[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

[Note: refer to the Federal Court decision dated 25 August 2014 [2014] FCAFC 121 for result of appeal.]

 

[2014] FWCFB 1996
FAIR WORK COMMISSION

DECISION


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 2010 1 (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, caf�, 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 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 2012 2 (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):

[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 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:

[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:

[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):

[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

[11] The Deputy President issued her decision, and an accompanying determination varying the Restaurant Award, on 10 October 2013 8 (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 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:

[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:

[19] Another example was evidence of a restaurateur from Queensland, whose evidence was summarised as follows:

[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:

[21] The evidence of Mr Hart was further summarised in the Decision as follows:

[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:

[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:

[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:

[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:

[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 Rates 9. 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:

[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 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:

[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:

[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:

[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:

[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:

[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 2012 10 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:

[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:

[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:

[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 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 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:

[49] Section 134(1) of the FW Act, which contains the modern awards objective, provided as at the date of this decision:

[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:

[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:

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 Commission 13 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 King 16 as follows:

[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 Norbis 17 in the following way:

[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 Gronow 18 Aickin J (with whom Mason and Wilson JJ agreed) said19:

[58] Similarly in the High Court decision in Queensland Electricity Commission, Re; Ex parte Electrical Trades Union 21 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 way 23:

[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 2012 24 said:

[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:

[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 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:

[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).

[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 requirement 25 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 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:

[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:

[76] The Minister also filed a submission explaining the amendment to the Ministerial request. In respect of penalty rates, the Minister’s submission said:

[77] In a “statement” issued on 25 September 2009 28, 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:

[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 following 29:

[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 RCA 30:

[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 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:

[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):

Award

Weekly Saturday

Casual Saturday

Weekly Sunday

Casual Sunday

Modern Award

25%

50%

50%

75%

NSW

25%

62.5% 34

50%

95% 35

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%


[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 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 2012 38, 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:

[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 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 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:

[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 decision 41. 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:

[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.

[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 said 60:

[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 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 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 - 1999 61, a Full Bench of the Commission said (underlining added):

[105] In Safety New Review - Wages - May 2002 62 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:

[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):

[107] It was again observed by the Full Bench in Annual Wage Review 2010-2011 63, 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):

[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 2005 64. In its decision summary, the Full Bench noted the following (underlining added):

[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:

[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:

[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 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:

[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.

[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 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:

[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:

[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:

[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:

[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:

[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 Rates 73 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:

[130] The issue of Sunday penalty rates vis-�-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 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 Award 75 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:

[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 Industry 82, 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:

[136] The position was different with career workers:

[137] The individual restaurateurs gave evidence to similar effect; for example:

(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.

...

(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’.

(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.

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)):

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 Award 90, 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:

[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:

[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 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 duties 97, 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 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 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:

(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 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:

[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 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].

[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 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 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:

[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

[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:

[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

[194] As far as appeals against such decisions, their Honours further said: 105

[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:

[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 adverse changes to employees and employers. As the Full Bench explained on a number of occasions, the general approach was as follows: 106

[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

[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

[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 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:

[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

[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

[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 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:

[210] More specifically in relation to Sunday penalties the Full Bench said:

[211] The Full Bench concluded as follows:

[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 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:

[220] The unions led the following evidence in opposition to the employer’s claims to reduce Sunday penalties:

[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 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:

[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

[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:

[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.

[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

[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.

[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:

[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:

[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.

[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 Yusuf 125 McHugh, Gummow and Hayne JJ observed:

[242] Seven errors are alleged in the first category. The first concerns paragraphs [226] and [247] in which the Deputy President said:

[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 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:

[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 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 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 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:

[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 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 criteria 127. 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 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.

[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 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)

[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

[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.

[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. 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:

[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 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.

[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.

[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 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.

[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.

140120_121417.jpeg

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.

 1   MA000119

 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].

 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

 8   [2013] FWC 7840

 9   [2013] FWCFB 1635

 10   [2012] FWAFB 5600

 11   (1936) 55 CLR 499 at 505

 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

 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

 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

 25   Section 354

 26   Section 354(2)(c)

 27   Award Modernisation [2008] AIRCFB 1000 at [113]-[121]

 28   [2009] AIRCFB 865

 29  Transcript 4 November 2009 PNs 2338-2368

 30   PNs 2370-2378

 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).

 36   Casual loading only without any penalty rate.

 37   Casual loading only without any penalty rate.

 38   [2012] FWAFB 5600

 39   [2014] FWCFB 1788

 40   [2012] FWAFB 5600 at [99]

 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

 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

 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

 57   Exhibit A5 pp.24-25

 58   Ibid p.26

 59   Exhibit A6 p.11

 60   Exhibit A5 p.38

 61   Print R1999; (1999) 87 IR 190

 62   PR002002; (2002) 112 IR 411

 63   [2011] FWAFB 3400

 64   PR002005; (2005) 142 IR 1

 65   Exhibit A4, Annexure JH-3

 66   Exhibit A24 paragraph 16

 67   Exhibit A26 paragraph 7

 68   Exhibit A26 paragraph 11

 69   Decision at [235]

 70   AN120468

 71   See Exhibit A1 p.14 and transcript 13 May 2013 PNs 389,479-485, 518, 520

 72   PR941526, (2003) 135 IR 1

 73   [2013] FWCFB 1635

 74   MA000004, clause 29.4

 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

 80   Exhibit A4 paragraphs 12-13

 81   Ibid paragraph 25

 82   Exhibit A4 Annexure JH-4

 83   Ibid pp.92-93

 84   Ibid p.94

 85   Exhibit A7 paragraph 18

 86   Exhibit A10 paragraphs 14-15

 87   Exhibit A 12 paragraphs 23-27

 88   Exhibit A13 paragraph 23

 89   Exhibit A18 paragraphs 15-17

 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]

 97   Exhibit A14 paragraph 36; Exhibit A27 paragraph 27; Exhibit A13 paragraph 39; Transcript 15 May 2013 at PNs 978, 981

 98   Exhibit A13 paragraph 39; Exhibit A14 paragraph 35; Exhibit A21 paragraph 44

 99   Transcript 15 May 2013 PNs 978-986

 100   Shop Distributive and Allied Employees Association v $2 and Under PR941526, (2003) 135 IR 1

 101   Paragraphs [249]-[252]

 102   Paragraphs [279]-[281]

 103   203 CLR 194.

 104   At [19].

 105   At [21].

 106   Re General Retail Award [2010] FWAFB 305.

 107   2009 AIRCFB 865.

 108   2009 AIRCFB 945.

 109   [2012] FCA 480 at [35].

 110   [2013] FWCFB 2170.

 111   [2013] FWCFB 5411.

 112   [2014] FWCFB 1846.

 113   [2013] FWCFB 1635.

 114   At [14].

 115   At [235].

 116   Ex A20 [12].

 117   Ex A21.

 118   Ex A10 [14] ff.

 119   Ex A13.

 120   Ex A7 [12].

 121   Ex A8 [23] ff.

 122   Ex A27.

 123   Ex A2.

 124   Ex A5 pp 38-48.

 125   [2001] HCA 30; (2001) 206 CLR 323.

 126   [2014] FWCFB1846 at [41]-[45].

 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.

 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”.

 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.

 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].

 150   Ex UV 10 p3 - estimated at 44.8% of the workforce.

 151   Shop, Distributive and Allied Employees Association v National Retail Association (No 2) [2012] FCA 480.

 152   [2011] FWAFB 2633 at [17].

 153   Annual Wage Review 2012-13 [2013] FWCFB 4000.

 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].

 155   Ex UV3 p9.

 156   PR941526.

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