On Wednesday, 11 October 2017, the Full Court of the Federal Court of Australia (FCAFC) released its reasons for upholding the Fair Work Commission’s (FWC) decision to cut Sunday and public holiday penalty rates for full-time and part-time workers. In their decision, the FCAFC, consisting of Justices North, Tracey, Flick, Jagot and Bromberg, held that the legal basis for the FWC’s decision was correct and therefore, in making its review of the awards system, the FWC met its legal obligations.
Under the Fair Work Act 2009 (the Act) section 156(1), “the FWC must conduct a 4 yearly review of modern awards”. As per subsection 2 of section 156, “the FWC:
(3) In a 4 yearly review of modern awards, the FWC may make a determination varying modern award minimum wages only if the FWC is satisfied that the variation of modern award minimum wages is justified by work value reasons.
(4) Work value reasons are reasons justifying the amount that employees should be paid for doing a particular kind of work, being reasons related to any of the following:
The other section of the Act relevant to this case is section 134, which outlines the "modern awards objective". As the review by the FWC altered the penalty rates for staff in a number of industries, it is essential that these alterations comply with the modern awards objective, as outlined in section 134. This section states:
(1) The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:
The appeal to the FCAFC is in regards to the FWC’s 4 yearly review of penalty rates which decreased penalty rates for weekends and public holidays, released on the 21st of June 2017. This review held that the penalty rates as they existed did not sufficiently provide a fair and relevant minimum safety net as per the Act, s 134(1). With relevant considerations of the historical and sociological context of the awards, the FWC submitted that a reduction was necessary in the penalty rates, which would better reflect the standard of a fair and relevant minimum safety net.
“The Penalty Rates decision determined, amongst other things, that the existing Sunday penalty rates in the Hospitality Industry (General) Award 2010 (Hospitality Award), Fast Food Industry Award 2010 (Fast Food Award), General Retail Industry Award 2010 (Retail Award) and Pharmacy Industry Award 2010 (Pharmacy Award) did not achieve the modern awards objective, as they do not provide a fair and relevant minimum safety net. The effect of the Penalty Rates decision was to reduce Sunday penalty rates to 150 per cent for full-time and part-time employees in the Hospitality, Retail and Pharmacy Awards and to 175 per cent for casual employees in the Retail and Pharmacy Awards. The Sunday penalty rate for casual employees in the Hospitality Award remained unchanged at 175 per cent. The decision reduced the Sunday penalty rates in the Fast Food Award (for Level 1 employees only) to 125 per cent for full-time and part-time employees and 150 per cent for casual employees. The Penalty Rates decision also reduced the public holiday penalty rates in the above awards, as well as the Restaurant Industry Award 2010 (Restaurant Award).” at  of 4 yearly review of modern awards – Penalty Rates – Transitional Arrangements  FWCFB 3334
By application, a number of unions applied to the FCA to seek: writs of certiorari quashing the determinations made by the FWC in its 4 yearly review; as well as writs of mandamus which would require the FWC to conduct a review of the awards under s 156 according to law.
It is important here to note that in assessing the review, the FCAFC’s role was not to review the FWC’s conclusions, rather merely to review the legal basis of the FWC’s decision to ensure that it was free of jurisdictional error. Indeed in the judgment, the Justices highlighted that “the Court may not enter into the merits of the determinations made by the Fair Work Commission”.
In the submissions made by the applicants, the unions presented a number of challenges to the FWC’s review. The main challenges were:
In rejecting the arguments against the decisions of the FWC to reduce penalty rates, the Full Court held that, read as a whole, the decision held no jurisdictional error.
“It would be wrong to read, for example,  and  of the primary reasons in isolation and without regard to the opening words “[f]or the reasons given” with which  commences. It must be recognised that these (and similar paragraphs dealing with the other sectors) record a mental process which the FWC has carried out explaining the conclusions reached. The mental process is explained by everything which precedes the conclusions. The conclusions are the outcomes or results of that mental process. The outcomes are expressed in separate paragraphs referring to “fair and relevant” in  and the s 134(1)(a)-(h) matters in . But this is to ensure that the conclusions are logically structured. Read in context, it is apparent that having regard to all factors it considered relevant (all of which were permissible and which included the historical context) the FWC considered that, as to Sunday penalty rates, the application of the modern awards objective as a whole required a variation of the rate in the Hospitality Industry (General) Award 2010 in the amount identified.
As such, this is not a case in which the FWC misapplied the statutory provisions. Its description of “relevant” as meaning “suited to contemporary circumstances” at  and elsewhere is too narrow if it is to be read literally as meaning suited to modern circumstances. As discussed “fair and relevant”, which are best approached as a composite phrase, are broad concepts to be evaluated by the FWC taking into account the s 134(1)(a)-(h) matters and such other facts, matters and circumstances as are within the subject matter, scope and purpose of the Fair Work Act. Contemporary circumstances are called up for consideration in both respects, but do not exhaust the universe of potentially relevant facts, matters and circumstances. But, as we have tried to demonstrate, the primary reasons when read as a whole amply demonstrate that the function, as in fact performed by the FWC, was not confined by reference to the criterion of contemporary circumstances. Nor, do the reasons demonstrate that, as a criterion, contemporary circumstances were elevated or given undue priority. This suggests that by “contemporary circumstances” the FWC may have simply meant “present circumstances” or, in other words, the circumstances at hand” at  - .
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Fair Work Act 2009, available from TimeBase's LawOne service.
Shop, Distributive and Allied Employees Association v The Australian Industry Group  FCAFC 161
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