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When modern awards were developed under the Fair Work Act, employer groups pushed hard for the removal or reduction of penalty rates, particularly in the hospitality and retail industries.

Employee unions pushed equally hard for the retention of penalty rates. When the main modern awards retained penalty rates there were loud grumblings from employer groups.

The Fair Work Commission has on several occasions now heard the arguments for and against penalty rates and has consistently held that penalty rates represented fair compensation for the inconvenience and lifestyle disruption associated with weekend and evening work for workers whose ordinary rates of pay were already low relative to other occupations. It has also recognised that the workforce most affected are often casual, young and more dependent on minimum conditions that other groups of workers.

These decisions have not stopped the controversy. During the two year transitional review of the modern awards, Restaurant and Catering Australia applied to have weekend penalty rates and weekday late night penalty rates in the Restaurant Industry Award 2010 removed. In October 2013, the Fair Work Commission’s Deputy President Anne Gooley rejected the application, noting that the RCA’s application had not identified any change in circumstances since the modern award was introduced in 2010 to justify removal of those conditions of employment.

Also in October 2013, a remuneration consultant Egan Associates released a discussion paper arguing that penalty rates are no longer relevant and adversely affect Australia’s global competitiveness. The report argues that 24/7 service provision is a reason for the declining relevance of penalty rates, which potentially misses the point that penalty rates are paid as a premium for the lifestyle sacrifice associated with working those hours, and that particularly in the case of hospitality, the market is local and not global.

And most recently, hospitality employer groups have lodged an appeal against DP Gooley’s decision refusing their application to remove penalty rates. It will now fall upon a full bench of the Fair Work Commission to again hear the arguments for and against the retention of penalty rates. Industry, and the 650,000 employees will have to await the outcome of the appeal, and possibly also the outcome of a 2014 review of the modern awards, to know the future of penalty rates.

The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.

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