsel for the applicants commenced presenting their evidentiary case on 13 May
2013 with the calling of the first witness. Further witnesses were called by the applicants on
the succeeding hearing days on 14, 15 and 16 May. After the applicants’ evidentiary case was
closed (subject only to the tender of some further documents) towards the end of 16 May
2013, their counsel raised the alternative case again in the following terms (underlining
added):
“The first point related to the penalty rates application that we make, our primary
application remains that the penalty rates should operate only on the sixth and seventh
day in the way that we proposed. We wish to make an alternative application which I
foreshadowed in opening and your Honour, Deputy President, you’ve heard some
evidence about it, which is that the rate for Sunday should be equal to the rate for
Saturday. That’s in the alternative. It should be reduced.”5
[10] Counsel then indicated he would provide the Deputy President with the form of order
to reflect this alternative case on the next hearing day, 20 May 2013. On that day, counsel
indicated there was a delay due to the difficulty in having to “go back and get approval from
various people internally”, but stated that he anticipated that later in the day that at least ABI
would be filing “applications” with the consent of the other 17 applicants in the proceedings.6
It was indeed the case that later in the day the Commission received two alternative
applications made by ABI. ABI made it clear that these applications were not intended to
displace the primary application we have earlier described, and were to be considered only if
the primary application was unsuccessful. It is not necessary to describe the details of ABI’s
first alternative application except to say that it still sought the complete abolition of weekend
penalty rates (subject to penalties being payable on the sixth and seventh days worked), but
modified the proposal earlier described concerning the reduction of award rates for small
businesses to the level of the national minimum wage rate so that it would only apply to non-
trades employees. In the second alternative application, ABI sought twelve discrete variations
to the Restaurant Award. The eighth variation maintained the position sought in the primary
application whereby, in respect of employees of small businesses, all award wage rates would
be reduced to the level of the minimum wage. The ninth variation sought that the weekend
penalty rates for Sundays only be reduced from 50% to 25% for weekly employees, and from
75% to 50% for casual employees (inclusive of the casual loading), thus aligning them with
the existing Saturday penalty rates in the Restaurant Award. Both alternative applications
appear to have been put forward as “packages”, and this appears to have been confirmed by
counsel for the applicants in closing submissions when he said, in respect of small businesses
under the second alternative application “And if that’s not successful, then they would pay
penalty rates on Saturday and Sunday but at the federal minimum wage”.7
4 Transcript 13 May 2013 PN 359
5 Transcript 16 May 2013 PN 1464
6 Transcript 20 May 2013 PN 1517
7 Transcript 22 May 2013 PN 2555
[2014] FWCFB 1996
5
[11] The Deputy President issued her decision, and an accompanying determination
varying the Restaurant Award, on 10 October 20138 (Decision). The variation in the
determination did not relate to any of the matters raised in the primary application of the 18
applicants or the two alternative applications made by ABI; it simply gave effect to a proposal
advanced by the Victorian Employers’ Chamber of Commerce and Industry to clarify a
provision concerning public holidays. In the Decision, the Deputy President gave her reasons
for rejecting the various proposed award variations advanced in the primary application
advanced by the 18 applicants and the two alternative applications advanced by ABI.
[12] There has been no appeal against the Deputy President’s rejection in whole of the
primary application of the 18 applicants. Nor has ABI appealed against the Deputy
President’s rejection of either of its alternative applications. Rather, the RCAV alone has
appealed in respect of the Deputy President’s rejection of one discrete aspect of ABI’s second
alternative application, namely the claim for a reduction in the Sunday penalty rate from 50%
to 25% for weekly employees and from 75% to 50% (inclusive of the casual loading) for
casual employees. We shall refer to this as the alternative penalty rates claim. The RCAV has
also appealed against the Deputy President’s rejection of the four claimed variations to the
classification structure which we have identified in paragraph [7] above.
[13] Thus, the RCAV’s appeal does not challenge the Deputy President’s conclusions with
respect to a wide range of claims which were advanced before her, including claims for the
complete abolition of penalty rates, for the reduction of all award wage rates to the level of
the national minimum wage for small business employees, and for a reduction in public
holiday penalty rates for casuals.
[14] None of the parties to the original, primary application sought to make any
submissions in support of the RCAV’s appeal.
The Decision under appeal
[15] In the Decision under appeal, the primary focus of the Deputy President was, not
surprisingly, upon the primary case of the applicants concerning penalty rates and reduced
pay rates for small businesses. As earlier stated, this appeal is not concerned with that primary
case. The narrower issues raised by this appeal received lesser attention in the proceedings at
first instance.
[16] The Decision commenced by setting out the provisions of the Transitional Act and the
FW Act relevant to the two-yearly review process and made reference to the principles
established in the Modern Awards Review 2012 decision (to which we have earlier referred)
applicable to such a review. The Decision then dealt sequentially and discretely with the
various issues raised by the various applications to vary the Restaurant Award,
notwithstanding that in the case of the application of the 18 applicants and ABI’s alternative
applications a number of the issues were raised in an interlinked or “packaged” way.
[17] After dealing at length with the issues of the Restaurant Award’s coverage and title,
and briefly with an application made by the Baking Industry Association of Queensland, the
8 [2013] FWC 7840
[2014] FWCFB 1996
6
Deputy President turned to the issue of penalty rates. The Decision at paragraphs [39]-[45]
summarised the primary and alternative positions advanced with respect to weekend penalty
rates as compared with the current provisions of the Restaurant Award, and summarised the
applicants’ case in the following terms:
“[44] It was submitted that the current penalty rate provisions in the Award are
operating in a manner which is inimical to the modern awards objective.
[45] It was submitted that the industry predominately operates on weekends and that
penalty rates are deterring a number of employers from providing work to employees
on weekends. It was submitted that the increased Sunday loading is not promoting
social inclusion and overvalues work performed on a Sunday. It was submitted that the
social disability specifically associated with Sunday work is no longer relevant in
Australian society and that for the majority of people work on Sunday is no different
to work on Saturday. It was submitted that the rates of pay in the Award, including
penalty rates, are so high that they are deterring employers from engaging in collective
bargaining.”
[18] The Decision then dealt with the evidence concerning penalty rates. The applicants
tendered statements of evidence from 20 restaurant operators and two catering operators. Of
the restaurant operators, ten were located in Queensland, five in New South Wales and five in
South Australia. The Deputy President summarised the evidence of these witnesses, and in
doing so made various comments upon that evidence. For example the evidence of a
restaurateur from South Australia was summarised and commented upon in the following way
in the Decision:
“[91] A witness who operates a restaurant in Mt Gambier which opens seven nights per
week said Saturday night is his busiest night. The majority of his staff are casuals
though he has three permanent employees and three apprentices. He and his wife work
in the business and they particularly work on Sundays to avoid paying penalty rates.
[92] Most of his employees are women with carer’s responsibility during the day who
like to work nights and weekends because their husbands can look after the children.
Some of his staff work second jobs during the day. All staff except some chefs are
paid Award rates of pay.
[93] He said that when the Award commenced wages went from 33% of turnover to
37% of turnover. He said that prior to the Award he paid a casual loading of 20% and
now he has to pay 25%. As the transitional provisions of the Award phased in the
increase in the casual loading the witness was not paying in accordance with the
Award if he immediately started paying a 25% loading to casuals.
[94] Prior to the Award staff were on AWA’s. He no longer has any staff employed on
AWA’s. He said that the Award had reduced the level of weekend penalties previously
payable in South Australia but he said this benefit had been more than offset by an
increase in the base rate and casual loading. No analysis was provided to support this
conclusion.
[2014] FWCFB 1996
7
[95] He has difficulty understanding the Award classifications and he said his staff do
not know what the difference is between Level 1 and 2. Also he does not know what
the expression “appropriate level of training” in the Award means.
[96] He said that the introduction of the Award means the number of hours available
for staff has decreased and he and his partner and other salaried staff work longer
hours. There has been a reduction in service levels and they have reduced the size of
the menu.
[97] He was unable to give evidence about the precise labour costs of the restaurant
business because the financial data is combined with the accommodation business that
he also runs.
[98] He said that energy costs had increased substantially. While he has implemented
cost cutting measures there is no capacity for further cuts. He said that the restaurant
only survives because of the accommodation business.
[99] He also said that the Global Financial Crisis (GFC) and a decline in the regional
economy were affecting the business. He also said that some of his competitors were
paying cash in hand to their staff which gave them an unfair advantage.
[100] He said that if penalties were only available on the sixth and seventh day, he and
his partner would stop working Sundays and another staff member would be
employed. Further he said that he would open for lunch on Sundays. This would have
a flow on effect for local producers.
[101] There was no evidence that any of his staff worked six or seven days in a row or
would do so if the variations were approved.”
[19] Another example was evidence of a restaurateur from Queensland, whose evidence
was summarised as follows:
“[128] A witness gave evidence that she operated a restaurant in Brisbane which opens
for lunch and dinner Monday to Friday and for dinner on Saturday.
[129] The business is busiest on Friday and Saturday. She would prefer to open
Tuesday to Sunday for lunch and dinner. She currently does not open on Sunday
because of the penalty rates. For the same reason she does not open on public
holidays.
[130] She employees [sic] 13 full-time staff and 12 casuals. Her front of house staff
are students, people from overseas on working visas, women with carer’s
responsibilities or people with second jobs. The casuals have a high attrition rate. This
increases her costs. Back of house staff are predominately full-time and are paid above
Award wages.
[131] She said that her staff do not mind working weekends and at night because it
suits their circumstances.
[2014] FWCFB 1996
8
[132] Prior to the introduction of the Award, casual employees were paid a flat rate of
$21.00 or $22.00 per hour. Once the Award came into operation, wages were dropped
back to the Award rate because of the penalties. This has added to compliance costs.
[133] She said the revenue had declined because of the GFC and because of the 2011
Brisbane flood but she is unable to increase her prices. Labour costs have increased
with the Award. Costs unassociated with the Award have also increased.
[134] If penalties were only payable on the sixth and seventh day then she would open
on Sunday and hire more staff. It would also reduce compliance costs.
[135] There was no evidence that any of her staff worked six or seven days in a row or
would do so if the variations were approved.”
[20] In relation to these witnesses, the Decision recorded at paragraph [155] that the
evidence of the restaurant and catering operators was not challenged, but what was challenged
was the weight to be given to that evidence. The Deputy President then summarised the
evidence of Mr John Hart, the Chief Executive Officer of Restaurant & Catering Australia
(RCA), of which the RCAV appears to be a branch or affiliate. He gave evidence firstly about
a survey conducted by the RCA of its members. The Deputy President in paragraph [157] of
the Decision quoted Mr Hart’s evidence to the effect that there were limitations upon the
reliability and representativeness of the survey because of the “modest numbers” of persons
responding and the fact that it was confined to RCA members. The survey results were then
summarised as follows:
“[158] Based on the 221 responses, Mr Hart concluded that 39% of participants
believed profitability would decrease and 31% believed it would remain the same.
70.9% said they would reduce the number of staff if labour costs continue to rise. 41%
said that they responded to weekend and Public Holiday penalty rates by reducing
employee hours and replacing with the owners picking up some of the work; 7.4% said
they either closed on Sundays or did not trade on weekends at all; 51% said their
labour costs were 31-50% of all costs and 22.9% said labour costs equated to 41-50%
of total costs.”
[21] The evidence of Mr Hart was further summarised in the Decision as follows:
“[160] Mr Hart gave evidence that the industry has a lower skill base compared to other
industries and that employees tend to be younger or pursuing other interests or
activities whilst working in the industry. It was his opinion that the high level of
casualisation means that people work in the industry whilst pursuing other objectives.
The labour force is traditionally drawn from students, school leavers, people in their
first job, people who work more than one job and people with carer’s responsibilities.
[161] Mr Hart gave evidence of role of restaurants and cafes in creating a night time
economy.
[2014] FWCFB 1996
9
[162] Mr Hart gave evidence of his impressions of the industry, in particular that costs
including labour costs are increasing and exceed increases in menu prices and
therefore profits are declining. He said that one way business operators respond to this
was by increasing the number of hours they work in the business and reducing rostered
staff hours. The Award introduced, especially in Queensland, penalties where none
existed before and these penalties apply at the very times people want to eat out.
[163] It was his opinion that if penalty rates were removed then business operators
would increase the number of hours offered to staff and small business operators
would be able to reduce the number of hours they work.
[164] The removal of penalty rates would enable employees to be remunerated by way
of commissions or incentive payments.
[165] He also said that employees generally have Monday and Wednesday off as
opposed to Saturdays and Sunday and therefore most hospitality workers socialise on
Mondays. He also said people now spend less time on religious and sporting pursuits
and that the increased use of dining out as entertainment means that we should
encourage employers to open their businesses on weekends.
[166] Mr Hart said small businesses are different and don’t have the hierarchical
structures of larger businesses. A system that provides for one minimum wage rate
means the employer can negotiate above that rate with its employees in a way which
encourages productivity.
[167] Mr Hart was cross examined and acknowledged that the proposal to have
penalties payable on the sixth and seventh day was put to the Award Modernisation
Full Bench.”
[22] The Decision then referred to the evidence of Mr Gregory Parkes, the Workplace
Relations Director of the RCA. The summary of his evidence at paragraphs [168]-[169] of the
Decision, referred to a number of matters concerning the classification structure in the
Restaurant Award, including that the RCA’s members were “unable to work out where a
barista was classified” and were concerned that “the introductory classification which is
limited to a duration of three months employment has no regard to the hours actually worked
by employees”.
[23] The Deputy President summarised at length the evidence of Professor Phil Lewis,
Foundation Professor of Economics and Director, Centre for Labour Market Research, at the
University of Canberra, who was commissioned by the RCA to produce two reports
concerning the restaurant industry and the Restaurant Award, and was cross-examined on
those reports. The matters most relevant to the issue of penalty rates in his evidence as
summarised in the Decision were as follows:
“[170] ... His starting point was the unsurprising proposition that an increase in the
cost of labour will reduce profitability. He also contended that a reduction in penalty
rates would result in an increased demand for labour. He did accept that ‘attempting to
[2014] FWCFB 1996
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estimate the likely impact of these changes with any accuracy is not possible given our
knowledge of actual and potential demand and supply factors.’
…
[172] In addition to the imposition of penalty rates having a significant negative effect
on employment and turnover in the industry, he also comments on the compliance
costs associated with such regulation.
[173] One of the factors influencing employer’s ability to reduce employee wages is
the ability of workers to find jobs requiring similar skills. For the restaurant industry
this would be the retail sector, hospitality, licenced [sic] clubs and the accommodation
industries. Professor Lewis concluded that because there was a great deal of
competition for youth and female labour there is limited scope for the restaurant
industry to impose wages and conditions of employment which employees are not
willing to voluntary enter into.
[174] Professor Lewis said that the rationale on which the introduction of penalty rates
in Australia was first based no longer exists. Sunday is not a day of religious
observance for most Australians. Similarly participation in sport and outdoor activity
is minimal compared with time spent on audio/visual media. He said penalty rates
were introduced at a time when the labour force was predominantly male, full-time in
industrial jobs with little casual or part-time work. Most retail outlets shut at midday
on Saturday and reopened on Monday. Weekends were for socialising, recreation,
participating in sport and worship.
…
[176] Professor Lewis says that employees only need to be compensated for working
unsocial hours if businesses cannot attract people to work those hours at standard rate
of pay.
[177] He says that the owners will benefit from the changes to penalty rates but not
necessarily greatly because the industry is very competitive and most cost savings are
eventually passed onto consumers in lower prices. Profit margins would be expected
to fall to the rate they were before the fall in labour costs.
[178] Suppliers would benefit as there would be an increased demand for their goods.
Tourism would benefit because customers would have a greater range of choices and
lower prices.
[179] There would be unambiguously more employment as the industry’s turnover
increased. There would be greater choice of shifts and more employment opportunities
for the unemployed.
[180] While some employees’ wage rates may fall they may receive an increase in
earnings from working more hours.
[2014] FWCFB 1996
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[181] Consumers would benefit because they would pay lower prices, eat out more
and at times which better suit their lifestyle.
[182] In his reply report, Professor Lewis said that he ‘made no comment on the
introduction of the Restaurant Award 2010. Indeed with all the other economic factors
at play, such as changes in income and consumer sentiment, it would be difficult to
definitely identify any positive or negative effect of the introduction of the award.”
[24] The Deputy President then referred to a report prepared by Price Waterhouse Coopers
“on the impacts of the proposed changes”. In paragraph [184] of the Decision, the Deputy
President referred to that report being based on a survey distributed to “3570 randomly
selected restaurant cafe and catering business owners/operators” of which there were “61
surveys completed and 251 partially completed surveys”. The key points in the report were
summarised in the Decision in the following way:
“[187] The survey showed that:
Respondents would hire more staff if penalty rates were not imposed on
weeknights, Saturday or Sunday.
Wages have increased at a higher rate than goods and services sold since the
inception of the Award.
64% of respondents would extend trading hours if penalty rates were not
imposed on weeknights, Saturday or Sunday.
[188] The proposed changes to penalty rates would reduce expenditure on wages by
14% on current operating models. This would have the following economy wide
impacts:
Additional jobs in the restaurant industry;
Additional jobs across all industries;
A fall in the CPI;
Higher consumer purchasing power and consumption; and
Greater economic activity and an increase in the GDP.
[189] The analysis suggests that while some existing staff would experience reduced
take-home pay in the short term there will be an expansion of job opportunities with
wages returning to forecast levels in the long run.”
[25] The Deputy President then summarised the evidence adduced by United Voice, which
opposed the application of the 18 applicants. United Voice called a number of its officials to
give evidence (some of whom had previously worked in the hospitality industry) about the
nature of the industry and the likely effects which would flow from the grant of the
application of the 18 applicants. The summary of this evidence in the Decision included the
following concerning the evidence of Ms Louise Tarrant:
“[192] Ms Louise Tarrant, the National Secretary of UV gave evidence that the
accommodation and food services industries are characterised by low levels of full-
time workers, cyclical growth, growing employment which is concentrated in the cafe,
[2014] FWCFB 1996
12
restaurants and takeaway food services sector and low paid employment. Ms Tarrant
agreed with Mr Hart that the traditional sources of labour for restaurants are “students,
school leavers, people in their first job, people work more than one job and people
with carers responsibilities.” Ms Tarrant said these are amongst the most vulnerable
workers in Australia. She said that even a slight reduction in income can have a
significant impact on their economic health, and cause significant stress. She said the
casual employees have little bargaining power and no right to insist on being placed on
a roster at a time or times of their choosing. They can be sent home early or asked to
work if there is an unexpected increase in custom on any day. She says they have little
choice to accept reductions in hours or potential disruption to family study or leisure
commitments when they are asked to work additional hours.
[193] It was her evidence that if penalties were only paid on the sixth and seventh day
the vast majority of restaurant employees would never qualify for penalty payments as
it is rare for them to work more than five days a week.
[194] During the award modernisation proceedings UV put submissions to the Full
Bench that penalty rates are a significant component of employees’ take-home pay and
a reduction in penalty rates would mean that employees would need to work more
hours to maintain their take-home pay. Further, work on penalty rate days causes
inconvenience and disability in relation to family and other relationships, recreational
and leisure opportunities. Workers are prepared to work on Sundays and public
holidays because of the penalty rates which provide an incentive for employees to
accept the social inconvenience and disability working these days.
[195] Ms Tarrant said that a reduction in penalty rates would transfer money away
from employees to employers. There is no guarantee that this would result in more
hours for employees or higher base rates for employees. Further it was submitted that
lowering the wages of employees in this sector would lead to lower rates of consumer
spending across the entire economy. Ms Tarrant gave evidence that in 2008 the ABS
estimated that approximately 73% workers in the accommodation and food services
industry usually work on weekends. Ms Tarrant recounted statements from members
in which they describe the impact of the loss of penalty rates on them.”
[26] At paragraphs [202]-[203] of the Decision the Deputy President referred to the
evidence of Mr David Briggs from Galaxy Research, who was commissioned by United
Voice to carry out a survey of community attitudes to penalty rates in the restaurant industry.
The survey results referred to were that, in respect of Sunday penalty rates, “67% said they
were about right, 20% said they were too high and 10% said they were too low”, and that
“81% of respondents said that the restaurant industry should be required to conform to the
minimum standards similar to those that apply to other industries”. The Deputy President also
referred to Mr Briggs as having critiqued the Price Waterhouse Coopers survey.
[27] The final evidence referred to in the Decision was that of Professor William Mitchell,
the Director of the Centre of Full Employment and Equity at Charles Darwin University and
the University of Newcastle, and Professor in Economics at Charles Darwin University and
Conjoint Professor at the University of Newcastle. His evidence was summarised in the
following terms:
[2014] FWCFB 1996
13
“[204] Professor William Mitchell gave evidence that the low profit margins in the cafe
and restaurant sector were largely due to the intense competition and an oversupply of
businesses in the sector.
[205] It was his evidence that there was no discernible change in profitability able to
be observed post-2010 nor was there any discernible change in employment growth. It
was his view that if penalty rates were cut in food services underemployed workers
would seek other opportunities in retail. It was his evidence that for the vast majority
of workers the traditional period to socialise, participate in sport and to worship
remains the weekends.”
[28] The Decision (at paragraphs [207]-[215]) then analysed the award modernisation
process which led to the making of the Restaurant Award. That is a matter which we
ourselves intend to discuss at greater length, so that we will not reproduce this part of the
Decision. The Deputy President then commenced her consideration of the penalty rates issue
(at paragraphs [216]-[217]) by rejecting a submission made by the 18 applicants that “it
would be wrong to assume that an award made under Part 10A of the Workplace Relations
Act 1996 satisfies the modern awards objective” as being inconsistent with the Full Bench
decision in Modern Awards Review 2012—Penalty Rates9. The Decision then referred to the
award modernisation process in which the RCA had advanced a case, supported by evidence,
initially that penalty rates should be abolished completely except for the sixth and seventh
days of work in a week, and subsequently an amended case that penalty rates for casual
employees should be abolished. The Deputy President then observed that “Those submissions
were not adopted by the Award Modernisation Full Bench” (paragraph [222]).
[29] At paragraph [223] of the Decision, the Deputy President said “The RCA seeks to vary
the Award so that penalties are payable on the sixth and seventh day worked”, and proceeded
to consider that proposition. It is clear from this statement and what followed immediately
thereafter that paragraphs [223] through to [248] of the Decision are concerned with the
primary application advanced by the 18 applicants with respect to penalty rates. It is only at
paragraph [249] that the Deputy President turned to the alternative application concerning
penalty rates advanced by ABI, saying “The RCA put forward an alternative proposal to
reduce Sunday penalties to the same rate as Saturday penalties”, and then dealt with that
alternative through to paragraph [252].
[30] The Deputy President’s major conclusions concerning the primary application were:
It was not in dispute that employees in the restaurant and catering industry
were low paid and disproportionately dependent on the minimum rates of pay
set in the Restaurant Award (paragraph [225]).
The submission that there were no longer any disabilities associated with
working unsociable hours was not accepted, and the Deputy President was
9 [2013] FWCFB 1635
[2014] FWCFB 1996
14
not satisfied “that there has been a significant change in the disabilities
associated with working unsociable hours since the making of the Award”
(paragraph [226]).
It was not possible to generalise the RCA survey results to the general
population of restaurant and catering operations, and the findings of the Price
Waterhouse Coopers survey could not be concluded to be representative of
the general population of restaurant and catering operations (paragraphs
[228]-[229]).
The restaurant operators’ evidence was disproportionately from Queensland,
which was probably unsurprising as the changes in penalty rate structure
effected by the making of the modern Restaurant Award were greatest there
(paragraph [231]). The Queensland witnesses said that other factors such as
“the downturn in the tourism dollar” had a negative impact on their business,
and some had not taken advantage of the transitional rates in the Restaurant
Award, meaning that they had been paying above award penalty rates. They
had in the main not produced financial data to support their conclusions,
although those who faced higher penalty rates would undoubtedly need to
make adjustments to their businesses, and it was not possible to reach
conclusions about the industry as a whole based on their evidence. The
evidence as to what operators would do if penalty rates were payable on the
sixth and seventh day was speculative (paragraphs [231]-[234]).
There was no empirical evidence derived from particular situations where
penalty rates had not been mandatory to support Professor Lewis’s theory
that if wage costs were reduced employment and economic activity would
increase. Annual Wage Review decisions had found that moderate minimum
wage increases had a very small or no actual effect on employment
(paragraphs [235]-[240]).
The proposed award changes would have a significant impact on the take-
home pay of employees in the industry, and the possibility that employees
could be offered additional hours of work to compensate for this was not a
sufficient answer. There was insufficient evidence of the capacity of existing
employees such as students to take up additional hours of work. “The
variations proposed would have a negative impact on the relative living
standards and the needs of the low paid who would need to increase the hours
worked simply to maintain their current income” (paragraphs [241] and
[243]).
There was insufficient or no evidence that the proposed changes would
improve productivity or encourage collective bargaining (paragraphs [242]
and [244]).
[31] The Deputy President decided to reject the primary case of the 18 applicants
(paragraph [245]). In doing so, the Deputy President said that she endorsed the comments of
the Full Bench made in response to the RCA’s proposal on penalty rates made during the
[2014] FWCFB 1996
15
award modernisation process that to adopt it “would give the operational requirements of the
restaurant and catering industry primacy over all other considerations which the Commission
is required to take into account, including the needs of the low paid and the weight of
regulation” (paragraph [246]). The Deputy President then said:
“[247] The RCA has not established cogent reasons for revisiting the penalty regime it
proposed in the Award Modernisation Full Bench. The grounds on which they seek the
variations do not identify a significant change in circumstance; rather they are largely
merits considerations which existed at the time the Award was made.”
[32] In respect of ABI’s alternative application as it concerned penalty rates, we set out the
Deputy President’s reasons for the rejection of this application in full:
“[250] While such a change would have a lesser impact on employees and operators,
for the reasons set out above, I am not satisfied that the proposed variations are
warranted on the basis that the Award is not achieving the ‘modern awards objective’
or is operating other then ‘effectively, without anomalies or technical problems arising
from the Part 10A award modernisation process.’
[251] While there is some evidence that some restaurants may open on Sundays if
penalty rates were reduced it is far from compelling. I accept however that if those
restaurants did open on Sunday that would increase employment opportunities.
However there is little evidence before me about the impact of the differential penalty
rates on the numbers of persons employed on Saturday compared with Sunday. A
reduction of Sunday penalties would still impact on the low paid albeit less than if the
primary proposal of the RCA were adopted.
[252] The question of whether the disabilities associated with working on Sunday are
greater than working on Saturday requires more consideration than has been given in
this matter. The four yearly review which commences next year will provide an
opportunity for these issues to be considered in circumstances where the transitional
provisions relating to the relevant awards will have been fully implemented.”
[33] The Decision then dealt with the proposed small business exemption sought by the 18
applicants from the payment of the rates prescribed for each classification by the Restaurant
Award, which the Deputy President rejected. The Deputy President then turned to the seven
classification structure changes proposed by the 18 applicants. As earlier stated, four of the
classification structure issues are raised by this appeal. The first concerned the requirement
for progression from the Introductory classification to Level 1. In respect of this claim, the
Deputy President said:
“Three months qualifying period
[274] The RCA submits that this is an anomaly as it permits an employee who works
one shift per week to move to Level 1 after three months while an employee who
works 38 hours per week also moves to Level 1 after three months.
[2014] FWCFB 1996
16
[275] The first thing that needs to be said is that this is not an anomaly arising from the
award modernisation process. Such provisions have been a feature of awards since the
introduction of skill based classification structures. For example, the Restaurants
Award etc (State) Award provided that a Level 1 employee had to have three months
on the job training before moving to Level 2.
[276] Further it is worth noting that such a time period is provided in the Hospitality
Award and the Registered and Licensed Clubs Award 2010 as well as other awards
with significant levels of casual and part time staff such as the Aged Care Award 2010
and the Amusement, Events and Recreation Award 2010.
[277] There was no evidence put before me to establish that an employee working
limited hours over the three month period did not, in that time, develop the necessary
skills to undertake the work of a Level 1 employee. In any event that Award provides
that by mutual agreement a maximum of another three months can be taken. It may be
that it does not take a full time employee three months to develop the skills necessary
to perform work at level 1 but the Award does not mandate that an employee remain at
the introductory level for three months as it provides that this is the maximum period
of engagement.
[278] I am not satisfied that this requirement is an anomaly.”
[34] The second claim raised in the appeal concerned the lack of reference to the function
of “receipt of monies” in the Level 1 classification definition. In respect of this claim, the
Decision said:
“Handling money at Level 1 instead of Level 2
[279] The RCA complains that the current classification structure prevents a Level 1
employee from handling cash and therefore in many restaurants employees will need
to be classified at Level 2.
[280] Be that as it may, the RCA has not put any submissions that the relativity that
has been established for work, at this level, was not properly fixed. While I accept that
for many restaurants waiting staff will receive monies, that is not an argument that the
relativity for the classification was not properly set.
[281] It is worth noting that the current rate of pay for a Level 1 employee is $43.20
below a Retail Worker Level 1 who is able to receipt [sic] monies and a restaurant
employee Level 2 employee is $18.60 below the Retail Worker Level 1.”
[35] The third concerned the lack of any reference to the work function of “barista” in the
Restaurant Award’s classification structure. The Deputy President said:
“[282] The Award does not list all the various job titles in the industry.
[283] While I accept that some cafe and restaurant owners may not understand the
classification structure and that the description of the tasks does not say barista, there
[2014] FWCFB 1996
17
is no doubt that a barista can be classified under the Award as a food and beverage
attendant grade 2 or 3.”
[36] The fourth claim concerned the absence of a reference to the work function of “taking
reservations, greeting and seating guests” in the Level 2 classification definition. No part of
the Decision specifically addressed this claim.
RCAV Submissions
[37] The RCAV’s submissions on that aspect of the appeal concerning the alternative
penalty rates proposal did not, as earlier stated, challenge the correctness of the proposition in
the Full Bench decision in Modern Awards Review 201210 that the demonstration of “cogent
reasons ... such as a significant change in circumstances which warrants a different outcome”
was required in order for an issue dealt with in the award modernisation process to be
revisited in the transitional review. However, it submitted that the following constituted
cogent reasons for revisiting the issue of penalty rates:
(1) there had been a case presented at first instance about the lack of distinction
between working on Saturdays and Sundays in terms of social disability which
had not been presented before or considered by the award modernisation Full
Bench; and
(2) there had been evidence adduced at first instance demonstrating that the
Restaurant Award since its making had in its operation not met the modern
awards objective, in particular because it had reduced employment through the
operation of penalty rates on weekends.
[38] On that basis, the RCAV submitted that the Deputy President fell into error when she
made findings such as those at paragraphs [226] and [247] of the Decision that she was not
satisfied there had been any change in relevant circumstances since the making of the
Restaurant Award. Cogent reasons did not have to consist of a demonstration of changed
circumstances and, by adopting changed circumstances as the test, the Deputy President had
failed to discharge properly the statutory functions under item 6 of Schedule 5 of the
Transitional Act.
[39] The RCAV also submitted that the Deputy President erred in rejecting, or failing to
have regard or proper regard to or to give effect or proper effect to, evidence concerning the
following matters:
(1) the adverse impact of penalty rate provisions on businesses, including on
productivity and employment;
(2) the effect of penalty rates on demand for labour and employment growth;
10 [2012] FWAFB 5600
[2014] FWCFB 1996
18
(3) that if penalty rates were reduced, low paid employees, although their wage
rate might fall, might receive even higher total earnings because the potential
to work a greater number of hours would increase;
(4) the impact on the performance and competiveness of the national economy;
(5) the lack of any material distinction between perceived inconveniences
associated with working on a Saturday as compared to a Sunday; and
(6) the Restaurant Award is concerned with an industry workforce that wants to
work on weekends.
[40] On the issue of the level of disability for working on Sundays as distinct from
Saturdays, the RCAV submitted that the Deputy President should have made and acted upon
findings to the following effect:
(1) Weekends are the period in which many persons, particularly young persons
and students, are available and want to work in the restaurant industry.
(2) Social mores in Australia have changed considerably from when penalty rates
were first introduced.
(3) Only a minority of Australians use Sunday as a day of religious observance,
having regard to the decline in church attendance and the growth in non-
Christian religions. These trends are more marked amongst young people.
(4) Sport and outdoor activities are not significant on weekends for most people,
and the greatest use of free time is on audio/visual media.
[41] On the business and employment impacts of penalty rates, the RCAV relied on the
evidence of Professor Lewis, who expressed the opinion that penalty rates had a negative
effect on employment and turnover in the restaurant industry and that the removal of penalty
rates would lead to more employment as turnover increased. The RCAV also referred to the
Price Waterhouse Coopers survey, with 101 employers indicating that on Sundays there had
been a reduction in trading hours (33%), an increase in business owners working longer hours
(29%) and some establishments closing (11%). The RCAV also pointed to the evidence of the
individual restaurant operators as supporting these conclusions, and said that United Voice’s
evidentiary case did not address or seek to justify the need for a distinction between Saturday
and Sunday penalty rates. It was submitted that the Deputy President, in “rejecting the
[RCAV’s] evidence or its import” in this respect on the basis of the lack of significant change
since the Restaurant Award was made and postponing consideration of penalty rates until the
four-yearly review, erred by failing to conduct the review as required by item 6(2) of
Schedule 5 of the Transitional Act and failing to consider or give effect to the matters
identified in paragraphs (c), (d), (f) and (h) of the modern awards objective in s.134(1) of the
FW Act.
[42] In respect of the four classification structure issues raised in the appeal, the RCAV
submitted that the Deputy President had erred by failing to recognise that the Restaurant
[2014] FWCFB 1996
19
Award was not operating effectively, without anomalies or technical problems arising from
the award modernisation process, and thereby had failed to apply or give proper effect to item
6(2)(b) of Schedule 5 of the Transitional Act. Concerning the issue of progression from the
Introductory Level pay grade to Level 1, the RCAV submitted that the requirement for
progression after a maximum of three months’ service was anomalous because it did not take
into account the number of hours that would be worked by an employee at the Introductory
Level. A part-time or casual employee would work fewer hours in the three month period and
thus gain less work experience than the full-time employee, but would progress at the same
time. This, it submitted, should have been rectified by an appropriate variation to the
Restaurant Award.
[43] In relation to the Food and Beverage Attendant Grade 1 classification within the
Level 1 pay grade, it was submitted that the absence of a reference to the “receipt of monies”
in the definition of that classification meant that for someone to engage in that function,
he/she had to be classified as a Food and Beverage Attendant Grade 2 within the Level 2 pay
grade. This was anomalous, because the receipt of payment from customers was not a
complex task and was one which, the evidence demonstrated, was expected to be performed
by all “front of house” employees whatever their level of experience. Mr Parkes, the
Workplace Relations Director of the RCA, gave evidence that the effect of this anomaly was
that no “front of house” staff could be employed on the Level 1 pay grade, and had to be paid
at Level 2 at least. The RCAV’s submission concerning the work function of “taking
reservations, greeting and seating guests” was to similar effect. It submitted that the exclusion
of this work function in the definition of the classifications of Food and Beverage Attendant
Grade 1 and Food and Beverage Attendant Grade 2 within the Level 1 and Level 2 pay grades
respectively was anomalous because the evidence demonstrated that it was a basic function
which “front of house” employees were expected to perform at all levels of experience. The
exclusion of a reference to the function of a barista in the definitions of the classifications of
Food and Beverage Attendant Grades 2 and 3 was anomalous because it made it difficult for
those covered by the Restaurant Award to understand at what level persons performing that
function were to be paid, meaning that the Restaurant Award was inconsistent with
s.134(1)(g) of the FW Act.
[44] The RCAV submitted that permission to appeal should be granted because the appeal
raised important questions as to the proper application of item 6 of Schedule 5 of the
Transitional Act, the penalty rates issue had wide application to a large range of employers
and employees across the country and attracted the public interest, the Decision was attended
by error and sufficient doubt to warrant reconsideration, and substantial injustice might result
if permission was refused because of the effect of the Decision on employers, employees and
the national economy. It sought that the appeal be upheld, and for this Full Bench to re-hear
the matter and vary the Restaurant Award in accordance with the alternative penalty rates
application and its submissions on the four classification structure issues.
United Voice submissions
[45] United Voice submitted that the Decision was made in strict conformity to the
requirements of item 6 of Schedule 5 of the Transitional Act and the principles stated in the
Full Bench Modern Awards Review 2012 decision, and characterised the RCAV’s appeal as
implicitly impugning that Full Bench decision without having the legal or discretionary basis
[2014] FWCFB 1996
20
to do so directly. The alternative application on penalty rates was not properly advanced until
midway through the hearing (and by ABI rather than the RCAV), which meant that the
RCAV’s submission that United Voice’s evidentiary case did not address or justify the
distinction between Saturday and Sunday penalty rates was disingenuous. The Deputy
President had taken into account all the evidence before her, including Professor Lewis’s
evidence that it was difficult to identify any positive or negative effect of the introduction of
the Restaurant Award, and had provided reasons for her rejection of the application before her
(including the alternative application) which articulated the essential grounds for that
outcome.
[46] It was submitted that the appeal was merely another attempt to re-agitate issues which
had been decided by the award modernisation Full Bench in 2009 in a way which properly
balanced the interests of employees and employers. There had been no identification of
jurisdictional or legal error, nor any discretionary error in accordance with the principles
stated in House v The King.11 Permission to appeal, United Voice submitted, should be
rejected for these reasons, as well as because the appellant, the RCAV, was not representative
of employers under the Restaurant Award generally, there was a lack of any evidence from
restaurateurs in the RCAV’s area of interest, Victoria, there was no evidence about the
experience of Victorian employers during the “penalty-free” period of 2006-2010, and the
upcoming four-yearly review of awards was the proper vehicle for the ventilation of the
RCAV’s issues.
[47] In relation to the classification structure issues, United Voice submitted that the
Deputy President considered, in an orthodox way, and rejected, the “anomalies” which were
contended to exist. The RCAV had not identified any error in the Deputy President’s analysis.
Relevant statutory provisions
[48] We will set out in full the statutory provisions to which we have earlier referred as
being relevant to this appeal. Firstly, item 6 of Schedule 5 of the Transitional Act provides:
6 Review of all modern awards (other than modern enterprise awards and State
reference public sector modern awards) after first 2 years
(1) As soon as practicable after the second anniversary of the FW (safety net
provisions) commencement day, the FWC must conduct a review of all modern
awards, other than modern enterprise awards and State reference public sector
modern awards.
Note: The review required by this item is in addition to the annual wage reviews and
4 yearly reviews of modern awards that the FWC is required to conduct under the FW
Act.
(2) In the review, the FWC must consider whether the modern awards:
(a) achieve the modern awards objective; and
11 (1936) 55 CLR 499 at 505
[2014] FWCFB 1996
21
(b) are operating effectively, without anomalies or technical problems
arising from the Part 10A award modernisation process.
(2A) The review must be such that each modern award is reviewed in its own right.
However, this does not prevent the FWC from reviewing 2 or more modern
awards at the same time.
(3) The FWC may make a determination varying any of the modern awards in any
way that the FWC considers appropriate to remedy any issues identified in the
review.
Note: Any variation of a modern award must comply with the requirements of the
FW Act relating to the content of modern awards (see Subdivision A of Division 3 of
Part 2-3 of the FW Act).
(4) The modern awards objective applies to the FWC making a variation under
this item, and the minimum wages objective also applies if the variation relates
to modern award minimum wages.
(5) The FWC may advise persons or bodies about the review in any way the FWC
considers appropriate.
(6) Section 625 of the FW Act (which deals with delegation by the President of
functions and powers of the FWC) has effect as if subsection (2) of that section
included a reference to the FWC's powers under subitem (5).
[49] Section 134(1) of the FW Act, which contains the modern awards objective, provided
as at the date of this decision:
Section 134 THE MODERN AWARDS OBJECTIVE
What is the modern awards objective?
(1) The FWC must ensure that modern awards, together with the National
Employment Standards, provide a fair and relevant minimum safety net of
terms and conditions, taking into account:
(a) relative living standards and the needs of the low paid; and
(b) the need to encourage collective bargaining; and
(c) the need to promote social inclusion through increased workforce
participation; and
(d) the need to promote flexible modern work practices and the efficient
and productive performance of work; and
(da) the need to provide additional remuneration for:
[2014] FWCFB 1996
22
(i) employees working overtime; or
(ii) employees working unsocial, irregular or unpredictable hours;
or
(iii) employees working on weekends or public holidays; or
(iv) employees working shifts; and
(e) the principle of equal remuneration for work of equal or comparable
value; and
(f) the likely impact of any exercise of modern award powers on business,
including on productivity, employment costs and the regulatory burden;
and
(g) the need to ensure a simple, easy to understand, stable and sustainable
modern award system for Australia that avoids unnecessary overlap of
modern awards; and
(h) the likely impact of any exercise of modern award powers on
employment growth, inflation and the sustainability, performance and
competitiveness of the national economy.
This is the modern awards objective.
[50] It should be noted that paragraph (da) of s.134(1) was not in operation at the time the
Deputy President issued the Decision. It was added to s.134(1) effective from 1 January 2014
as a result of the Fair Work Amendment Act 2013.
[51] Section 138 of the FW Act identifies how the modern awards objective is to be
achieved as follows:
138 Achieving the modern awards objective
A modern award may include terms that it is permitted to include, and must include
terms that it is required to include, only to the extent necessary to achieve the modern
awards objective and (to the extent applicable) the minimum wages objective.
[52] For completeness, we also set out the minimum wages objective set out in s.284(1) of
the FW Act, which is referred to in item 6(4) of Schedule 5 of the Transitional Act:
What is the minimum wages objective?
(1) The FWC must establish and maintain a safety net of fair minimum wages,
taking into account:
[2014] FWCFB 1996
23
(a) the performance and competitiveness of the national economy,
including productivity, business competitiveness and viability, inflation
and employment growth; and
(b) promoting social inclusion through increased workforce participation;
and
(c) relative living standards and the needs of the low paid; and
(d) the principle of equal remuneration for work of equal or comparable
value; and
(e) providing a comprehensive range of fair minimum wages to junior
employees, employees to whom training arrangements apply and
employees with a disability.
This is the minimum wages objective.
The Full Bench’s function in an appeal
[53] In order for a party to be able to appeal from a single-member decision of the
Commission to a Full Bench of the Commission, s.604 of the FW Act requires that the Full
Bench must first grant the party permission to appeal. The Full Bench is required by s.604(2)
to grant permission to appeal where it is satisfied that it is in the public interest to do so. The
Full Bench may also grant permission in the exercise of its discretion upon other grounds.
Conventionally, grounds upon which permission to appeal may be granted include that the
decision was attended by sufficient doubt to warrant its reconsideration, that substantial
injustice would result if permission were refused, or a clear case of error has been
demonstrated.12
[54] Where the appeal is from a discretionary decision, it is important to recognise that
even where it decides to grant permission to appeal, it is not simply open for the Full Bench to
substitute its own preferred view for that of the single member whose decision is under
appeal. The High Court made it clear in Coal and Allied Operations Pty Limited v Australian
Industrial Relations Commission13 that, under the Workplace Relations Act (WR Act), a Full
Bench of the Australian Industrial Relations Commission could only exercise its statutory
appellate power if the decision under appeal was attended by appellable error in accordance
with the principles stated in the earlier High Court decision of House v The King14. This
proposition has been firmly established as applicable to the exercise of appeal powers under
the FW Act by Full Benches of the Fair Work Commission.15
[55] The principles applicable to the identification of appellable error were stated in the
High Court decision of House v The King16 as follows:
12 GlaxoSmithKline Australia Pty Ltd v Makin [2010] FWAFB 5343 at [3]
13 (2000) 203 CLR 194 at [18] per Gleeson CJ, Gaudron and Hayne JJ
14 (1936) 55 CLR 499 at 504-5 per Dixon, Evatt and McTiernan JJ
15 See e.g. Linfox Australia Pty Ltd v Fair Work Commission [2013] FCAFC 157 at [13]
16 (1936) 55 CLR 499 at 504-5 per Dixon, Evatt and McTiernan JJ
[2014] FWCFB 1996
24
“The manner in which an appeal against an exercise of discretion should be determined
is governed by established principles. It is not enough that the judges composing the
appellate court consider that, if they had been in the position of the primary judge, they
would have taken a different course. It must appear that some error has been made in
exercising the discretion. If the judge acts upon a wrong principle, if he allows
extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he
does not take into account some material consideration, then his determination should
be reviewed and the appellate court may exercise its own discretion in substitution for
his if it has the materials for doing so.”
[56] The principle that mere preference for a particular result is not a proper basis to
interfere with a discretionary decision upon appeal was reiterated by the High Court in Norbis
v Norbis17 in the following way:
“The principles enunciated in House v. The King were fashioned with a close eye on the
characteristics of a discretionary order in the sense which we have outlined. If the
questions involved lend themselves to differences of opinion which, within a given
range, are legitimate and reasonable answers to the questions, it would be wrong to
allow a court of appeal to set aside a judgment at first instance merely because there
exists just such a difference of opinion between the judges on appeal and the judge at
first instance. In conformity with the dictates of principled decision-making, it would
be wrong to determine the parties’ rights by reference to a mere preference for a
different result over that favoured by the judge at first instance, in the absence of error
on his part. According to our conception of the appellate process, the existence of an
error, whether of law or fact, on the part of the court at first instance is an
indispensable condition of a successful appeal.”
[57] It is not sufficient to demonstrate appellable error to contend that the first instance
decision-maker failed to give a particular matter “sufficient weight” or failed to have “proper
regard” to it unless this amounted in substance to a failure to exercise the discretion conferred
on the court or tribunal. In the High Court decision in Gronow v Gronow18 Aickin J (with
whom Mason and Wilson JJ agreed) said19:
“It is however a mistake to suppose that a conclusion that the trial judge has given
inadequate or excessive weight to some factors is in itself a sufficient basis for an
appellant court to substitute its own discretion for that of the trial judge. As Kitto J said
in Lovell v Lovell20 at p 533:
‘The proposition that the appeal court will consider whether ‘no sufficient
weight’ has been given relevant considerations is not inconsistent with the
principle that the appeal court does not deal with the appeal as if it were
exercising the original jurisdiction; even if it considers that insufficient weight
17 (1986) 161 CLR 513 at 518-9 per Mason and Deane JJ
18 (1979) 144 CLR 513
19 Ibid at 537-8, Mason and Wilson JJ agreeing at 526.
20 (1950) 81 CLR 513
http://www.austlii.edu.au/cgi-bin/LawCite?cit=%281950%29%2081%20CLR%20513?stem=0&synonyms=0&query=
[2014] FWCFB 1996
25
has been given to some relevant consideration, it will still not substitute its
judgment for that of the primary judge unless it come clearly to the conclusion
for that reason that the discretion has been exercised wrongfully.’
It is clear that test will not be satisfied merely by reason that the appellant court,
considering the matter de novo, would itself have arrived at a different result.”
[58] Similarly in the High Court decision in Queensland Electricity Commission, Re; Ex
parte Electrical Trades Union21 the majority (Mason CJ, Wilson and Dawson JJ) said that
failure to give sufficient weight to a relevant factor did not “generally speaking ... entitle an
appellate court to overturn the discretionary decision of a primary judge”. And in Milillo v
Konnecke the NSW Court of Appeal (Ipp JA, with whom Macfarlan JA and Sackville JA
agreed) said that it was incorrect that in respect of a discretionary decision inadequate weight
could give rise to appellant intervention, and that when an appellate court said a matter was
given “little or no weight”, this was “akin to saying that the relevant factor was not considered
at all”, which was strictly in accordance with the test for appellate intervention recognised in
House v The King.22
[59] In Coal and Allied, the High Court characterised a discretionary decision-making
process in the following way23:
“‘Discretion’ is a notion that ‘signifies a number of different legal concepts’. In general
terms, it refers to a decision-making process in which ‘no one [consideration] and no
combination of [considerations] is necessarily determinative of the result.’ Rather, the
decision-maker is allowed some latitude as to the choice of the decision to be made.
The latitude may be considerable as, for example, where the relevant considerations
are confined only by the subject-matter and object of the legislation which confers the
discretion. On the other hand, it may be quite narrow where, for example, the decision-
maker is required to make a particular decision if he or she forms a particular opinion
or value judgment.”
[60] It is clear that the decision-making process required to be undertaken by the Deputy
President in respect of the Restaurant Award was discretionary in nature. The Full Bench in
Modern Awards Review 201224 said:
“[63] Under subitem 6(3) of Schedule 5, the Tribunal has a broad discretion to vary
any of the modern awards in any way that it considers necessary to remedy any issues
identified in the Review. However, subitem 6(4) provides that in making such a
variation the Tribunal must take into account the modern award objective in s.134 of
the FW Act, and, if varying modern award and minimum wages, the minimum wages
objective in s.284.”
21 (1987) 72 ALR 1 at 7
22 [2009] NSWCA 109 at [94]-[95]
23 (2000) 203 CLR 194 at [19]
24 [2012] FWAFB 5600
[2014] FWCFB 1996
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[61] In exercising its discretion under subitem 6(3) of Schedule 5, the Commission is also
required to give consideration to the matters identified in subitem 6(2), but although those
matters assist in identifying the purpose of the statutory review requirement and may therefore
guide the exercise of the discretion, they do not operate to alter the broad character of the
discretion given under subitem 6(3).
[62] We have applied the above-described appeal principles to our consideration of this
appeal. Our task is therefore to determine whether the Deputy President erred in the exercise
of the discretionary power under item 6 of Schedule 5 of the Transitional Act. It is only if
error is identified in the Decision that the Full Bench may embark upon a merits
reconsideration of those claims which were before the Deputy President and which the RCAV
continues to agitate in this appeal.
Permission to appeal
[63] We have determined that the RCAV should be granted permission to appeal in respect
of the specific matters raised by its appeal, namely Sunday penalty rates and the classification
structure issues earlier identified. The subject matter of the appeal is, we consider, of
sufficient importance to attract the public interest and thus require the grant of permission
under s.604(2) of the FW Act. Further, as our reasons below disclose, we have identified error
in the Decision in a number of respects, consistent with the principles applicable to an appeal
from a discretionary decision which we have identified, such as to justify the grant of
permission to appeal.
Sunday penalty rates
Development of the penalty rate provisions in the Restaurant Award
[64] Clause 34.1 of the Restaurant Award currently provides as follows:
34.1 Penalty rates for work on weekends and public holidays
An employee working ordinary time hours on the following days will be paid
the following percentage of the minimum wage in clause 20 - Minimum wages
for the relevant classification:
Type of employment Monday to
Friday
Saturday Sunday Public
holidays
% % % %
Full-time and part-
time
100 125 150 250
Casual (inclusive of
25% casual loading)
125 150 175 250
[65] Before we turn directly to the issues raised by the appeal, it is convenient to describe
briefly how the Restaurant Award in its current form, including the above weekend penalty
rate provisions, came to be. In broad terms, the Restaurant Award was an outcome of the
award modernisation process commenced under Part 10A of the WR Act and continued after
https://www.fwc.gov.au/documents/documents/modern_awards/award/MA000119/ma000119-24.htm#P320_29361
https://www.fwc.gov.au/documents/documents/modern_awards/award/MA000119/ma000119-24.htm#P320_29361
[2014] FWCFB 1996
27
the commencement of the FW Act by virtue of item 2(5) of Schedule 5 to the Transitional
Act.
[66] Prior to 27 March 2006, the industrial regulation of the restaurant industry in Australia
was highly mixed. There were three federal awards in place which applied, respectively, in
Victoria, the ACT and the Northern Territory. The Victorian award only applied to those
employers specifically named as respondents to the award (but did cover all members of the
RCAV). Those Victorian employers to which the Victorian Award did not apply were
covered by a minimum wage order made under Part XV of the WR Act. The ACT and
Northern Territory awards were common rule awards - that is, they applied to all employers in
those territories. In the other States, the restaurant industry was covered by State common rule
awards made by State industrial tribunals under State legislation. The various federal and
State instruments had considerable differentials in a wide range of conditions, including in
respect of penalty rates for ordinary hours worked on weekends.
[67] The position of mixed federal and State industrial regulation of the restaurant industry
(and of industry generally) changed when substantial amendments to the WR Act effected by
the Workplace Relations Amendment (Work Choices) Act 2005 (Work Choices legislation)
came into effect. One of the fundamental features of the Work Choices legislation was that it
sought to bring within the scope of the federal industrial relations system all private sector
incorporated employers and their employees. The corporations power contained in s.51(xx) of
the Commonwealth Constitution was utilised in order to achieve this objective. Employers
and employees removed from State awards were initially placed under “Notional Agreements
Preserving State Awards” (NAPSAs), which preserved most of the terms of the previously
applicable State awards, including provisions relating to penalty rates. However, these
NAPSAs were to cease to be in operation after three years (unless earlier ceasing to have an
effect in relation to an employee because the employee became bound by a workplace
agreement or a federal award). Under Part 10 Division 4 of the WR Act as amended by the
Work Choices legislation, federal awards were required to be subject to an “award
rationalisation” process conducted by the Australian Industrial Relations Commission in
accordance with a request made by the Minister. An important aspect of that process was
prescribed by s.535(1), which provided:
(1) In undertaking the first award rationalisation process requested under
subsection 534(2), the Commission must ensure that:
(a) terms and conditions of employment included in awards are not
determined by reference to State or Territory boundaries; and
(b) awards have effect in each State and Territory.
[68] Part 10 also required awards to be simplified by their reduction to provisions
concerning 13 specified matters (which included loadings for working overtime or for shift
work and penalty rates). Thus the scheme of the Work Choices legislation was that, within
three years of its commencement, all employees, including employees who had formerly been
covered by State awards, were to be covered by nationally uniform, simplified, federal awards
(unless otherwise covered by a workplace agreement).
[2014] FWCFB 1996
28
[69] One other feature of the Work Choices legislation should be noted. Since 1996 and
prior to 27 March 2006, incorporated employers had the capacity to enter into Australian
Workplace Agreements (AWAs) with individual employees. AWAs, once approved,
displaced the operation of any otherwise applicable State or federal award. However, in order
to be approved, it was necessary for the AWA to pass the “no-disadvantage test” - that is, the
AWA could not result in a reduction in the overall terms and conditions of employment of
any relevant State or federal award. The Work Choices legislation changed that position by
removing the “no-disadvantage test”. It was replaced by a requirement25 to the effect that
persons covered by (relevantly) AWAs would retain the protection of “protected award
conditions” (which included loadings for overtime and shift work and penalty rates), but
subject to “any terms of the [AWA] that expressly exclude or modify all or part of them”.26
The effect of that provision was that AWAs could entirely exclude, relevantly, the application
of award provisions for loadings for overtime and shift work and penalty rates.
[70] The opportunity to enter into AWAs excluding the operation of penalty rates was
widely availed of in a number of award-dependent industries, including the restaurant
industry. However, the opportunity did not last long. The Workplace Relations Amendment (A
Stronger Safety Net) Act 2007 established, from 1 July 2007, a new “fairness test”, under
which AWAs had to provide “fair compensation” for any protected award conditions, such as
penalty rates, that were excluded or modified by the AWA. The “fairness test” was
substantially the same in effect as the previous “no-disadvantage test”. The fairness test was
applied retrospectively to AWAs covering low paid employees which removed or modified
protected award conditions, so that such AWAs had to be varied to provide “adequate
compensation” for the removed or modified protected award conditions in order to continue in
effect.
[71] The next phase in the legislative history came with the Workplace Relations
Amendment (Transition to Forward with Fairness) Act 2008. Relevantly, this Act amended
the WR Act to delete the award rationalisation and simplification provisions in Part 10
Division 4 and replace them with a new Part 10A entitled “Award Modernisation”. However,
like the provisions it replaced, the new Part 10A contemplated that the Commission would, in
accordance with a request from the Minister, establish a new scheme of nationally uniform
“modern awards”. National uniformity was required by s.576T(1) which, subject to a five-
year phasing-out period, prohibited modern awards from including terms and conditions of
employment which were “determined by reference to State or Territory boundaries” or which
“do not have effect in each State and Territory”.
[72] On 28 March 2008, the then Minister made an award modernisation request pursuant
to s.576C(1) of the WR Act. That request was subsequently the subject of various
amendments by the Minister. The Ministerial request required, among other things, that the
Commission complete the award modernisation process by 31 December 2009. It is not
necessary for current purposes to otherwise describe the details of that request or the process
which the Commission set in train to modernise awards in accordance with that request and
the relevant provisions of the WR Act. It is sufficient to say that as a result of the request and
in accordance with the WR Act, the Commission was ultimately required, in relation to the
25 Section 354
26 Section 354(2)(c)
[2014] FWCFB 1996
29
restaurant industry, to establish a modern award with national application which covered that
industry and which contained, subject to transitional provisions, nationally uniform rates of
pay and other conditions of employment.
[73] Initially the Full Bench of the Australian Industrial Relations Commission which was
allocated the task of undertaking the award modernisation process concluded in a decision
issued on 19 December 2008 that a single modern award should be established to cover the
whole of the hospitality industry, which included the restaurant, accommodation, resorts and
gaming sectors.27 The RCA made submissions in strong opposition to this course. Its
submissions included the contention that weekend penalty rates derived from the broader
hospitality industry would not be appropriate to the restaurant industry and would drive up
employer costs.
[74] The position changed when the Ministerial request was subsequently the subject of an
amendment made on 28 May 2009 which added the following paragraph:
“Restaurant and catering industry
27A. The Commission should create a modern award covering the Restaurant and
catering industry, separate from those sectors in the hospitality industry providing
hotelier, accommodation or gaming services. The development of such a modern
award should establish a penalty rate and overtime regime that takes account of the
operational requirements of the Restaurant and catering industry, including the labour
intensive nature of the industry and the industry’s core trading times.”
[75] In response to that request, the award modernisation Full Bench received further
submissions and proposals from interested parties as to what the scope and content of a
modern award specific to the restaurant and catering industry should be. On 24 July 2009, the
RCA filed a submission together with its proposed draft of a modern award for the restaurant
and catering industry. In respect of weekend penalty rates, the RCA proposed that weekly
employees should receive no penalty rate for ordinary-time Saturday work and a 50% penalty
rate for ordinary-time Sunday work, and that casual employees should receive no weekend
penalty rates but rather only the casual loading of 25%. In support of that proposal, the RCA
submitted:
“22. The revised Modernisation Request clearly states that the operational
requirements of the industry should be the determinant of conditions in the Modern
Award. The operational requirements of the Restaurant and Catering Industry are that
the industry needs to operate 7 days a week and operating times are predominantly
lunches and dinners (albeit many businesses also open for breakfast).
23. As noted in previous submissions, between 16% and 25% of business in the
restaurant and catering industry is conducted on Saturday and between 11% and
20% of business is on Sunday. In addition, between 31% and 42% of business is
after 7pm in the evening.
27 Award Modernisation [2008] AIRCFB 1000 at [113]-[121]
[2014] FWCFB 1996
30
24. The operational requirements that flow from this spread of work is that the modern
award needs to be flexible enough to cope with the ‘high peaks’ and ‘low troughs’ of
business in the working week.
25. As demonstrated above, the industry’s core trading time is Saturday (and in
particular Saturday evening). This is followed by evenings and then Sunday.
Restaurant and Catering Australia contends that the Modernisation Request, as
quoted above, compels consideration of not penalising work undertaken in the
restaurant industry during these periods.
26. The labour intensive nature of the industry is the other aspect of the Minister’s
Modernisation Request. R&CA contends that this aspect of the request draws
attention to the magnified impact of a small change in the cost of labour on the
sustainability of the businesses that comprise the industry.
27. In the letter from the Deputy Prime Minister, to the President, dated the 29th May
2009, this aspect of the amendment to the request is further clarified citing that
labour costs in the industry sit at ‘36.4 per cent of expenses’.
28. With this further clarification in mind, the Association believes that conditions
established for other industries should be modified for application to the restaurant and
catering industry, based on the criteria listed. The proposed Restaurant and Catering
Industry Award amends the following conditions to take account of operational
requirements of the restaurant and catering industry, including the labour intensive
nature of the industry and the industry’s core trading times:
...
b. The casual loading of 25% in the . . . Hospitality Industry (General) Award
has been maintained;
...
d. In recognition of the operational requirements of the industry, the shiftwork
definitions in the ... Hospitality Industry (General) Award has been removed.
Employees in the restaurant and catering industry do not work shift work as
defined in these awards;
e. Restaurant & Catering Australia submits that the core tenet of the Deputy
Prime Minister’s Modernisation Request, as amended at 27A, is that the
Restaurant and Catering Industry Award should have a penalty rate and
overtime regime that takes account of the operational requirements of the
restaurant and catering industry, as such the three more unworkable parts of
the Hospitality Industry (General) Award for the industry were the
Saturday Penalty, the Sunday Penalty and the Evening Penalties. This being
the case, the R&CA proposal contains no Saturday or evening penalty rates
and retains the NSW and South East Queensland NAPSA rate of 50%
penalty on Sunday;
[2014] FWCFB 1996
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f. As a further recognition of the role that casuals play in staffing enterprises
in the industry, particularly on weekends, consistent with the NAPSA
applying to restaurants in South East Queensland, casuals have been excluded
from penalty rates on Sunday (as they are in the Retail Modern Award on
Saturday), and;
...”
[76] The Minister also filed a submission explaining the amendment to the Ministerial
request. In respect of penalty rates, the Minister’s submission said:
“17 The Minister’s request variation was not intended to suggest to the Commission that
penalty rates for working unsociable hours, such as late evenings, weekends and public
holidays, should not be included in a modern award for the restaurant and catering
industry.
18 Rather, the intention of the request variation is to ensure that when considering
these subject matters and the most appropriate provisions for the industry, that the
Commission has regard to the content and range of provisions concerning hours of
work and penalty rates and related conditions currently applying to restaurants and
cafés through pre-reform federal awards and NAPSAs. In addition, the Commission
should have regard to the weight of coverage of these industrial instruments. That is,
the likely number of employers and employees presently subject to these instruments.
19 Consistent with the objects of award modernisation set out in clauses 1, 2, 2A and
2B of the request, and having regard to the remainder of the request, the Commission
should select a national benchmark that:
‘Establish[es] a penalty rate and overtime regime that takes account of the
operational requirements of the restaurant and catering industry, including the
labour intensive nature of the industry and the industry’s core trading time’.”
[77] In a “statement” issued on 25 September 200928, the award modernisation Full Bench
(which at this time was constituted by Giudice J, Watson VP, Watson, Harrison and Acton
SDPP, and Smith C) gave consideration, among other things, to what the content of an award
specific to the restaurant industry should be. In respect of weekend penalty rates, the Full
Bench said:
“[227] There were major differences in the drafts submitted by the LHMU and the
R&CA [Restaurant and Catering Australia] in relation to penalty payments, reflecting
very different approaches. The relevant penalties are for work in ordinary hours
outside the hours of 7.00am and 7.00pm Monday to Friday and on Saturdays, Sundays
and public holidays, for full-time, part-time and casual employees.
28 [2009] AIRCFB 865
[2014] FWCFB 1996
32
[228] The LHMU based its draft on the Victorian Restaurant Award, which is also
consistent with the Hospitality Modern Award. The R&CA draft was based in some
respects on the NSW Restaurant Award but it relied primarily on the operational
requirements of the industry and in particular the seven days a week operation of
restaurants, predominantly at times directed to the provision of lunches and dinners.
[229] The penalty provisions advanced by the LHMU and the R&CA are summarised
in the table below, and compared to the provisions in the Hospitality Modern Award,
the Victorian Restaurant Award and the NSW Restaurant Award.
Penalty rates for working ordinary hours –full-time and part-time employees
Additional payment
R&CA
draft
LHMU
draft
Victorian
Restaurant Award
NSW Restaurant
Award
Saturday 0 25% 25% 25%
Sunday 50% 75% 75% 50%
Monday–Friday:
7pm–midnight
Midnight–7am
0
0
10%
15%
10%
15%
0
30%
Public holiday 150% 150% 150% 150%
Penalty rates for working ordinary hours –casual employees
Additional payment (additional to 25% casual loading)
R&CA
draft
LHMU
draft
Victorian Restaurant
Award
NSW Restaurant
Award
Saturday 0 25% 25% 25%
Sunday 0 50% 50% 25%
Monday–Friday:
7pm–midnight
Midnight–7am
0
0
10%
15%
10%
15%
0
30%
Public holiday 125% 150% 150% 125%
[230] In its 24 July 2009 submissions, the LHMU provided a table of penalty
provisions which we reproduce in the tables below in an edited form:
[not reproduced]
[231] The R&CA draft accompanied a submission made on 24 July 2009. The
R&CA’s approach is based on an overriding conviction that penalty payments should
be minimal or non-existent during any periods when restaurants trade. The submission
was filed before the Australian Government’s submission of the same date containing
the clarification in paragraphs 10-12 of that submission which we have set out above.
The penalty arrangements contained in the R&CA draft pay little regard to the penalty
rate provisions in pre-reform awards and NAPSAs applying to restaurants and cafés.
The proposal also ignores some penalties in the NSW Restaurant Award, determined
by the Industrial Relations Commission of New South Wales, for full-time and casual
[2014] FWCFB 1996
33
employees for work on Saturday and between midnight and 6.00am and for casual
employees for work on Sunday penalties for full-time and casual employees and
Sunday penalties for casuals. R&CA had relied upon the provisions of that award
during the priority stage of the modernisation process.
[232] The R&CA’s approach is directed at substantially reducing or eliminating
penalty payments provided for in existing instruments applying to the restaurant
industry during times when restaurants are open. That approach ignores the
inconvenience and disability associated with work at nights and on weekends – which
are the basis for the prevailing provisions in pre-reform awards and NAPSAs. Nor
does the R&CA approach take into account the significance of penalty payments in the
take-home pay of employees in the restaurant industry. A modern restaurant award
based on the penalty rates proposed by the R&CA would give the operational
requirements of the restaurant and catering industry primacy over all of the other
considerations which the Commission is required to take into account, including the
needs of the low paid and the weight of regulation. A more balanced approach is
required.
[233] There is considerable diversity in the penalty provisions across pre-reform
federal awards and NAPSAs in the industry. For example, in relation to penalties for
Saturday and Sunday work, the SEQ Restaurant Award, the Queensland non-SEQ
Restaurant Award and the WA Restaurant Award all prescribe a 50% penalty for both
days, whereas the Victorian Restaurant Award provides for different rates – 25% on
Saturday and 75% on Sunday. The pattern of some penalty arrangements is more clear
cut. Taking all of the provisions into account, and having some regard to the
employment levels under the instruments, the weight of coverage supports the
following provisions, which we have included in the exposure draft:
penalty payments for casual employees;
a 15% penalty for work between midnight and 7.00am Monday to Friday;
a 25% penalty for work on Saturday, in addition to the 25% casual loading in
the case of casual employees;
a 50% penalty for work by casual employees on Sunday, in addition to the
25% casual loading; and
a 150% penalty for work on public holidays by full-time and part-time
employees.
...
[235] In relation to work performed in ordinary time by full-time and part-time
employees on Sunday, there is no critical mass for one provision or another or, in the
terms of the Government submission, no clear national benchmark for penalties. A
review of pre-reform awards and NAPSAs in the industry shows that penalty rates of
50% and 75% are common but having regard to the likely numbers of employees
covered by the various instruments there is no basis to prefer one over the other.
Taking into account the terms of clause 27A of the consolidated request, the fact that
Sunday is a core trading time for much of the industry and the operational
[2014] FWCFB 1996
34
requirements of the industry in that regard, we have decided on a 50% penalty for
Sunday work.”
[78] An exposure draft of a modern award for the restaurant and catering industry was
subsequently produced by the Full Bench, and the industry parties were given an opportunity
to make further submissions about it at a hearing which occurred on 4 November 2009. The
RCA’s submissions at that hearing included the following29:
“The focus of award modernisation in our sector needs to take account of the effect of
changing consumer pressures and what those consumer pressures do to the operational
viability of our businesses. The new Restaurant Award has overwhelmingly failed to
respond to the modern market. In any case, if the Commission felt that for pragmatic
reasons a best fit approach to award modernisation is appropriate then it has not taken
into account the weight of evidence amongst the existing awards and NAPSAs. Much
has been made in all of the submissions about existing conditions in those awards and
NAPSAs, however, little attention has been paid to the relevant weighting that should
be applied to the consideration.
We say that at least more weight should be given to the south east Queensland
NAPSA and the New South Wales NAPSA as between the two they represent over 50
per cent of the staff engaged in the industry. In other words, whilst it's correct to say
that four out of seven awards may have a particular condition, if those four awards
represent less than 20 per cent of employment in the industry they are in fact less
relevant than the awards in New South Wales and Queensland that cover over 50 per
cent. The ABS statistics run along the lines of 36 per cent of businesses in New South
Wales, 27 in Victoria, 18 in Queensland, and it's that relative weighting that we rely on
in drawing a line through the conditions in the modern award.
...
We would now like to direct our attention to the treatment of weekend and public
holiday penalties if I can. Of significance in the Commission's decision statement is
the reference to the Government's clarification that the Minister's Request variation
was not intended to suggest to the Commission that penalty rates for working
unsociable hours such as late evenings, weekends and public holidays should not be
included in a modern award.
This attempt at clarification by the Government ignores the very real employment
factor that now categorises the restaurant and catering industry, that is, choice. We are
an industry of choice for those balancing work with their personal time. A notion of
unsociable hours has not surfaced in any other submissions within the Government's
own submission. It has not been adequately defined. Unsociable hours as an
employment term have their basis in traditional industries in the past, traditional those
in shift work areas [sic]. Employees in restaurants and catering businesses do not work
traditional shift work hours. The Minister herself agreed that peak operating times in
the industry are evenings and weekends.
29Transcript 4 November 2009 PNs 2338-2368
[2014] FWCFB 1996
35
Employees specifically choose to work on weekends and evenings and as everyone in
this room knows, as we are consumers ourselves, businesses cannot choose to open
their doors other than on weekends and evenings. They have to open in order to
compete and meet the demands of consumers as they are engaged in a pleasant
Saturday night or Sunday out. We contend that there is no evidence to support the
concept of unsociable hours as a basis for arguing the penalty rate structures are more
applicable in our industry sectors. If it is acknowledged that the industry and the hours
worked in the industry are a matter of personal choice for the employee then this
should lead to the conclusion that modern workplaces require a modern award without
a penalty rate structure that's out of date, particularly for casual staff.
Further, if this industry is discouraged from employing people in what is termed
unsociable hours then where else for the employees working in the industry find
suitable work? Jobs that are considered normal conflict with university students'
timetables, school students and parents seeking additional income. We won't repeat the
evidence contained in our submission but draw your attention to the Productivity
Commission paper of June 08, Part Time Employment, the Australian Experience as
there is some compelling evidence in this paper that shows the link between education,
part time employment and working patterns of full time students.
The restaurant and catering sector in the 21st century working environment will not
find increased flexibility in the application of the draft modern award. The sector will
continue to find itself handicapped by the retention of a penalty rate structure
reminiscent of the 1980s and ignores the seven day trading demands of modern day
consumers. Under the new award restaurant and caterers will continue to be penalised
for being open to meet consumers' demands with overtime and loading taking effect
after prescribed working days, not working hours. This means to stay open and
consumer demand an employer must pay more for staff on a Sunday than they do on a
Monday.
Restaurant and Catering Australia argues that any modern workplace attempting to
meet the conflicting demands of consumer trading hours and expectations an
employee's needs for work and family balance should not pay penalty rates outside
those hours. Restaurant and Catering Australia acknowledges that our proposal in
relation to penalty rates and overtime did adopt a different approach to other awards.
The association defends this approach on the basis that the variation from the Minister
did call for the Commission to establish a penalty rate and overtime regime that
appropriately recognise the restaurant and catering industries core trading and the
labour intensive nature of the work in the industry.
...
Owner managers who will find additional pressure placed on them to work more of the
penalty or overtime hours rather than employing additional staff. Consumers also who
will find that the increased use of surcharge menus will drive the cost of their weekend
eating experience to a higher level. While it may be argued that the use of transitional
provisions will ease the financial pain on employers, this argument misses the point
that it is not so much the hourly rate of pay at each grade level that creates the
[2014] FWCFB 1996
36
business's operational pressures but more so the ongoing application of penalty rates
on evening, weekend and overtime work on a labour force that is actually keen to
work so called unsociable hours.
...
Restaurant and Catering Australia strongly commends that the Commission should
hand down a landmark decision to reflect the unique operational requirements and the
employees demand for weekend work as being a matter of choice to reflect their
personal flexibility demands.
We recommend that this historical decision be a modern award that removes weekend
penalty rates and overtime rates where an employee is working a regular and
consistent roster of less than 38 hours a week. Through this decision the Commission
has the opportunity to encourage the private sector to retain its low paid, low skilled
workforce and be an employer of choice for young people and those returning to work
after an absence from the workforce.”
[79] We note that the transcript records the following exchange occurred during the hearing
between the then Commission President, Justice Giudice, and Mr Hart, who appeared for the
RCA30:
“JUSTICE GIUDICE: Mr Hart, in relation to your submissions about costs I take it
that your organisation represents people in the restaurant industry outside of New
South Wales?
MR HART: Yes, your Honour.
JUSTICE GIUDICE: Yes. If the exposure draft were made as the final award would
any of those members experience any reduction in costs?
MR HART: There are some reductions, yes, your Honour, certainly.
JUSTICE GIUDICE: Significant?
MR HART: Not as significant as the increases in areas which increases would be the
result.
JUSTICE GIUDICE: I see. But there will be members outside New South Wales, for
example, who will be on a lower cost structure than they currently are, is that the case?
MR HART: That is the case, your Honour.
JUSTICE GIUDICE: Yes, thank you.”
[80] We further note, from other parts of the RCA’s submissions on that day, that to the
extent the RCA was concerned the exposure draft of the modern award would increase costs
30 PNs 2370-2378
[2014] FWCFB 1996
37
for some of its members, that concern was primarily based upon the proposed weekday
penalty rate for hours after 10:00pm. There had previously been no penalty rate of this nature
in some States, in particular New South Wales and Queensland.31 An earlier written
submission filed by the RCA had also identified issues concerning the classification structure
and the superannuation guarantee threshold as being major cost issues arising from the
exposure draft.32 None of these issues arise for consideration in this appeal.
[81] The award modernisation Full Bench issued its final decision with respect to the
modern Restaurant Award on 4 December 2009.33 With respect to penalty rates, the Full
Bench said:
“[187] The RCA reargued the position in relation to penalty rates which it had put in
the pre-exposure draft consultations. That position is set out in the table at paragraph
229 of our statement of 25 September 2009. The LHMU was more particular in its
approach. It sought to amend penalty payments for casual employees working on
public holidays, from 150% to 175%, and to have the penalty which applies to work
between 10pm and midnight commence at 8pm instead.
[188] The penalty provisions generally and the two particular penalties raised by the
LHMU were subject to considerable attention by us in preparing the exposure draft.
As noted in our statement of 25 September 2009, these issues raise matters requiring
fine judgement to be exercised in the context of a diverse range of provisions in the
relevant instruments and the terms of cl.27A of the consolidated request. Nothing was
put to us which indicates that we should depart from the penalty provisions in the
exposure draft and we are of the view that those provisions, including the particular
penalties addressed by the LHMU, should be included in the modern award. We
adhere to the reasons contained in our statement of 25 September 2009.”
[82] The Full Bench then proceeded to make the modern Restaurant Award, which took
effect on 1 January 2010. The Saturday and Sunday ordinary-time penalty rates established by
the award modernisation Full Bench in the Restaurant Award, compared to what had earlier
applied in each State and territory, were as follows (inclusive of casual loadings):
31 PNs 2359-2361
32 RCA submissions on the exposure draft dated and lodged 16 October 2009 at paragraphs 106-109
33 [2009] AIRCFB 945
34 Base rate plus 20% casual loading, then 25% penalty on the loaded rate, plus 1/12 loading on Saturday rate inclusive of
penalty rate as required by the Annual Holidays Act 1944 (NSW).
35 Base rate plus 20% casual loading, then 50% penalty on the loaded rate, plus 1/12 loading on Sunday rate inclusive of
penalty rate as required by the Annual Holidays Act 1944 (NSW).
Award Weekly
Saturday
Casual
Saturday
Weekly
Sunday
Casual Sunday
Modern Award 25% 50% 50% 75%
NSW 25% 62.5%34 50% 95%35
[2014] FWCFB 1996
38
[83] It should be noted, however, that to the extent that the above penalty rates represented
an increase in cost to any employer or a reduction in entitlement to any employee, they were
subject to the phasing provisions specified in clauses A.4-A.7 of Schedule A to the Restaurant
Award. Those phasing provisions result in the new penalty rates becoming fully effective
from 1 July 2014.
[84] Having regard to the nature of the award modernisation process - in particular, the
requirement to create a modern award with nationally-uniform conditions of employment to
replace a diverse range of State-based instruments - and the amended Ministerial request, it
was clearly unavoidable that the award modernisation Full Bench would have to engage in an
exercise whereby new weekend penalty rates would be established which would alter the pre-
existing position which applied in some States and Territories. The variable nature of the
change to weekend penalty rates effected by the Restaurant Award is readily apparent. With
respect to weekly employees, in no case was the weekend penalty rate established by the
Restaurant Award higher than what preceded it, and in a number of cases (Queensland,
Western Australia and South Australia on Saturdays, and Victoria, South Australia and
Tasmania on Sundays) it was significantly lower. In respect of casual employees, there were
both reductions and increases; in respect of Sundays there were significant reductions in New
South Wales and South Australia, but significant increases in Queensland and Western
Australia.
[85] A number of matters of significance may be identified from the above history. Firstly,
in the award modernisation process in 2008 and 2009, the RCA did not contend that the
disability associated with working Sundays as compared to Saturdays was in all
circumstances the same. In fact, the RCA effectively submitted to the contrary: it proposed no
penalty rates at all for Saturday work and, for weekly employees but not for casuals, a 50%
penalty rate for Sunday work. This submission implicitly involved the acceptance that, at least
for weekly employees, there was a differentiated or discrete disability associated with
working Sunday which did not apply to Saturdays.
[86] Secondly, the Full Bench in deciding that the Sunday penalty rate would be 50% took
into account the RCA’s submission that Sunday was a core trading time for much of the
industry and the operational requirements of the industry in that regard, but balanced that with
the needs of the low paid and the need not to significantly reduce the take-home pay of
employees. In respect of weekly employees, the decision to set a 50% penalty rate for Sunday
36 Casual loading only without any penalty rate.
37 Casual loading only without any penalty rate.
Victoria 25% 50% 75% 75%
SE Queensland 50% 23%36 50% 23%37
Non-SE
Queensland
50% 50% 50% 100%
Western Australia 50% 50% 50% 50%
South Australia
(pre/post-noon)
25/50% 45/70% 100% 120%
Tasmania 25% 50% 75% 75%
[2014] FWCFB 1996
39
ordinary-time work represented an adoption of the position advanced by the RCA and a
rejection of the higher 75% penalty sought by the relevant union, the LHMU.
[87] Thirdly, having regard to the weight of employment numbers in the two largest states,
New South Wales and Victoria, it is likely that the aggregate effect of the award
modernisation Full Bench’s decision was to reduce Sunday penalty rates, although in
Queensland and Western Australia Sunday penalty rates for casuals only did need to increase
in order to obtain a nationally uniform outcome as required by the WR Act.
Appellable error?
[88] That part of the Decision which concerned ABI’s alternative application to reduce
Sunday penalty rates only was understandably brief, given the primary focus in the
proceedings before the Deputy President was on the much more broad-ranging primary
application of the 18 applicants. It is also understandable that the Deputy President, having
given detailed reasons concerning the primary application which we have earlier summarised,
cross-referred to those reasons in dealing with the alternative application by saying that she
rejected it “for the reasons set out above” (paragraph [250]). As a result of that approach it is
necessary to give attention to the Deputy President’s reasoning concerning the primary
application in order to determine whether her reasoning concerning the alternative application
was attended by error.
[89] We identified at the outset of this decision, by reference to the Full Bench decision in
the Modern Awards Review 201238, that the two-yearly review process was not intended to
involve a completely fresh assessment of modern awards unencumbered by previous Full
Bench decisions concerning those modern awards, and that cogent reasons would need to be
established in order to revisit issues that had already been considered and dealt with in the
award modernisation process. The following analysis in the recent Full Bench decision in 4
Yearly Review of Modern Awards: Preliminary Jurisdictional Issues39 usefully explains,
albeit in the context of the broader four-yearly review required under s.156 of the FW Act, the
basis for the proposition that a party which seeks a departure from a previous Full Bench
decision concerning a modern award needs to demonstrate “cogent reasons” to do so:
“[23] The Commission is obliged to ensure that modern awards, together with the NES,
provide a fair and relevant minimum safety net taking into account, among other
things, the need to ensure a ‘stable’ modern award system (s.134(1)(g)). The need for a
‘stable’ modern award system suggests that a party seeking to vary a modern award in
the context of the Review must advance a merit argument in support of the proposed
variation. The extent of such an argument will depend on the circumstances. We agree
with ABI’s submission that some proposed changes may be self evident and can be
determined with little formality. However, where a significant change is proposed it
must be supported by a submission which addresses the relevant legislative provisions
and be accompanied by probative evidence properly directed to demonstrating the facts
supporting the proposed variation.
38 [2012] FWAFB 5600
39 [2014] FWCFB 1788
[2014] FWCFB 1996
40
[24] In conducting the Review the Commission will also have regard to the historical
context applicable to each modern award. Awards made as a result of the award
modernisation process conducted by the former Australian Industrial Relations
Commission (the AIRC) under Part 10A of the Workplace Relations Act 1996 (Cth)
were deemed to be modern awards for the purposes of the FW Act (see Item 4 of
Schedule 5 of the Transitional Act). Implicit in this is a legislative acceptance that at
the time they were made the modern awards now being reviewed were consistent with
the modern awards objective. The considerations specified in the legislative test
applied by the AIRC in the Part 10A process is, in a number of important respects,
identical or similar to the modern awards objective in s.134 of the FW Act. In the
Review the Commission will proceed on the basis that prima facie the modern award
being reviewed achieved the modern awards objective at the time that it was made.
[25] Although the Commission is not bound by principles of stare decisis it has
generally followed previous Full Bench decisions. In another context three members
of the High Court observed in Nguyen v Nguyen:
“When a court of appeal holds itself free to depart from an earlier decision it
should do so cautiously and only when compelled to the conclusion that the
earlier decision is wrong. The occasions upon which the departure from
previous authority is warranted are infrequent and exceptional and pose no real
threat to the doctrine of precedent and the predictability of the law: see
Queensland v The Commonwealth (1977) 139 CLR 585 per Aickin J at 620 et
seq.” [(1990) 169 CLR 245 at 269]
[26] While the Commission is not a court, the public interest considerations
underlying these observations have been applied with similar, if not equal, force to
appeal proceedings in the Commission. As a Full Bench of the Australian Industrial
Relations Commission observed in Cetin v Ripon Pty Ltd (T/as Parkview Hotel)
(Cetin) [(2003) 127 IR 205 at [48]]:
“Although the Commission is not, as a non-judicial body, bound by principles of
stare decisis, as a matter of policy and sound administration it has generally
followed previous Full Bench decisions relating to the issue to be determined,
in the absence of cogent reasons for not doing so.”
[27] These policy considerations tell strongly against the proposition that the Review
should proceed in isolation unencumbered by previous Commission decisions. In
conducting the Review it is appropriate that the Commission take into account
previous decisions relevant to any contested issue. The particular context in which
those decisions were made will also need to be considered. Previous Full Bench
decisions should generally be followed, in the absence of cogent reasons for not doing
so.”
[90] The Full Bench in the Modern Awards Review 2012 decision identified a “significant
change in circumstances which warrants a different outcome” as being an example of “cogent
[2014] FWCFB 1996
41
reasons” which might justify a departure from a previous Full Bench decision.40 However, it
is clear that there might be other cogent reasons why a Full Bench decision might not be
followed in the conduct of a modern award review. These might include that the evidence
demonstrates that the modern award has not operated in practice in the way intended by the
Full Bench in its earlier decision, or that a matter critical to the proper operation of the
modern award was not raised before the Full Bench and consequently not considered, or that
the Full Bench made a patently demonstrable error. For the purpose of the two-yearly review,
if a party cogently demonstrates that for any reason an award is not achieving the modern
awards objective and/or is not operating effectively, without anomalies or technical problems
arising from the award modernisation process, then that must be taken into account in the
conduct of the review under item 6(2) regardless of whether circumstances have changed
since the Full Bench decision which resulted in the making of the modern award.
[91] In paragraph [247] of the Decision (which we have earlier set out), the Deputy
President concluded that cogent reasons had not been established because the “grounds on
which they [the 18 applicants] seek the variations do not identify a significant change in
circumstance; rather they are largely merits considerations which existed at the time the
Award was made”. That conclusion, with respect, appears to have established a criterion for
the determination of the penalty rates case, namely “a significant change in circumstance”,
which was not derived from item 6 of Schedule 5 of the Transitional Act. Although in the
following paragraph of the Decision the Deputy President stated a general conclusion that the
variations to the penalty rate provisions sought by the 18 applicants were not warranted on the
basis that the Restaurant Award was not achieving the modern awards objective or operating
other than effectively without anomalies or technical problems arising from the award
modernisation process, we consider that it appears to emerge from the Deputy President’s
chain of reasoning that this conclusion was a consequence of the earlier finding that no
significant change in circumstance had occurred.
[92] The 18 applicants ran a case before the Deputy President, supported by a considerable
volume of evidence, that the existing weekend penalty rates provisions in the Restaurant
Award were not meeting the modern awards objective and were not operating effectively. The
case was not confined to or even significantly concerned with any change in circumstances
since the Restaurant Award was first made; the 18 applicants relied upon a range of matters
including that penalty rates were inhibiting restaurant operators from opening and/or
employing persons on weekends, thereby suppressing business turnover and job creation, and
that the level of penalty rates on Sundays was too high given that the disability associated
with working Sundays was no higher than Saturdays and higher than was necessary to attract
persons to work on Sundays. Those matters were raised in connection with the alternative
penalty rates application as well as the primary case. Although the Deputy President made
some findings about these aspects of the applicants’ case, her adoption of “a significant
change in circumstance” as the apparent criterion for variation (including at paragraph [226]
in relation to the specific issue of “disabilities associated with working unsociable hours”)
meant that the alternative case was not considered in accordance with the requirements of
item 6 of Schedule 5 of the Transitional Act and that the exercise of the discretion was
artificially confined and thereby miscarried. Although we recognise there are several possible
ways of reading the Deputy President’s reasoning process in the Decision, we have taken the
40 [2012] FWAFB 5600 at [99]
[2014] FWCFB 1996
42
view, on balance, that the approach adopted by the Deputy President was attended by
appellable error.
Re-hearing of the alternative application
[93] Once a Full Bench in relation to an appeal made under s.604 of the FW Act has
granted permission to appeal and has identified appellable error, it is then open for the Full
Bench to exercise the powers available in s.607(3) of the FW Act. Section 607(3) provides:
(3) The FWC may do any of the following in relation to the appeal or review:
(a) confirm, quash or vary the decision;
(b) make a further decision in relation to the matter that is the subject of the
appeal or review;
(c) refer the matter that is the subject of the appeal or review to an FWC
Member (other than an Expert Panel Member) and:
(i) require the FWC Member to deal with the subject matter of the
decision; or
(ii) require the FWC Member to act in accordance with the directions of
the FWC.
[94] We consider that the appropriate course for us to take is to quash the Decision insofar
as it determined the alternative penalty rates application, and to re-hear and make a further
decision in relation to that alternative application based upon the evidence that was before the
Deputy President and the FW Act as it stands at the date of this decision41. That will require
us to take into account s.134(1)(da) of the FW Act, which came into effect on 1 January 2014,
although our decision in this matter would have been the same had s.134(1)(da) not yet come
into effect. We also note that the Deputy President’s rejection of the primary application
concerning penalty rates was not appealed and is thus not open to be reconsidered by us. That
approach will be far more expeditious than referring the matter back to a single member of the
Commission for a further hearing, with the possibility of there then being a further appeal. It
will also avoid the completion of the two-yearly review in relation to the Restaurant Award
becoming entangled with the commencement of the four-yearly review of the same award
which has already commenced its preliminary stages in accordance with s.156(1) of the FW
Act.
[95] There are a number of general propositions about the restaurant industry in Australia
which may be stated at the outset of our consideration which were either not in dispute or
were clearly established by the evidence:
41 See Edwards v Noble (1971) 125 CLR 296 at 304 per Barwick CJ; Builders Licensing Board v Sperway Constructions
(Syd) Pty Ltd (1976) 135 CLR 616 at 619-620; Harris v Caladine (1991) 172 CLR 84 at 125 per Dawson J
[2014] FWCFB 1996
43
The proportion of employees in the restaurant industry who are paid wholly by
reference to the Restaurant Award is very high, at about 45-55%. The proportion of
award-reliant employees is about three times the national average.42
Approximately half of persons who work in the restaurant industry are casual
employees, and close to two-thirds work less than full-time hours,43 with over 40%
working 1-24 hours per week.44
Females account for well over half the workforce in the restaurant industry, and are
disproportionately employed on a casual basis.45 Women with children make up
about 22% of the workforce.46
Over 40% of all employees are younger than 24 years old, compared to 14% for the
economy as a whole. Approximately 20% are aged 15-19 and would therefore be
paid junior rates under the Restaurant Award. Almost 30% of the workforce are
students, and 80% of these are combining work with full-time study. 47
The industry has a lower skills base than other industries, and employees are low-
paid compared to other industries.48
Total employment in the restaurant industry (including catering) was about 196,000
in 200649 and about 198,000 in 2010-1150.
Employment in the Food and Beverage Services Sector, which includes the
restaurant industry, has grown strongly and above the national average since
2000.51
There is no evidence that the introduction of the modern Restaurant Award in 2010
had any discernible effect or “shock” upon employment growth in the restaurant
industry.52
Profit margins in the restaurant industry are relatively low, and there is a relatively
high rate of business failure. This is in major part a function of an industry which is
42 Exhibit UV10, Report of Professor Mitchell, p.3, p.11; Exhibit A6, Report of Professor Lewis in response to the report of
Professor Mitchell, pp.8,27; Exhibit A4, Statement of John Hart, Annexure JH-4 p.986
43 Exhibit A6 p.32; Exhibit UV3, Statement of Louise Tarrant, paragraph 1.11
44 Exhibit A5 p.16
45 Exhibit A5, Report of Professor Lewis, pp.12-13; Exhibit UV3 paragraph 1.17
46 Exhibit A5 p.15; Exhibit UV3 paragraph 1.15
47 Exhibit A5 pp.13-14.
48 Exhibit A4 paragraph 12 and Annexure JH-4 pp.993-996
49 Exhibit A5 p.39
50 Exhibit A1, Price Waterhouse Coopers Report, pp. 5, 13.
51 Exhibit UV10 p.12; Exhibit A6 p.9; Exhibit UV3 paragraph 1.15
52 Exhibit UV10 p.12; Exhibit A6 p.11
[2014] FWCFB 1996
44
intensely competitive, is made up of predominantly small businesses, contains an
oversupply of businesses and has low barriers to entry.53
Labour costs are the most significant expense for restaurant and cafe owners, at
about 34%. This is higher than the average for other industries at 20%.54
The relatively low profit margins in the restaurant industry are not caused by wages
being “too high”.55
The restaurant industry is highly sensitive to changes in consumer demand brought
about by cyclical economic downturns because it is treated by consumers as a
supplier of a discretionary “luxury” service.56
[96] We will consider the alternative application in the light of these general propositions
and the evidence presented.
Employment and business effects of the Sunday penalty rates
[97] An important feature of the case advanced by the 18 applicants at first instance, and
repeated by the RCAV in the appeal, was that the penalty rates provisions of the Restaurant
Award were not meeting the modern awards objective in s.134 of the FW Act, taking into
account in particular the matters identified in paragraphs (c), (d), (f) and (h). In this respect, it
was contended that penalty rates operated to suppress business activity at times when penalty
rates applied, with consequential detrimental effects upon employment and business turnover,
and that reductions in penalty rates would produce identifiable beneficial effects in terms of
turnover and employment.
[98] There is an initial difficulty in assessing this aspect of the case because the evidence in
support of it was almost entirely directed at the primary application of the 18 applicants,
involving as it did the complete abolition of penalty rates except on public holidays and the
sixth and seventh day of work in any week, and in addition the substitution of the national
minimum wage rate for all existing award rates for employees in small businesses. Thus, for
example, the Price Waterhouse Coopers report modelled the effect of that suite of changes
upon the restaurant industry and the Australian economy as a whole, on the basis that they
would produce a “shock” to industry wages by way of a 14% reduction. That modelling
purported to demonstrate that this 14% reduction would have various positive benefits,
including an increase in employment in the industry. We shall state our conclusion about the
reliability of that evidence in due course. But what the Price Waterhouse Coopers report did
not do was model the effects of the alternative application concerning a reduction in Sunday
penalty rates. This is not surprising because as earlier explained that alternative application
only emerged midstream in the proceedings.
53 Exhibit UV10 p.6, Exhibit A5 pp.8-9; Exhibit A1, Price Waterhouse Coopers Report, pp.9, 11
54 Exhibit A5 pp.8-9
55 Exhibit UV10 p.6; Exhibit A6, p.2
56 Exhibit A6 p. 5; Exhibit UV10 p.10
[2014] FWCFB 1996
45
[99] Similarly the report commissioned to be prepared by Professor Lewis concerning the
effect of penalty rates required him to assess, in relation to the Restaurant Award, the current
effect on employment, productivity and efficiency of all the penalty rate provisions in the
Restaurant Award, and what their effect would be if they were removed in accordance with
the primary application. Professor Lewis stated a conclusion, based upon the application of a
mathematical formula to calculate the elasticity of demand for labour using “reasonable
assumptions” about the elasticity of substitution of labour and the elasticity of demand for
output, that the penalty rate in the Restaurant Award of 50% on Sundays has reduced demand
for labour on Sundays by 50% as a lower estimate to 100% as an upper end estimate.57 He
then used those figures to conclude that the reduction of Sunday penalty rates for casuals in
accordance with the primary application would increase the demand for casual labour on
Sundays by between 29% and 87%.58 The alternative application was not actually modelled
by Professor Lewis. It might be presumed that, on the mathematical model and “reasonable
assumptions” used by Professor Lewis, a reduction in the penalty rates for casuals on Sundays
from 75% to 50%, inclusive of the casual loading, would produce an increase in demand for
Sunday labour of 14%-42%, but we were not asked to make that presumption by any party.
We also note that Professor Lewis said that his report “related to the likely impacts of a
fundamental change to the structure of penalty rates rather than a change such as that which
occurred in 2010” (that is, when the Restaurant Award came into operation) and that “there
was not such a dramatic change in pay structure and wage costs in 2010 which would have
resulted in a major ‘shock’ to employment”.59 It is not clear to us whether Professor Lewis
would have regarded the discrete and lower change to Sunday penalty rates proposed by the
alternative application as a fundamental change to the structure of penalty rates, or merely a
non-dramatic change to penalty rates, of the type which occurred when the Restaurant Award
was made, which would not result in a major “shock” to employment. The analysis we have
earlier set out of the change to penalty rates effected by the Restaurant Award, which
involved increases and reductions to weekend penalty rates of an order similar to that
proposed by the alternative application, would suggest the latter rather than the former.
[100] The alternative proposal involves an across-the-board reduction in the award rate of
pay for employees working on Sundays. Given the high degree of award dependence in the
restaurant industry, it is likely that a reduction in Sunday penalty rates as proposed in the
alternative application would effect an actual reduction in the take-home pay of employees
who currently work on Sundays. In relation to the issue of penalty rate reductions leading to
reductions in pay, Professor Lewis said60:
“Some employees, although their wage rate may fall, may even receive higher total
earnings without penalty rates since the potential to work a greater number of hours
will increase.”
[101] That comment was made by Professor Lewis by reference to the primary application
as a whole. The RCAV sought to rely upon it as applicable to the alternative application as
well, and as the complete answer to United Voice’s concerns about the detriment to
57 Exhibit A5 pp.24-25
58 Ibid p.26
59 Exhibit A6 p.11
60 Exhibit A5 p.38
[2014] FWCFB 1996
46
employees which would result from the grant of the alternative application. However we do
not consider that this proposition answers the difficulty in any substantial way at all. Firstly,
the fact that Professor Lewis’s proposition is commenced by the words “Some employees”
makes it implicitly clear that he recognised that other employees would suffer a reduction in
income if penalty rates were reduced. Secondly, the capacity of many employees who already
work on Sundays to pick up extra hours will be limited. It is unlikely, for example, that a chef
who is already permanently employed to work on Sundays will be offered extra hours on
Sundays because of a reduction in penalty rates, because any additional hours will probably
be overtime and payable at overtime penalty rates. Thirdly, even where there is the capacity to
work additional hours, the reduction in the rate of pay on Sundays would be almost 17% for a
weekly employee and over 14% for a casual. This would mean, for example, that an employee
who currently works four hours on a Sunday would, if the alternative application was granted,
have to work in excess of an additional half hour to earn the same pay for the day as he or she
is earning now. That would have to be regarded as detrimental to the employee unless there
are so many additional available hours allocated to the employee that the day’s pay is
significantly increased. We consider that, in all probability, only a minority of employees
currently working on Sundays would fall into this category.
[102] The operating premise must be, therefore, that the full grant of the alternative
application would reduce the take-home pay of a large proportion of those employees covered
by the Restaurant Award who already work on Sundays, and the extent of the reduction may
be as high as approximately 17% for weekly employees and 14% for casual employees. Given
that the modern awards objective requires the establishment of “a fair and relevant safety
net”, taking into account among other things “relative living standards and the needs of the
low paid”, any countervailing considerations concerning increased employment opportunities
or productivity or other benefits to business would have to be clearly identified and
demonstrated in order for the alternative application to be seriously entertained. However,
even taking the RCAV’s case at its highest, the failure to properly identify what are the
claimed employment benefits of the alternative application (as distinct from the primary
application) makes it difficult to conclude that the Restaurant Award is not achieving the
modern awards objective or is not operating effectively by reason of the Sunday penalty rate
being 50% instead of 25%.
[103] In any event, we do not consider that the reports of Professor Lewis or Price
Waterhouse Coopers provide a reliable basis to conclude that the existing Sunday penalty rate
constitutes a significant inhibitor to employment or that even its entire removal would provide
a significant benefit to business or employment seekers. Professor Lewis’s report suggests
that almost any regulatory intervention in that market produces inferior outcomes, and
proceeded on the basis that a largely unfettered labour market should be left to determine
what, if any, extra payments should be made to employees who work on weekends. However,
the FW Act requires intervention in the labour market by way of the making of awards by the
Commission that achieve the modern awards objective in s.134 and further requires the
Commission in making awards to take into account “the need to provide additional
remuneration” to “employees working unsocial ... hours” or “working on weekends ...”
(s.134(1)(da)).
[104] The Commission and its predecessors have consistently rejected the proposition that
labour market modelling of the type engaged in by Professor Lewis in his report based upon
[2014] FWCFB 1996
47
specific elasticities for the demand for labour are capable of providing a reliable guide as to
the way in which changes to minimum wages and conditions actually affect employment
levels in particular industries or the economy generally. For example, in Safety New Review -
Wages - 199961, a Full Bench of the Commission said (underlining added):
“[48] ACCI added to the range of estimates of the elasticity of demand for labour the
results of a study by P.E.T. Lewis ["The Elasticity of Demand for Labour",
P.E.T. Lewis]. Lewis estimates a total elasticity of demand for labour of 0.7%, over the
period 1957 to 1997, implying that a 1% rise in real wages will bring about a 0.7%
reduction in the demand for labour. This is one of many estimates of labour elasticity
...
[49] The material summarised by the Joint Governments, alone, suggests that
econometric studies in Australia produce a consistent direction of labour elasticity, but
a diversity in specific elasticities, reflecting different methodologies and different
periods over which aggregate elasticities are measured. For example, the Debelle and
Vickery results show smaller elasticities over the period since 1978 than from 1969. It
would be unwise to rely on any specific elasticities reported or to assume that
elasticities are fixed over time and independent of other factors, such as the general
state of the economy, the level of corporate profitability or the size of real wage
increases. It is commonly agreed for example that significant real wage increases in
the 1970s had marked adverse employment effects. In contrast, no significant adverse
employment effect is evident from recent safety net increases.”
[105] In Safety New Review - Wages - May 200262 a Full Bench again rejected the
proposition that there was any automatic connection between changes to minimum wages and
employment based upon a fixed figure for elasticity for demand for labour:
“[107] With respect to the macro-economic effects, ACCI relied upon a study by Lewis
and MacDonald. They reviewed Australian studies, the results of which they found
"suggest an employment elasticity with respect to real wages of about -0.6 and -0.8".
The authors were critical of the studies and made their own estimate, finding an
elasticity of demand for labour with respect to real wages of -0.8, close to the "wrongly
interpreted and estimated elasticity of other studies".
[108] The study suggests that real wage increases will detrimentally affect
employment. We accept that, whilst there is no automatic relationship between the
two, real wage growth can adversely affect aggregate employment growth. The extent
of such effect will depend upon the prevailing economic circumstances and the extent
of the real wage movement. The limited addition to aggregate wages cost associated
with our decision will not have a significant real wages effect. In the context of strong
productivity growth, and in the absence of any factor share imbalances, we think it is
unlikely to cause dislocation to labour market outcomes.”
61 Print R1999; (1999) 87 IR 190
62 PR002002; (2002) 112 IR 411
[2014] FWCFB 1996
48
[106] Interestingly, the Full Bench went on to observe that employment growth in the
heavily award-reliant accommodation, cafes and restaurants and retail trade sectors, where
minimum wages might be expected to have the greatest actual impact, was higher than for
other industries, saying (underlining added):
“[124] The international material concerning the employment effects of minimum
wages provided in the past, and augmented in the present proceedings, confirms a
continuing diversity of research findings. The additional studies themselves reach
different conclusions. They do not establish that moderate increases in the wages of the
low paid, of themselves, will diminish aggregate employment outcomes, although
some studies suggest that some negative effect might arise in respect of that group of
employees in receipt of the minimum wage.
[125] We note, as previous Full Benches have, that there are difficulties in directly
applying the international material to the task before us. As noted by the
Commonwealth in its reply, there have been no empirical studies that have examined
the effect that safety net adjustments have had on employment in Australia. The longer
term picture emerging from data for employment by industry, reproduced below,
shows employment increasing faster than for all industries in the award reliant
industries of accommodation, cafes and restaurants and retail trade over the period
November 1995 to November 2001, with that trend accentuated since late 1996.
Whilst casual observation does not permit firm conclusions to be drawn, the data
suggest that past safety net increases have not significantly impacted upon
employment growth in those sectors.”
[107] It was again observed by the Full Bench in Annual Wage Review 2010-201163, by
reference to data concerning hours worked in various industry sectors, that hours growth was
very strong in award-reliant industries such as accommodation and food services (which
includes restaurant and cafes) in the period February 2010 to February 2011 (immediately
after the Restaurant Award and other modern awards came into effect):
“[262] A number of parties submitted that the adjustment to minimum wages in the
Annual Wage Review 2009–10 decision resulted in negative employment effects. To
provide some context, we note that industry employment data indicate that for the
period February 2010 to February 2011 total hours worked increased by 2.3 per cent.
Hours worked in industries with the greater proportion of the award-reliant workforce
grew even more strongly - Accommodation and food services by 7.1 per cent, Retail
trade by 3.9 per cent, Administrative and support services by 4.5 per cent, and Health
care and social assistance by 6.8 per cent.”
[108] The reliability of modelling of the effects of wage adjustments based on estimates as
to the elasticity of demand for labour was extensively discussed by the Full Bench in Safety
Net Review - Wages 200564. In its decision summary, the Full Bench noted the following
(underlining added):
63 [2011] FWAFB 3400
64 PR002005; (2005) 142 IR 1
[2014] FWCFB 1996
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“[21] The Commonwealth and ACCI submitted that the Commission has not placed
enough emphasis on the employment effects when deciding on the level of safety net
adjustments. Elsewhere in this decision we once again review the literature and studies
purporting to show the effect of increases in minimum wages on employment. To
illustrate the problems with the research it is only necessary to mention that in the
2004 proceedings the Commonwealth relied upon a study which showed an elasticity
of demand for labour of -0.21 per cent. This year it urged us to accept a study which
showed an elasticity of -0.63 per cent. On the Commonwealth's submission this year
we would have been wrong to accept its submission in last year's safety net review. We
do not draw attention to this inconsistency to be critical of the Commonwealth but to
underline the need for a cautious approach to estimates of the employment effects.
This is an area in which theory and philosophy play a large part in the submissions,
tending to obscure what facts there are rather than to elucidate them, and in which
useful and robust research is all too rare.”
[109] In the full decision, the Full Bench (at paragraph [178]) summarised again the varying
studies estimating elasticity of demand for labour in Australia, with numbers ranging from
-0.15 to -0.8 in respect of increases to real wages, and went on to say:
“[180] We think it would be unwise to rely on any specific elasticities reported or to
assume that elasticities are fixed over time and independent of other factors, such as
the general state of the economy, the level of corporate profitability or the size of real
wage increases. It is commonly agreed for example that significant real wage increases
in the 1970s had marked adverse employment effects. In contrast, viewed overall, there
is no cogent evidence to suggest that recent safety net increases have led to adverse
employment effects of the same magnitude, or anything like it.
[181] The difficulty with much of this material is demonstrated by comparing the
elasticities found in three of the recent studies upon which the Commonwealth relies.
In the Minimum Wages Report, tendered by the Commonwealth in the 2004 safety net
review proceedings, the short-term impact of the May 2003 safety net adjustments on
employment demand was 14 000 fewer job places than would otherwise have been the
case. This represented an elasticity of demand of about -0.2 per cent, that is, for every
1 per cent increase in award wages employment demand for award workers will fall by
0.2 per cent.
[182] In the same proceedings the Commonwealth relied on a paper by Leigh which
sought to estimate the effect of raising the Western Australian statutory minimum
wage on employment. Leigh's overall finding was that a 1 per cent rise in the
minimum wage leads to a 0.15 percentage fall in employment - an elasticity of
demand of -0.15 per cent.
[183] The findings in these two studies may be contrasted with the results of the
Monash Paper, upon which the Commonwealth relied in these proceedings and to
which we shall return shortly. The Monash Paper found an overall implied elasticity of
labour demand of -0.63 per cent, more than three times higher than that found in the
other two studies to which we have referred. No attempt has been made by the
[2014] FWCFB 1996
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Commonwealth to explain these differences. In such circumstances it is appropriate
that the results be treated with considerable caution.”
[110] The Full Bench went on to conclude in relation to modelling of the effects of any
minimum wage increases based upon fixed labour demand elasticity numbers as follows:
“[220] While the simulations undertaken may provide some guidance as to the direction
of effects from an increase in award wage rates, for the reasons given, little weight
should be attached to the specific magnitude of the effects reported. As the
Commission has noted in the past, models such as those utilised in the Monash Paper
are the product of technical specifications, which are open to debate and involve a
wide range of inputs and the application of judgment. Nevertheless we encourage
further research into this important area.”
[111] It may be observed from the decisions from which we have quoted above that the
various Full Benches were dealing with contentions concerning negative elasticities in
relation to minimum wage increases. Professor Lewis in his report was of course contending
for positive elasticities in relation to wage reductions. Noting that distinction, the range of 1 to
3 as the figures calculated represent labour demand elasticity by Professor Lewis in order to
model the effects of penalty rates do not appear to bear any relationship in terms of quantum
to the numbers advanced in the debate referred to above.
[112] Much of the evidence concerning the way the restaurant industry actually operates in
this case strongly suggests that Professor Lewis’s modelling of the effects of Sunday penalty
rates on employment does not reflect reality. It will be recalled that he concluded that the
existing Sunday penalty rates operate to reduce employment on Sundays from 50% as a lower
range estimate to 100% as an upper range estimate. Of course, if the upper range estimate was
correct, there would be no-one being employed in the restaurant industry on Sundays at all
where the Restaurant Award’s Sunday penalty rate fully applied. Although the evidence did
not statistically demonstrate levels of employment in the industry on Sundays, it did indicate
that a large proportion of restaurants open on Sundays and employ persons for that purpose,
and that the proportion of restaurants which do not open on Sundays because of penalty rates
is small.
[113] For example, the RCA conducted a survey of its members in 2011 concerning a large
range of issues of relevance to the industry.65 One question in the survey was: “What has been
the impact on weekend/penalty rates being enforced through the restaurant industry?” That
question is curiously phrased; in particular the import of “enforced” is not entirely clear. The
intermingling of weekend penalty rates and public holiday rates in the question also reduces
the value of the survey response for our purposes. In answer to the question, only 7.4% of
participants said that the impact was that they either closed on Sundays or did not trade on
weekends at all. That cannot be interpreted as meaning that all other participants opened on
Sundays, but it does appear to mean that if any other participants did not trade on Sundays
(and thus did not employ on Sundays), it was not because of the impact of penalty rates. It
should be added that 44.4% of respondents said that the business owner or manager worked
on weekends (possibly meaning that this was done in substitution for the engagement of an
65 Exhibit A4, Annexure JH-3
[2014] FWCFB 1996
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employee), and that 33.3% indicated that they “reduced their business trading hours” (without
indicating when), thus indicating that there might be more scope for additional employment
but for weekend penalty rates. However, nothing in the survey suggests that the extent of
suppression of employment caused by the Sunday penalty rates in particular was anywhere
near to that estimated by Professor Lewis. The survey itself almost certainly exaggerates the
impact of penalty rates because it was confined to members of the RCA on an “opt-in” or self-
selection basis rather than being truly random.
[114] An analysis of the individual restaurateurs who gave evidence also suggests that
impact upon turnover and employment of the current Sunday penalty rates is limited. Of the
19 who gave evidence, 14 opened on Sundays. The other five indicated that they did not open
on Sundays in whole or in part because the Sunday penalty rate would not make it profitable
to do so. However, some of the evidence given by those five restaurateurs is troubling. For
example, an Adelaide restaurateur, who opened his restaurant on Mondays to Fridays only,
said:
“Ideally, I would love to put tables and chairs outside in the street and open the
Restaurant for Saturday and Sunday breakfasts or lunch. However, under the current
penalty rates structure, this is impossible. The labour costs on weekends (and
particularly Sundays) are prohibitive. If I wanted to engage an 18 year old kid with no
experience to carry meals around at a Sunday breakfast, the Restaurant would have to
pay the kid $38 an hour... There is no way the Restaurant would recover the costs of
the kid’s wages plus other costs on a $15 or even $20 breakfast plate.”66
[115] The proposition that the Restaurant Award required at the time the witness’s statement
was made that an 18 year old employee with no experience performing basic waiting duties be
paid $38 an hour for working on Sundays is simply not correct. If the person was classified as
a Food and Beverage Attendant Grade 2, the pay rate for such an employee at the age of 18 in
the second half of 2012 for working on a Sunday was only $23.05 (being the transitional rate
for South Australia). As at the date of this decision, the rate is only $22.54 per hour. The $38
per hour figure referred to by the witness does not appear to include on-costs, but even if that
was what the witness meant, it still cannot be anywhere near correct.
[116] Another example is that a restaurateur from Townsville said that the restaurant in
which he was a partner had previously decided (before he entered the business, apparently in
about 2008) not to trade on Sundays because of “the incredibly high wage rates the Restaurant
was paying on Sundays”.67 However the same witness disclosed that the restaurant was
currently operating under an enterprise agreement (which pre-dated the making of the
Restaurant Award) which required “a flat rate of $25 per hour” and which “did not require the
Restaurant to pay penalty rates or overtime loadings to staff”.68 This had not, apparently,
induced the restaurant to open on Sundays. It might be inferred that lack of demand on
Sundays was the real issue.
66 Exhibit A24 paragraph 16
67 Exhibit A26 paragraph 7
68 Exhibit A26 paragraph 11
[2014] FWCFB 1996
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[117] It may be accepted from the evidence of the restaurateurs generally that the Sunday
penalty rate may reduce employment to some degree - in particular, because in small
businesses the owner-operator may work on Sundays only to avoid the expense of an
additional staff member’s penalty rates. However, it is probable that the evidence of the
restaurateurs overstates the actual position because, firstly, the witnesses were presumably
selected by the 18 applicants to support their case that penalty rates should be abolished and
are therefore unlikely to be representative, and, secondly, they disproportionately came from
Queensland, where the effect of the commencement of the Restaurant Award on penalty rates
was most significant, and included no witnesses from Victoria, Western Australia or
Tasmania. Further, to the extent that the restaurateur witnesses gave evidence as to business
difficulties and insufficient profitability, it is clear that they identified a wide range of causes
for this, including changes to consumer demand since the global financial crisis,
underpayment or cash payment of wages by competitors, and increases in costs in energy and
food accompanied by a highly price-sensitive consumer market which made it difficult to pass
on such increased costs.
[118] There are clear examples in the history of industrial regulation of the restaurant
industry in which weekend penalty rates have been abolished or reduced, but no evidence was
forthcoming to demonstrate that this had discernibly positive effects in terms of turnover and
employment. The Deputy President, correctly in our view, pointed to the period 2006 to 2010
in Victoria when restaurant operators not bound by the then-applicable federal award were not
required to pay any penalty rates at all as providing an opportunity to test empirically what the
business and employment effects of a removal of penalty rates would be.69 However, no
evidence was called at first instance from any restaurant operator in Victoria, and the evidence
did not otherwise touch upon this period. There was another historical opportunity which we
can identify. Prior to the Work Choices period commencing in 2006, restaurants in New
South Wales were largely regulated by an award of the Industrial Relations Commission of
New South Wales, the Restaurant &c., Employees (State) Award70. In 1996, the NSW
Commission (Marks J) heard and determined various applications, including an application
from the Restaurant and Catering Association of NSW and other employers, in respect of that
award. The employers’ application sought amongst other things a reduction in weekly penalty
rates. In the Commission’s decision issued on 23 August 1996, it was determined that the
Saturday penalty rate should be reduced from 50% to 25% and the Sunday penalty rate
reduced from 75% to 50% (with casual employees receiving casual loadings in addition). On
the employers’ case presented before the Deputy President, that change should have increased
turnover and employment in the NSW restaurant industry. But there was no evidence that was
actually the case.
[119] There was some limited evidence in the proceedings below which suggested that
reductions in weekend penalty rates did not produce the business or employment benefits to
the extent contended for. As earlier stated, the result of the commencement of the Modern
Award was that in some States penalty rates were reduced. The clearest example of that was
South Australia, where the Sunday rate for permanent employees was reduced from 100% to
50%, and for casuals from 120% to 75% (including the casual loading). This was partially
offset by an increase in the base rate upon which these penalty rates operated, but
69 Decision at [235]
70 AN120468
[2014] FWCFB 1996
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notwithstanding this the actual hourly Sunday rate for a Food and Beverage Attendant Grade
2 under the Restaurant Award is lower in dollar terms as at the date of this decision than it
was for the equivalent classification in the pre-existing instrument in late 2008, and
significantly lower in real terms. However, none of the South Australian restaurateur
witnesses identified that any benefit had accrued to them from this, or that it had any effect on
the number of staff employed on Sundays.
[120] As earlier stated, the Price Waterhouse Coopers report is of little relevance to a
consideration of the alternative penalty rates application because it did not model the effects
of that application. For completeness we will, however, state briefly our conclusion about that
report, since the RCAV continued to rely on it to support its general contention that cutting
penalty rates would have significant positive effects for business, employment and the
economy generally. That report was based initially on a survey of 3570 members of the RCA
and other employer organisations. The survey form was very detailed and sought to capture a
large amount of information about various aspects of the respondents’ businesses. Only 61
surveys were fully completed, and another 251 were completed in part. Price Waterhouse
Coopers then developed a number of “stylised business models” (based on business type, size
and location) to model the business effects of the primary application, partly based on the
information in the completed surveys. The report then constructed aggregate outcomes for the
entire restaurant industry based on these models, and then used those aggregate outcomes to
model the economy-wide effects of the grant of the primary application using a regional
computable general equilibrium model. Certain positive results were then emphasised,
including increases to employment in the short and long term.
[121] For a number of reasons, including the following, we do not consider that the Price
Waterhouse Coopers report provides any reliable guide to the general effect of cutting penalty
rates:
(1) The respondents to the survey were self-selected and not randomly chosen.
(2) The sample size of completed surveys (61) was very small compared to the
total size of the restaurant industry of about 15,000 businesses.
(3) A number of the questions in the survey were badly constructed, some to the
point of being misleading. For example, one question, “What has been the
impact on the business’s operating hours since the implementation of
weeknight, weekend and public holiday penalty rates through the Restaurant
Industry Award 2010”, implied that these things had been introduced by the
Restaurant Award for the first time, and did not recognise the variable impact
of the Restaurant Award in different States.
(4) The survey results include answers to particular questions in partially complete
surveys, but fail to account for the reasons why a respondent might choose not
to respond to a question. For example, in respect of the question referred to
above, the results record the answers of 142 respondents, but fail to account for
the 170 respondents who decided not to answer that question. As United Voice
submitted, this is likely to reflect a lack of interest in the issue raised by the
question.
[2014] FWCFB 1996
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(5) It is unclear how the business models were extrapolated from the data in the 61
completed surveys, and it appears to be the case that to a significant degree the
results in the models reflect merely a judgment or opinion on the part of the
report’s author, and are also based on the use of external data in a way which is
not properly explained.71
(7) It seems to us inherently improbable that any reliable estimation of Australian
economy-wide effects extending through to the year 2030 can be derived from
a non-random and self-selecting survey involving only 61 fully completed
responses and 251 partly completed responses.
[122] Although we accept that the Sunday penalty rate in the Restaurant Award, as
compared to a hypothetical lower penalty rate of 25%, would have some effect on
employment (particularly in relation to some owner-operators working on Sundays in
preference to working staff for additional hours), we do not think that those effects are nearly
as significant as contended for by the RCAV. Employment in the restaurant industry has
consistently grown strongly over the last two decades, and has continued to do so since the
Restaurant Award was made. Nor do we consider that the evidence has demonstrated that the
lower Sunday penalty rate sought by the RCAV would cause those restaurants not already
open on Sundays to open on Sundays to an extent that would have a significant effect on
business turnover. Accordingly, we do not consider that the Restaurant Award has been
shown to be not meeting the modern awards objective or is not operating effectively by reason
of the effects of the Sunday penalty rate on employment and business.
Sunday work, contemporary Australian society and the restaurant industry workforce
[123] The RCAV, as did the 18 applicants at first instance, contended that the disability
associated with working on Sundays was no higher than for Saturdays, and that accordingly
there was no proper justification for the Sunday penalty rate being twice as high as the
Saturday penalty rate. Two main propositions were advanced in support of this contention.
The first was that there had been significant changes in Australian society concerning
weekend work and leisure which vitiated the original rationale for the higher Sunday penalty
rate. In this respect, reliance was placed primarily on the evidence of Professor Lewis to the
following effect:
The proportion of persons considering themselves Christians had fallen from over
96% in 1911 to about 60%, with the result that the significance of Sunday as a
Christian day of worship had diminished.
Regular church attendance had dropped from 44% in 1950 to 17% in 2007, with
lower figures for young people, so that for most people Sunday was not a day of
religious observance.
The amount of time spent on sport and outdoor activity increased on average by
only 17 minutes per day on weekends, thus indicating that this was not a major
weekend activity.
71 See Exhibit A1 p.14 and transcript 13 May 2013 PNs 389,479-485, 518, 520
[2014] FWCFB 1996
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The contemporary workforce, being characterised by weekend as well as weekday
work, part-time and casual work, flexible working hours, participation in the
workforce by women with children, and the predominance of service industries
means that there is no longer any special disability associated with working Sunday
work.
[124] The second proposition was that the workforce in the restaurant industry was
characterised to a large degree by persons for whom there was little or no disability associated
with working Sundays or weekends generally. It was submitted that such persons were
usually engaged to a substantial degree in other activities during weekdays, so that weekends
constituted the days upon which they were available and wanted to work, with the result that
in those circumstances the Sunday penalty rate exceeded what was necessary to compensate
them for any disability which they suffered or to attract them to work on Sundays.
[125] We will deal with each of these propositions in turn. As to the first, it is necessary to
note at the outset that much of the RCAV’s case about the disabilities associated with Sunday
work appeared to suggest that Sunday penalty rates had not been assessed in the light of
contemporary circumstances and were a relic of a stage in the development of Australian
society which existed in the mid-twentieth century but was long past. This is not so. As
recently as 2003, the issue of the disability associated with Sunday work, and the proper
penalty rate to be applied to such work, was considered by a Full Bench in the context of the
Victorian retail industry in Shop Distributive and Allied Employees Association v $2 and
Under (SDA v $2 and Under).72 The majority (Watson SDP and Raffaelli C) identified the
disability in the following terms:
“RATIONALE FOR THE SUNDAY PENALTY
[91] In deciding the appropriate penalty rate in the roping-in award for the working of
ordinary hours on a Sunday, with a capacity for employers to require such work at that
time, it is necessary to consider the appropriate rationale for the penalty. Historically,
penalty rates for "unsociable" hours has involved consideration of additional
compensation of employees in respect of disabilities and/or deterrence of work at such
times. In our view, in the context of the reality that retailing in Victoria is a seven-day
a week industry, as noted in the January 2003 decision, the Sunday ordinary time
penalty in the roping-in award should be directed to the compensation for the
disabilities upon employees and should not be directed to deterring the working of
Sunday ordinary time hours. This approach is consistent with that of Gay C in respect
of the hospitality industry. There appears to be no significant divergence between the
parties in the present matter in respect of that approach.
THE DISABILITY ASSOCIATED WITH SUNDAY WORK
[92] It was accepted that some disadvantage arises for some employees from Sunday
work. The ARA acknowledged that some disadvantage is had by some for working on
Sunday. The SDA brought evidence from two expert witnesses in relation to the nature
72 PR941526, (2003) 135 IR 1
[2014] FWCFB 1996
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of Sunday work and the associated social disabilities. They were Dr Michael Bittman
and Dr Graeme Russell.
[93] Dr Bittman prepared a report based on Australian Bureau of Statistics time-use
data, which disclosed:
Sunday remains an overwhelmingly non-work day, with only one of five currently
employed working age persons working on a Sunday, compared with four out of
five on weekdays.
In the 23 year period between 1974 and 1997, the proportion of persons living in
large metropolitan centres and aged 20-59 working for at least two hours on
Sunday has risen from 9% to 17%.
Working on Sundays reduces family leisure time by over two hours, inclusive of
reduced parents' time with their children and reduces leisure time in the company
of friends by an hour and a half.
Time lost on Sundays by persons working on Sundays is not recovered on other
days of the week, other than four additional minutes eating with family members.
[94] Dr Bittman concluded that:
"...As compared to those who work on weekends, Sunday workers miss-out on
key types of social participation and have less opportunity to balance the
demands of work and family".
[95] The data used by Dr Bittman is at an aggregate level. As such, it does not
distinguish between employees within different family structures or with different
views about working on a Sunday. Some employees working on Sunday would
experience a less than average loss of time and opportunity for family and other social
participation, whilst others would experience a greater than average loss. Nonetheless,
it does show, in aggregate, a very substantial disability endured by persons working on
a Sunday. Such disability, in our view, would be heightened in the context whereby
provision is made in the roping-in award for the non-voluntary working of ordinary
hours on a Sunday. It may be inferred from the pursuit of such a provision by the
employer associations representing respondents to the roping-in award, that some
employees will be compelled to work ordinary hours on a Sunday, against their
wishes.
[96] Dr Russell assessed the research literature to conclude:
Family and close relationships matter both to individuals and to family and
individual outcomes, including child development.
Time together, shared activities and the active involvement in the lives of other
family members are essential to sustain effective family relationships and positive
outcomes for families and individuals.
Sundays are very important in providing time and opportunity for
participation/involvement between people.
[2014] FWCFB 1996
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Research shows that most employees prefer not to work on Sundays.
[97] In our view, the evidence of Dr Bittman and Dr Russell demonstrates a significant
social disability associated with work on a Sunday.”
[126] In their decision, Watson SDP and Raffaelli C assessed the appropriate Sunday
penalty rate for the Victorian retail industry to be 100% (compared to 25% for Saturdays).
The other member of the Full Bench, Giudice J, President, dissented from that outcome. In his
judgment, he concurred with the other members as to the disability associated with Sunday
work, saying:
“[6] I agree with and gratefully adopt the summary of these proceedings and the account
of the evidence and submissions of the parties given by the two other members of the
Bench. I also agree with their conclusion that the evidence of Dr Bittman and Dr
Russell demonstrates a significant social disability associated with work on a Sunday,
subject only to the reservation that it suits some people to work on that day. I
respectfully disagree with their conclusion as to the appropriate penalty for work
performed in ordinary hours on a Sunday.”
[127] Giudice J’s conclusion was that the appropriate penalty rate for Sundays was 50%, not
100%. In reaching that conclusion, his Honour relied in particular on the need for there to be
proper proportionality between the Sunday penalty rates and other penalty rates for Saturdays,
weeknights and shift work:
“[17] As already mentioned the penalty rate for work in ordinary hours in non-exempt
shops on Saturday under the roping-in award is 25%. The penalty rate for work in
ordinary hours under the parent award is also to be treated for practical purposes as
25%. The history of that provision is dealt with in the January 2003 decision. The
penalty for ordinary hours on Sunday should bear a proper relationship to the Saturday
penalty. The proposition that the disability of Sunday work is four times the disability
of Saturday work cannot be accepted. For this reason a penalty of double time is
excessive.
[18] The penalty for work in ordinary hours in non-exempt shops between 6.00 pm
and 9.00 pm on weekdays is also 25%. The penalty for work in ordinary hours in such
shops on Sundays should bear a proper relationship to that penalty. The proposition
that the disability of working on Sunday is four times the disability of working
between 6.00 pm and 9.00 pm on weeknights cannot be accepted.
[19] It is also relevant that night shift workers under the parent award are paid at
double time for shift work performed on Sundays, while for shift work performed on
weekdays there is a shift penalty of 30% for full-time and part-time employees and
45% for casual employees. The additional penalty for night shift work on Sunday is
thus 70% or 55% depending upon the category of employment. This is another
indication that a penalty of 100% for work in ordinary hours on Sundays is excessive.
…
[2014] FWCFB 1996
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[28] Taking all of these considerations into account, but particularly the penalty rates
under the parent award for work in ordinary hours on other days of the week, a penalty
rate of 100% for work performed in ordinary hours on Sundays in the retail industry in
Victoria is excessive. In the circumstances it is not necessary that I express a final
view on the appropriate penalty rate.”
[128] We do not consider that there has since 2003 been any real change in Australian
society and the workforce such as to render the Full Bench decision in SDA v $2 and Under
anything other than a contemporary general assessment of the disabilities associated with
working on Sundays as compared to other days of the week. We agree with the identification
of the nature of that disability, being the loss of a day of family time and personal interaction
upon which special emphasis is placed by Australian society. Nothing in the evidence of
Professor Lewis addressed the matters identified in SDA v $2 and Under. Indeed, we consider
that Professor Lewis’s evidence to some extent missed the point: he described Sundays in
terms of various types of “activity”, when it is the lack of “activity” on Sundays which
provides space for leisurely interaction with family and friends.
[129] We note that the Full Bench in Modern Awards Review 2012 - Penalty Rates73 dealt
with a number of applications to vary penalty rate provisions in various awards, including an
application to reduce the Sunday penalty rate in the General Retail Industry Award 201074
from a 100% to a 50% loading. This application was rejected as not having been supported by
sufficient evidence, but the Full Bench in its conclusion did recognise that there was some
merit in the proposition that the 100% Sunday penalty rate might need to be revisited in light
of the Saturday penalty rate of 25%. The Full Bench said:
“[235] We are not persuaded that a sufficient case has been made out to warrant varying
the relevant awards in the manner proposed by the employers. While aspects of the
applications before us are not without merit - particularly the proposals to reassess the
Sunday penalty rate in light of the level applying on Saturdays - the evidentiary case in
support of the claims was, at best, limited.
[236] The 4 yearly review of these awards is to commence in 2014. That review will
be broader in scope than the Transitional Review and will provide an opportunity for
the issues raised in these proceedings to be considered in circumstances where the
transitional provisions relating to the relevant awards will have been fully
implemented. In the event that the claims before us are pressed in the 4 yearly review
we would expect them to be supported by cogent evidence. We would be particularly
assisted by evidence regarding the matters referred to above and the likely impact
upon employment levels, the organisation of work and employee welfare of any
change in the penalty rates regimes.”
[130] The issue of Sunday penalty rates vis-à-vis Saturday penalty rates is clearly one which
affects awards generally, and could more appropriately be considered in the course of the
broader four-yearly review in a proceeding in which all affected interests can be heard. But to
the extent that the Full Bench in Modern Awards Review 2012 - Penalty Rates has identified
73 [2013] FWCFB 1635
74 MA000004, clause 29.4
[2014] FWCFB 1996
59
that the issue may be dealt with in that context, it is on the basis of a consideration as to
whether a 100% penalty rate on Sundays is disproportionate to a 25% Saturday penalty rate
and whether 50% is the proportionate amount. This consideration reflects the different views
taken by the members of the Full Bench in SDA v $2 and Under.
[131] In the Restaurant Award, the Sunday penalty rate is already at 50%, reflecting the fact
that the penalty rates regime in the Restaurant Award is at the bottom end of the spectrum
compared to other modern awards. For example, the General Retail Industry Award75 has (as
earlier stated) a Sunday penalty rate of 100%, as does the Clerks - Private Sector Award76, the
Road Transport and Distribution Award77 and the Manufacturing and Associated Industries
and Occupations Award78, while the Hospitality Industry (General) Award79 has 75%. We do
not consider that in those circumstances, and on the evidence before us, the Sunday penalty
rate in the Restaurant Award is, as a general proposition, disproportionate to the Saturday
penalty rate. We reject the proposition that the Restaurant Award is not meeting the modern
awards objective or is not operating effectively for that reason.
[132] As to the second proposition, namely that the special and peculiar characteristics of the
restaurant industry workforce meant that the Sunday penalty rate was excessive, we accept
that there is a degree of evidence which supports this proposition. We have earlier identified,
in our description of the general characteristics of the restaurant industry, the fact that a very
large proportion of the workforce consists of young people pursuing full-time studies or
women with weekday carers’ responsibilities who work significantly less than full-time hours
on a casual basis. The evidence tends to demonstrate that for that proportion of the workforce,
weekends will frequently be the time that they are available to and want to work. Their
position is distinguishable from “core” or “career” restaurant employees such as, for example,
trade-qualified chefs or senior front-of-house staff intending to stay in the industry on a long
term basis, who are much more commonly engaged on a full-time or permanent part-time
basis, have to accept the loss of Saturdays and Sundays as a permanent feature of their
working lives, and depend upon penalty rates as a core component of their take-home pay.
[133] Mr Hart, for example, gave the following evidence:
“Another key characteristic of the restaurant and catering industry is that the industry
has a lower skills base compared to other industries. It is therefore readily accessible to
those that are in the younger categories, or are pursuing other interests or activities
while also working in the restaurant and catering industry. This lower skills base,
together with the high level of casualised work indicates to me that many people work
in the industry at the same time as they are pursuing other objectives, such as study,
saving money for overseas travel, saving money to open their own businesses, and so
on.
75 MA000004, clause 29.4(c)
76 MA000002, clause 27.2(b)
77 MA000038, clause 28.1(b)
78 MA000010, clause 40.8
79 MA000009, clause 32.1
[2014] FWCFB 1996
60
The restaurant industry’s traditional sources of labour come from students, school
leavers, people in their first job, people who work more than one job and people with
carer’s responsibilities.”80
[134] However, workers in this category were to be contrasted to full-time workers, most of
whom “have Mondays and Tuesdays off, as opposed to Saturdays and Sundays”, with jobs of
that nature being advertised as such.81
[135] A qualitative report prepared by Colmar Brunton Social Research in August 2008 on
the Accommodation, Cafes and Restaurants Industry82, which was commissioned by the
Australian Fair Pay Commission, likewise distinguished between younger industry workers
and others working casually and part-time, and career industry workers. In respect of the
former category, the report said:
“A relatively large portion of the workforce in the ACR industry is employed on a
casual or part-time basis. The ability to work on casual terms, in shifts, or outside of
regular business hours was attractive to many participating employees, as this allows
them to work around other commitments. Participants also mentioned the benefits of
being able to swap shifts and negotiate starting and finishing times at the last minute to
accommodate unforeseen circumstances.
...
While the pay rate is low in real terms, younger employees (particularly those aged 18
to 20) often reported that their pay rates are high relative to other industries.
...
Many of these younger employees were employed on a casual basis that paid them a
higher hourly rate (to compensate for not providing annual or personal leave). Many of
those younger employees who felt that their current rate of pay was good were also
receiving shift penalties for working late at night or on weekends.
...
For those employees their current pay rate is sufficient to support their lifestyle, in
most cases providing them with disposable income while they live with their parents.
...
Many employees reported that it was easy to get their first job in the ACR industry.
The entry requirements for many jobs in the industry were reportedly low. Many jobs
require no qualifications at all and only very basic on-the-job training. There are also
jobs that require only very basic qualifications, and these qualifications are relatively
80 Exhibit A4 paragraphs 12-13
81 Ibid paragraph 25
82 Exhibit A4 Annexure JH-4
[2014] FWCFB 1996
61
quick and easy to obtain (e.g. Responsible Service of Alcohol or Responsible Conduct
of Gambling certificates).”83
[136] The position was different with career workers:
“Apprentices, trainees and mature-aged workers employed on a permanent full-time or
part-time basis believed that wages in the ACR industry are low in comparison to pay
rates available in other industries. Many of these employees, particularly those with
significant financial commitments, reported that their wages are insufficient to support
their lifestyle.”84
[137] The individual restaurateurs gave evidence to similar effect; for example:
(1) “The vast majority of my employees do not have difficulties with working on
Saturdays or Sundays. On the contrary, the university students enjoy the
weekend shifts because that is when they are available.”85
(2) “I do not usually have any problems attracting staff to work on weekends. This
is because most of my staff are school or university students who can only
work on weekends. Often, I actually receive resumes from students that say
‘Can only work Saturday and Sunday’. Other than trying to hire a good chef, I
never need to advertise for staff to work for me, as there are many people who
are eager to work at the Cafe, and who have no concerns with working on a
weekend.
...
I find it frustrating that many of my employees can only work on a Saturday or
Sunday, and I have to pay a penalty rate for them to work on the only time that
they are available.”86
(3) “The two permanent front of house staff who I employ are people who have
both worked in the hospitality industry for a long time. I would call them
‘career hospitality people’.
Similarly, I consider the chefs to be ‘career hospitality people’, however the
chefs only tend to work for short periods of time in the current business. Most
chefs seem to leave after 12 to 18 months and move to a new restaurant or cafe.
I have found it difficult to retain chefs for long periods of time.
Most of my casual wait staff used to be young university students who wanted
to work on the weekends or weeknights, when they did not have university
commitments. Some of the students also had other jobs that they worked
83 Ibid pp.92-93
84 Ibid p.94
85 Exhibit A7 paragraph 18
86 Exhibit A10 paragraphs 14-15
[2014] FWCFB 1996
62
during the week, and requested weekend shifts in order to arrange work during
their available time.
However, over the last 12 months, I have gradually shifted away from
employing university students, as I have found them to be increasingly
unreliable, and less hard working than older staff.
Accordingly, I have started employing older workers as casual wait staff. I now
have two wait staff over 50 working in the current business. One of these staff
members has carer’s responsibilities, however, she works on weekends when
her husband is able to look after their child.”87
(4) “Many of the casual staff we employ are students. They study at university
during the day, and work outside of the university hours at night or on the
weekend. I have found that it is much easier to find casual staff to employ on
the weekend than it is during the week. This is because the casual university
students generally have commitments during the weekdays.”88
(5) “I find that the mothers who work in the Restaurant generally work at times
that they do not need to care for their children. For instance, the mothers often
work at night times or weekends, when their husbands or partners can look
after the children.
The university students, on the other hand, predominantly can only work on
weekends. There are about 10 of them who usually only want the weekend
shifts, because these are the only times that they do not have university or
study commitments.
The kitchen and front of house staff who work full time often stay with us for
quite a while (some of the staff have been with the Restaurant for over 18
years). However, the university students and school kids who work casual
hours usually only work for the Restaurant for a couple of years before moving
on elsewhere.”89
[138] None of this evidence would cause us to conclude that a total Sunday penalty rate of
50% is too high. For career restaurant industry workers, the disability associated with working
on Sundays which we have earlier described clearly applies. Even for transient and lower-
skilled casual employees working primarily on weekends, that disability exists, as in the retail
industry. However, we consider that for this latter category of primarily younger workers, the
superimposition of the casual loading of 25% in addition to of the Sunday penalty of 50%,
resulting in a total loading of 75%, would tend to overcompensate them for working on
Sundays and is more than is required to attract them to work on that day. That raises an issue
as to whether the Restaurant Award is meeting the modern awards objective in s.134.
87 Exhibit A 12 paragraphs 23-27
88 Exhibit A13 paragraph 23
89 Exhibit A18 paragraphs 15-17
[2014] FWCFB 1996
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Conclusion re modern awards objective
[139] The modern awards objective in s.134(1) of the FW Act, which we have earlier set
out, requires that modern awards, together with the National Employment Standards, provide
a “fair and relevant safety net of terms and conditions”, taking into account a number of
specified matters. We have concluded that, in respect of Sunday penalty rates, the Restaurant
Award does not meet the modern awards objective in that they are not “fair and relevant” to
the extent that they tend to overcompensate one category of employees as identified in
paragraph [138] above. In reaching that conclusion, we have taken the matters in s.134(1)(a)-
(h) into account in the following way (by reference to the paragraph lettering in s.134(1)):
(a) Employees covered by the Restaurant Award, who are to a significant degree
award-dependent, may generally be characterised as low paid. In general terms,
the Sunday penalty rates regime is appropriate for employees’ needs, except in
relation to the category of employees identified in paragraph [138] who we
consider tend to be over-compensated.
(b) Given the restaurant industry is largely award-reliant it appears that only a
small proportion of the restaurant industry employers engage in collective
bargaining. We do not consider that the issue of Sunday penalty rates impacts
on the incidence of collective bargaining or, relevantly, the “need to
encourage” such bargaining.
(c) Because of our conclusion that Sunday penalty rates have some effect, but not
a significant effect, on employment on Sundays (paragraph [122]), social
inclusion through increased workforce participation may be affected to that
limited extent.
(d) We consider the effect of the current provisions to be neutral in respect of this
factor (noting our conclusion concerning effects on business in paragraph [122]
above).
(da) The Restaurant Award currently provides additional remuneration for working
on Sundays (and should continue to do so).
(e) The Restaurant Award currently provides equal remuneration for men and
women workers for work of equal or comparable value.
(f) The Sunday penalty rates in the Restaurant Award are neutral in respect of
productivity and the regulatory burden because they do not significantly affect
business turnover (see paragraph [122]). However, as to “employment costs”,
they do have some, but not a significant, effect on employment on Sundays
(paragraph [122]).
(g) We do not consider this factor to be relevant to our consideration.
(h) We do not consider that the Sunday penalty rates provisions have economy-
wide effects, noting our earlier conclusion that employment growth in the
[2014] FWCFB 1996
64
restaurant industry has continued to grow strongly since the modern Restaurant
Award was made (see paragraph [122]).
Appropriate award variation
[140] The appropriate course to address this issue is to vary the Restaurant Award to
provide, in respect of the class of employees in question, that the Sunday penalty rate together
with the casual loading should not exceed 50% in total. We consider that varying the
Restaurant Award in this manner would be consistent with the modern awards objective in
s.134 and, to the extent relevant, the minimum wages objective in s.284. In this regard, we
note that the approach whereby, with respect to casual employees, the weekend penalty rate is
established in aggregate with the casual loading is one which is to be found in a number of
modern awards such as the Registered Licensed Clubs Award90, the General Retail Industry
Award91, the Hospitality Industry (General) Award92 and the Clerks - Private Sector Award93.
This approach was also taken by the Full Bench in setting weekend penalty rates in the Aged
Care Award 201094, which decision was followed by the Commission (Vice President
Watson) in Australian Municipal, Administrative, Clerical and Services Union re Social,
Community, Home Care and Disability Services Industry Award 201095, relevantly affirmed
on appeal by the Full Bench in Australian Municipal, Administrative, Clerical and Services
Union.96
[141] The difficulty then is to find a mechanism by which to separate the class of transient
and lower-skilled casual employees from career restaurant industry employees, recognising
that the latter category of employees is also likely to include persons employed on a casual
basis, working regular and/or full time hours. We consider that the distinction should be made
on the basis that, for casual employees employed in the Introductory Level classification or in
any classification falling within the Level 1 and Level 2 pay grades, the Sunday penalty rate
together with the casual loading should not exceed 50% in total (that is, the 25% casual
loading and in addition a further 25%). We have chosen those classification levels because,
for Food and Beverage Attendant Grade 3, Cook Grade 2, Clerical employee Grade 3 and
Storeperson Grade 3 (all of which classifications fall within the Level 3 pay grade), an
“appropriate level of training is required”. That expression is defined in clause 3.1 of the
Restaurant Award as follows:
“appropriate level of training means that an employee:
(a) has completed an appropriate training program that meets the training and
assessment requirements of a qualification or one or more designated units of
competency from a Training Package;
90 MA000058, clause 29.5
91 MA000004, clause 29.4(c)
92 MA000009, clause 32.4
93 MA000002, clause 28.7
94 [2010] FWAFB 2026 at [59]
95 [2013] FWC 4141 at [33]
96 [2014] FWCFB 379 at [29]-[31]
[2014] FWCFB 1996
65
(b) has been assessed by a qualified skills assessor to have skills at least equivalent to
those attained in an appropriate training course; and/or
(c) at 31 December 2009 (except for a Food and Beverage attendant grade 2 as defined
in Schedule B—Classification Structure and Definitions) has been doing the work of a
particular classification for a period of at least three months,
(however, to avoid doubt, the minimum classification rate for an employee who has
completed AQF Certificate III or higher qualifications relevant to the classification in
which they are employed is Level 4 in clause 20.1. For Food and beverage attendants
grade 2, classification at grade 3 is subject to the employee having completed AQF
Certificate II qualifications relevant to the grade 3 classification).”
[142] The completion of the training requirements described above would be a strong
indicator, we consider, that an employee intends to pursue a career in the restaurant industry
and is not a transient and low-skilled worker. Such employees are not intended to be affected
by the change to the Restaurant Award we propose to make.
[143] In making this change, we do not intend as far as possible to affect the take-home pay
of existing employees, noting that we are dealing with low-paid employees. Therefore we
consider that the variation should include a requirement that no existing employee classified
as Level 3 or above be moved down to Levels 1 or 2 or be discriminated against in the
allocation of work as a result of this variation.
[144] The variation shall take effect on 1 July 2014.
Classification structure issues
Three month progression requirement
[145] Clause B.1 of Schedule B - Classification Structure and Definitions of the Restaurant
Award defines the Introductory Level classification as follows:
“B.1 Introductory level
Introductory level means a worker who enters the industry and is unable to meet the
competency requirements of Level 1. Such an employee will remain in this level for a
maximum of three months. Provided that an additional three months may be served at
this level by mutual agreement between the employer and the employee. Further, if
any disagreement arises from this provision it will be determined in accordance with
clause 9—Dispute resolution.”
[146] It can be seen from the classification definition that the purpose of the Introductory
Level is to provide a pay rate for an employee who cannot meet the competency requirements
of Level 1. This posits a fairly low standard of competency, since, for example, the functions
of a Food and Beverage Attendant Grade 1, which falls within Level 1, only consists of
“picking up glasses”; “general assistance to food and beverage attendants of a higher grade
not including service to customers”; “removing food plates”; “setting and/or wiping down
http://www.fwc.gov.au/documents/modern_awards/award/ma000119/ma000119-11.htm#P254_22060
http://www.fwc.gov.au/documents/modern_awards/award/ma000119/ma000119-11.htm#P254_22060
http://www.fwc.gov.au/documents/modern_awards/award/ma000119/ma000119-24.htm#P360_33033
http://www.fwc.gov.au/documents/modern_awards/award/ma000119/ma000119-48.htm#P915_75326
http://www.fwc.gov.au/documents/modern_awards/award/ma000119/ma000119-48.htm#P915_75326
[2014] FWCFB 1996
66
tables”; and “cleaning and tidying of associated areas”. We note in this connection that the
wage rate for the Introductory Level classification is an amount equal to the national
minimum wage.
[147] There is, we consider, no basis to assume that an employee working full-time hours
would require the full three month period to become competent in Level 1 duties, or that an
employee working significantly fewer hours than full-time hours would require more than
three months to become competent in Level 1 duties. If the evidence demonstrated that the
effect of the progression requirement was to require employees to be moved to Level 1 who
were not able to perform competently Level 1 duties, then we would accept that would
compel the conclusion that the Restaurant Award was not “operating effectively, without
anomalies or technical problems arising from the ... award modernisation process”.
However, as the Deputy President found at paragraph [277] of the Decision, there was no
evidence that this was the case. The very limited evidence on the topic merely asserted an
inequity as between full-time and less than full-time employees in having the same maximum
period in the Introductory Level classification, but this was not sufficient to show that the
Introductory Level classification was not meeting its intended purpose. We cannot discern any
error in the Deputy President’s reasoning.
Receipt of monies
[148] The Deputy President rejected the claim that the inclusion of the work function of
“receipt of monies” in the classification of Food and Beverage Attendant Grades 2 and 3, but
its exclusion from Food and Beverage Attendant Grade 1, constituted an anomaly arising
from the award modernisation process which prevents the Restaurant Award from operating
effectively. The reason for the Deputy President’s rejection of this claim in paragraph [280] of
the Decision, which we have earlier set out, was that no argument had been put that the
relativity established for the work at these levels was not properly fixed.
[149] We consider that in reaching that conclusion, the Deputy President fell into error
because she failed to take into account a relevant consideration of significance, namely that
because (as the evidence demonstrated) the vast majority of waiting staff covered by the
Restaurant Award are expected and required to receive money from customers as part of their
ordinary duties97, the exclusion of the receipt of monies as a duty permitted to be performed
by a Food and Beverage Attendant Grade 1 meant that no waiting or “front of house”
employees could be engaged at that grade and paid at Level 1. We have earlier quoted the
evidence of Mr Parkes in that respect. That consideration clearly affected the question of
whether the Restaurant Award was, in terms of item 6(2)(b) of Schedule 5 of the Transitional
Act, operating effectively.
[150] We will therefore quash this part of the Decision and re-hear the matter ourselves. It
must be taken as a given proposition that the classification of Food and Beverage Attendant
Grade 1, which applies to “front of house” duties, was intended by the award modernisation
Full Bench to have actual utility in the sense that it was available to and practicable for
employers under the Restaurant Award lawfully to employ persons at that level. As we have
stated, the evidence demonstrates that in fact persons who perform the duties in the definition
97 Exhibit A14 paragraph 36; Exhibit A27 paragraph 27; Exhibit A13 paragraph 39; Transcript 15 May 2013 at PNs 978, 981
[2014] FWCFB 1996
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of Food and Beverage Attendant Grade 1 cannot be employed at that level because they are
also, overwhelmingly, required to receive monies from customers. We consider therefore that
the definition of the classification of Food and Beverage Attendant Grade 1 is not operating
effectively and that the exclusion of the “receipt of monies” function is an anomaly arising
from the award modernisation process. We also consider that because this anomaly has
rendered the Food and Beverage Attendant Grade 1 inutile, the Restaurant Award is not
meeting the modern awards objective in that it is not providing a “relevant” minimum safety
net of terms and conditions. In order to achieve the modern awards objective, we will vary the
Restaurant Award to include “receipt of monies” as an additional work function in the
definition of Food and Beverage Attendant Grade 1 in clause B.2.1 of Schedule B. This
variation will make clear however that no existing employee can have his or her classification
reduced as a result of the variation. The variation shall take effect on 1 July 2014.
Classification of baristas
[151] With respect to the issue of the barista, we do not consider that the Decision was
attended by error. As the Deputy President found, the classification structure is not currently
drafted in a way which exhaustively describes in relation to food and beverage preparation the
detailed job functions at each classification level. Thus the exclusion of the barista function
does not constitute any sort of anomaly or technical problem arising from the award
modernisation process that prevents the Restaurant Award from operating effectively, nor
does it affect the achievement of the modern awards objective. There is no issue that a barista
can be classified under the Restaurant Award as a Food and Beverage Attendant Grade 2 or 3
(that is, paid at Level 2 or 3), as the Deputy President found. If the RCAV wishes to have the
classification structure modified so as to more comprehensively describe food and beverage
preparation functions, that is a matter which it can raise in the four-yearly review.
Taking reservations, greeting and seating guests
[152] In the proceedings at first instance, the 18 applicants contended that there was an
anomaly in the operation of the Restaurant Award in terms of item 6(2)(b) of Schedule 5 of
the Transitional Act because, in Schedule B, the classification definition of Food and
Beverage Attendant Grade 3 included the work function of “Taking reservations, greeting and
seating guests”, but the classification definition of Food and Beverage Attendant Grade 2 did
not. As we have earlier stated, this part of the 18 applicants’ case did not receive any specific
consideration in the Decision. Notwithstanding that this was a comparatively minor issue in
the proceedings and inevitably received much less attention than other parts of the matters, the
Deputy President was obliged to consider and determine it. The failure to do so demonstrated
error. It is therefore necessary for us to re-hear this part of the matter.
[153] We are satisfied on the evidence that the taking of reservations and greeting and
seating guests is a function which may ordinarily be expected to be performed by persons who
would otherwise be classified as a Food and Beverage Attendant Grade 2, and that the failure
to include this work function in the definition of that classification means that such persons
may have to be paid at the higher rate for a Food and Beverage Attendant Grade 3 for that
reason alone.98 Mr Taylor, a United Voice official from South Australia and a former worker
98 Exhibit A13 paragraph 39; Exhibit A14 paragraph 35; Exhibit A21 paragraph 44
[2014] FWCFB 1996
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in the industry, gave evidence that as a consequence of this, as well as the issue of the
classification of the receipt of monies function, waiting staff are unlikely to be classified as a
Food and Beverage Attendant Grade 1 or 2, and that those two classifications have little
significance for the restaurant industry.99 That cannot be a practical result that was intended
by the award modernisation Full Bench which made the Restaurant Award. The purpose of
the Food and Beverage Attendant Grade 3 classification was not, we consider, to provide a
higher rate of pay just for waiting staff who take reservations and greet and seat guests; as
earlier explained the main justification for the Grade 3 classification was that, unlike Grade 2,
it applies to a person who has “achieved the appropriate level of training”, being (as the
definition of “appropriate level of training” in clause 3.1 makes clear) the completion of
relevant AQF Certificate II qualifications. Because the Restaurant Award has classifications
which cannot in practical terms be utilised by employers, we conclude that it is clearly not
operating effectively because of an anomaly arising from the award modernisation process,
and we further find that the Restaurant Award is not meeting the modern awards objective in
that it is not providing a “relevant” minimum safety net of terms and conditions. We will vary
the Restaurant Award to include the work function of “Taking reservations, greeting and
seating guests” in the definition of the classification of Food and Beverage Attendant Grade 2
in clause B.2.2. Again, that variation will make it clear that no existing employee can have his
or her classification reduced as a result of the variation. The variation shall take effect on 1
July 2014.
Conclusions
[154] In summary, our conclusions are as follows:
(1) The RCAV’s appeal only challenged limited aspects of the Deputy President’s
Decision, namely the refusal to reduce the Sunday penalty rate in the
Restaurant Award from 50% to 25% and to make four specific changes to the
classification structure.
(2) Permission to appeal is granted because the subject matter of the appeal is of
sufficient importance to attract the public interest, and because error has been
identified in the Deputy President’s decision in a number of respects.
(3) The Deputy President’s decision concerning Sunday penalty rates was attended
by appellable error, in that the Deputy President apparently determined the
matter by reference to the test of whether there had been a significant change
in circumstances since the making of the Restaurant Award and, as a result, did
not consider the matter in accordance with the relevant requirements of the
Transitional Act.
(4) It is necessary therefore for the Full Bench to re-determine the RCAV’s
alternative claim for a reduction in the Sunday penalty rate from 50% to 25%.
(5) The RCAV’s case that the reduction in the Sunday penalty rate from 50% to
25% would have significant benefits for employment and business turnover
99 Transcript 15 May 2013 PNs 978-986
[2014] FWCFB 1996
69
was not made out. Employment in the restaurant industry has consistently been
growing strongly over the last two decades, and has continued to grow since
the Restaurant Award was made. It is accepted however that Sunday penalty
rates may have a limited effect on employment, particularly in relation to
owner-operators working on Sundays in preference to engaging staff for
additional hours.
(6) The RCAV’s case that, as a general proposition, the level of disability for
working on Sundays is no higher than that for Saturdays is rejected. The
position has not changed since a Full Bench of the Australian Industrial
Relations Commission considered this issue in 2003.100 Working on Sundays
involves a loss of a day of family time and personal interaction upon which
special emphasis is placed by Australian society.
(7) Although a 50% Sunday penalty rate is generally appropriate for employees
under the Restaurant Award, for transient and lower-skilled casual employees
working mainly on weekends, who are primarily younger workers, the
superimposition of the casual loading of 25% in addition to the 50% penalty
tends to overcompensate them for working on Sundays and is more than is
required to attract them for work on that day. In that respect, the Restaurant
Award is not meeting the modern awards objective in s.134 of the FW Act.
(8) It is necessary to vary the Restaurant Award to remedy the issue identified. It
is not intended that the variation to be made have any effect upon career
restaurant industry employees, recognising that the latter category of
employees is likely to include persons employed on a casual basis working
regular and/or full time hours.
(9) It is considered that transient and lower-skilled casual employees will
primarily be employed in the Introductory Level classification or in the Level 1
and Level 2 pay grades. Accordingly, effective from 1 July 2014, the
Restaurant Award shall be varied to provide that for casual employees in these
classifications, the Sunday penalty rate together with the casual loading should
not exceed 50% in total (that is, the 25% casual loading and in addition a
further 25%). To prevent as far as possible affecting the take-home pay of
existing employees, there will be an additional requirement that no existing
employee classified as Level 3 or above should be moved down to Levels 1 or
2 or be discriminated against in the allocation of work as a result of this
variation.
(10) In respect of the four proposed changes to the classification structure in the
Restaurant Award, it is considered that the Deputy President erred in her
consideration of two of the changes, which means that those claims must be re-
determined by the Full Bench. The Restaurant Award currently does not permit
employees classified as Food and Beverage Attendants Grade 1 to receive
money from customers, and does not permit employees classified as Food and
100 Shop Distributive and Allied Employees Association v $2 and Under PR941526, (2003) 135 IR 1
[2014] FWCFB 1996
70
Beverage Attendants Grade 2 to take reservations and greet and seat guests.
Because this restriction artificially limits the use of those classifications, the
Restaurant Award is not meeting the modern awards objective in this respect.
The Restaurant Award shall be varied, effective from 1 July 2014, to allow
employees classified as Food and Beverage Attendants Grade 1 to receive
money from customers, and employees classified as Food and Beverage
Attendants Grade 2 to take reservations and greet and seat guests, subject to
the requirement that no existing employee should have his or her classification
reduced as a result of this variation.
Orders
[155] We make the following orders:
(1) Permission to appeal is granted.
(2) The appeal is upheld to the extent indicated in our decision.
(3) The relevant parts of the Decision concerning the alternative Sunday penalty
rates application101 and the receipt of monies102 are quashed.
[156] The RCAV is directed to file and serve a draft determination to vary the Restaurant
Award in accordance with this decision within seven days. If United Voice considers that the
RCAV’s draft determination does not properly give effect to this decision, it may file and
serve its own draft determination within a further seven days.
DECISION OF VICE PRESIDENT WATSON AND COMMISSIONER ROBERTS
Introduction and Summary
[157] This decision relates to an appeal against the decision of Deputy President Gooley in
relation to penalty rates and certain other technical changes in the Restaurant Industry Award
pursuant to a review of the Award required by Item 6 of Schedule 5 of the Fair Work
(Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act).
[158] The review of the award is usually described as the 2 year review, not because of the
length of time to undertake it, but because it was required by the Transitional Act to be
undertaken as soon as practicable after the second year of operation of modern awards that
came into effect on 1 January 2010. The awards were made following a very intensive award
modernisation process over the previous 18 months by a seven member bench of the
Australian Industrial Relations Commission (AIRC) - of which Vice President Watson was a
member.
[159] During the award modernisation process, the Minister for Employment and Workplace
Relations, the Hon J Gillard, varied the award modernisation ministerial request with respect
to the restaurant and catering industry to require the AIRC to provide specific award coverage
101 Paragraphs [249]-[252]
102 Paragraphs [279]-[281]
[2014] FWCFB 1996
71
for that industry that took into account the operational circumstances of the restaurant
industry.
[160] The Restaurant Industry Award that was made as a result of the award modernisation
process essentially involved the determination of the critical mass of award provisions that
were replaced by the modern award. No substantive consideration of the rationale and level of
Sunday penalty payments occurred beyond the process of rationalising instruments containing
quite disparate provisions and balancing the competing objectives of no loss for employees
and no additional costs for employers. The employers consented to a 50% penalty payment
for full and part-time employees because this reflected the prevailing position in New South
Wales, Queensland and Western Australia, and the penalty payments in the other states were
higher.
[161] The 2 year review process was commenced in March 2012 by interested parties
making applications to vary awards in respect of which they wished to contend that the
awards were not achieving the modern awards objective or operating effectively without
anomalies or technical problems. Issues concerning penalty rates in various awards were
allocated by the President to a five member bench of which he and Deputy President Gooley
were members.
[162] By agreement of the parties involved in the Restaurant Industry Award and in light of
a foreshadowed extensive evidentiary case, the matters were remitted to a single member,
ultimately Deputy President Gooley, to conduct the 2 year review with respect to the
Restaurant Industry Award.
[163] The matter was listed for directions in July 2012. The employers filed various
materials in support of their cases in November 2012 and the union filed their materials in
response in February 2013. Substantive hearings were conducted in May 2013 and the Deputy
President handed down her decision in October 2013.
[164] A five member Full Bench was constituted to consider the appeal against the Deputy
President’s decision. The appeal was heard in December 2013. Mr H Dixon, of senior counsel
with Mr J Stanton, of counsel, appeared for the appellant, the Restaurant and Catering
Association of Victoria. Mr J Nolan, of counsel, appeared for United Voice.
[165] The initial issue in the appeal is not the level of penalty rates in the Restaurant
Industry Award as such. Rather it is whether the 2 year review was correctly applied by the
Deputy President in relation to the issue of Sunday penalty rates in the Award.
[166] In this decision we first explain why permission to appeal should be granted [190]. By
way of context and background and to determine the correct approach to be adopted, we
analyse the nature of the Commission’s duty to conduct a review of the Award, and outline
the consideration of Sunday penalties in the restaurant industry by the AIRC during the award
modernisation process [191] - [203]. We then deal with the consideration of penalty rates
issues as part of the 2 year review of awards in other industries by a Full Bench of this
Commission [204] - [218].
[2014] FWCFB 1996
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[167] Next, we consider the evidence adduced before the Deputy President in this matter
[219] - [237]. We then deal with the grounds of appeal and determine that the decision under
appeal contains a number of serious appealable errors that warrant a full reconsideration of
the review of Sunday penalty payments in the restaurant industry based on the correct
approach to the review and a fair and proper consideration of the evidence [238] - [270]. The
other members of this Full Bench have also determined that there are appealable errors in the
Deputy President’s decision. Therefore a proper undertaking of the 2 year review becomes
necessary as a result of this appeal.
[168] In the appeal, the employers focussed on the alternative position they had submitted in
the proceedings before the Deputy President, that the Sunday penalties should be reduced
from 50% (plus 25% for casuals) to 25% (plus 25% for casuals) - the same level as applies to
Saturday work under the Award. The case for a reduction of Sunday penalties from 50% to
25% was not considered by the award modernisation Full Bench in 2008 and 2009 because
the nature of the task at the time was essentially to rationalise the terms of pre-existing
instruments into a single national industry award with limited practical ability to reconsider
the terms and rationale of existing instruments. The employers in the restaurant industry did
not seek a reduction below 50% for full time and part time employees at the time and
therefore such a reduction was not considered by the AIRC.
[169] In 2013, in relation to penalty rates in awards applying to other industries, a five
member Full Bench of this Commission said that the reduction of Sunday penalties was not
without merit because of the alleged impact on employment levels - but that the evidence
submitted by the employers with respect to the other industries did not establish the necessary
factual basis to support a change.
[170] In contrast, the employers in the restaurant industry mounted, on any view, a
substantial evidentiary case. They called direct evidence from approximately 20 restaurant
and catering operators about their business circumstances and the impact of Sunday penalty
rates on their operations and employment levels. That evidence is replete with references to
reduced operations on Sundays, the closure of the restaurants on Sundays, and increased work
by the owners of the business on Sundays to avoid Sunday penalties in an attempt to operate
profitably.
[171] A survey of employers revealed that more than 92% changed their Sunday operations
since the introduction of the modern award. They had either reduced trading hours, the owner
had undertaken more work or the restaurant was now closed on Sundays. If the actual position
is anything like this pattern, this is a most disturbing situation. In performing the duty to
review the operation of the Award these circumstances could not be ignored.
[172] Expert evidence led by the employers projected that penalty rates for work on Sundays
in the industry reduced the demand for labour by between 50% and 100% and that the
removal of penalty rates would reverse the reduction because there would be substantial
increases in the number of hours that employers would want to hire employees.
[173] The analysis of this material needs to be carefully evaluated and adjusted for the
alternative position put by employers for the reduction of Sunday penalty rates to the Saturday
penalty rates level. The employers supplemented their case with an analysis of the purpose of
[2014] FWCFB 1996
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penalty rates. They sought to demonstrate that the original rationale was no longer applicable
and that in contemporary Australian society, in an industry which mainly employs casual
employees who are predominantly female, the level of disability for working unsocial hours is
no greater on Sunday than it is on Saturday.
[174] In our view the evidentiary case put by the employers filled the evidentiary gap found
by the Penalty Rates Full Bench and made a clear case that the Award was not achieving the
modern awards objective. Central to this conclusion is the impact of Sunday penalties on
employment opportunities.
[175] The archaic justification for penalty rates to deter or prevent employers operating at
certain ‘unsocial’ times of the week has long ceased to be a rationale for fixing the level of
penalty rates in awards. In this case evidence was adduced that demonstrates that the current
level of penalty rates is nevertheless having that effect. Such a situation should be the cause of
utmost concern. More specifically, it is anathema to the modern awards objective and compels
a review of the provisions which operate in such a manner.
[176] A central plank in the reasoning of the Deputy President in reviewing the Restaurant
Industry Award was whether circumstances had changed since the making of the Award in
2010. No such change was alleged by the employers who submitted that determining whether
the Award was achieving the modern awards objective did not involve a consideration of that
question. Largely because no change since that time was found to exist, the Deputy President
decided that the Award was achieving the modern awards objective. That reasoning and
approach was a jurisdictional error and vitiated the review purported to be conducted by the
Commission. In lay terms, it amounted to the erection of an artificial barrier to the proper
consideration of the evidence before the Commission and was contrary to the Commission’s
legislative duty.
[177] Other errors were made by the Deputy President in the way the decision dealt with the
legislative duty to review the Award. These are detailed further in our decision. Additionally,
despite the fact that much of the evidence before the Deputy President was unchallenged, the
Deputy President was dismissive of it. The Deputy President should have made findings of
fact based on the evidence placed before the Commission and evaluated those facts against
the modern awards objective - providing a fair and relevant minimum safety net of terms and
conditions. The evidence clearly established a significant problem in the operation of the
Sunday penalty rates in the Award. There was no basis to find that the problem did not exist.
It could not be said that the problem was an isolated one. Nor could it have been contended
that the circumstances established by the evidence were irrelevant to the legislative task.
[178] The evidence of reduction in employment opportunities and closure of restaurants on
Sundays should have been considered in the context of structural changes in the Australian
economy, the level of unemployment, changes in the participation rate, levels of
underemployment, the largely small business nature of the restaurant industry, the nature of
minimum safety net awards and the nature of work opportunities provided by the restaurant
sector for women, students, first job seekers and low skilled workers.
[179] Such an analysis, as required by the 2 year review, is absent from the Deputy
President’s decision. As a result, there has not been a full, proper, economically literate
[2014] FWCFB 1996
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consideration of the level of award Sunday penalty rates in the restaurant industry based on
twenty first century circumstances. Such an analysis is now required to be undertaken by the
five member bench constituted to hear this appeal as the other members of this bench are also
of the view that the Deputy President made appealable errors in her decision.
[180] The approach of other members of the bench to the conduct of this review differs from
our own. Hence we have set out our findings, reasoning and conclusions in this separate
decision.
[181] We deal with the consequences of the Deputy President’s errors at [271] - [274]. In
essence we consider that the decision of the Deputy President should be quashed and a proper
review, as required by the Transitional Act should be undertaken by this Full Bench.
[182] Next, by reference to contextual and factual circumstances, we consider the role and
operation of Sunday penalties in the restaurant and catering industry [275] - [278]. We note
the importance to the Australian economy and Australian society of creating employment
opportunities, especially for young people. This is particularly important when the economy is
undertaking structural change, many traditional sources of employment opportunities are
contracting, there is a rising level of unemployment and underemployment and there has been
a reduction in the participation rate.
[183] We note that the restaurant industry is mainly comprised of small businesses and a
significant majority of its employees are employed on a casual or part-time basis. For those
who receive Sunday penalty payments, these are an important component of their income and
the level of Sunday penalties in this industry is not as high as other industries. However the
level of Sunday penalty rates currently applying in the restaurant industry is having an
adverse effect on employment opportunities and deterring employment on Sundays - which
for many restaurants is potentially one of their busiest trading days, if not their busiest trading
day.
[184] In short:
restaurants want to operate more on Sundays,
restaurant operators want to employ more labour on Sundays,
restaurant employees are ready and willing to work on Sundays because for many it
suits the balance they strike between work and other educational and family
responsibilities,
there is a strong demand for more casual and part-time work in the restaurant and
catering industry,
existing employees value the penalties they currently receive, but would make up for
any loss if there were additional opportunities to work longer hours,
providing additional Sunday work will benefit young people and others wishing to
work more hours,
providing additional employment opportunities for young unskilled workers will
benefit the Australian economy and Australian society, and
expanding operations on Sundays will directly assist the restaurant and catering
businesses and indirectly assist other businesses in the food, distribution and tourism
industries. Consumers are also likely to benefit.
[2014] FWCFB 1996
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[185] We have reviewed the context and evidence against the modern awards objective of
providing a fair and relevant minimum safety net at [279] - [304]. Of the nine elements of this
objective set out in s.134 of the Fair Work Act 2009 (the Act) we find that six are adversely
affected by the current level of Sunday penalty rates in the restaurant and catering industry
and three are not undermined by the current provisions. We find that the penalty rates are not
operating in the best interests of the low paid, are not promoting social inclusion, are not
promoting flexible work practices and the efficient and productive performance of work, are
having an adverse impact on business, are having a negative impact on employment growth
and to a more limited degree are inconsistent with the notion of a simple, stable and
sustainable award system.
[186] In an overall sense we find that the adverse impact on employment opportunities and
business circumstances caused by the operation of the current Sunday penalty rates regime
leads to the inescapable conclusion that the Sunday penalty rates regime is not achieving the
modern awards objective of a fair and relevant minimum safety net. This conclusion is in line
with the approach of the Full Bench in the Penalty Rates case having proper regard to the
evidence before the Commission in relation to the restaurant and catering industry. In
particular the impact on employment opportunities was regarded by that bench as a significant
factor. The evidence in this matter filled the evidentiary gap the other bench identified in
respect to the other industries considered by that bench.
[187] The Commission has a duty to vary the Award to remedy issues identified in the 2
year review. We deal with this at [305] - [313]. In our view any variation must adequately
remedy the problem identified. An outcome that leads to more complexity or anomalies, or
which does not reverse the elements of the modern awards objective that are currently
operating negatively, would be totally inappropriate.
[188] We have concluded that a 20% reduction in the level of Sunday penalty rates should
be provided - and this should be achieved in two stages to limit the impact on current
employees. This would result in the Sunday penalty being reduced to 140% from 1 July 2014
and to 130% from 1 January 2015. The existing casual loading should continue to apply on
top of this Sunday penalty. The existing differential between full and part-time employees on
the one hand and casuals on the other should not be altered because there is a large proportion
of casuals in this industry, the loading is designed to compensate for the absence of other
entitlements and a reduction in the differential could well encourage a larger incidence of
casualisation in the industry.
[189] The other elements of the employers’ appeal relate to classification changes which
were said by the employers to be illogical, inefficient and appropriate to remedy as an
anomaly in the operation of the Award. In our view the Deputy President did not give these
matters appropriate attention. On a review of the evidence and submissions we have
concluded that the evidence supports the employers’ contentions and they should be remedied
as part of the 2 year review.
Permission to Appeal
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[190] This appeal relates to an important statutory review of the operation of an award
applying to a large and important industry in relation to Sunday penalty rates which are
considered to be critical to many restaurant operations on Sundays and more generally. The
consideration of penalty rates in other industries was undertaken by a five member Full
Bench. Essentially because of the detailed evidentiary case in this matter the review of
Sunday penalties in the restaurant industry was remitted to a single member. A five member
Full Bench has been constituted to hear the appeal. These circumstances constitute compelling
grounds to grant permission to appeal.
The Commission’s Duty
[191] The decision under appeal arises from a review of the Award conducted under Item
6(2) of Schedule 5 of the Transitional Act. The obligation of the Commission under that
provision is as follows:
6 Review of all modern awards (other than modern enterprise awards and State
reference public sector modern awards) after first 2 years
(1) As soon as practicable after the second anniversary of the FW (safety net
provisions) commencement day, FWA must conduct a review of all modern awards,
other than modern enterprise awards and State reference public sector modern awards.
Note: The review required by this item is in addition to the annual wage reviews and 4 yearly reviews of
modern awards that FWA is required to conduct under the FW Act.
(2) In the review, FWA must consider whether the modern awards:
(a) achieve the modern awards objective; and
(b) are operating effectively, without anomalies or technical problems arising
from the Part 10A award modernisation process.
(2A) The review must be such that each modern award is reviewed in its own right.
However, this does not prevent FWA from reviewing 2 or more modern awards at the
same time.
(3) FWA may make a determination varying any of the modern awards in any way
that FWA considers appropriate to remedy any issues identified in the review.
Note: Any variation of a modern award must comply with the requirements of the FW Act relating to
the content of modern awards (see Subdivision A of Division 3 of Part 2-3 of the FW Act).
(4) The modern awards objective applies to FWA making a variation under this item,
and the minimum wages objective also applies if the variation relates to modern award
minimum wages.
(5) FWA may advise persons or bodies about the review in any way FWA considers
appropriate.
[2014] FWCFB 1996
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(6) Section 625 of the FW Act (which deals with delegation by the President of
functions and powers of FWA) has effect as if subsection (2) of that section included a
reference to FWA’s powers under sub-item (5).
[192] Item 6 follows a provision which enables the Commission to deal with minor
corrections arising from the award modernisation process. The 2 year review is obviously
intended to be a far more significant process. The Commission is required to conduct a review
of each modern award and must consider the questions posed by Item 6(2). The nature of the
duty reposed in the Commission under this provision must be correctly identified and applied.
The review requires the exercise of a discretion by reference to the questions contained in the
statute. The exercise of the discretion can only be overturned on appeal if there is found to be
an error in the decision-making process. Indeed, if there is an error in the decision-making
process, this means that the discretion has not been correctly exercised, the decision should be
quashed and the discretion should be re-exercised in a correct manner.
[193] The High Court considered the nature of discretions arising from workplace relations
legislation in Coal and Allied v AIRC.103 Gleeson CJ, Gaudron and Hayne JJ said:104
“[19] Discretion” is a notion that “signifies a number of different legal concepts”. In
general terms, it refers to a decision-making process in which “no one [consideration]
and no combination of [considerations] is necessarily determinative of the result.”
Rather, the decision-maker is allowed some latitude as to the choice of the decision to
be made. The latitude may be considerable as, for example, where the relevant
considerations are confined only by the subject-matter and object of the legislation
which confers the discretion. On the other hand, it may be quite narrow where, for
example, the decision-maker is required to make a particular decision if he or she
forms a particular opinion or value judgment.” (References omitted)
[194] As far as appeals against such decisions, their Honours further said:105
“[21] Because a decision-maker charged with the making of a discretionary decision has
some latitude as to the decision to be made, the correctness of the decision can only be
challenged by showing error in the decision-making process. And unless the relevant
statute directs otherwise, it is only if there is error in that process that a discretionary
decision can be set aside by an appellate tribunal. The errors that might be made in the
decision-making process were identified, in relation to judicial discretions, in House v
The King in these terms:
“If the judge acts upon a wrong principle, if he allows extraneous or irrelevant
matters to guide or affect him, if he mistakes the facts, if he does not take into
account some material consideration, then his determination should be
reviewed and the appellate court may exercise its own discretion in substitution
for his if it has the materials for doing so.” (References omitted)
103 203 CLR 194.
104 At [19].
105 At [21].
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[195] It is also relevant to note the general background of the 2 year review of awards and
the making of the Award under the award modernisation process by a seven member Full
Bench of the Australian Industrial Relations Commission (AIRC) - of which Vice President
Watson was a member. Award modernisation was a process conducted by the AIRC under the
Workplace Relations Act 1996 (the WR Act). Pursuant to the terms of Part 10A of the WR
Act, the AIRC was required to perform its functions having regard to the factors in s.576B
and in accordance with an award modernisation request made by the Minister under s.576C
(the Ministerial Request). The s.576B factors included the desirability of reducing the number
of awards operating in the workplace relations system. The original Ministerial Request was
issued on 28 March 2008 and was varied on eight occasions during the process.
[196] The Award Modernisation Full Bench decided in its decision of December 2008 to
make a single award for the Hospitality Industry encompassing the restaurant and catering
industry and the hotel industry. On 28 May 2009, the Minister varied the Award
Modernisation Ministerial Request by the inclusion of the following new paragraph in the
request:
“Restaurant and catering industry
27A. The Commission should create a modern award covering the restaurant and
catering industry, separate from those sectors in the hospitality industry providing
hotelier, accommodation or gaming services. The development of such a modern
award should establish a penalty rate and overtime regime that takes account of the
operational requirements of the restaurant and catering industry, including the labour
intensive nature of the industry and the industry’s core trading times.”
[197] As a result of that variation the Award Modernisation Full Bench revisited the scope
of the Hospitality Award and created a separate Restaurant Industry Award.
[198] The Ministerial Request contained additional objects of the process including that the
creation of modern awards was not intended to disadvantage employees or increase costs for
employers. The request required the award modernisation process to be completed by
31 December 2009.
[199] As a result of the award modernisation process, approximately 1560 federal and state
awards were reviewed over a period of about 18 months and replaced by 122 modern awards.
A further 199 applications to vary modern awards were made during this period. It is clear
from any review of the process that the objects of rationalising the number of awards and
attempting to balance the inconsistent objects of not disadvantaging employees and not
leading to increased costs for employers attracted the vast majority of attention from the
parties and the AIRC. It was clearly not practical during the award modernisation process to
conduct a comprehensive review of the industrial merit of the terms of the awards. Matters
that were not put in issue by the parties were not subject to a merit determination in the
conventional sense. Rather, terms were adopted from predecessor awards that minimised
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adverse changes to employees and employers. As the Full Bench explained on a number of
occasions, the general approach was as follows:106
“[3] In general terms we have considered the applications in line with our general
approach in establishing the terms of modern awards. We have had particular regard to
the terms of existing instruments. Where there is significant disparity in those terms
and conditions we have attached weight to the critical mass of provisions and terms
which are clearly supported by arbitrated decisions and industrial merit. We have
considered the impact of the provisions based on the information provided by the
parties as to current practices.”
[200] Pursuant to that approach and following the variation to the Ministerial Request, the
Full Bench dealt with the Restaurant Industry Award in Stage 4 of the Award Modernisation
process. It issued a Statement accompanying an exposure draft in September 2009 and said
the following in relation to penalty payments:107
“[229] The penalty provisions advanced by the LHMU and the R&CA are summarised
in the table below, and compared to the provisions in the Hospitality Modern Award,
the Victorian Restaurant Award and the NSW Restaurant Award.
Penalty rates for working ordinary hours –full-time and part-time employees
Additional payment
R&CA draftLHMU
draft
VICTORIAN
RESTAURANT
AWARD (1)
NSW Restaurant
Award (2)
Saturday 0 25% 25% 25%
Sunday 50% 75% 75% 50%
Monday–Friday:
7pm–midnight
Midnight–7am
0
0
10%
15%
10% (3)
15% (3)
0
30% (4)
Public holiday 150% 150% 150% 150%
Penalty rates for working ordinary hours –casual employees
Additional payment (additional to 25% casual loading)
R&CA
draft
LHMU
draft
Victorian Restaurant
Award (1)
NSW Restaurant
Award (2)
Saturday 0 25% 25% 25%
Sunday 0 50% 50% 25%
Monday–
Friday:
0
0
10%
15%
10%
15%
0
30% (4)
106 Re General Retail Award [2010] FWAFB 305.
107 2009 AIRCFB 865.
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7pm–midnight
Midnight–7am
Public holiday 125% 150% 150% 125%
(1) AP787213CRV
(2) AN120468
(3) Expressed as dollar amount
(4) To 6.00am
...
[233] There is considerable diversity in the penalty provisions across pre-reform
federal awards and NAPSAs in the industry. For example, in relation to penalties for
Saturday and Sunday work, the SEQ Restaurant Award, the Queensland non-SEQ
Restaurant Award and the WA Restaurant Award all prescribe a 50% penalty for both
days, whereas the Victorian Restaurant Award provides for different rates – 25% on
Saturday and 75% on Sunday. The pattern of some penalty arrangements is more clear
cut. Taking all of the provisions into account, and having some regard to the
employment levels under the instruments, the weight of coverage supports the
following provisions, which we have included in the exposure draft:
penalty payments for casual employees;
a 15% penalty for work between midnight and 7.00am Monday to Friday;
a 25% penalty for work on Saturday, in addition to the 25% casual
loading in the case of casual employees;
a 50% penalty for work by casual employees on Sunday, in addition to
the 25% casual loading; and
a 150% penalty for work on public holidays by full-time and part-time
employees.
[234] The remaining issues raise matters requiring fine judgment. With respect to
work by casuals on public holidays, there is a penalty of 175%, inclusive of the 25%
casual loading, in the Victorian Restaurant Award, the ACT Award and the SEQ
Restaurant Award. There is a loading of 150%, inclusive of the 25% casual loading, in
the NSW Restaurant Award, the Queensland non-SEQ Restaurant Award, the NT
Award and the Tasmanian Restaurant Award. The WA Restaurant Award and the SA
Restaurant Award provide for a lesser payment to casuals on public holidays. We have
decided to include a Sunday penalty of 150%, inclusive of the 25% casual loading, in
the exposure draft, the same payment as applies to full-time employees for work on
public holidays.
[235] In relation to work performed in ordinary time by full-time and part-time
employees on Sunday, there is no critical mass for one provision or another or, in the
terms of the Government submission, no clear national benchmark for penalties. A
review of pre-reform awards and NAPSAs in the industry shows that penalty rates of
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50% and 75% are common but having regard to the likely numbers of employees
covered by the various instruments there is no basis to prefer one over the other.
Taking into account the terms of clause 27A of the consolidated request, the fact that
Sunday is a core trading time for much of the industry and the operational
requirements of the industry in that regard, we have decided on a 50% penalty for
Sunday work.”
[201] In its final decision on the terms of the Restaurant Industry Award the Full Bench said
the following in relation to penalty rates:108
“[187] The RCA reargued the position in relation to penalty rates which it had put in the
pre-exposure draft consultations. That position is set out in the table at paragraph 229
of our statement of 25 September 2009. The LHMU was more particular in its
approach. It sought to amend penalty payments for casual employees working on
public holidays, from 150% to 175%, and to have the penalty which applies to work
between 10pm and midnight commence at 8pm instead.
[188] The penalty provisions generally and the two particular penalties raised by the
LHMU were subject to considerable attention by us in preparing the exposure draft.
As noted in our statement of 25 September 2009, these issues raise matters requiring
fine judgment to be exercised in the context of a diverse range of provisions in the
relevant instruments and the terms of cl.27A of the consolidated request. Nothing was
put to us which indicates that we should depart from the penalty provisions in the
exposure draft and we are of the view that those provisions, including the particular
penalties addressed by the LHMU, should be included in the modern award. We
adhere to the reasons contained in our statement of 25 September 2009.
[189] The AWU continued to seek the inclusion in the modern award of provisions
derived from the Queensland non-SEQ Restaurant award. Those provisions relate to
Saturday penalty rates, penalty payments for working during rest breaks and the
minimum period of engagement for casual employees. We have reviewed the relevant
provisions and compared them with those in the exposure draft. We are satisfied that
the provisions of the exposure draft are appropriate. In the circumstances provisions
which are found in only one existing instrument do not provide a sound basis for
altering provisions which are to apply nationally.”
[202] It will be seen that the award modernisation Full Bench essentially determined the
critical mass of pre-existing Sunday penalties. As these varied widely, a compromise position
was adopted that attempted to balance the competing objectives of no loss for employees and
no additional costs for employers. Inevitably neither objective was fully achieved for all
employees or all employers. As Sunday penalties varied widely within the restaurant and
catering industry and across other industries, the rates struck did not conform to any general
pattern. However for casual employees a standard casual loading of 25% was developed to
compensate for the loss of other benefits, irregularity of hours and the flexibility required to
108 2009 AIRCFB 945.
[2014] FWCFB 1996
82
be provided by casual employees. A review of Sunday penalties in the Restaurant Industry
Award should have regard to these circumstances.
[203] For the purposes of seeking relief from the existing Sunday penalty rates in the Award
the appellant in this matter relies principally on the contention that the Award is not achieving
the modern awards objective. The objective is expressed in s.134 of the Act (following an
amendment of adding paragraph (da) that took effect on 1 January 2014) as follows:
“134 The modern awards objective
What is the modern awards objective?
(1) The FWC must ensure that modern awards, together with the National
Employment Standards, provide a fair and relevant minimum safety net of terms and
conditions, taking into account:
(a) relative living standards and the needs of the low paid; and
(b) the need to encourage collective bargaining; and
(c) the need to promote social inclusion through increased workforce participation;
and
(d) the need to promote flexible modern work practices and the efficient and
productive performance of work; and
(da) the need to provide additional remuneration for:
(i) employees working overtime; or
(ii) employees working unsocial, irregular or unpredictable hours; or
(iii) employees working on weekends or public holidays; or
(iv) employees working shifts; and
(e) the principle of equal remuneration for work of equal or comparable value; and
(f) the likely impact of any exercise of modern award powers on business, including
on productivity, employment costs and the regulatory burden; and
(g) the need to ensure a simple, easy to understand, stable and sustainable modern
award system for Australia that avoids unnecessary overlap of modern awards; and
(h) the likely impact of any exercise of modern award powers on employment growth,
inflation and the sustainability, performance and competitiveness of the national
economy.
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This is the modern awards objective.”
[204] In a case concerning minimum engagement periods in the retail industry, Tracey J of
the Federal Court described the task of applying the modern awards objective in the following
terms:109
“[35] That objective is very broadly expressed: FWA must “provide a fair and relevant
minimum safety net of terms and conditions” which govern employment in various
industries. In determining appropriate terms and conditions regard must be had to
matters such as the promotion of social inclusion through increased workforce
participation and the need to promote flexible working practices.”
[205] Various Full Benches have considered the nature of the task of considering whether a
particular award provision meets the modern awards objective. For example the Full Bench
dealing with changes to the award flexibility clause expressed its reasons for refining the
terms of the standard award flexibility clause as follows:110
“[211] The variations proposed are necessary to remedy the issues identified in the
Transitional Review and to ensure that the model award flexibility term and modern
awards are operating effectively, without anomalies or technical problems arising from
the award modernisation process. We are also satisfied that the variations proposed are
‘necessary’ (within the meaning of s.138) to achieve the modern awards objective and
will ensure that modern awards provide a fair and relevant minimum safety net of
terms and conditions having regard to the matters set out at paragraphs 134(1)(a)-(h).
In particular, the variations proposed will provide flexible modern work practices and
reduce regulatory burden while taking into account the needs of the low paid and
making the model flexibility term simpler and easier to understand.”
[206] The Full Bench reviewing provisions regarding apprentice provisions of modern
awards also considered whether the current provisions of awards represented a fair and
relevant minimum safety net of terms and conditions of employment by reference to the
factors in the modern awards objective. In various instances it was found that the provisions
should be varied based on fairness, equity and other grounds. It is clear from the decision that
the task involved a broad judgement of the type described, without applying a high hurdle that
favours the retention of the status quo.111
[207] Similarly, in the more recent consideration of an application by the Shop, Distributive
and Allied Employees to increase the rates of pay for 20 year old employees in the retail
industry under the 2 year review process, a Full Bench found that the particular claim had not
been put in contest and therefore was not considered by the Award Modernisation Full Bench
in 2008. In a decision handed down on 21 March 2014 it decided to grant the claim because it
formed the view that the General Retail Award was not achieving the modern awards and
109 [2012] FCA 480 at [35].
110 [2013] FWCFB 2170.
111 [2013] FWCFB 5411.
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minimum wages objectives because the discounted rate is not a fair and relevant minimum
safety net.112
[208] In the Penalty Rates case,113 a Full Bench identified the duty to review awards under
Item 6(2) and noted that the Commission has a broad discretion to vary any of the modern
awards in any way it considers necessary to remedy any issues identified in the 2 year review,
relevantly taking account the terms of the modern awards objective.114
[209] In the Penalty Rates Case the Full Bench considered applications to revise the penalty
rates in the Fast Food Industry Award 2010 (Fast Food Award), the Food, Beverage and
Tobacco Manufacturing Award 2010 (Food Manufacturing Award), the General Retail
Industry Award 2010 (General Retail Award), the Hair and Beauty Industry Award 2010
(Hair and Beauty Award), and the Hospitality Industry (General) Award 2010 (Hospitality
Award). It noted that by consent of the parties, the applications in relation to the Restaurant
Industry Award were being considered and determined by a single member. That separate
process led to the decision now under appeal. The Full Bench described its approach to
reviewing penalty rates as follows:
“[206] Although described in the modern awards as penalty rates, they are in reality a
loading which compensates for disabilities. In the modern award context these
loadings must recognise the disabilities of working at unsociable times; be sufficient to
induce people with appropriate skills to voluntarily work the relevant hours, and be set
having regard to whether employers in the particular industry concerned normally
trade at such times. These factors and the elements of the modern awards objective
need to be balanced and weighed accordingly.”
[210] More specifically in relation to Sunday penalties the Full Bench said:
“[219] We have considered whether the level of ‘penalty’ for work on Sundays in the
Retail Award is disproportionate to the disability suffered by employees in comparison
to other times (such as on Saturdays). The level of penalty may also be having an
impact on the manner in which the employers are conducting their businesses and this
in turn has some impact on employment opportunities. There is also evidence which
suggests that ‘double time’ on Sundays is not necessarily required as an incentive for
employees to work on Sundays.”
[211] The Full Bench concluded as follows:
“[233] The essence of the employers contentions, (particularly in the retail sector), was
that the existing penalty rate provisions had the consequence that employers were
engaging fewer employees than they would prefer to employ on a Sunday and that the
mix of employees engaged on a Sunday, in terms of age and experience, was less than
optimal. It was submitted that if the Sunday penalty rate was reduced then employers
112 [2014] FWCFB 1846.
113 [2013] FWCFB 1635.
114 At [14].
[2014] FWCFB 1996
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would be willing to offer more hours of work on Sundays and the mix of employees
engaged would better promote the efficient and productive performance of work.
[234] While there is some evidence in support of elements of these contentions, it is
far from compelling. There is a significant ‘evidentiary gap’ in the cases put. It is
particularly telling that there is no reliable evidence regarding the impact of the
differing Sunday (or other) penalties when applied upon actual employer behaviour
and practice. This is a most unfortunate omission given that the transitional provisions,
which rely upon the differing NAPSA entitlements, provide an opportunity for
evidence to be led from employers operating in multiple States to provide these
comparisons. There is also no reliable evidence about the impact of the existing
differential Saturday and Sunday penalties upon employment patterns, operational
decisions and business performance.
[235] We are not persuaded that a sufficient case has been made out to warrant
varying the relevant awards in the manner proposed by the employers. While aspects
of the applications before us are not without merit - particularly the proposals to
reassess the Sunday penalty rate in light of the level applying on Saturdays - the
evidentiary case in support of the claims was, at best, limited.”
[212] It will be clear from the above, that the duty of the Commission to review awards
under the 2 year review is a very important one. It involves a broad discretion to ensure that
the terms of the award (considered along with the statutory minimum standards) provide a fair
and relevant minimum safety net of terms and conditions. The impact of Sunday penalties on
employment patterns, operational decisions and business performance is potentially a
significant matter in the 2 year review - provided reliable evidence is produced to demonstrate
the actual impact of Sunday penalties. It must also be borne in mind that since penalty rates in
awards were last reviewed, the nature of the award system has changed. The fact that awards
are intended to be a minimum safety net underpinning enterprise bargaining has implications
for elements of the rationale of penalty rates, such as labour attraction factors. The context is
that minimum wage rates in awards are high by international standards and penalty rates
operate on top of those minimum rates.
[213] The history of award modernisation discloses that specific award coverage of the
restaurant industry was required by the Minister in order to take into account its operational
requirements, its labour intensive nature and the industry’s core trading times. Nevertheless
the award modernisation process essentially involved consolidating a large number of
disparate instruments, balancing the objectives of no disadvantage to employees and no
increased costs for employers, and determining the critical mass of existing historical
arbitrated and agreed award provisions. There was no real opportunity to seek a
reconsideration of terms and conditions arising from existing instruments. The restaurant
employers sought a Sunday penalty of 50% for full-time and part-time employees and no
penalty on top of the 25% casual loading for casual employees who work on a Sunday. The
AIRC awarded a 50% Sunday penalty for full and part-time employees and a total of 75%
penalty and Sunday loading for casuals.
[214] The 2 year review presented an opportunity to review the operation of these provisions
against the terms of the modern awards objective as has been applied on a number of
[2014] FWCFB 1996
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occasions in relation to other matters. The review is required to consider each award in its
own right. The review of Sunday penalty rates in the restaurant industry was separated from
the consideration of claims to review penalty payments in other awards by a Full Bench and
therefore enabled a consideration of Sunday penalties in the restaurant industry in its
particular circumstances and on the detailed evidentiary case the employers wished to
advance. In relation to Sunday penalties in other industries, a Full Bench has found that while
the case for reassessing the Sunday penalty rate in light of the rate operating on Saturdays had
merit, the evidentiary case in support of the claims in the other industries was limited.115
[215] This was the context of the matter before the Deputy President. The initial task of the
Commission was to determine whether the award was achieving the modern awards objective.
This required a consideration of the evidence adduced in the proceedings, the making of
relevant findings of fact and coming to a conclusion on that primary question by reference to
the considerations in the modern awards objective. The claims for changes to the Award were
a secondary step in the event that it was found that the Award was not achieving the modern
awards objective.
[216] In the proceedings before the Deputy President, the major issue in contention was the
reduction in Sunday penalty payments. The employers advanced a primary position and an
alternative position. The primary position was that in lieu of Saturday and Sunday penalties of
125% and 150% (in addition to the 25% loading for casuals) the sixth and seventh
consecutive day of work should attract penalties of 125% and 150% (plus casual loading)
respectively. In other words, unless an employee worked more than 5 consecutive days, no
penalty payments would be payable (apart from the 25% casual loading).
[217] The alternative compromise position advanced by the employers to deal with the
Sunday penalty issue was that the Sunday penalty rate of 150% be reduced to 125% - the
same rate as for Saturdays. This was the position sought to be justified by the employers in
the appeal by reference to the evidentiary case advanced before the Deputy President and
alleged errors in the Deputy President’s decision-making process.
[218] We turn to consider the evidentiary case led by the employers and the unions in the
proceedings before the Deputy President.
The Evidence before the Commission
[219] The employers led the following evidence in relation to weekend penalties:
A primary report and supplementary report by Jeremy Thorpe, Partner in Economics
and Policy of PricewaterhouseCoopers Australia (PwC) on the restaurant and cafe
industry in Australia and a survey of 312 restaurants and cafes about the business,
staff working patterns, operating hours, financial information and the impact of the
modern award on businesses and on the Australian economy.
A report by Professor Phil Lewis, and a further report in response, on the restaurant
and catering industry in Australia, the nature and composition of its workforce, the
impact of penalty rates on profitability, employment, efficient and productive
115 At [235].
[2014] FWCFB 1996
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performance of work, employment costs and regulatory burdens and changes in
social mores and conditions since penalty rates were introduced into Australian
awards.
The CEO of the Restaurant and Catering Industry Association of Australia Inc, John
Hart attaching a number of reports and publications.
The owner of a fine dining restaurant in Cairns, Queensland.
The owner of an unlicensed take away food shop (formerly a restaurant) on
Magnetic Island, Queensland.
A cafe owner in Parkinson, Queensland.
A cafe owner in Brunswick Heads, New South Wales.
A restaurant owner in Brisbane, Queensland.
A restaurant owner in Lake Macquarie, New South Wales.
A restaurant owner in Kirribilli and Crows Nest, New South Wales.
The owner of a Thai restaurant in Mount Gambier, South Australia.
The owner of a restaurant start-up consultancy in Queens Park, New South Wales.
The owner of a cafe/restaurant in Byron Bay, New South Wales.
The owner of an upper tier restaurant in Adelaide, South Australia.
The manager of a seafood restaurant in Scarborough, Queensland.
The owner of a catering business in Melbourne, Victoria.
The owner of a restaurant in Port Douglas, Queensland.
The owner of a fresh produce restaurant in rural New South Wales.
The owner of a bistro/steakhouse on the Gold Coast, Queensland.
The CEO of a high end restaurant in Byron Bay, New South Wales.
The manager of a high end restaurant in Adelaide, South Australia.
The owner of a boutique catering business in Townsville, Queensland.
The owner of a restaurant in Townsville, Queensland.
The owner of an Italian family restaurant in Adelaide, South Australia.
The owner of a steakhouse in Adelaide, South Australia.
Other documentary evidence including the 2006 OECD Employment Outlook
Report on Boosting Jobs and Incomes.
[220] The unions led the following evidence in opposition to the employer’s claims to
reduce Sunday penalties:
A union organiser from South Australia, William Taylor.
A union Industrial Officer from Tasmania, Peter Tullgren.
The United Voice National Secretary, Louise Tarrant.
The United Voice National Legal Coordinator, Neal Swancott.
Two statements from David Briggs of Galaxy Research and a survey conducted by
that company.
A union organiser from Western Australia, David Bydder.
A report from Professor William Mitchell of Charles Darwin and Newcastle
Universities.
[221] In the proceedings before the Deputy President there was no substantive challenge to
the evidence of employers through cross examination. The Deputy President summarised the
evidence in her decision, and as she was bound to do, appears to accept the evidence given by
[2014] FWCFB 1996
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them. The evidence was detailed, and by way of representative sample and expert analysis,
could only be described as a substantial evidentiary case.
[222] The evidence of operators of businesses contained details of their operating
expenditure, trading patterns and profitability. The evidence commonly included statements to
the effect that Sunday opening hours have been reduced or employment on Sundays has been
reduced as a result of cost pressures and the level of Sunday penalty rates. The business
owners and operators indicated that if penalty payments were reduced, they would look to
open longer and/or employ more labour on Sundays than they do at present.
[223] For example the owner of the Port Douglas restaurant said:
“Given that we have huge staff overhead costs, we currently do not open on Sundays, as
the penalty rates applicable to Sunday wage rates make Sunday trading largely
unprofitable. To open 7 days in a week requires a much larger staff. The current
modern award operates a disincentive to us to employ more staff. For these reasons we
choose to close the Restaurant on Sunday. If the modern award was less onerous, and
we could choose one day to close our preference would be to close on Monday.”116
[224] The owner of the fresh produce restaurant in New South Wales said that she and her
husband work on Sundays in order to minimise the effect of penalty rates on Sundays and
except for 2 Sundays, have worked every Sunday for the past 5 years.117
[225] The owner of the cafe in Brunswick Heads said that his wife worked on Sunday
mornings to minimise the impact of penalty rates on Sundays, many of his employees can
only work on weekends and he finds it frustrating that he has to pay them more to work at the
only time they are available. He said that he understood that other operators in the area do not
comply with the Award and that if weekend penalties were removed he would employ a third
person to work during the week for 15-20 hours per week.118
[226] The owner of restaurants in Kirribilli and Crows Nest said that in 2012 he decided to
cease opening on Sunday nights at the Kirribilli restaurant because he could not break even.
The other restaurant is also struggling to break even on Sunday nights and future trading is
under review.119
[227] The owner of a large fine dining restaurant in Cairns said that he employs employees
on a permanent part-time basis on a flat rate regardless of which day is worked in order to set
off the penalty loadings at weekends. He believes that a number of his competitors pay rates
below the Award on a cash in hand basis. He said that the restaurant is losing money and the
only reason he keeps it open is to support his associated catering business that makes money
through large weddings and functions in Cairns.120
116 Ex A20 [12].
117 Ex A21.
118 Ex A10 [14] ff.
119 Ex A13.
120 Ex A7 [12].
[2014] FWCFB 1996
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[228] The owner of a take away store on Magnetic Island gave evidence of closing the
restaurant that she previously operated and converting the business to a take a way food
operation. She said that there had been seven other restaurant and cafe closures on Magnetic
Island in the past 12 months. The conversion of the restaurant to a take away food store
enabled her to remove the need to wash dishes and serve tables, substantially reducing labour
hours, eliminate one chef position and rent less space. She said that the removal of weekend
penalty rates would have given her some breathing space until economic conditions on the
Island improved.121
[229] The owner of the family Italian restaurant in Adelaide said that he and his family work
quite a bit over the weekend in order to avoid the extra cost of penalty rates and that if
changes in the penalty rates in the Award were made he would be likely to employ more staff
in order to reduce the hours the owners spent in the business.122
[230] The statements of the operators provide a good snapshot of the business circumstances
and the operational issues affecting their businesses. It is clear that the overall costs of the
Award combined with the economic circumstances they are experiencing is generally causing
economic difficulties and that penalty rates on Sundays are commonly having an effect on
opening hours and/or the extent of employed labour on Sundays.
[231] The survey of 312 employers conducted by PwC asked 38 questions, not all of which
were answered by all respondents to the survey.123 It included the following question:
“What has been the impact on the business’s operating hours since the implementation
of weeknight, weekend and public holiday penalty rates through the Restaurant
Industry Award 2010?”
The responses with respect to Sundays were as follows:
No change 6
Reduced trading hours 34
Business owner works longer hours 31
Closed 11
[232] The key findings of the PwC study included a finding that restaurants would hire more
employees if penalty rates were not imposed on weeknights, Saturdays or Sundays and 64%
would extend trading hours if penalty rates were not imposed on weeknights, Saturdays or
Sundays. On a conservative view of the labour cost savings, the net benefit to society could be
in the order of $2.5 billion over the period 2013-2030. It stated that its analysis suggests that
while some existing staff will experience reduced take home pay in the short run, there will be
an expansion of job opportunities in the restaurant and cafe industry with wages returning to
forecast levels in the long run. Society would benefit through increased employment,
increased economic activity and positive effects on inflation.
121 Ex A8 [23] ff.
122 Ex A27.
123 Ex A2.
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[233] Professor Lewis was asked a series of questions to be answered in his report. In
addition to answering the questions, he included a lengthy analysis of the issues raised by the
questions. The key questions and his answers were as follows:124
“1. What is the size of the restaurant and catering industry?
According to ABS (2008) at the end of June 2007, there were 15,423 businesses in
Australia involved in the provision of cafe, restaurant and catering services. This
comprised 13,987 cafe and restaurant businesses and 1,437 catering businesses.
2. What is the importance of the restaurant and catering industry to the
Australian economy?
Businesses involved in the provision of cafe, restaurant and catering services
generated a total income of $13,673.2m, which represented an average of $886,500
per business. Total industry value added by these businesses was $5,695.5m which
represented 0.5 percent of Australia's Gross Domestic Product (GDP). During 2006-
07, the operating profit before tax for these businesses was $576.4m and their
operating profit margin was 4.2 percent.
The above does not take into account the impact of the cafe, restaurant and catering
services industry on other industries. These include suppliers (and their employees) to
industry cafe, restaurant and catering services businesses, such as food wholesalers,
fanners, commercial prope1ty renters, and complementary industries to cafe,
restaurant and catering services, such as those in tourism.
3. What is the impact of the restaurant and catering industry on employment?
Collectively, businesses in Australia involved in the provision of cafe, restaurant and
catering services employed 195,814 people in 2006. Cafe, restaurant and catering
services are characterised by a large casual work force which account for just over half
of all employment. Permanent full-time employees account for under a quarter of all
employment, while permanent part-time employees account for 15.5 percent. Females
account for just over half of all employment and most (57 percent of female
employment or 59,332 people) worked as casuals. Permanent full-time positions tend
to be occupied by more males than females. 5.7 percent of employment is made up of
working proprietors and partners of unincorporated businesses at the end of June 2007.
More people were employed as waiting staff, 38 percent, than any other occupation.
Collectively, qualified and other chefs/cooks account for 20.5 percent of all people
employed, while kitchen hands account for 18.2 percent of total employment. At the
end of June 2007, there were 4,100 employees in cafe, restaurant and catering services
holding a Working Holiday visa, accounting for 2.1 percent of total employment.
4. To what extent does the restaurant and catering industry facilitate entry/re-
entry to the Australian workforce of:
124 Ex A5 pp 38-48.
[2014] FWCFB 1996
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a. school-leavers seeking entry to the workforce?; and
b. married women seeking to return to the workforce?
The cafe, restaurant and catering services industry provides a great deal of flexibility
for those seeking to balance paid work with other responsibilities including school
leavers and married women.
The industry is a major source of employment for young people. Research shows that
part-time work often provides a "stepping-stone' for welfare recipients into stable
employment. The stepping-stone hypothesis suggests that a job such as those in the
industry is likely to lead to a better and more stable job, because of more efficient
search, accumulated human capital, or improved motivation and positive health
effects.
The growth of part-time work for young people has also been as a major factor in
improving participation of youth in education, which is the single biggest factor
determining labour market performance throughout a person's lifetime.
5. Is the restaurant and catering industry in growth or decline? By what extent is
the restaurant and catering industry growing or declining?
With the long period of trend growth from 1992 to just before the Global Financial
Crisis (GFC) in 2007-08 there was strong trend growth in turnover for the cafe,
restaurant and catering services industry but it is also noticeable that there is
significant fluctuation in turnover implying increased business risk for this industry.
The GFC caused a marked fall in turnover in 2008 and the cash handouts given to
households as part of the federal government in 2009 caused turnover to rise in 2009.
The future financial health of the cafe, restaurant and catering services industry is
uncertain. While the Australian economy has come through the GFC in reasonable
shape, consumer confidence and uncertainty, as evidenced by increased household
savings and reduced consumption, relative to household income, is still low. Economic
commentators are divided on the prospects for the economy. Some point to the
strength of the Chinese economy, the low level of government debt, low inflation and
relatively low unemployment. Others point to Australia's reliance on China as a major
risk, the two-speed economy - a booming primary sector, a struggling export and
import competing sector (due to the high Australian dollar) and a sluggish domestic
household consumption-reliant sector. Strong doubts also remain regarding the ability
of the Euro zone to solve its financial problems and the consequent international
implications of failure.
6. What is the importance of small businesses (including small restaurant and
catering businesses) to the Australian economy?
The cafe, restaurant and catering services industry consists mainly of small businesses.
Small businesses are defined here as those with employment of less than 20 persons
(including non-employing businesses). Small businesses are very important to the
Australian economy. They account for over 47 percent of all employment, over 32
[2014] FWCFB 1996
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percent of wages and salaries, over 30 per cent of sales and service income, over 42
percent of operating profit (before tax) and over 35 percent of industry value added.
Businesses employing less than 10 people account for around two-thirds (67.5 percent)
of all cafe and restaurant businesses and for more than half (57.8 percent) of catering
businesses. For the whole industry there are about 10,300 businesses employing less
than 10 people and 14,000 businesses employing less than 20 people. These businesses
employ about 50,000 people in total and generate over $3 billion in income.
7. What impact do labour costs have on the profitability of the restaurant and
catering industry?
For cafe, restaurant and catering services combined labour accounts for 36 percent of
total costs. During 2006- 07, the operating profit before tax for cafe, restaurant and
catering services was $576.4m and their operating profit margin was 4.2 percent.
These margins do not appear to have changed significantly since 2006-07. Businesses
with small profit margins depend crucially on turnover for total profit. Since demand
for the output of the cafe, restaurant and catering services is sensitive to price (elastic)
then it is difficult for businesses in this industry to pass on rises in labour costs to
customers without a large drop in turnover and profits.
8. The Restaurant Industry Award 2010 became operative on 1 January 2010. To
what extent do the award provisions requiring:
a. penalty rates for work on weekends and public holidays - Clause 34;
b. additional payment for· work done between the hours of 10pm-7am,
Monday-Friday- Clause 34.2; and
c. junior employees working as liquor service employees to be paid as
adults - Clause 15.1
affect the profitability of the restaurant and catering industry?
The low profit margins in service industries, such as cafe, restaurant and catering
services, demonstrates the importance of turnover in determining profits from these
businesses. Financial performance is strongly related to the number of customers and
their expenditure that are served by the business over a period of time, such as a week.
The higher labour costs resulting from penalty rates would be expected to have
significantly reduced turnover and thus profitability.
Apart from the effects of direct costs imposed by penalty rates, there are also costs
relating to allocative inefficiency costs and compliance costs related to penalty rates.
Regulation may well stifle innovation by restricting management prerogative on how
to organise their business to reduce costs and provide better goods and services at
lower prices. Compliance costs relate to the costs of actually abiding by the regulation
and demonstrating compliance with legislation (red tape). Clearly, the less regulation
of business the lower will be these costs and the greater the profitability.
9. To what extent do the current award provisions requiring:
[2014] FWCFB 1996
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a. penalty rates for work on weekends and public holidays - Clause 34;
b. additional payment for work done between the hours of 10pm - 7am,
Monday-Friday - Clause 34.2; and
c. junior employees working as liquor service employees to be paid as
adults - Clause 15.1
affect employment in the restaurant and catering industry?
Penalty rates for Midnight- 7 am work have reduced demand for labour by between 15
and 45 percent below what would be the case with no penalty rates. Penalty rates for
work on Saturdays are projected to have reduced demand for labour by between 25
and 75 percent below what would be the case with no penalty rates. Penalty rates for
work on Sunday are projected to have reduced demand for labour by between 50 and
100 percent. Penalty rates for public holidays are projected to have almost eliminate
demand for hired labour. The actual change in employment will depend on the
increase in market wages, if any, which businesses would need to pay in order to
attract people to work these hours.
10. To what extent do the current award provisions requiring:
a. penalty rates for work on weekends and public holidays - Clause 34;
b. additional payment for work done between the hours of 10pm-7am,
Monday-Friday - Clause 34.2; and
c. junior employees working as liquor service employees to be paid as
adults - Clause 15.1
impede the efficient and productive performance of work in the
restaurant and catering industry?
The imposition of penalty rates would have had a significant negative effect on
employment and turnover in the industry. Since profit margins are low, less turnover
would significantly reduce profits of businesses. These effects on labour demand are a
result of direct costs imposed by regulations governing penalty rates. However, there
are also costs relating to allocative inefficiency costs (higher prices and less
consumption of cafe, restaurant and catering services) and compliance costs borne by
businesses due to penalty rates. Clearly, the less regulation of business the lower will
be these costs. Lower costs will allow for lower prices, greater turnover, higher
employment and increased profits.
11. To what extent do the current award provisions requiring:
a. penalty rates for work on weekends and public holidays- Clause 34;
[2014] FWCFB 1996
94
b. additional payment for work done between the hours of 10pm-7am,
Monday-Friday - Clause 34.2; and
c. junior employees working as liquor service employees to be paid as
adults - Clause 15.1
impact upon restaurant and catering businesses including productivity,
employment costs and regulatory burden in the restaurant and catering
industry?
Penalty rates clearly increase the direct costs of businesses, particularly employment
costs. They also impose allocative efficiency costs and compliance costs. Clearly, the
less regulation of business the lower will be these costs and the more productive will
businesses be.
12. In the event that the Restaurant Modern Award was amended to:
a. exclude penalty rates for work on Saturdays and Sundays for full-time
and part-time employees;
b. limit the obligation to a loading of 25 percent for casual employees
working Monday-Sunday and a loading of 125 percent for work on public
holidays;
c. eliminate penalty payments for work between 10pm and 7am for
employees, including casuals;
d. restrict payments for:
i. permanent full-time and part-time employees to a 25 percent
loading for work on the sixth consecutive day and 50 percent
loading for work on the seventh consecutive day; and
ii. casuals to a 50 percent loading (inclusive of the pre-existing 25
percent casual loading) for work on the sixth consecutive day and
75 percent loading (including the existing casual loading of 25
percent) for work on the seventh consecutive day;
e. allow employers the ability to pay junior rates to employees engaged in
the service of alcohol where relevant state legislation permits; and
f. create a small business employer provision, meaning an employer
engaging 15 or less full-time equivalent employees being paid the
minimum rate as prescribed by Fair Work Australia from time to time as
distinct from the minimum weekly rates contained in Clause 20.1 from
time to time;
what impact would this have on:
[2014] FWCFB 1996
95
g. the profitability of establishments in the restaurant and catering
industry;
h. employment in the restaurant and catering industry;
i. the efficient and productive performance of work in the restaurant and
catering industry; and
j. business, including productivity, employment costs and regulatory burdens
in the restaurant and catering industry?
Penalty rates for Midnight- 7 am work have reduced demand for labour by between 15
and 45 percent below what would be the case with no penalty rates. Penalty rates for
work on Saturdays are projected to have reduced demand for labour by between 25
and 75 percent below what would be the case with no penalty rates. Penalty rates for
work on Sunday are projected to have reduced demand for labour by between 50 and
100 percent. Penalty rates for public holidays are projected to have almost eliminated
demand for hired labour. Removing these penalty rates would result in a reversal of
these reductions in demand for labour. There would be substantial increases in the
number of hours businesses would want to hire employees.
If the casual loading is limited to 25 percent on a Sunday rather than the current
loading of 75 percent, then it is projected that demand for casual labour will rise by
between 29 and 87 percent on a Sunday.
If penalty payments for work between 10 pm and 7 am for employees were eliminated
there would be an increase in labour demand of between 10 and 30 percent for those
currently being paid a penalty of 1 0 percent and between 15 and 45 percent for those
currently paid a penalty of 15 percent.
Paying junior rates to those 18 years or over but below 21 years of age when serve
alcohol would mean greater employment of juniors since businesses could to be more
flexible in staffing arrangements. There may well be lesser employment of adults. If
payments were to be restricted for permanent full-time and part-time employees to a
25 percent loading for work on the sixth consecutive day and 50 percent loading for
work on the seventh consecutive day then demand for these workers would fall and
demand for other workers not subject to the loading would rise. However, the exact
amount cannot be determined. There is little evidence on the degree of substitution
between those working on their sixth or seventh day and those who can be employed
but who have not reached the sixth or seventh day requirement. Economic theory,
however, suggests that businesses will seek to employ fewer people for these long
continuous periods of time and employ other workers instead. Since total labour costs
are reduced by this hiring strategy total hours of employment would rise.
A similar reasoning applies to a casual loading of 50 percent (inclusive of the pre
existing 25 percent casual loading) for work on the sixth consecutive day and 75
percent loading (including the existing casual loading of 25 percent) for work on the
seventh consecutive day. Businesses will seek to employ few people for these long
[2014] FWCFB 1996
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continuous periods of time and employ other workers instead. Since total labour costs
are reduced by this hiring strategy total hours of employment would rise.
It is difficult to predict what would happen in the event of small businesses (15 or less
full-time equivalent employees) paying the national minimum wage rather than the
minimum rates in 20.1 of the industry award. Attempting to estimate the likely impact
of these changes with any accuracy is not possible given our knowledge of actual and
potential demand and supply factors. What can be said is that the removal of industry
specific minimum rates would allow greater flexibility for owners to manage their
businesses and allow wages to be determined by the market.
The above results suggest that the imposition of penalty rates have had a significant
negative effect on employment and turnover in the industry. Since profit margins are
low, lower turnover would significantly reduce profits of businesses.
As explained before the above effects on labour demand are a result of direct costs
imposed by regulations governing penalty rates. However there are also costs relating to
allocative inefficiency costs and compliance costs related to penalty rates.
Owners of cafe/restaurant and catering services businesses would benefit but not
necessarily greatly. This is because the industry is very competitive (large number of
small firms). In a competitive industry most cost savings are eventually passed on to
consumers in lower prices as output expands from both existing firms and by new firms
entering the industry. Profit margins would be expected to fall to the rate they were before
the fall in labour costs. The volume of profit per business will increase as turnover is
increased. Greater ability of managers to organise the business in the most efficient way
would be expected to improve the productivity of the sector.
There would unambiguously be more employment in the industry as turnover
increased. There would be greater choice of shifts available. There would be more
employment opportunities for the unemployed with the potential for providing a
stepping stone into further employment. Some employees, although the wage rate may
fall, may even receive higher total earnings without penalty rates since the potential to
work a greater number of hours will increase. For example, employees only working
20 hours per week may get additional hours or a day's extra work.
The biggest beneficiaries from removing penalty rates would be consumers. They
would pay lower prices, eat out more and at times which better suit their lifestyle.
Suppliers (and their employees) to industry cafe, restaurant and catering services
businesses, such as food wholesalers, fanners, commercial property renters, would
benefit as output of the industry rises increasing the demand for inputs into the
industry. Complementary industries to cafe; restaurant and catering services, such as
those in tourism, for example, would benefit from customers having a greater range of
choice and lower prices. Australia would be a more attractive destination for overseas
tourists.
The removal of penalty rates would make the economy more efficient and productive
as distortions in the allocation of resources would be reduced.
[2014] FWCFB 1996
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13. Penalty rates have manifested themselves in the Australian restaurant and
catering industry as a result of a number of decisions including the decisions
provided in my letter of instruction dated 3rd July 2012. Those decisions were
based on applicable social mores and conditions at the time of their
determination:
a. How relevant is the Restaurant Industry Award 2010 to today's social
mores/conditions and the modern service-based economy?
b. Further to the preceding question (a) above, how do today's social
mores/conditions differ from those in place during the period when
penalty rates were first applied to employers in the restaurant and
catering industry?
Penalty rates by their very name imply that businesses must pay a penalty for
imposing conditions which are to employees disadvantage and must be compensated
for. However, penalty rates have their origins in a labour market quite different to that
of much of the Australian labour market today. The Australian economy used to be
characterised by mostly males working full-time in industrial jobs, little part-time or
casual work. Working married women and jobs with flexible hours were rare. Most
retail outlets shut at midday on Saturday and reopened on Monday. The weekends
were for many the only time available for socialising, recreation, participating in sport
and worship. The Australian economy today is dominated by the service sector, part-
time work, casual work, working women and flexibility are the norm for many.
Also, the social mores which defined Australian society have to a large degree
changed radically over time. Among the most relevant here are:
a. the growth in participation in education and the consequent supply of part-
time and casual labour,
b. participation in the workforce of women with children and;
c. use of leisure time for other activities including church attendance and
participation in sporting activities. Both the latter account for a very small
percentage of people's leisure time on weekends.”
[234] The evidence led by the unions recounted the effect of the loss of penalty rates on
restaurant industry employees and criticised the reliability of the evidence led by the
employers. The evidence about the impact on employees was largely indirect, but had a
common theme that penalty rates were an important element of the income of existing
restaurant employees. Ms Tarrant gave indirect evidence of the circumstances of United
Voice members who work in the hospitality industry on the basis that their identity would be
protected. She gave examples of 11 employees who each regarded the level of penalty
payments received by them for working on weekends as important to balancing their other
commitments and living expenses. Ms Tarrant accepted that the proportion of union members
in the industry was very low - less than 5% of the restaurant and catering industry workforce.
[2014] FWCFB 1996
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[235] By way of example only, Ms Tarrant gave evidence of statements made by an honours
university student who works as a barista at an Italian restaurant in Melbourne. She said that
penalty rates provide her with financial security and time to complete her thesis because she is
unable to work additional hours at other times. According to Ms Tarrant, she said that if the
Sunday rate was the same as the Monday to Friday rate she would not know what to do. The
reduced rate of pay would not be enough for her to support herself and with her study load she
cannot afford to work additional hours. As a result she would struggle to complete her thesis.
[236] Professor Mitchell seriously criticised a number of the assumptions and conclusions of
Professor Lewis. Mr Briggs was critical of the methodology and conclusions of the PwC
report.
[237] The indirect evidence of the views of employees was not able to be tested through
cross-examination. Nevertheless, it raised points that are likely to be valid concerns about the
impact of a general reduction in penalty rates on employees who currently receive them. The
evidence of both employers and employees dealt with the issue of penalty rates generally and
addressed more fundamental changes than were ultimately put as an alternative way to deal
with employer concerns with Sunday penalty rates. That is not to say that the evidence did not
bear upon this proposal, but the anticipated relief for employers, the anticipated detriment to
existing employees who receive penalty payments and the anticipated benefits of the changes
to business viability and employment opportunities need to be adjusted when considering the
alternative proposal which has become the focus of these proceedings.
Errors in the Decision Making Process
[238] We turn to consider the decision of the Deputy President in the light of the
Commission’s duty and the evidence as summarised above. The Deputy President first dealt
with the primary claim for the elimination of Saturday and Sunday penalties and the
substitution of alternative penalties for the sixth and seventh successive day of work in any
week. At paragraphs [216] - [248] she gave her reasons for rejecting that claim. At paragraph
[249] the Deputy President commenced to deal with the alternative proposal of reducing the
Sunday penalties from 50% to 25% (plus casual loading of 25%). Her reasons for rejecting
the alternative proposal were as follows:
“[249] The RCA put forward an alternative proposal to reduce Sunday penalties to the
same rate as Saturday penalties.
[250] While such a change would have a lesser impact on employees and operators,
for the reasons set out above, I am not satisfied that the proposed variations are
warranted on the basis that the Award is not achieving the “modern awards objective”
or is operating other then “effectively, without anomalies or technical problems arising
from the Part 10A award modernisation process.”
[251] While there is some evidence that some restaurants may open on Sundays if
penalty rates were reduced it is far from compelling. I accept however that if those
restaurants did open on Sunday that would increase employment opportunities.
However there is little evidence before me about the impact of the differential penalty
rates on the numbers of persons employed on Saturday compared with Sunday. A
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reduction of Sunday penalties would still impact on the low paid albeit less than if the
primary proposal of the RCA were adopted.
[252] The question of whether the disabilities associated with working on Sunday are
greater than working on Saturday requires more consideration than has been given in
this matter. The four yearly review which commences next year will provide an
opportunity for these issues to be considered in circumstances where the transitional
provisions relating to the relevant awards will have been fully implemented.”
[239] The basis of the employer’s case for a reduction in Sunday penalties from 50% to 25%
(plus the casual loading of 25%) was described in the appeal as follows:
“Saturday and Sunday penalty rates
[36] The foundation of the Appellant's case to support a reduction of the penalty rates
on a Sunday from 150% to 125% was, in summary, the following:
“(i) employers (operators) in the industry operate on weekends;
(ii) penalty rates in the award are deterring a number of employers from
providing employment for workers on weekends;
(iii) the increased Sunday loading is not promoting social inclusion and
overvalues work carried out on a Sunday compared to the same work as carried
out on a Saturday. Further it is not justified by the modern awards objective as
the social disability once specifically associated with Sunday work is no longer
prevalent in Australian society. For the majority of people, the disability (if
any) associated with working on a Sunday is the same as that for a Saturday:
(iv) the closure/reduction of operations on weekends has a particular effect on
the low paid;
(v) the rates of pay under the award (including the penalty rates) are so high
they are deterring employers from engaging in collective bargaining''
(vi) the weekend penalty rates were adding significantly to the employers' costs
of labour in an industry where labour costs are a high proportion of overall
costs and margins are small.”
[240] The RCAV submits that the errors made by the Deputy President fell into two
categories - first, and more fundamentally, because of a number of serious errors in the
approach to the review, errors amounting to a failure to conduct the review required by Item
6(2) of Schedule 5, and secondly by failing to give effect to matters that were required to be
taken into account as relevant to the modern awards objective. The first category involves
alleged jurisdictional error and essentially concerns the nature of the test applied by the
Deputy President. The second category concerns the way in which the test was applied.
[2014] FWCFB 1996
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[241] The High Court has explained the nature of errors that may be made by a decision-
maker and the way in which they often overlap. In Minister for Immigration and
Multicultural Affairs v Yusuf125 McHugh, Gummow and Hayne JJ observed:
“[82] ...“Jurisdictional error” can thus be seen to embrace a number of different kinds of
error, the list of which, in the passage cited from Craig, is not exhaustive. Those
different kinds of error may well overlap. The circumstances of a particular case may
permit more than one characterisation of the error identified, for example, as the
decision-maker both asking the wrong question and ignoring relevant material. What is
important, however, is that identifying a wrong issue, asking a wrong question,
ignoring relevant material or relying on irrelevant material in a way that affects the
exercise of power is to make an error of law. Further, doing so results in the decision-
maker exceeding the authority or powers given by the relevant statute. In other words,
if an error of those types is made, the decision-maker did not have authority to make
the decision that was made; he or she did not have jurisdiction to make it. Nothing in
the Act suggests that the Tribunal is given authority to authoritatively determine
questions of law or to make a decision otherwise than in accordance with the law.”
[242] Seven errors are alleged in the first category. The first concerns paragraphs [226] and
[247] in which the Deputy President said:
“[226] I do not accept the submissions of RCA that there are no longer any disabilities
associated with working unsociable hours. More importantly, I am not satisfied that
there has been a significant change in the disabilities associated with working
unsociable hours since the making of the Award.
...
[247] The RCA has not established cogent reasons for revisiting the penalty regime it
proposed in to the Award Modernisation Full Bench. The grounds on which they seek
the variations do not identify a significant change in circumstance; rather they are
largely merits considerations which existed at the time the Award was made.”
[243] The RCAV contends that the absence of change since the making of the Award is not
an element in the consideration required of the Commission in Item 6(2).
[244] In our view these paragraphs demonstrate reliance on an inappropriate consideration
that is at variance with the statutory obligation to conduct a review to determine whether the
Award is achieving the modern awards objective by providing a fair and relevant minimum
safety net of terms and conditions. The passages appear towards the beginning of her analysis
and at the end. They are critical to the overall approach adopted by the Deputy President and
her conclusions. In our view they reveal how the test required to be applied was
impermissibly narrowed. The Award was required to be reviewed by reference to its current
operation - not by reference to changes in circumstances since 2010. By introducing an
extraneous requirement into the conduct of the review, the test required to be applied was not
applied. An artificial barrier was erected that precluded a proper evaluation of the evidence.
No such barrier was erected by the Full Bench that recently considered the rate of pay for 20
125 [2001] HCA 30; (2001) 206 CLR 323.
[2014] FWCFB 1996
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year olds in the retail industry - where as in this case, such a claim had not been considered in
the award modernisation process. This is an appealable error.
[245] The second alleged error is that, contrary to the Deputy President’s conclusion, the
substance of the variation did not involve a departure from previous Full Bench decisions.
This appears to relate to the reliance by the Deputy President on Full Bench decisions with
respect to award modernisation, annual wage reviews and the two year review and the
approach adopted by the Deputy President that cogent reasons were required in order to
depart from a previous Full Bench decision in the two year review. It is clear that the Award
Modernisation Full Bench ultimately adopted the Sunday penalty of 50% proposed by the
employers in the modernisation process and did not rule on any application to reduce the
Sunday penalty further. However in our view it matters little if the claim for a reduction was
not made and was not dealt with or was impliedly rejected in adopting the 50% figure in
making the modern award. In either case a party involved in a review must demonstrate a case
for change based on the tests to be applied for the 2 year review. In this case the
Commission’s duty was to consider whether the Award was achieving the modern awards
objective. It is undesirable to depart from the words of the statute when exercising this duty.
[246] However, the initial duty of the Commission is to determine whether the Award was
achieving the modern awards objective by reference to the considerations in s.134 and only if
that question is answered in the negative, to consider what variations are appropriate under the
broad discretion conferred by Item 6(3). That is the approach adopted by the recent Full
Bench in dealing with the rate of pay for 20 year olds in the retail industry.126 However the
Deputy President considered the question by reference to the proposed variations. With
respect to the first proposal the Deputy President concluded:
“[248] I am unable to conclude that such variations are warranted on the basis that the
Award is not achieving the “modern awards objective” or is operating other than
‘effectively, without anomalies or technical problems arising from the Part 10A award
modernisation process.’”
[247] The Deputy President then expressed a similar conclusion with respect to the
alternative proposal at paragraph [250] quoted above. In our view mixing the primary
question in the review with the proposals made by the employers confused the duty reposed
on the Commission. It meant that the determination of the initial question - whether the
Award was achieving the modern awards objective - was not properly applied. The focus on
the proposed changes deprived the Deputy President of the statutory basis for reviewing the
operation of the Award, minimised the significance of the evidence on the way the Award
was operating and left no room for necessary findings as to whether the Award was achieving
the modern awards objective. In our view this is a further appealable error.
[248] In the recent Full Bench decision concerning the rate of pay for 20 year olds in the
retail industry the Full Bench concluded that as the particular claim was not raised in the
award modernisation process, cogent reasons were not required in order to justify a variation
to the award. As the same situation applies to the employers claim in this case for the
reduction in the standard Sunday penalty payment, the same approach should have been
126 [2014] FWCFB1846 at [41]-[45].
[2014] FWCFB 1996
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adopted by the Deputy President. By requiring the existence of cogent reasons for all aspects
of the claims, the Deputy President made a further appealable error.
[249] The third alleged error is that, in the alternative, the evidence in the proceedings
provided cogent reasons for the alternative proposal. Beyond the errors already identified, this
is a challenge to the conclusion of the Deputy President as much as the reasoning process. As
we have said, and deal with further below, the Deputy President was dismissive of the
employer’s evidentiary case. The nature of the test was stated at paragraph [250]. What
follows at paragraph [251] is a cursory view of the evidence. We consider that this allegation
is better addressed under the second category of errors alleged by the RCAV.
[250] The fourth alleged error is that the reference to the 4 yearly review in paragraph [252]
is an impermissible qualification of the duty of the Commission to properly conduct the 2
year review. In our view, the Commission was under a duty to determine whether the Award
was achieving the modern awards objective under Item 6(2), and then to determine what
changes were appropriate under the broad discretion vested in it under Item 6(3). The
expressed preference for determining changes at a later time does not play a legitimate role in
determining the primary question. Insofar as the Deputy President relied on this factor in
determining the primary question, as the decision states was done, it was an error in
undertaking the duty reposed in the Commission.
[251] The fifth alleged error is that the absence, on the evidence in the proceedings, of any
differentiation in the disabilities for Saturday and Sunday, should have resulted in a finding
that the modern awards objective is not being achieved. We consider that this matter relates to
the application of the test rather than the nature of the test applied and is best considered in
the second category of errors.
[252] The sixth and seventh alleged errors are in the same category. The alleged errors are
the creation of an anomaly by continuing differential penalty payments when there is no basis
for the differentiation and the failure to give consideration to the context in which the Award
was made. These alleged errors relate to the way in which the test was applied rather than the
test itself.
[253] It is trite to observe that a failure to apply the correct test in exercising a statutory
function involves a fundamental error and vitiates the purported exercise of a statutory duty.
The duty of the Deputy President was to review the operation of the Award to determine
whether it was achieving the modern awards objective. Where a substantial evidentiary case
was led, this involved making findings on the basis of the evidence in relation to the central
concept of the modern awards objective and its various elements. The Deputy President
introduced impermissible considerations. Further, the Deputy President confused the notions
of the operation of the Award and the proposed ways of remedying the deficiencies alleged by
the employers. In our view this resulted in the function under Item 6(2) not being validly
performed.
[254] Further grounds of appeal related to the failure to consider matters that were required
to be taken into account under s.134 of the Act - the modern awards objective. The errors in
not applying the correct test are compounded by the errors alleged by the employers in the
evaluation of the evidence. If the correct test was applied to the unchallenged evidence led in
[2014] FWCFB 1996
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the matter, a most disturbing problem in the operation of the Award would have been evident.
It would not have been possible for these consequences to be ignored.
[255] The clear evidence before the Commission was that the Award was impacting on the
trading hours of restaurants, the extent to which restaurants opened on Sundays and the extent
to which employees were engaged to work on Sundays. This evidence was given directly by
owners and operators of restaurants and as the Deputy President correctly observed was not
challenged in cross-examination or otherwise contradicted.
[256] It was also demonstrated by the PwC survey and the answer to question 25 reproduced
above. This evidence was most disturbing. When asked the direct question about the impact
of the modern award on Sunday operations, less than 8% answered “no change”. The other
respondents to this question said that they either reduced trading hours (41%), the owner
worked longer hours (38%) or the restaurant closed (13%). Even allowing for some latitude in
the accuracy of this survey, if the actual position is anywhere approaching such a situation it
remains of the utmost concern. The fact that the direct evidence of restaurant operators
suggests a similar position heightens the concern. Professor Lewis’s evidence that Sunday
penalty rates are projected to have reduced labour demand by between 50% and 100% is
consistent with the other evidence.
[257] The evidence clearly established a significant problem in the operation of the Sunday
penalty rates in the Award. There was no basis to find that the problem did not exist, to
suggest that the problem is an isolated one or that it was irrelevant to the task at hand. There
was no basis to be dismissive of this evidence.
[258] As the Full Bench in the Penalty Rates decision made clear, the purpose of penalty
rates is to operate as a loading to compensate for disabilities of working unsociable hours.
They should be sufficient to induce employees to voluntarily work at those times and have
regard for the usual operating times of an employer. The archaic rationale of discouraging
business from operating at certain times, such as on Sundays, has long since ceased to be a
legitimate factor in determining the level of penalty payments. Where penalty rates have that
effect, as the evidence in this matter demonstrates, it bears directly on the fundamental
question in the 2 year review of whether the Award is achieving the modern awards objective
of a fair and relevant minimum safety net of terms and conditions.
[259] Indeed in our view the effects of reduced employment opportunities, reduced
utilisation of employed labour, reduced operating hours and the closure of restaurants are
anathema to the modern awards objective. That is particularly so when underemployment is
an issue in the Australian economy, unemployment has risen over the past year, the
participation rate has fallen, the restaurant industry provides entry level employment
opportunities, the level of youth unemployment is disturbingly high and increasing, increased
employment opportunities are required in order to compensate for job losses in other sectors
of the economy, the viability of the restaurant industry has a bearing on the fortunes of other
industries such as the tourist industry (and vice versa), and there is a demand for restaurant
and catering industry services in the community on Sundays.
[260] It is to be expected that there will be a differential impact of Sunday penalties on
different operations in the industry. If a business is generally successful, the additional
[2014] FWCFB 1996
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penalties on Sunday can be sustained without undermining overall business performance. If
the business is struggling, penalty rates could well make Sunday trading unviable and have
the effect of depriving the business of a strong trading day, limiting the use of its capital, and
making it more difficult for the business to grow and prosper. The evidence in this matter
suggests that regional issues have an impact and trading difficulties can be related to the
fortunes of the tourist trade and events such as the adverse weather conditions in Queensland
in recent years.
[261] The following specific elements of the modern awards objective are directly and
manifestly affected by these circumstances:
(a) relative living standards and the needs of the low paid;
(c) the need to promote social inclusion through increased workforce participation;
(d) the need to promote flexible modern work practices and the efficient and
productive performance of work;
(f) the likely impact of any exercise of modern award powers on business, including
on productivity, employment costs and the regulatory burden; and
(h) the likely impact of any exercise of modern award powers on employment growth,
inflation and the sustainability, performance and competitiveness of the national
economy.
[262] As the Penalty Rates Full Bench also made clear, an evidentiary case that
demonstrates such an impact on employment opportunities gives rise to a need to review the
terms of the Award. In our view, the evidence in this matter (summarised above) established
that the Award was not achieving the modern awards objective.
[263] Other factors such as the potential reduction of income of those who receive Sunday
penalty payments are of course further considerations. That factor needs to be considered in
relation to the case put by the employers that, in the context of restaurant industry workers,
there is now no discernible distinction in the level of disabilities between Saturday and
Sunday. That position is not unprecedented. Indeed, the Queensland and Western Australian
awards that operated prior to the modern award commencing in 2010 provided for the same
level of penalty payments for Saturday and Sunday.
[264] If there is no discernible distinction in disabilities between Saturday and Sunday
employment in the context of the restaurant industry, then two consequences arise. First, the
much larger Sunday penalty payment would not be considered to be part of a fair and relevant
safety net of minimum wages and conditions. Secondly, the issue of reducing entitlements for
existing employees should be viewed in the context of a benefit that does not have a sound
justification.
[265] The issue of potential reductions in penalty payments also needs to be considered in
relation to the employment profile in the Restaurant Industry. Over 50% of employees are
casual (who receive a 25% loading on top of the Sunday penalty payment for working on
[2014] FWCFB 1996
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Sundays) and a further 15% are permanent part-time. Only 25% are permanent full-time
employees. Over 50% of employees in the industry are female. The largest area of
employment is waiting staff who are predominantly women. A further large category of
employment is kitchen hands who usually have a low level of skills. The industry is a major
source of employment for young people. Employment opportunities are utilised extensively as
a first job and by students in tertiary education. Increased employment opportunities for these
groups of employees have significant benefits for the economy and the community, and can
assist in addressing the high youth unemployment rate. The impact of any change can be
modified by a phasing in of revised arrangements.
[266] The necessary analysis of these factors is absent from the Deputy President’s decision.
[267] The Deputy President, having admitted the direct employer evidence unchallenged,
was dismissive of the evidence as a whole. The Deputy President said limited reliance should
be placed on surveys [228], the 312 employers in the survey are not demonstrated to be
representative [229], the direct evidence of employers was limited in its geographic scope
(Queensland, New South Wales, Victoria and South Australia) [230] and disproportionately
from Queensland, where the changes in the penalty rate structure in the Award were greatest
[231] and the operators did not, in the main, produce financial data to back up their
conclusions [232]. The Deputy President said that a reduction in Sunday penalties would give
operational requirements primacy over other considerations such as the needs of the low paid.
[268] In this appeal the employers submit that the Deputy President failed to take into
account the needs of employees and prospective employees where there is demand for more
work (and evidence that there will be more work on a Sunday), the needs of employers as
established by the evidence and the factors in s.134(1) (c), (d), (f) and (h) of the Act. The
employers put a substantial evidentiary case that impacted many elements of the modern
awards objective and challenged the underlying premise of the current level of penalties by
reference to significant changes in society and social values.
[269] Rather than criticise the reliability and import of the evidence, the proper approach to
such an evidentiary case was to make findings of fact and fairly evaluate those facts against
the statutory criteria127. In our view the Deputy President did not undertake this task.
Consequently, not only did the Deputy President apply an incorrect approach. In our view, by
virtue of the way the Deputy President was dismissive of the evidence before the
Commission, further errors were made in failing to have regard to relevant, indeed critically
important, considerations. In doing so the Deputy President made further appealable errors.
[270] As a result of these appealable errors the appeal should be allowed and the decision of
the Deputy President should be quashed.
The Consequences of the Errors
[271] Despite a Full Bench of this Commission finding that where evidence establishes that
penalty rates are having an impact on employment opportunities the modern awards objective
127
Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (1999) 93 FCR 317 at
341-342; Edwards v Giudice and Others (1999) 94 FCR 561 at 564.
[2014] FWCFB 1996
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is affected, and despite the restaurant employers producing such an evidentiary case to the
Commission in lengthy drawn out proceedings over the course of 2012 and 2013, the decision
of the Deputy President giving rise to this appeal discloses that no proper review of the
Sunday penalty provisions was conducted under the 2 year review process.
[272] The Full Bench in this appeal has concluded that appealable errors were made by the
Deputy President, the appeal should be allowed and the decision under appeal should be
quashed. Consequently, the important statutory function of conducting the 2 year review of
the Restaurant Industry Award must now be undertaken in a manner consistent with the
statutory framework. The Full Bench is of the view that this is best undertaken by the five-
member Full Bench established to deal with the appeal based on the evidence led by the
parties before the Deputy President.
[273] Given the substantial evidentiary case advanced by the parties in this case, a proper
exercise of the Commission’s duty requires a review of the Sunday penalty rates in the
Restaurant Industry Award relevant to the contemporary circumstances of the restaurant
industry in the context of twenty first century Australian society.
[274] We have reviewed the evidence and conducted a review of the Sunday penalty
provisions of the Restaurant Industry Award as required by the 2 year review statutory
requirements set out in the section above headed “The Commission’s Duty”. Arising from
this consideration we have reached different conclusions to the other members of the Full
Bench. Our analysis, findings, reasoning and conclusions are set out below.
The role and impact of Sunday Penalties in the Restaurant Industry
[275] The starting point is the identification of the legislative task. As noted above at [191] -
[218], the Commission’s duty to review the Sunday penalties in the Restaurant Industry
Award arises from Item 6(2) of Schedule 5 of the Transitional Act. That provision is set out in
full above at [191]. The relevant question posed by this provision is whether the Sunday
penalty rate provisions of the Award achieve the modern awards objective contained in s.134
of the Act and are operating effectively without anomalies or technical problems. The modern
awards objective is set out in full above at [203].
[276] The next step is to consider the relevant facts based on the evidence led before the
Commission and the relevant economic and social context. For the reasons outlined earlier in
our decision, the proper exercise of the 2 year review process requires a review of the
evidence before the Commission and making of relevant findings of fact. The evidence led by
the parties is summarised above at [219] - [237]. The witnesses called by the employers made
written statements. Mr Thorpe, Professor Lewis and Mr Hart were cross-examined on their
statements, and in a number of respects, were countered by contrary evidence. The twenty two
restaurant and catering operators who gave evidence were not cross examined and no contrary
evidence was given in relation to the circumstances of their individual businesses. It is
appropriate therefore to accept that evidence. Other documentary material on broader
economic circumstances, such as Australian Bureau of Statistics data and a major OECD
report on boosting jobs and incomes, is also in evidence.
[2014] FWCFB 1996
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[277] The evidence led by United Voice included a survey conducted by Galaxy Research,
evidence of Professor Mitchell which challenged the evidence of Professor Lewis and
evidence of various union officials on their knowledge and experience on the role and impact
of penalty rates on employees in the restaurant industry. Each witness made a written
statement and was cross-examined.
[278] We have reviewed the evidence led in the matter. For relevant statistical data we have
had regard to more recent data where this has become available through the Australian Bureau
of Statistics. In our view the following relevant contextual considerations and findings of fact
should be made:
The Australian economy is undergoing a process of structural change arising from
the ongoing impact of globalisation, significant technological advances and massive
improvements in the economies of developing countries. For example, since 1975
the relative share of manufacturing jobs to total Australian employment has almost
halved to be about 10%. There has been a consequent increase in the proportion of
jobs in the services sector which is now estimated to account for over 70% of all jobs
in Australia128. Many enterprises that have directly and indirectly sustained
significant employment opportunities have contracted and reduced their employment
levels. Other employment opportunities need to be created to counter these changes.
The composition of the Australian workforce has also undertaken significant change.
Demand for full-time employees has not kept pace with supply. Part-time
employment has been an important source of jobs growth. Part-time employment,
particularly for females has increased. Full-time employment, particularly for males,
has fallen. Casual employment has grown as a proportion of the overall Australian
workforce.129 The need to build a workforce that sustains an aging population is an
important policy challenge for Australia. Labour force statistics reveal a decline in
the participation rate, a rise in underemployment and a trend increase in the level of
unemployment.130
ABS data reveals that the average hours worked by Australian residents has fallen
from a peak of almost 73 hours per month in 2008 to around 69 hours per month
more recently.131
Over the past two years the rate of youth unemployment has risen. This rise is
disproportionate to the rise in unemployment generally in that period and is now
more than double the overall rate of unemployment. The rate of youth
unemployment is much higher in certain rural and urban regions. Youth
unemployment currently represents about 40% of all unemployment132. The number
of long term unemployed has more than tripled in this period. The decline in the
participation rate has been more rapid and sustained than for the entire workforce
128 Ex A5 p6.
129 Ex A5 p5.
130 ABS cat 6202.0.
131 ABS, Burgess, Business Spectator, 11 April 2014.
132 ABS, Brotherhood of St Lawrence “Australian Youth Unemployment 2014”.
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and is now at its lowest level since the relevant ABS series began in 1978.133
Organisations such as the Brotherhood of St Lawrence have prioritised action in
relation to the youth unemployment problem because it perceives significant wider
social problems occurring as a consequence. First job opportunities are important in
creating work skills and permitting further education and skills acquisition. Noted
economists such as former Secretary of the Treasury, Ken Henry, has recently said
that Australia cannot afford this level of youth unemployment.134
An ABS survey in 2007 found that there were approximately 15,500 businesses
involved in the provision of cafe, restaurant and catering services employing
approximately 196,000 employees.135 Industry estimates put the current level of
employees at about 250,000.136 During 2006-7 the average operating profit margin
was 4.2% (lower than retail at 4.5% and manufacturing at 10%). Labour costs are the
most significant expense (about 43% of the total for catering businesses and 34% for
restaurants). For other industries labour costs account for about 20% of total costs.
Customer turnover is of high importance in determining profitability. There is a high
incidence of business failure in the restaurant industry.137
The cafe, restaurant and catering industry consists mainly of small businesses. Small
businesses account for over 47% of all Australian employment and are an important
source of employment in the Australian economy. In 2007, of the approximately
15,500 restaurant industry businesses, about 10,300 businesses employed less than
10 people and about 14,000 businesses employed less than 20 people.138 The
industry is regarded as intensely competitive and this accounts for low profit margins
and a high rate of businesses exiting the industry each year.139
The cafe, restaurant and catering industry is important to other industries such as
food wholesalers and farmers through the provision of food supplies and the tourism
industry through the benefits of low price amenable food services. For a large
proportion of businesses there is community demand for their services on Sundays.
For operators in localities where tourist or leisure activities occur, Sunday is one of
their busiest trading days, if not the busiest trading day.140
As at 2006-7 casual employees accounted for just over half of all employment in the
cafe, restaurant and catering industry. Permanent full-time employees accounted for
under a quarter of all employment. Permanent part-time employees accounted for
15.5%. Just over half of all employees were female, most working as casuals.141
133 ABS, Brotherhood of St Lawrence - “On the Treadmill: Young and Long-term unemployed in Australia”, April 2014.
134 Forward to Brotherhood of St Lawrence “April Youth Unemployment Monitor”, April 2014.
135 Ex A5 p7.
136 Ex A4 [7].
137 Ex A5 p9 ff.
138 Ex A5 p9.
139 Ex UV10 p2.
140 Ex A16 [6], Ex A17 [6]-[7]; Ex A23 [8]; Ex A10 [7]; Ex A12 [14]; Ex A 21 [11].
141 Ex A5 p12.
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Waiting staff comprised about 38% of all employees in the sector, qualified and
unqualified chefs accounted for 20.5% and kitchen hands 18.2%. About 2% of
employees in the sector held a working holiday visa.142
The industry is a major source of employment for young people. Over 40% of all
employees in the cafe, restaurant and catering sector are younger than 24, compared
to less than 14% for the economy as a whole. About 30% of the industry workforce
is comprised of students compared to an average of 22% across all industries. Over
80% of the students are combining work with full-time study. This suggests a
demand for casual and part-time employment for those wishing to finance study.143
There is a much higher percentage of single people in the industry (over 60%) than
the economy as a whole. Women with children make up about 22% of the workforce
of which 57% work part-time.144
Of all industry sectors, the cafe and restaurant industry is the only one in which the
largest group of employees (40%) work less than 24 hours per week. Employment in
the cafe, restaurant and catering industry is an important source of employment
opportunities for those who wish to combine paid work with education and family
responsibilities.145
Part-time employment can be an important stepping stone for welfare recipients into
stable employment.146 Professor Mitchell suggests that support for this hypothesis is
weak and that transition from welfare to part-time work requires job opportunities
that provide “sufficiently high wages”.147
There is a high incidence of owner/operators who work in their own businesses.148 It
is common for owners to manage their labour costs by increasing the personal hours
they work in the business or the hours worked by family members, especially at
times which incur penalty payments.149
The evidence of operators suggests that many businesses cannot trade profitably on
Sundays unless they reduce their reliance on employed labour. The evidence
establishes that many businesses have made changes in their Sunday operating hours
or work arrangements because of the costs of operating on Sundays compared to
other days of the week even though they would prefer to operate on Sundays if they
could do so profitably. For a large proportion of the industry there is a community
demand for restaurant services on Sundays. Care should be taken in evaluating the
evidence in this regard. However a consistent and strong theme in the evidence is
142 Ex A5 p13.
143 Ex A5 p14.
144 Ex A5 p15.
145 Ex A5 p16.
146 Ex A5 p14.
147 Ex UV10 p3.
148 Ex A7-28.
149 Ex A4 [19].
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that the current level of Sunday penalty rates is having a significant impact on
decisions as to whether to open on Sundays, the trading hours on Sundays and the
extent to which employees are engaged to work on Sundays on the prevailing
Sunday penalty rates. That evidence includes the PwC survey in which the question
was asked: “What has been the impact on the business’s operating hours since the
implementation of weeknight, weekend and public holiday penalty rates through the
Restaurant Industry Award 2010?”
The responses with respect to Sundays were as follows:
No change 6 (7.3%)
Reduced trading hours 34 (41.5%)
Business owner works longer hours 31 (37.8%)
Closed 11 (13.4%)
The direct and unchallenged evidence of operators confirms that the current level of
Sunday penalties in the Award is having a detrimental effect on employment
opportunities. Not all operators are affected in the same way. For some, Sunday
trading has become unviable. For others they are operating on a suboptimal basis and
reducing employment levels. Others appear to be trading profitably. The more
marginal the business, the less likely it will be able to incur losses on Sundays and
the less return it can make on its business investment. In an industry with some
15,000 separate small businesses, direct evidence of 22 businesses is likely to be said
to be selective or unreliable. However their evidence is consistent with the evidence
of the industry association witness, Mr Hart, consistent with the PwC survey of
restaurant operators and in line with the more theoretical and broader statistical
analysis of Professor Lewis. In our view the evidence can safely be regarded as
presenting a snapshot of the industry and the circumstances presented can give rise
to more generalised conclusions. Even allowing for some overstatement or
overemphasis on the detrimental effects of Sunday penalties, there is an inescapable
conclusion from the evidence that Sunday penalty payments are having a detrimental
effect on employment levels in the industry.
The current level of penalty payments is a very important component of the income
of employees who receive the penalty payments. Many employees are paid at or
around the award level,150 work on a casual or part-time basis and have significant
unpaid responsibilities. The penalty payments supplement the base wage rate and
allow the employees to receive an income for the hours worked greater than the
amount they would receive for working on other days of the week. For a large
proportion of the restaurant and catering industry workforce the income they receive
for working on Sundays on penalty rates allows them to combine their work with
other responsibilities. For this group of employees a reduction in Sunday income
would alter the current balance and require changes of one sort or another to deal
with this changed circumstance. The changes may include working longer hours for
the same rate of pay or seeking additional work. The changes necessary to strike an
150 Ex UV 10 p3 - estimated at 44.8% of the workforce.
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appropriate balance may well have an adverse impact on their ability to undertake
their other unpaid responsibilities to current standards.
The current level of Sunday penalty payments in the Award is 150% for full-time
and part-time employees. With the addition of the standard 25% casual loading in
modern awards, the current award obligation is 175% for casual employees. Modern
awards adopt a variety of Sunday penalty rates due to the disparate rates contained in
pre-existing instruments and the approach of determining penalty rates representing
a critical mass of penalty payments in the superseded instruments. By reference to
the terms of other modern awards the 150% Sunday penalty level in the Restaurant
Industry Award is low by comparison. The Fast Food Award and the Fitness
Industry Award adopt 150%. Other awards are mostly higher. The General Retail
Industry Award, other retail related awards, the Clerks (Private Sector) Award and
the Manufacturing and Associated Industries and Occupations Award all contain a
Sunday penalty rate of 200%. The Sunday rate under the Hospitality Industry Award
and the Registered Licenced Clubs Award is 175%.
The Impact of Sunday Penalties on the Modern Awards Objective
[279] The next task is to consider the above contextual and factual circumstances against the
modern awards objective. The objective is set out in full at [191] above. It requires that
modern awards, together with the statutory minimum entitlements, provide a fair and relevant
minimum safety net of terms and conditions of employment, taking into account a number of
specified factors. As has been noted by the Federal Court and by numerous Full Benches of
this Commission, the objective is expressed very broadly.151 Importantly, it requires a
consideration of the level of the minimum safety net - not the actual entitlements of
employees. The minimum safety net is the set of minimum terms and conditions that underpin
actual rates and conditions that may otherwise apply by way of enterprise agreements, over-
award payments, performance payments and gratuities. In the restaurant and catering industry
there is a high incidence of employees receiving a base rate of pay at or near the Award
minimum.
[280] The question posed by the modern awards objective is not simply whether the level of
Sunday penalties is fair, but whether they are set at a level which constitutes a fair minimum
safety net, when all other minimum entitlements and the specified factors in s 134 are taken
into account. The specified factors in s.134 have changed since the Deputy President heard
the matter by the addition of a specific mention of penalty rates. The additional paragraph
s.134(1)(da) was added by Schedule 2 to the Fair Work Amendment Act 2013 and commenced
on 1 January 2014. Item 7 to Schedule 4 of the Act states that the amendment made by
Schedule 2 to the 2013 amending Act applies in relation to a modern award that is made or
varied after the commencement of that Schedule. As we propose that the award be varied as
part of the 2 year review, we propose to have regard to this new element of the modern
awards objective. We turn to consider those specified factors.
Relative Living Standards and the Needs of the Low Paid: s.134(1)(a)
151 Shop, Distributive and Allied Employees Association v National Retail Association (No 2) [2012] FCA 480.
[2014] FWCFB 1996
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[281] Low paid employees have been generally regarded as those who are paid at or around
the award rate of pay and are paid at the lower award classification levels.152 In the June 2013
Annual Wage Review case the Full Bench said:153
“[362] There is a level of support for the proposition that the low paid are those
employees who earn less than two-thirds of median full-time wages. This group was
the focus of many of the submissions. The Panel has addressed this issue previously in
considering the needs of the low paid, and has paid particular regard to those receiving
less than two-thirds of median adult ordinary-time earnings and to those paid at or
below the C10 rate in the Manufacturing Award. Nothing put in these proceedings has
persuaded us to depart from this approach.”
[282] While employees at Levels 1-3 in the Award might generally fall within this category,
a number of other considerations would appear to be relevant. First, the large proportion of
casual and part-time employees in the industry suggests that while the rate of pay may be
higher for some, the availability of less than full time hours may bring part-timers and casuals
into the category of low paid. Secondly, the loadings for Sunday and casual work take the
base hourly rate of pay well beyond the base Award level. For full-time employees in receipt
of these penalties, their incomes may exceed the level customarily regarded as low paid. It is
not possible to reliably assess the impact of these factors on the restaurant industry workforce
as a whole.
[283] In our view a significant proportion of employees in the restaurant and catering
industry are properly described as low paid. The impact of the disincentive for employment
opportunities is a matter that operates in two directions. First, those who currently receive
work on Sundays at prevailing penalty rates obviously value the income that results. Any
reduction in that income level is detrimental to their interests. On the other hand, a regime
which limits employment opportunities to low paid employees who wish to work additional
hours is detrimental to their interests. If a reduction in the level of penalty payments creates
additional work for those who do not currently work on Sundays this would appear to be of a
positive benefit to them. If current employees are paid a lower penalty rate than they currently
receive they will be obviously be worse off and unless they are already working full-time,
may need to work additional hours to receive the same income. There are many
imponderables involved in these questions and again no reliable generalisations or estimates
can be made.
[284] The advantage of extra work is a clear benefit when it actually occurs. For example, a
casual employee who currently works four hours on a Sunday receives 7 hours pay (4 x 1.75).
A full or part-time employee receives 6 hours pay (4 x 1.5). If additional employment is
available on Sundays of a full 8 hour shift as a result of lower penalty rates as sought by the
employers in this case, (for example by work on two meals rather than one), then casual
employees would receive 12 hours pay (8 x 1.5) and full and part-time employees 10 hours
pay (8 x 1.25). Even if only one hour more is worked by an employee who currently works a
four hour shift, their overall income for that day will increase. And of course any hours
worked by someone who does not currently work on a Sunday is an obvious net benefit.
152 [2011] FWAFB 2633 at [17].
153 Annual Wage Review 2012-13 [2013] FWCFB 4000.
[2014] FWCFB 1996
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[285] In our view a reduction in the level of Sunday penalties is likely to be of net benefit to
low paid employees if it results in additional employment opportunities. It is necessary to
review the evidence in relation to this matter to determine whether such an assumption can be
made.
[286] The PwC survey submitted by the employers indicated that 64% of businesses would
extend trading hours if penalty rates were not imposed on weeknights or weekends. This
question relates to much more than a reduction in the Sunday penalty rate as sought by the
employers in this case. We therefore do not believe that it establishes the proposition that
additional employment would necessarily be created by a reduction in penalty rates.
[287] Professor Lewis estimated that the reduction in the casual and Sunday loading from
175% to 125% would increase demand for casual labour by between 29% and 87%. Professor
Mitchell states that “economists who use neo-classical concepts of substitution elasticities
(the impact of a wage change on employment) and creatively invent parametric values to
support their claim that cutting wages will lead to substantial employment gains have been
largely discredited in wage setting arenas for many years” and “... admissions from the OECD
confound those who continue to push the textbook line that cutting wage rates (which
includes cutting penalty rates) will have significant positive employment effects.”
[288] In our view Professor Lewis’s estimate is theoretical and should not, on its own, be
relied upon with any confidence. However we regard Professor Mitchell’s broad dismissal of
the notion of positive employment impact in reliance on broad general statements as
somewhat implausible. Professor Mitchell obviously approaches these matters with a strong
ideological perspective and we found his evidence unduly argumentative in the current
context. The issue here is not a notion of general reduction in wages that may give rise to a
shift from wages to profits. Rather, the context involves evidence of limited employment and
operations on Sunday and an attempt to lower penalty payments in order to make Sunday
trading economically viable and expand employment opportunities for those operations that
currently limit employment because of the level of Sunday penalties.
[289] In our view the uncontested evidence of restaurant operators is of more assistance in
assessing whether the current Award is having any actual impact on employment levels. We
have already found that the evidence establishes that the current level of Sunday penalty
payments is having a detrimental effect on employment opportunities on Sundays. The
evidence of operators is also replete with statements that the removal of weekend penalties
would enable the business to employ more employees.154
[290] At this stage of our analysis we are evaluating the impact of the current Award
provisions on the low paid. We are not considering any particular alternative proposal. The
evidence of restaurant operators was not contradicted. It addresses the removal of penalties
rather than their reduction. However we do not believe that such strong and consistent
evidence can be ignored. We find that the evidence establishes that the current level of
Sunday penalty rates is having a detrimental impact on employment levels. A reduction in the
level of penalty rates is likely to create additional employment opportunities for the low paid.
154 Ex A7 [34]; ExA8 [29]; Ex A9 [37]; Ex A10 [27]; Ex A11 [36]; Ex A12 [36]; Ex A14 [38]; Ex A17 [28]; Ex A19 [22]; Ex
A20 [30]; Ex A21 [42]; Ex A22 [39-41]; Ex A23 [31]; Ex A24 [32]; Ex A27 [26]; Ex A28 [43].
[2014] FWCFB 1996
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We therefore determine that a consideration of this element of a fair and relevant safety net
suggests that the current Sunday penalty regime is not operating in the best interests of the
low paid.
The Need to Encourage Collective Bargaining: s.134(1)(b)
[291] There is little evidence of collective bargaining in the restaurant and catering industry.
One employer gave evidence of having an agreement that provided for the same rate of pay
for each day of the week to assist in operating profitably on days that attracted high penalty
rates. The notion of a minimum safety net comprehends a capacity for employers and
employees to bargain over varied terms and conditions that provide benefits for employees
that are better off overall, and enable mutual benefits from agreement making. A safety net
which does not provide an opportunity for bargaining having regard to the market
considerations of the industry could be said to be set too high. However in this case we are
merely considering the level of Sunday penalties. We do not consider that it has been
established that the current level of penalties encourages or discourages collective bargaining.
Therefore this is essentially a neutral factor.
The Need to Promote Social Inclusion through Increased Workforce Participation:
s.134(1)(c)
[292] This factor is closely aligned to our conclusions on the interests of the low paid. The
restaurant industry is a good source of first employment opportunities. The youth
unemployment problem is of rising concern in the community. If the current level of Sunday
penalties is having a detrimental effect on employment opportunities, then those seeking to
obtain work, especially young people, are detrimentally affected. In our view the current
penalty regime is discouraging, rather than promoting, social inclusion.
The Need to Promote Flexible Work Practices and the Efficient and Productive
Performance of Work: s.134(1)(d)
[293] The evidence establishes that on Sundays, many restaurants are either closing their
operations, reducing trading hours or reducing the number of employees. This suggests that
the current Award is operating negatively as far as this factor is concerned. Businesses in a
low profit margin industry comprised of small businesses with owners who often work in the
business need the availability of flexible labour supply at a cost which enables them to
maximise their business opportunities. The evidence clearly establishes that the current
Award is operating negatively as far as this factor is concerned.
The Need to Provide Additional Remuneration for Employees Working on Weekends:
s.134(1)(da)(iii)
[294] This is the first time this element of the modern awards objective has been considered
by a Full Bench. The explanatory memorandum to the relevant Bill stated:
“Modern awards objective
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Under the FW Act, the FWC must ensure that modern awards, together with the
National Employment Standards, provide a fair and relevant safety net of terms and
conditions. In making or varying modern awards, the FWC must take into account the
modern awards objective (see subsection 134(1) of the FW Act).
Item 1 of Schedule 2 to the Bill amends the modern awards objective to include a new
requirement for the FWC to consider, in addition to the existing factors set out in
subsection 134(1) of the FW Act, the need to provide additional remuneration for:
� employees working overtime;
� employees working unsocial, irregular or unpredictable hours;
� employees working on weekends or public holidays; or
� employees working shifts.
This amendment promotes the right to fair wages and in particular recognises the need
to fairly compensate employees who work long, irregular, unsocial hours, or hours
that could reasonably be expected to impact their work/life balance and enjoyment of
life outside of work.”
[295] This factor must be considered against the profile of the restaurant industry workforce
and the other circumstances of the industry. It is relevant to note that the peak trading time for
the restaurant industry is weekends and that employees in the industry frequently work in this
industry because they have other educational or family commitments. These circumstances
distinguish industries and employees who expect to operate and work principally on a 9am-
5pm Monday to Friday basis. Nevertheless the objective requires additional remuneration for
working on weekends. As the current provisions do so, they meet this element of the
objective.
The Principle of Equal Remuneration for Work of Equal or Comparable Value:
s.134(1)(e)
[296] The definition of this term in s 302 of the Act makes it clear that the principle relates
to equal remuneration for men and women workers. In our view this is a neutral factor in this
case where the proportion of employees of each gender is roughly equal and the current
provisions do not operate differentially and are not proposed by us to do so. A differential
approach for different classifications which are customarily performed by different genders
may bring this principle into play.
The Likely Impact on Business, including Productivity, Employment costs and
Regulatory Burden: s.134(1)(f)
[297] This factor is closely aligned to our consideration of efficient and productive
performance of work. The evidence in this matter establishes that the predominantly small
businesses in the industry are looking at ways of improving their business viability. One
method of improving the business is to operate on a cost effective basis when trade is likely to
be at high levels and to consequently maximise the investment in capital and fixed costs.
Businesses which build a following by reputation or experience in a competitive market stand
[2014] FWCFB 1996
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to gain a great deal by operating at times when turnover is likely to be high or when the public
is willing to access their services. The current Sunday penalty regime is a having a negative
impact on a great many restaurant businesses in this regard. That is not to say that all
businesses are affected in the same way. However the evidence of restaurant operators
provides a snapshot of the industry and is indicative of a more widespread pattern. The
current Sunday penalties are having an adverse impact on a significant proportion of the
restaurant and catering industry.
The Need to Ensure a Simple, Easy to Understand, Stable and Sustainable Modern
Award System: s.134(1)(g)
[298] The current Sunday penalty rates are causing many businesses to change their
operating patterns in a manner that many regard as nonsensical - by requiring payment at
higher rates for hours that the business wants to operate and employees wish to work. In our
view the evidence to this effect suggests that the Sunday penalty regime may not be described
as simple, easy to understand, stable and sustainable but only to a limited extent because it is
not the way in which the provisions are written, but their content that is of concern. The
employers concerns are more relevant with respect to other factors.
The Likely Impact on Employment Growth, Inflation and the Sustainability,
Performance and Competitiveness of the Australian Economy: s.134(1)(h)
[299] It follows from our conclusions above that the current detrimental effect of award
Sunday penalty rates on many restaurant businesses and their employment levels has a
broader macroeconomic effect on the Australian economy. A regulatory provision which
operates as a limit on employment is detrimental to the economy. Reduced trading hours and
competitiveness on Sundays is also harmful to other industries such as tourism. Australia is
already regarded as having restaurant and catering prices towards the high end of international
comparisons. To the extent that reduced Sunday restaurant trading contributes to this, it
creates a negative effect on this element of a fair and relevant minimum safety net.
Conclusion on the Modern Awards Objective
[300] As the Penalty Rates Full Bench said in the passage quoted in paragraph [209] above,
penalty rates “are in reality a loading which compensates for disabilities. In the modern award
context these loadings must recognise the disabilities of working at unsociable times; be
sufficient to induce people with appropriate skills to voluntarily work the relevant hours, and
be set having regard to whether employers in the particular industry concerned normally trade
at such times. These factors and the elements of the modern awards objective need to be
balanced and weighed accordingly.”
[301] The Penalty Rates Full Bench expressly acknowledged the importance of an adverse
impact on employment opportunities through the level of Sunday penalties on the
achievement of a fair and relevant minimum safety net. It also acknowledged the merit of
reviewing the level of penalty rates payable on Sundays in view of the level of penalties
payable on Saturdays. The Full Bench said however that an evidentiary case must be made
out to support such conclusions.
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[302] In this case there is a detailed evidentiary case. We have found that the evidence has
established that the level of Sunday penalty rates in the restaurant and catering industry is
having a detrimental impact on employment levels. That conclusion is inescapable. The level
of payment is disproportionate to the disabilities for which it is intended to compensate. There
is evidence that labour supply at reduced penalty rates is readily available. Employers want to
operate on Sundays. For many restaurants, Sundays are the busiest or one of their busiest
trading days. Employees in the industry are available and willing to work on Sundays. Many
are not available to work at other times. By discouraging employment and hampering
businesses, the Sunday penalty rate regime in this industry is the antithesis of a fair and
relevant safety net. It is operating in a manner that in certain key aspects is diametrically
opposed to the modern awards objective.
[303] Our analysis of the specific elements of the modern awards objective is that six of the
nine elements of the objective are detrimentally affected by the current Sunday penalty regime
in the Restaurant Industry Award. The other factors are generally satisfied by the current
provisions. On the basis of this analysis we conclude that the Sunday penalty rate provisions
in this Award are not achieving the modern awards objective of a fair and relevant minimum
safety net.
[304] We turn to consider what changes should be made to remedy this situation as part of
the 2 year review.
The Appropriate Remedy
[305] Item 6(3) of Schedule 5 of the Transitional Act empowers the Commission to make a
determination varying a modern award in any way it considers appropriate to remedy any
issues identified in the review. The issue we have identified above is a significant one and in
our view must be remedied by a variation to the Award that adequately resolves the problems
identified. A result which complicates the operation of the Award or does not reverse the
deficient nature of the minimum safety net would be a totally inappropriate result.
[306] The current award provisions apply a casual loading on top of the prevailing penalty
provision. Given the widespread incidence of casual employment in this industry and the
purpose of such provisions to compensate for the insecurity and lesser benefits of casual
employees we consider that the casual loading should continue to apply on top of the
prevailing Sunday penalty loading. We would also be concerned that reducing the differential
between full and part-time employees on the one hand and casual employees on the other
would create an incentive for increased casualisation of the restaurant and catering workforce.
[307] A small reduction in the level of Sunday penalties, or one that involves a reduction for
certain groups of employees and not others, is unlikely to remedy the problems established by
the evidence in this case. It is also likely to complicate the operation of the Award and be
inconsistent with the modern awards objective. The reduction in Sunday penalties must be
meaningful. It must be likely to result in the removal of the disincentive to employment
opportunities on Sundays while providing an adequate compensation for the disabilities
employees experience in working on Sundays. The remedy must continue to provide
additional remuneration for employees working on weekends.
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[308] We are mindful of the large proportion of casual employees in this industry, the high
proportion of young employees who work in this industry and the fact that many who work on
Sundays have educational and other responsibilities that they are endeavouring to balance by
obtaining work in the industry.
[309] The employers initially sought the removal of weekend penalties except for the sixth
and seventh day of work on any week. That would have resulted in no penalty payments for
most if not all restaurant employees working on Sundays. The alternative now pressed is a
reduction to the level of Saturday penalties - 25% for full-time and part-time employees and
(with the continued application of the casual loading) 50% for casuals. This is a significant
compromise from the initial position. The case has involved some debate about whether, in
contemporary Australian society, the disabilities associated with working on Sundays are
significantly greater than working on Saturdays as has been traditionally the case in
Australian awards. We note that prior to 2010 the awards that applied to restaurants in
Western Australia and Queensland provided for identical penalty payments for Saturdays and
Sundays.
[310] The Federal Secretary of United Voice, Louise Tarrant gave evidence in this case that
penalty rates are a continuing societal norm in Australia. She said: “Weekends and time with
family, friends and community are valuable and those who miss that due to work should be
compensated”.155 The introduction of the modern award system permits a re-evaluation of
historical concepts such as this in the context of employment in each industry. This factor
must be considered in the context of the high proportion of casual and part-time work in this
industry. While social opportunities may be limited on Sundays they may nevertheless be
available at other times.
[311] From the evidence led in this case we are not persuaded that in the restaurant and
catering industry there is an ongoing justification for a level of Sunday penalties significantly
above the Saturday rate for employees. There has been a need since 2010 to review modern
award provisions in the context of the modern awards objective. An inherent requirement in
that task is to consider each industry in the context of its particular circumstances. Adopting
that approach, we do not believe that previous considerations of Saturday and Sunday
penalties, especially those with respect to other industries, should outweigh the analysis now
required to be undertaken under the current Act. Relatively recent previous cases, such as the
Retail Case in 2003, were determined as part of a more general legislative discretion and
related to the circumstances of other industries. The close relationship between restaurant and
catering services and the leisure needs of the community and the elements of the modern
awards objective that require a consideration of the circumstances of each industry render
such previous cases of marginal significance. Historical considerations should not be elevated
to the point of outweighing a contemporary and relevant analysis as required by the current
Act.156
[312] Taking into account all of these considerations and each of the elements of the modern
awards objective we would reduce the current Sunday penalty rate in the Restaurant Industry
Award by 20%. To limit the impact on current employees we would provide for the reduction
155 Ex UV3 p9.
156 PR941526.
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in two stages - the first 10% reduction from 1 July 2014 and the second 10% reduction on 1
January 2015. This would result in the Sunday penalty being 140% from 1 July 2014 (plus the
casual loading) and 130% (plus the casual loading) from 1 January 2015.
[313] We consider that such a reduction, similar to that sought by employers to reverse the
detrimental business and employment effects of the current provisions, should provide
benefits for both employers and employees and is consistent with the spirit and the letter of
the modern awards objective. Additional benefits to consumers are also likely. Further,
making such a variation to the Award is consistent with the obligation of the Commission
under the 2 year review.
Classification changes
[314] In the review before the Deputy President, the employers advanced seven matters that
they contended constituted anomalies in the operation of the classification structure in the
Award. The Deputy President rejected each of them. In some cases the arguments were not
considered. We agree with the other members of the Full Bench that the Deputy President’s
consideration of these matters involved appealable errors. There is therefore a need to
consider the four changes now pressed by the employers in the appeal.
[315] The first matter concerns the progression requirement at the introductory level. The
current provision requires reclassification to Level 1 after 3 months employment. Evidence
was led in the proceedings that this provision applies arbitrarily and without regard to actual
skill acquisition because the 3 month time period applies equally to full time employees, part-
time employees and casuals. Evidence was led to the effect that two employees were required
to be reclassified at the same time even though one had worked full time over three months
and the other had worked only one day per week. The relative skill levels of the employees
were markedly different. The only means by which the 3 month period can be extended is in
the case of mutual agreement. This does not appear to be a workable solution to the
differential learning involved for full and part-time employees. We consider that this situation
is anomalous and should be remedied as part of the two year review, although we are not
persuaded that it should necessarily be remedied in the way sought by the employers. As the
other members do not consider the matter anomalous we take the matter no further.
[316] The second matter concerns the absence of a mention of “the receipt of monies” in the
definition of Food and Beverage Attendant Grade 1. The employers led evidence that in the
context of the small businesses involved in this industry, such a requirement is needed for all
employees and is not complicated. In the absence of such a mention, employees in Grade 1
must either not be permitted to undertake this task, or be reclassified to a higher grade. In our
view this is both inefficient and illogical. It should be remedied as part of the 2 year review as
all members of this Full Bench agree.
[317] The third matter concerns the absence of a mention of barista duties in Grades 2 and 3.
The title is said to be now a recognised title in the industry and the absence of the mention of
it makes the Award difficult to understand and apply. The Deputy President rejected the
change by saying that in her view there is no doubt that a barista could be classified as either
Grade 2 or 3. In the light of the evidence of confusion it is better that greater clarity be
provided by inserting an express reference to barista in these classification grades.
[2014] FWCFB 1996
120
[318] The fourth matter concerns the absence of a reference to taking reservations, greeting
and seating guests in the Grade 2 definition. The employers led evidence that this leads to
results described by restaurant operators as ‘absurd’. Restaurant operators said they require all
front of house operators to meet and greet guests and it is not practical to only allocate
meeting, greeting and seating guests to a Grade 3 employee. This matter was not considered
by the Deputy President. We agree that this consequence was not intended by the award
modernisation bench, it constitutes an anomaly and it should be remedied by orders arising
from this appeal.
VICE PRESIDENT
Appearances:
H. J. Dixon SC and J. Stanton of counsel with G. Parkes for the Restaurant and Catering
Association of Victoria
J. Nolan of counsel with G. Noble for United Voice
Hearing details:
2013.
Sydney:
18 December.
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