Many of you would have already seen news reports that a Full Bench of the Fair Work Commission has decided to reduce Sunday penalties for casuals in the cafe and restaurant industry. But what exactly does it mean, what impact will it have on your business now and in the future, and does it suggest similar changes to other modern awards moving forward?

Which Penalty Rates Have Actually Changed?

Until now, employees under the Restaurant Award received 150% of their normal hourly rates for work on Sundays, and casuals received their additional casual 25% loading on top of this – meaning a total of 175% of their ordinary rates on Sundays.

The Restaurant Award will now be amended so that casual employees in the bottom three classifications (Introductory Level, Level 1 and Level 2) will have their Sunday penalties reduced from 175% to 150% for time worked on Sundays.

Who Does It Affect?

Only casual employees covered by the Restaurant Award who fall within the bottom three classifications.

The decision has no impact on casual employees in higher classifications, full-time or part-time employees, or employees not covered by the Restaurant Award (for instance, those employees who are covered by an enterprise agreement, or by a different modern award).

What Other Changes Have Been Made To The Award?

Employers are prohibited from moving any existing casual employees who are already classified at Level 3 or above, down to Level 2 or below, in order to take advantage of the lower penalty regime operating at the lower classifications.

There were also some minor amendments to the classifications within the Restaurant Award:

  • The duties of the Food and Beverage Attendants Grade 1 classification will be expanded to allow such workers to receive money from customers.
  • The duties of the Food and Beverage Attendants Grade 2 classification will be expanded to allow such workers to take reservations and greet and seat guests.

When Do The Changes Take Effect?

1 July 2014.

Is There Any Chance This Decision Could Be Reversed?

United Voice, the union opposing the application to lower the penalty rates, has yet to confirm whether it will appeal the decision to the Federal Court.

What Impact Might This Decision Have On Penalties In Other Modern Awards?

The Restaurant Award Sunday Penalty decision was determined by a Full Bench of the Fair Work Commission, which consisted of five members. Three of those members delivered a joint majority decision which carried through the changes referred to above. The other two members delivered a joint minority decision, which preferred an approach of reducing the Sunday penalty rate for all employees regardless of their particular classification or whether the employee was casual or permanent. The minority would have seen the Sunday penalty reduced from 150% to 130% for all workers (but would have maintained the casual loading on top of this, so casual workers would receive 155%).

This case was part of the formal two-year review process which has occurred across all modern awards (the original hearing in fact occurred in 2012). In an earlier two-year review decision of a separately constituted Full Bench, it was decided that Sunday penalties in the Fast Food Award, Food Manufacturing Award, General Retail Award, Hair and Beauty Award, and Hospitality Award should not be changed. Significantly in that case, the Full Bench had expressly noted that the employer groups’ application to vary penalty rates – particularly the reassessment of Sunday penalties to more appropriately align with Saturday penalties – were “not without merit”. However it said there had been a lack of evidence submitted in support of the applications (including evidence regarding impact on employment, business revenue and likelihood of increased hours being offered on Sundays if the penalties were lowered). The Full Bench observed that the issue would be reconsidered as part of the four-year review of all modern awards (which will take place this year), and stated they expected more comprehensive supporting evidence to be adduced during the four-year review applications to support the contentions.

Perhaps learning from this earlier warning, the employer groups in this Restaurant Award Sunday Penalty case submitted a significant amount of evidence in support of their applications – including expert reports, and 18 witness statements from business owners across the country all supporting the rationale for lower penalties on Sundays. This evidence was not compelling enough to sway the majority, which held that the evidence did not show that lowering penalties on Sundays would have a material impact on employment levels or business on Sundays (rather, their rationale for reducing Sunday penalties for casual employees in the lower classifications was that it primarily affects younger workers who prefer to work Sundays due to other obligations they generally have on weekdays, and therefore do not require comparatively high loadings to attract them to work on Sundays). However, it did sway the minority – who found the evidence established that lower penalties on Sundays would lead to more restaurants opening on Sundays, for longer hours, with more hours being offered to staff and an increase in the overall number of jobs (meaning a win-win-win with increased revenue for businesses, increased overall take-home pay of employees, and a greater amount of restaurant-choice for the public on Sundays).

It is interesting to note that Sunday penalties under the Restaurant Award are already much lower in comparison with other modern awards. For instance, the Sunday rate is 175% in the Hospitality Award, and 200% in the General Retail Industry Award. The members who make up a Full Bench of the Fair Work Commission can be different at any time, and as described above the minority in the Restaurant Award case were very strongly of the view that lower penalties on Sundays was for the good of everyone. If, as would be expected, the employer groups adduce the sort of evidence they did in the Restaurant Industry case when the four-year reviews come around, it is quite possible that differently constituted Full Benches will prefer the view of the minority and follow the trend of a downward alignment of Sunday rates in other awards as well. But we will have to wait and see.