DECISION

Fair Work Act 2009
s.157 – Variation of a modern award to achieve the modern awards objective

Application to vary the General Retail Industry Award 2010
(AM2020/31)

Application to vary the General Retail Industry Award 2010.

1. Introduction

[1] The Shop, Distributive and Allied Employees Association (SDA) has applied to vary the General Retail Industry Award 2010 (the Retail Award) which provides as follows:

‘29.4 Penalty payments

…

(e) Sunday work

…

(iv) From 1 July 2020

A penalty payment of an additional 50% loading will apply for all hours worked by a full-time or part-time employee on a Sunday. A penalty payment of an additional 75% loading will apply for all hours worked by a casual employee on a Sunday (inclusive of the casual loading).’

[2] The SDA application 1 seeks to delete clause 29.4(e)(iv) and insert a new clause 29.4(e)(iv) in the following terms:

‘(iv) From 1 February 2021:

A penalty payment of an additional 50% loading will apply for all hours worked by a full-time or part-time employee on a Sunday. A penalty payment of an additional 75% loading will apply for all hours worked by a casual on a Sunday (including of the casual loading).’

[3] In effect the variation seeks to delay the final stage of the transitional arrangements regarding the reduction of Sunday penalty rates for full time and part time employees in the Retail Award.

[4] By way of background, on 23 February 2017 a Full Bench issued a decision (the Penalty Rates decision) 2 dealing with weekend and public holiday penalty rates and some related matters in a number of modern awards including the Retail Award. Specifically, the Penalty Rates decision determined that the existing Sunday penalty rates in the Retail Award did not achieve the modern awards objective, as they did not provide a fair and relevant minimum safety net. The effect of the Penalty Rates decision was to reduce the Sunday penalty rates in the award from 200 per cent to 150 per cent for full time and part time employees and to 175 per cent for casual employees.

[5] In the Penalty Rates decision the Full Bench observed that a substantial proportion of the employees covered by the modern awards which were the subject of the proceedings are ‘low paid’ (within the meaning of s.134(1)(a)) and that the award variations proposed would be likely to reduce the earnings of some of those employees and have a negative effect on their relative living standards and on their capacity to meet their needs. At [2000] of that decision the Full Bench said:

‘The immediate implementation of all of the variations we propose would inevitably cause some hardship to the employees affected particularly those who work on Sundays. There is plainly a need for appropriate transitional arrangements to mitigate such hardship.’

[6] As the various submissions before the Full Bench at that time had given little attention to the implementation of any variations to penalty rates arising from the proceedings, the Full Bench invited further submissions on the appropriate transitional arrangements. To assist those parties who wished to make submissions as to the form of such transitional arrangements the Full Bench also expressed some provisional views (at [2021] of the Penalty Rates decision), as follows:

(i) Contrary to the views expressed by the Productivity Commission we do not think it appropriate to delay making any changes to Sunday penalty rates for 12 months, at which time the reductions apply in full. The Productivity Commission’s proposal imposes an unnecessary delay on the introduction of any reduction in Sunday penalty rates and would give rise to a sharp fall in earnings for some affected employees.

The Productivity Commission suggests that a 12 month delay would allow the affected employees to ‘review their circumstances’ so that they ‘can seek other jobs, increase their training and make other labour market adjustments’.

As we have mentioned, the employees affected by these changes are low paid and have limited financial resources. It is unlikely that they will be able to afford the costs associated with increasing their training.

Further, workers in the Accommodation and Food Services and Retail sectors have lower levels of educational attainment than the total workforce, which is likely to limit their capacity to obtain other employment. As noted in the Peetz and Watson Report:

‘… while a majority of tertiary students who are employed work in either retail or hospitality (i.e. accommodation and food services) industries, this does not mean that most people who work in those industries are tertiary students. Nor does it indicate that they are not in need …

Pay rates in retail therefore affect not only tertiary students but also a significant number of other people who are likely to be dependent on earnings from this industry as their principal or sole source of income.’

(ii) If ‘take home pay orders’ are an available option then they may mitigate the effects of a reduction in Sunday penalty rates. But we do not favour any general ‘red circling’ term which would preserve the current Sunday penalty rates for all existing employees. A consequence of such a term would be that different employees of the one employer may be employed on different terms and conditions. Such an outcome would add to the regulatory burden on business (a relevant consideration under s.134(1)(f)).

(iii) The reductions in Sunday penalty rates should take place in a series of annual adjustments on 1 July each year (commencing 1 July 2017) to coincide with any increases in modern award minimum wages arising from Annual Wage Review decisions.

(iv) As to the number of annual instalments, the 5 annual instalment process which accompanied the making of the modern awards is too long for present purposes. It will be recalled that the Award Modernisation Full Bench was dealing with an array of award provisions that were the subject of transitional arrangements including minimum wages, whereas we are only dealing with one provision, Sunday penalty rates. It is likely that at least 2 instalments will be required (but less than 5 instalments). The period of adjustment required will depend on the extent of the reduction in Sunday penalty rates, the availability of ‘take home pay orders’ and the circumstances applying to each modern award. The most significant reduction is for full-time and part-time employees covered by the Retail Award (from 200 per cent to 150 per cent), it follows that a longer period of adjustment may be required in this award, than for the other awards before us. (references omitted)

[7] In a decision published on 5 June 2017 the Penalty Rates Full Bench dealt with the implementation of its decision to reduce Sunday penalty rates (the Penalty Rates – Transitional Arrangements decision). 3 In that decision the Full Bench summarised the matters which were relevant to the determination of the transitional arrangements to apply to the reductions in penalty rates decided in the Penalty Rates decision, as follows:

‘[141] The relevant considerations may be conveniently grouped into three broad categories:

•  the statutory framework;

•  the Penalty Rates decision; and

•  fairness.

[142] Before turning to each of these matters we would observe at the outset that the range of relevant considerations – and the tension between some of the matters we must take into account – means that the determination of appropriate transitional arrangements is a matter that calls for the exercise of broad judgment, rather than a formulaic or mechanistic approach involving the quantification of the weight accorded to each particular consideration.

[143] As to the statutory framework, any transitional arrangements must meet the modern awards objective and must only be included in a modern award to the extent necessary to meet that objective. Further, as to the s.134 considerations (set out in s.134(1)(a)–(h)), the setting of transitional arrangements will require a particular focus on:

•  relative living standards and the needs of the low paid (s.134(1)(a));

•  the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden (s.134(1)(f)); and

•  the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards (s.134(1)(g)).

[144] We must also perform our functions and exercise our powers in a manner which is ‘fair and just’ (as required by s.577(a)) and must take into account the objects of the Act and ‘equity, good conscience and the merits of the matter’ (s.578).

[145] As to the second category, the evidence and our findings and conclusions in the Penalty Rates decision are relevant.

[146] The finding that the relative disutility of Sunday work (as opposed to Saturday work) is ‘much less than in times past’ informed our conclusion that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not provide a fair and relevant safety net. That finding, that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not achieve the modern awards objective (because they do not provide a fair and relevant safety net), is a consideration which plainly supports the timely implementation of the reduction in Sunday penalty rates in these awards.

[147] A number of the submissions advanced by employer organisations in these proceedings contend that a shorter transition period will result in positive employment affects materialising earlier. While this may be so, it needs to be borne in mind that the views expressed in the Penalty Rates decision about the potential for positive employment affects consequent upon a reduction in Sunday penalty rates, were somewhat muted and cautious. As such, the force of the various employer submissions which rely on positive employment effects to support a shorter transition period are somewhat diminished. We note however that the various employer submissions also rely on other effective effects resulting from the reduction in Sunday penalty rates (discussed at [82] above). These positive effects favour a shorter transition period.

[148] Finally, fairness is a relevant consideration, given that the modern awards objective speaks of a ‘fair and relevant minimum safety net’. Fairness in this context is to be assessed from the perspective of both the employees and employers covered by the modern award in question. 4 While the impact of the reductions in penalty rates on the employees affected is a plainly relevant and important consideration in our determination of appropriate transitional arrangements, it is not appropriate to ‘totally subjugate’ the interests of the employers to those of the employees.5

[149] In assessing the fairness of transitional arrangements it is relevant to consider the extent of the reduction in penalty rates and the number of employees affected. In this regard we note that the reductions in Sunday penalty rates are more significant in the Retail and Pharmacy Awards than in the Hospitality and Fast Food Awards. This is a factor which favours a longer transition period in respect of the Retail and Pharmacy Awards.

[150] As to the number of employees affected by the penalty rate reductions, one of the questions on notice put to all parties in the present proceedings was in the following terms:

‘Each party is asked to provide an estimate of the number of employees affected by the penalty rate reductions determined in the [Penalty Rates decision], by award, and the basis of that assessment.’

[151] The revised background document published on 26 May 2017 summarises the submissions filed in response to the above question, it is not necessary to repeat that material here. Suffice to say that there was a significant variation in the estimates provided, depending on the range of assumptions adopted.

[152] For example, in respect of the Retail Award the Retail Employers submit that ‘between 79,833 and 108,831 employees will be affected by the penalty rate reductions under the Retail Award. 6 ABI’s estimate is between 71,62 and 164,002 employees.7 Whereas the SDA contends that the 412,171 persons employed in the ANZSIC industry classification ‘Retail Trade’ (which includes employees covered by the Retail, Fast Food and Pharmacy Awards), whose pay is determined by award only, are affected by the penalty rate reductions ‘irrespective of whether or not they presently perform any hours of work on a Sunday’.8

[153] The available data does not allow us to determine the number of employees affected by the penalty rate reductions with any precision. Nor is it necessary that we do so. It suffices to observe that the number will be significant, in respect of each of the awards before us, both in terms of absolute numbers and as a proportion of the employees covered by the relevant awards.

[154] We make the same observation about the monetary impact of the penalty rate reductions on particular employees. The extent of the impact on an individual employee will depend on a number of factors, including:

•  whether the employee is paid in accordance with the relevant award or is covered by an enterprise agreement or over award arrangement;

•  the frequency with which they work on Sundays and public holidays;

•  the number of hours they work on Sundays and public holidays;

•  their classification level and employment status (full-time, part-time or casual); and

•  the applicable award.

[155] A range of potential adverse impacts were advanced in the proceedings. As a general proposition, the union submissions advance examples which tended to overstate the impact, while the employer submissions understate it. For our part, we accept that the reductions in penalty rates we have determined will have an adverse impact on the award-reliant employees who work at these times and are likely to reduce their earnings and have a negative impact on their relative living standards and on their capacity to meet their needs.’ 9

[8] A range of proposals were advanced concerning the transitional arrangements relating to the reduction in Sunday penalty rates in the Retail Award, 10 which are summarised in the table below:

[9] The Full Bench decided as follows:

‘[176] We have had regard to the submissions advanced in support of the respective proposals, the considerations identified in Chapter 4 and the evidence, findings and conclusions in respect of the Retail Award in the Penalty Rates Decision. In relation to the evidence, findings and conclusions in the Penalty Rates decision we have had particular regard to:

•  the overview of the Retail sector in Chapter 8.1;

•  the background to the Retail Award in Chapter 8.2.2;

•  the evidence of the SDA’s lay witnesses and the observations about the impact of a reduction in Sunday penalty rates as the relative living standards and the needs of the low paid (at [1623]–[1661]);

•  the propositions drawn from the Retail Employers lay evidence, the Retail Survey and the Sands Report (at [1619]–[1622]);

•  the findings in relation to the s.134 considerations (see Chapter 8.2.5); and

•  the conclusions in Chapter 8.2.6.

[177] We have decided that the transitional arrangements set out below for the reduction in Sunday penalty rates in the Retail Award, are necessary to ensure that the Retail Award achieves the modern awards objective.

Full-time and part-time employees

1 July 2017 200 per cent ➞ 195 per cent

1 July 2018 195 per cent ➞ 180 per cent

1 July 2019 180 per cent ➞ 165 per cent

1 July 2020 165 per cent ➞ 150 per cent

Casual employees (inclusive of casual loading)

1 July 2017 200 per cent ➞ 195 per cent

1 July 2018 195 per cent ➞ 185 per cent

1 July 2019 185 per cent ➞ 175 per cent’ 11

[10] The transitional arrangements have been fully implemented in respect of casual employees. The application before us is directed at the final stage of the transitional arrangements regarding the Sunday penalty rate applicable to full time and part time employees.

2. The Submissions

[11] The grounds advanced in support of the SDA’s application are as follows:

1. The Penalty Rates decision [2017] FWCFB 1001 and [2017] FWCFB 3001 provided for the phased reduction of Sunday penalty rates in relation to, amongst other Modern Awards, the General Retail Industry Award, in circumstances where the Fair Work Commission was at that time satisfied that:

(a) a reduction was necessary to meet the moderns award objective in relation to the wards to which the reduction would apply; and

(b) a phased reduction would be implemented ‘on 1 July each year, at the same time as the implementation of any increases arising from the Annual Wage Review decision’ and that, in relation to the General Retail Industry Award, the Full Bench decided that its proposed transitional arrangement was ‘necessary to ensure that the Award achieves the modern awards objective’. (emphasis added)

See generally paragraphs [23] and [26] - Summary of Decision dated 5 June 2017 - 4 yearly review of modern awards - penalty rates - transitional arrangements.

2. The Annual Wage Review Decision [2020] FWCFB 3500 in relation to the 2020/21 financial year has determined by a majority decision that there should be an increase of 1. 75% in the minimum weekly wage for, amongst other awards, the General Retail Industry Award but that the increase shall take operative effect from 1 February 2021, not 1 July 2020.

3. The basis therefore upon which the Fair Work Commission was earlier satisfied that its phased reduction met the modern awards objective, namely the stated coincidence in timing between the reduction and any increase arising from the Annual Wage Review decision is now demonstrated to be falsely premised in circumstances where the increase as determined will now not take effect until 1 February 2021.

4. Further to paragraph 3., in circumstances where the effect of the transitional arrangements decision, if not varied, will be to impose a reduction in take-home pay for Award covered retail workers working relevant penalty rate hours without (at least until 1 February 2021) what is submitted to be the intended offsetting benefit of the national wage increase as determined, it is submitted that the General Retail Industry Award will not be meeting the modern awards objective from 1 July 2020 in relation to those affected employees unless the phased penalty rates reduction is itself deferred in lockstep with the national wage increase.

5. The SDA further submits that, in the event that the Commission determines after 1 July 2020 to vary the General Retail Industry Award 2010 in the terms proposed by the Applicant, exceptional circumstances justify the determination as made operating from a date earlier than the date on which the determination is made, namely 1 July 2020 so as to ensure that affected employees are not prejudiced by any relevant delay.

[12] The SDA filed a written submission in support of its application.

[13] The Application is said to be made to ‘restore the alignment between the reduction in penalty rates and the Annual Wage Review increase which was contemplated by the Full Bench in the Transitional decision’. 12

[14] The gravamen of the SDA’s submission is at [42] of its written submission:

‘The decision by the Annual Wage Review Panel to delay the implementation of the annual wage increase in respect of employees covered by the GRIA was taken in acknowledgment of the effect on some sectors covered by the award of the COVID-19 pandemic. The limited nature of the increase in any event is also reflective of those matters. However, in circumstances where the timing of reductions in penalty rates for Sunday work were determined on the basis that the final reduction would occur on the same day as the Annual Wage Review increase, this argues strongly in favour of the proposition that that reduction should itself be delayed to coincide with the increase in February 2021. That will ensure that to some extent the burden is eased on those employees who are, no less than their employers, suffering from the effects of the dislocation arising from the pandemic.’

[15] The essence of the argument advanced by the SDA’s submission can be distilled into 4 points:

1. In the Penalty Rates – Transitional Arrangements decision the Full Bench operated on the basis that the timing of the reductions in penalty rates to coincide with the increase under the Annual Wage Review ‘was an ameliorative factor in favour of that choice of date’. 13

2. The recent Annual Wage Review Decision 14 has determined, by majority, that there should be an increase of 1.75% in the minimum weekly wage for, amongst other awards, the Retail Award but that increase shall take operative effect from 1 February 2021, not 1 July 2020.

3. The effect of the delay to the Annual Wage Review increase is that ‘the basis … upon which the Fair Work Commission was earlier satisfied that its phased reduction met the modern awards objective, namely the stated coincidence in timing between the reduction and any increase arising from the Annual Wage Review decision is now demonstrated to be falsely premised in circumstances where the increase as determined will now not take effect until 1 February 2021.’ 15

4. Since the Annual Wage Review decision ‘more recent information reveals a more encouraging picture’.

[16] The SDA does not cavil with the matters that the Full Bench had regard to in the Penalty Rates – Transitional Arrangements Decision (see [7] and [9] above) including the findings made in the Penalty Rates case in relation to the s.134 considerations, a matter to which we shall return shortly. But the SDA submits, in essence, that the recent decision to delay the Annual Wage Review increase, in respect of the Retail Award, to 1 February 2021 ‘throws a new issue into the mix [and provides] a strong case for shifting [the transitional arrangements]’.

[17] The SDA’s application was supported by the AWU and RAFFWU. The Application was opposed by Australian Industry Group (Ai Group), the National Retail Association (NRA), the Australian Retailers Association (ARA), Australian Business Industrial and the New South Wales Business Chamber (ABI), MGA – Independent Retailers, the Australian Newsagents Federation Ltd, and the Newsagents’ Association of New South Wales and Australian Capital Territory Ltd.

[18] Written submissions opposing the Application were filed by:

•  the NRA;

•  the ARA; and

•  Ai Group.

[19] For reasons which will become apparent, it is not necessary for us to canvass all of the matters raised by the various employer submissions, though we canvass some of those matters in our discussion of the s.134 considerations.

3. Consideration

[20] The impact of the restrictions imposed in response to the COVID-19 pandemic on the Retail trade sector has been mixed. As the majority observed in the recent 2019-20 Annual Wage Review decision:

‘[72] Retail trade has seen varied effects of the COVID-19 pandemic, some of which can be seen in the more recent data on turnover, output, profits and changes in the number of jobs. While COVID-19 has provided a positive impact in turnover on some parts of the retail industry, other parts of the industry have experienced dramatic declines.

[73] While retail turnover rose sharply by 8.5 per cent (the largest monthly increase recorded) in March 2020, the increase was not evident across all industry subgroups. It reflected significant increases in areas such as Other specialised food retailing (30.5 per cent); Liquor retailing (30.3 per cent); Supermarket and grocery stores (23.0 per cent); and Pharmaceutical, cosmetic and toiletry goods retailing (22.3 per cent). This coincided with the panic buying that preceded the implementation of a number of social distancing restrictions in March. However, this increase was temporary, with retail turnover declining by an unprecedented 17.7 per cent in April 2020 (the largest monthly decline on record), resulting in total turnover lower than the pre-COVID period. The largest declines in turnover were seen in Clothing retailing (–56.0 per cent); and Footwear and other personal accessory retailing (−49.3 per cent).

[74] Output in Retail trade increased in the March quarter 2020, while total output declined. Gross operating profits also increased in the March quarter 2020 above the all industries average. However, the relatively positive results in output and profits likely reflect the temporary spike in turnover in March 2020, driven by increases in some sub-sectors (particularly Food retailing), and not necessarily growth across the wider industry.

[75] This variation within Retail trade is also shown in the jobs data. Between 14 March 2020 and 30 May 2020, total jobs in Retail trade fell by 9.8 per cent. At the 2-digit subdivision level, Fuel retailing was the only subdivision to experience an increase in jobs (6.1 per cent), while the decline in Food retailing (–7.2 per cent) and Motor vehicle and motor vehicle parts retailing (–6.1 per cent) was smaller than the Retail trade average. Larger declines were in Other store-based retailing (–12.4 per cent); and Non-store retailing and retail commission based buying and/or selling (–15.1 per cent).’ 16 (footnotes omitted)

[21] An Information Note, prepared by Commission staff on the Retail trade sector was published on 26 June 2020. The Information Note discusses the impact of the COVID-19 pandemic on retail businesses, based on survey data published by the ABS.

[22] Relevantly, between 10 June 2020 and 17 June 2020, only 12 per cent of businesses in Retail trade were operating as normal, with 88 per cent of businesses operating under modified conditions (i.e., shifting more operations online, or operating with a reduced workforce). The proportion of businesses in Retail trade operating as normal was lower than the proportion across all industries (24 per cent), as shown in Table 1 below.

Table 1: Operating conditions of businesses, 1017 June 2020

Note: Modified conditions include shifting more operations online, or operating with a reduced workforce.

Source: ABS, Business Indicators, Business Impacts of COVID-19, June 2020, Catalogue No. 5676.0.55.003.

[23] Table 2 presents changes in revenue compared to the same time last year by industry. Around 71 per cent of businesses in Retail trade reported a decrease in revenue compared to the same time last year, which is slightly higher than for all industries (68.8 per cent).

Table 2: Changes in revenue compared to the same time last year by industry, 10 June–17 June 2020

Note: These proportions exclude responses that did not know their change in revenue.

Source: ABS, Business Indicators, Business Impacts of COVID-19, June 2020, Catalogue No. 5676.0.55.003.

[24] Chart 1 below shows the monthly change in retail turnover to May 2020. Following a significantly large increase in March 2020, retail turnover then increased by 16.3 per cent in May 2020, the largest monthly increase ever recorded, following the largest fall of 17.7 per cent in April 2020. Over the year to May 2020, retail turnover was 5.3 per cent higher.

Chart 1: Retail turnover, May 2020

Source: ABS, Retail Trade, Australia, Preliminary, May 2020, Catalogue No. 8501.0.55.008; ABS, Retail Trade, Australia, Apr 2020, Catalogue No. 8501.0.

[25] Chart 2 compares the change in payroll jobs from Weekly Payroll Jobs and Wages in Australia between February and May 2020 and the quarterly change in employment from the Labour Force Survey (LFS).

[26] The all industries decline in payroll jobs (−6.8 per cent) and employment (−6.2 per cent) was broadly consistent between the data sources. Industries that experienced the largest declines in payroll jobs also experienced a similar decline in employment in May 2020.

[27] Total payroll jobs declined by 8.6 per cent in Retail trade between February and May 2020, while employment declined by 4.5 per cent. While the decline in payroll jobs is almost double the decline in employment, differences between the composition and characteristics of the series might explain the variation. For example, data on payroll jobs are collected from administrative data while data from the LFS are collected through surveying households. Payroll data are also in original terms, while LFS data are in seasonally adjusted terms.

Chart 2: Change in payroll jobs and employment in the May quarter, by industry

Note: Payroll data are in original terms. Labour force data are in seasonally adjusted terms. Payroll data calculated between 8 February and 9 May 2020 to align with the respective Labour Force survey reference periods.

Source: ABS, Weekly Payroll Jobs and Wages in Australia, Week ending 30 May 2020, Catalogue No. 6160.0.55.001; ABS, Labour Force, Australia, Detailed, Quarterly, May 2020, Catalogue No. 6291.0.55.003.

[28] Chart 3 presents the change in job vacancies by industry in the May quarter 2020 and over the year. Total job vacancies fell by 45.8 per cent in the May quarter 2020 to be 43.2 per cent lower over the year. Job vacancies in Retail trade fell by 39.7 per cent in the May quarter 2020 and 40.0 per cent over the year.

Chart 3: Change in job vacancies, May quarter 2020

Note: Data are in original terms.

Source: ABS, Job Vacancies, Australia, May 2020, Catalogue No. 6354.0.

[29] The data set out below, from Alphabeta, tracks consumer spending on a weekly basis in ‘real time’ (Chart 4). It shows that total spending in the week of 8 to 14 June was slightly above a normal week (an index of 101) following much lower spending from mid March to early June. While essential spending was the same as a normal week, discretionary spending was slightly above (index of 103). 17

Chart 4: Consumer spending, 8–14 June

Source: Illion and AlphaBeta, Covid19 Economic Impact – Real Time Tracking.

[30] The SDA submits that the recent data on retail turnover and consumer spending gives rise to ‘cautious optimism’ regarding the fortunes of the Retail trade sector, though it acknowledges that the sector is operating in a rapidly changing environment.

[31] It seems to us that the recent data shows considerable volatility and that there remains considerable uncertainty about the future and about the impact on the Retail trade sector. As noted by the majority in the 2019-20 Annual Wage Review decision, the COVID-19 pandemic ‘casts a large shadow over the current economic environment’ 18 and the future is uncertain:

‘Despite the success in flattening the curve, health experts and the Commonwealth Government have advised that some level of restrictions on movement and gatherings, as well as border controls and social distancing measures, are likely to continue for some time, possibly until a vaccine is developed. The highly infectious nature of COVID-19 and concerns about a second wave of infections add to the uncertainty.

The form and shape of our pathway to recovery is uncertain and heavily contested. However, it is generally accepted that the pathway to recovery is largely dependent on how well the spread of the virus is contained, which will affect the extent to which restrictions can be eased with a consequent impact on business and consumer confidence.

The pace of recovery beyond the June quarter 2020 is especially uncertain.’ 19 (Footnotes omitted)

[32] We now turn to the legislative framework.

[33] The Commission may make a determination varying a modern award if the Commission is satisfied the determination is necessary to achieve the modern awards objective. The modern awards objective is in s.134 of the Fair Work Act 2009 (Cth) (the Act) and provides as follows:

‘What is the modern awards objective?

134(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:

(a) relative living standards and the needs of the low paid; and

(b) the need to encourage collective bargaining; and

(c) the need to promote social inclusion through increased workforce participation; and

(d) the need to promote flexible modern work practices and the efficient and productive performance of work; and

(da) the need to provide additional remuneration for:

(i) employees working overtime; or

(ii) employees working unsocial, irregular or unpredictable hours; or

(iii) employees working on weekends or public holidays; or

(iv) employees working shifts; and

(e) the principle of equal remuneration for work of equal or comparable value; and

(f) the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden; and

(g) the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

(h) the likely impact of any exercise of modern award powers on employment growth, inflation and the sustainability, performance and competitiveness of the national economy.’

This is the modern awards objective.

When does the modern awards objective apply?

(2) The modern awards objective applies to the performance or exercise of the FWC’s modern award powers, which are:

(a) the FWC’s functions or powers under this Part; and

(b) the FWC’s functions or powers under Part 2-6, so far as they relate to modern award minimum wages.

Note: The FWC must also take into account the objects of this Act and any other applicable provisions. For example, if the FWC is setting, varying or revoking modern award minimum wages, the minimum wages objective also applies (see section 284).’

[34] The modern awards objective is to ‘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 particular considerations identified in ss.134(1)(a)–(h) (the s.134 considerations).

[35] The modern awards objective is very broadly expressed. 20 It is a composite expression which requires that modern awards, together with the National Employment Standards (NES), provide ‘a fair and relevant minimum safety net of terms and conditions’, taking into account the matters in ss.134(1)(a)–(h).21 Fairness in this context is to be assessed from the perspective of the employees and employers covered by the modern award in question.22

[36] The obligation to take into account the s.134 considerations means that each of these matters, insofar as they are relevant, must be treated as a matter of significance in the decision-making process. 23 No particular primacy is attached to any of the s.134 considerations24 and not all of the matters identified will necessarily be relevant in the context of a particular proposal to vary a modern award.

[37] It is not necessary to make a finding that the award fails to satisfy one or more of the s.134 considerations as a prerequisite to the variation of a modern award. 25 Generally speaking, the s.134 considerations do not set a particular standard against which a modern award can be evaluated; many of them may be characterised as broad social objectives.26 In giving effect to the modern awards objective the Commission is performing an evaluative function taking into account the matters in s.134(1)(a)–(h) and assessing the qualities of the safety net by reference to the statutory criteria of fairness and relevance.

[38] Section 138 of the Act emphasises the importance of the modern awards objective:

‘Section 138 Achieving the modern awards objective

A modern award may include terms that it is permitted to include, and must include terms that it is required to include, only to the extent necessary to achieve the modern awards objective and (to the extent applicable) the minimum wages objective.’

[39] What is ‘necessary’ to achieve the modern awards objective in a particular case is a value judgment, taking into account the s.134 considerations to the extent that they are relevant having regard to the context, including the circumstances pertaining to the particular modern award, the terms of any proposed variation and the submissions and evidence. 27

[40] Before turning to the s.134 considerations, we propose to comment on the merits of the Application and the SDA’s contention that the variation proposed is ‘industrially fair’.

[41] The Information Note referred to earlier presents data on employees who work on Sundays in the Retail trade sector. Some 29.2 per cent of the 240 800 employees who work on Sundays are casuals and 70.8 per cent are full time are full time or part time employees. 28 It follows that the SDA’s application will affect some 125 200 full time and part time employees, out of the 1 056 500 employees who work in the sector (about 12 per cent).

[42] Central to the SDA’s submission is the contention that when the Penalty Rates Full Bench determined the transitional arrangements in respect of Sunday penalty rates in the Retail Award, ‘it decided implicitly that it was necessary to have the final reduction align with a wage review increase which was in all likelihood to occur on 1 July 2020.’ 29 The SDA contends that ‘that matter alone provides a foundation for the variation which is proposed.’30

[43] The particular passage from the Penalty Rates – Transitional Arrangements decision relied on by the SDA in support of its application is the following:

‘[43] We accept that while the transitional arrangements determined in this decision will ameliorate the adverse impact of our decision upon the employees affected, it will not remove that impact and the implementation of the variations we propose (albeit over an extended time period) are still likely to reduce the earnings of the employees affected. The phased reductions in Sunday penalty rates that we intend to make will be implemented at the same time as the implementation of any increases arising from the Annual Wage Review decision. This will usually mean that the affected employees will receive an increase in their base hourly rate of pay at the same time as they are affected by a reduction in Sunday penalty rates. As such, the take home pay of the employees concerned may not reduce to the same extent as it otherwise would – but it is also important to acknowledge that they will receive a reduction in the earnings they would have received but for the implementation of the Penalty Rates decision. Accordingly, any Annual Wage Review increase cannot be said to ameliorate the impact of our decision. It is the phased implementation of the Sunday penalty rate cuts which provides a degree of amelioration.’

[44] The SDA submits that while the Full Bench did not operate upon the basis that an increase under the Annual Wage Review would ameliorate the reductions in penalty rates, it did operate on the basis that the timing of the reductions to coincide with the increase under the Annual Wage Review was an ameliorative factor in favour of that choice of date.

[45] We acknowledge that the Penalty Rates – Transitional Arrangements Full Bench intended that the implementation of the phased reduction in Sunday penalty rates would occur at the same time as any increases arising from the Annual Wage Review decision. But two points may be made about that decision and about the passage relied upon by the SDA.

[46] The first is that the Full Bench observed that the coincidence in timing would ‘usually mean that the affected employees will receive an increase in their base hourly rate of pay at the same time as they are affected by a reduction in Sunday penalty rates’. The use of the expression ‘usually mean’ makes clear that there was no immutable presumption that the penalty rates reductions and Annual Wage Review increases would always occur at the same time. The Full Bench did not determine some sort of decision rule as to the timing of the phased reduction in Sunday penalty rates. So much is also made clear by the Full Bench’s earlier observation that:

‘the determination of appropriate transitional arrangements is a matter that calls for the exercise of broad judgment, rather than a formulaic or mechanistic approach involving the quantification of the weight accorded to each particular consideration’. 31

[47] The second point to be made about the passage relied upon by the SDA is that the Full Bench clearly states that any Annual Wage Review increase cannot be said to ameliorate the impact of its decision to reduce Sunday penalty rates and that ‘[i]t is the phased implementation of the Sunday penalty rate which provides a degree of amelioration’. 32

[48] It seems to us that the ‘linkage’ between the timing of the phased reduction of Sunday penalty rates and the date of operation of any increase arising from an Annual Wage Review is not as strong as that asserted by the SDA. In particular, we reject the proposition that the Penalty Rates – Transitional Arrangements decision ‘decided implicitly that it was necessary to have the final reduction align with a wage review decision’. It seems to us that the operative date of the increase arising from the Annual Wage Review decision is relevant to the SDA’s application, but it is not a determinative factor. We reject the SDA’s submission that this matter ‘alone provides a foundation for the variation which is proposed’. 33

[49] Five other matters are also relevant to the merits of the variation proposed.

[50] The first matter concerns the findings and conclusions in the Penalty Rates decision. We agree with the following observation in the Penalty Rates – Transitional Arrangements decision:

‘The finding that the relative disutility of Sunday work (as opposed to Saturday work) is ‘much less than in times past’ informed our conclusion that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not provide a fair and relevant safety net. That finding, that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not achieve the modern awards objective (because they do not provide a fair and relevant safety net), is a consideration which plainly supports the timely implementation of the reduction in Sunday penalty rates in these awards.’ 34

[51] The second concerns the SDA’s contention that recent Retail trade turnover data and consumption data gives rise to what it describes as ‘cautious optimism’ with regard to the fortunes of the Retail trade. As the majority observed in the 2019-20 Annual Wage Review decision:

‘In our view there are significant downside risks in the period ahead. These include that the international outlook remains highly uncertain, the future of fiscal support to the domestic economy (including through JobKeeper) is unknown and there is the risk of a second wave of COVID-19 infection and the reimposition of extensive restrictions. As to the last point, the June 2020 OECD Economic Outlook (Preliminary Version) notes in regard to Australia that:

‘… should widespread contagion resume, with a return of lockdowns, confidence would suffer and cash-flow would be strained. In that double-hit scenario, GDP could fall by 6.3% in 2020. Even in the absence of a second outbreak, GDP could fall by 5% in 2020’. 35 (footnotes omitted).

[52] In our view the uncertainty surrounding the economic outlook tells against the variation proposed.

[53] We acknowledge that parts of the Retail trade sector have seen an increase in revenue during the COVID-19 pandemic. But, as mentioned earlier (see [21]) other parts of the sector have experienced dramatic declines. In this context we note that the proposed variation will affect some 125 200 full time and part time employees or about 12 per cent of employees who work in the sector. While we accept that some of these employees work for employers who have seen an increase in turnover during the pandemic, the SDA made no attempt to quantify how many of the employees affected by the application fall into this category. Consequently, we have no idea how many of the employees affected by the application work in those parts of the sector which have experienced dramatic declines in turnover, output and profits.

[54] The third matter relevant to our consideration of the Application is that the variation sought does not seek to delay all of the Sunday penalty rate transitional provisions in the Retail Award. Clause 30.3(c)(iii) deals with the phased reduction in Sunday penalty rates for shiftworkers, as follows:

‘30.3 Rate of pay for shiftwork

…

(iii) From 1 July 2020

Any shiftwork performed on a Sunday will be paid at the rate of 175% (200% for casuals, inclusive of the casual loading) of the ordinary time rate of pay.’

[55] Curiously, the Application does not seek to vary clause 30.3(c)(iii). This omission was raised by the NRA in its written submissions and by the Newsagents Association of NSW and the ACT and the Australian Newsagents Federation (the Newsagents Associations) during the course of oral argument as giving rise to a source of some confusion, particularly among small businesses, in the event that we granted the Application. The SDA did not respond to the submissions put and provided no explanation for the omission of shiftworkers from its application.

[56] We agree with the NRA and the Newsagents Associations. If we varied the Retail Award as proposed by the SDA it would create an anomaly regarding the treatment of shiftworkers and could give rise to some confusion.

[57] The fourth relevant consideration concerns the impact of the proposed variation on employers. It is a reasonable inference that some employers will have relied on the scheduled reduction in Sunday penalty rates in their operational and staffing decisions. As Ai Group put it:

‘The Commission should give significant weight to the (obvious) planning made by employers to implement the reduction in weekend penalty rates on 1 July 2020 and to the practical difficulties (including relating to payroll systems) with delaying the implementation of the next reduction (see, for example, the payroll system issues discussed in Re MRVL Investments Pty Limited [2019] FWCA 293 at [3] per Sams DP and McDonald’s Australia Enterprise Agreement [2019] FWCA 8563 at [5], [61], [77] per Colman DP).’ 36

[58] This consideration weighs against the variation proposed. Relatedly, the MGA submitted that the scheduled reduction in Sunday penalty rates will assist employers in the sector to maintain the viability of their businesses, and to retain employees in employment. This is also a relevant consideration which tells against the Application. As is the absence of evidence the impact of making the variation sought, as submitted by the NRA:

‘the Applicant has effectively provided no evidence at all. It has not even provided an estimate of the actual financial impact that the proposed change would have upon employees, or any factual material upon which a reasonable estimate may be drawn. Further, considering the speed with which this application has been sought, neither the NRA nor any other intervening party has reasonably been able to provide data in relation to this issue.’ 37

[59] Finally, it is relevant that the employees affected by the Application are predominantly low paid employees and that the reduction in Sunday penalty rates will adversely impact on the ability of these employees to meet their needs. This is a consideration which weighs in favour of granting the Application.

[60] On balance, we are not persuaded of the merit of the Application.

[61] We now turn to the s.134 considerations.

[62] In doing so we note that the SDA contends that the considerations in s.134(1)(b), (c), (d), (e), (g) and (h) are either neutral considerations in respect of the present application or are unlikely to be relevant.

s.134(1)(a): relative living standards and the needs of the low paid

[63] The SDA submits:

‘This consideration strongly favours the proposed variation.

In the Penalty Rates case, the Full Bench made the following two key findings in respect of award reliant employees generally in the retail industry: 38

(a) that “a substantial proportion of award reliant employees covered by the Retail Award are “low paid”; and

(b) that retail households face greater difficulties in raising emergency funds, which suggested “that their financial resources are also more limited than those of other industry households.

There is no reason to believe that these considerations would have changed. Moreover, the dislocation and unemployment resulting from the COVID-19 pandemic will only have exacerbated these matters.

The Commission can therefore proceed on the basis that the retail employees who will be affected by this proposed variation will have the detriment of the reduction in their penalty rates ameliorated by the delay in that reduction so that it occurs at the same time as the 1.75% increase awarded from 1 February 2021.’ 39

[64] Section 134(1)(a) requires that we take into account ‘relative living standards and the needs of the low paid’. A threshold of two-thirds of median full-time wages provides a suitable benchmark for identifying who is ‘low paid’, in this context. We accept that a substantial proportion of award-reliant employees covered by the Retail Award (and a substantial proportion of those affected by this application) are ‘low paid’. We also accept that this consideration weighs in favour of making the variation sought.

s.134(1)(b): the need to promote social inclusion through increased workforce participation

[65] Section 134(1)(b) speaks of ‘the need to encourage collective bargaining’. We are not persuaded that varying the Retail Award in the manner sought would ‘encourage collective bargaining’, it follows that this consideration does not provide any support for a change to the transitional arrangements.

s.134(1)(c): the need to promote social inclusion through increased workforce participation

[66] In the Penalty Rates decision the Full Bench concluded that a reduction in the Sunday penalty rate in the Retail Award is likely to lead to some additional employment. It follows that delaying the implementation of the reduction in Sunday penalty rates could be said to adversely impact on employment, though we would not wish to overstate the significance of this consideration; as noted in the Penalty Rates – Transitional Arrangements decision:

‘A number of the submissions advanced by employer organisations in these proceedings contend that a shorter transition period will result in positive employment effects materialising earlier. While this is so, the above findings from the Penalty Rates decision need to be borne in mind. In particular, the views expressed about the potential for positive employment effects consequent upon a reduction in Sunday penalty rates were somewhat muted and cautious. As such, the force of the various employer submissions which rely on positive employment effects to support a shorter transition period are somewhat diminished.’ 40

s.134(1)(da): the need to provide additional remuneration for (i)  employees working overtime; or (ii)  employees working unsocial, irregular or unpredictable hours; or (iii)  employees working on weekends or public holidays; or (iv)  employees working shifts.

[67] In our view, this consideration weighs against the variation sought, albeit slightly.

[68] As to s.134(1)(da) the SDA submits:

‘This was of course the subject of the Penalty Rates Decision. The questions of timing it is submitted need to be revisited in the light of the delayed introduction of the Annual Wage Review increase.’ 41

[69] In the Penalty Rates decision the Full Bench dealt with this consideration at [1673]- [1681] noting that in the event that Sunday penalty rates were reduced (but not removed entirely) employees working on Sundays would still receive ‘additional remuneration’. Further, at [195] and [199] the Full Bench said:

‘Section s.134(1)(da) is a relevant consideration, it is not a statutory directive that additional remuneration must be paid to employees working in the circumstances mentioned in paragraphs 134(1)(da)(i), (ii), (iii) or (iv). Section 134(1)(da) is a consideration which we are required to take into account. To take a matter into account means that the matter is a ‘relevant consideration’ in the Peko-Wallsend 42sense of matters which the decision maker is bound to take into account. As Wilcox J said in Nestle Australia Ltd v Federal Commissioner of Taxation:

‘To take a matter into account means to evaluate it and give it due weight, having regard to all other relevant factors. A matter is not taken into account by being noticed and erroneously disregarded as irrelevant’. 43

…

Third, s.134(da) does not prescribe or mandate a fixed relationship between the remuneration of those employees who, for example, work on weekends or public holidays, and those who do not. The additional remuneration paid to the employees whose working arrangements fall within the scope of the descriptors in s.134(1)(da)(i)–(v) will depend on, among other things, the circumstances and context pertaining to work under the particular modern award.’

[70] It seems to us that s.134(1)(da) is a neutral consideration in the present matter.

s.134(1)(d) and (f): the need to promote flexible modern work practices and the efficient and productive performance of work and the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden.

[71] As to these considerations the SDA submits:

‘Clearly any delay in reduction of the Sunday penalty rates will result in the maintenance of existing employment costs for employers for the period of the delay. However, such prejudice is offset by the fact that there will be no countervailing increase in employment costs arising from the annual wage review until February 2021. It is likely that the delay in the increase will far exceed the financial burden imposed upon employers by not reducing penalty rates from 1 July 2020 since the annual wage increase is across the board, whereas the penalty rate deduction affects only a small proportion of hours (and disproportionately affects a particular subset of employees only).

In those circumstances, delaying the penalty rate decrease does not undo the work proposed by the Wage Review Decision but merely ensures that the burden is shared more equitably. As the Full Bench noted in the Annual Review Decision it was unable to take such a step because it was not within its powers. 44

[72] In the Penalty Rates decision the Full Bench found that a reduction in Sunday penalty rates would reduce employment costs, and ‘promote flexible work practices’. 45 These considerations weigh against granting the Application, though, as noted by the SDA, the variation proposed seeks to delay the implementation of the Penalty Rates decision, not to undo it.

s.134(1)(g): the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards

[73] A number of the organisations opposing the Application submitted that this consideration weighed against granting the Application on the basis that the variation sought would undermine the objective referred to in s.134(1)(g). For example, the NRA submitted:

‘If the present Application is successful, then the Commission will effectively overturn (in part) a timetable it set in pace three years ago, and Sunday penalty rates will be raised with, at most, two days’ notice.

A sudden and significant change of this kind undermines the objective of a simple, easy to understand and, in particular, stable modern award system. This is particularly so where the proposed change could result in knock-on effects to the planned increases for October 2020 and March 2021.

It is also significant that the proposed variation to clause 29.4(e)(iv) of the Award would lead to an inconsistency with clause 30.3(c)(iii) of the Award, which will provide for the Sunday penalty rates for shiftworkers to decrease on 1 July 2020 regardless of whether the proposed variation is made.’ 46

[74] We agree with the NRA’s submission that the need to ensure a ‘stable … modern award system’ weighs against granting the Application.

4. Conclusion

[75] In our view, for the reasons given, the proposed variation lacks merit. Further, taking account of the s.134 considerations, insofar as they are relevant, we are not persuaded that the variation proposed is necessary to ensure that the Retail Award achieves the modern awards objective.

[76] Accordingly, we reject the variation proposed and dismiss the Application.

PRESIDENT

Printed by authority of the Commonwealth Government Printer

<PR720614>

Appearances

Mr W Friend of counsel with Mr G van Rensburg and Mr D Macken for the Shop, Distributive and Allied Employees Association

Mr L Izzo for Australian Business Industrial and the New South Wales Business Chamber

Mr I Booth for the Newsagents Association of New South Wales and the Australian Capital Territory Ltd and the Australian Newsagents Federation Ltd

Mr S Mackie of counsel for the National Retail Association

Mr A Gotting with Ms K-M O’Brien for The Australian Industry Group

Mr M Iskandar for MGA–Independent Retailers

Mr M Cornthwaite for the Retail and Fast Food Workers’ Union

Mr N Tindley for The Australian Retailers Association

Hearing details

Melbourne (by telephone)

2020

29 June.

 1   SDA application 22 June 2020

 2   [2020] FWCFB 1001

 3   [2017] FWCFB 3001

 4   See [2017] FWCFB 1001 at [117]–[119]

 5   Transcript, 9 May 2017 at PN29037

 6   Retail Employers submission 21 April 2017 at [43]

 7   ABI and NSWBC Submission in reply at para 5.1

 8   SDA submission in reply, 21 April 2017 at paras 4–12

 9   [2017] FWCFB 3001 at [141] – [155]

 10   See [2017] FWCFB 3001 at [199] – [206]

 11   [2017] FWCFB 3001 at [207] – [208]

 12   SDA submission, 26 June 2020 at [5].

 13   SDA submission, 26 June 2020 at [14].

 14   [2020] FWCFB 3500.

 15   SDA Application, at [3].

 16   [2020] FWCFB 3500 at [72] – [52].

 17   Spending categories are not provided by essential or discretionary and can be found here https://www.alphabeta.com/illiontracking/ under “2. Consumer spending by category”.

 18   [2020] FWCFB 3500 at [23]

 19   [2020] FWCFB 3500 at [35] – [37]

 20   Shop, Distributive and Allied Employees Association v National Retail Association (No 2) (2012) 205 FCR 227 at [35]

 21   (2017) 265 IR 1 at [128]; Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161 at [41]–[44]

 22   [2018] FWCFB 3500 at [21]-[24]

 23   Edwards v Giudice (1999) 94 FCR 561 at [5]; Australian Competition and Consumer Commission v Leelee Pty Ltd [1999] FCA 1121 at [81]-[84]; National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [56]

 24   Shop, Distributive and Allied Employees Association v The Australian Industry Group [2017] FCAFC 161 at [33]

 25   National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [105]-[106]

 26   See National Retail Association v Fair Work Commission (2014) 225 FCR 154 at [109]-[110]; albeit the Court was considering a different statutory context, this observation is applicable to the Commission’s task in the Review

 27   See generally: Shop, Distributive and Allied Employees Association v National Retail Association (No.2) (2012) 205 FCR 227

 28   Fair Work Commission, Information Note – Retail trade and COVID-19, 26 June 2020 at [14] and Table 4.

 29   SDA submission, 26 June 2020 at para [26].

 30   Ibid at para [27].

 31   [2017] FWCFB 3001 at [142].

 32   [2017] FWCFB 3001 at [43].

 33   SDA submission, 26 June 2020 at [27].

 34   [2017] FWCFB 3001 at [146].

 35   [2020] FWCFB 3500 at [101].

 36   Ai Group submission 29 June 2020 at para. 6.12.

 37   NRA submission 29 June 2020 at para. 34

 38   At [1656].

 39   SDA submission, 26 June 2020 at paras [28] – [31].

 40   [2017] FWCFB 3001 at [81].

 41   Ibid at para [35].

 42   Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24

 43   (1987) 16 FCR 167 at 184; cited with approval by Hely J in Elias v Federal Commissioner of Taxation (2002) 123 FCR 499 at [62] and by Katzmann J in Construction, Forestry, Mining and Energy Union v Deputy President Hamberger (2011) 195 FCR 74 at [103]

 44   Ibid at paras [37] – [38].

 45   [2017] FWCFB 3500 at [1669] and [1672].

 46   NRA submission 29 June 2020 at para. 44(h)