Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

The fact that penalty rates is a topic of its own in the PC issues papers suggests the “squeaky wheel” principle is at play. In our submission, there is nothing extraordinary about our industrial relations system providing for penalty rates. They should remain part of the safety net maintained by the FW Commission and bargaining parties should continue to be free to modify them, as with other award safety net conditions, by collective bargaining on a “better off overall” basis.

We note that penalty rates are a matter of some contention in the present review of modern awards by the FW Commission. Through this process, the ACTU, SDA and United Voice along with a number of other affiliated unions are defending claims by employers to reduce or remove penalty rates in a number of modern awards. As part of our defence we will likely be filing further information and data with the FW Commission that is also relevant to the questions being posed by the PC. We suggest that the PC keep abreast of the proceedings in the FW Commission and take into consideration evidence filed as part of this process²⁵². In any event, it would remiss of us not to make the point that it is undesirable and inefficient to have two government inquiries dealing with this issue in parallel. This point has particular force given the Minister has apparently already ruled out a legislative change concerning penalty rates irrespective of what the PC’s views may ultimately be.

Who, where and why

Penalty rates exist in most industries. Most modern awards provide for higher rates of pay for employees who work on Saturdays, Sundays, afternoons, evenings and early mornings – times which are considered to be unsociable.

The organisation of work and workers in industries where penalty rates are payable is however variable. Some workers work fixed or rotating roster patterns over several days per week which involve the payment of penalties because some unsociable hours are involved within the roster pattern. Some workers who work those patterns on a roster have had the shift penalties incorporated into their regular pay, with only exceptional overtime requirements attracting penalty rates²⁵³. Some workers work casually or part time on fixed or variable rosters and their work, but not necessarily the work of others in that business, is concentrated during unsociable hours. There are some areas in which workers are required to work at any time over a day or week, including unsociable hours, such as in necessary services like hospitals or emergency services etc. There are some employees who are required to work unsociable hours because their employer chooses to open their business during these times. While there is a distinction between work that must be done because the nature of the service is essential or necessary to ensure the health, safety and welfare of Australians, and work which is done because an employer decides to offer a good or service at a time which is considered to be unsociable, there is no practical difference for the employees. Employees have to work when they are directed to do so by their employer and often they have no choice about when this is as it may be the only time at which the work is available. The negative effects on health and social interaction, which are discussed below, apply equally to all employees who work during unsociable times. As such, all workers deserve to receive penalty rates when they work during unsociable hours regardless of the reasons why they have to work.

Penalty rates were originally introduced as a deterrent to stop employers engaging people under long or abnormal hours and also as a way to compensate employees who performed work outside of the traditional Monday to Friday, 9am to 5 pm pattern of work. In contemporary society the deterrent nature of penalty rates has ceded ground to the compensatory effect.

Penalty rates also help to define the working week: they act as punctuation signalling periods of time when work is not normally done and they form an essential function in this regard. As we set out below all societies have regulated patterns of work with distinct days of rest when it is expected that individuals will be able to participate in activities other than work. Penalty rates form an important part of a broad community consensus of when work activity should mainly take place. There is longstanding historical precedent and broad public support and consensus for distinguishing week end and week day work.

In Barrier Branch of Amalgamated Miners Association v Broken Hill Pty Company Ltd (1909), (3 CAR commencing at p21) Justice Higgins awarded penalty payments valued at time-and-a-half of ordinary payments be made for work on the seventh day in any week, an official holiday and all time of work done in excess of the ordinary shift during each day of twenty hours’.  Justice Higgins awarded the penalty rates, firstly as compensation to employees being made to work at inconvenient times, but secondly to act as a deterrent against ‘long or abnormal hours being used by employers’.

The rationale for penalty rates; that employees should be appropriately compensated for working long hours at inconvenient and unsociable hours, was reaffirmed almost forty years later by the C&A Commission.  It decided that Saturday work should be paid at 125% of the base rate, and people working on Sundays should receive double-pay. ²⁵⁴ The FW Commission, through its various iterations, has not departed from its view even when its discretions were wide enough to permit it to do so. Sensibly, this view is now explicitly referred to in the MAO, which conditions the exercise of the FW Commission’s powers to vary modern awards and minimum wages.

While penalty rates have led to commentary for a number of decades, the debate has become more vocal in recent periods owing to changes in the industrial relations framework. Whereas once the award system was based on achieving resolution to actual disputes within an industry, in more recent years the award system has been characterised by legislative requirements to “simplify” or “review” the system in an almost endless cycle in the absence of any such dispute. This necessarily brings with it the opportunity for all concerned to agitate for changes that would undo the consensual status quo and seek to have the safety net re-written in a vacuum to meet only the interests of their constituents.

Throughout this process, no strong arguments or evidence have been provided to justify the wholesale removal or reduction of penalty rates. Penalty rates have existed alongside awards and agreements for the entire period of industrial regulation in Australia.