MA000119 - Decision - 10 Oct 2013

[2013] FWC 7840

FAIR WORK COMMISSION

DECISION


Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

Sch. 5,Item 6 - Review of all modern awards (other than modern enterprise and State PS awards) after first 2 years

Baking Industry Association of Queensland - Union of Employers

Restaurant and Catering Australia and Others

Victorian Employers’Chamber of Commerce and Industry

(AM2012/180,AM2012/186,AM2012/213)

DEPUTY PRESIDENT GOOLEY

MELBOURNE,10 OCTOBER 2013

Variation to the Restaurant Industry Award 2010.

[1] The Fair Work Commission (previously Fair Work Australia) is required by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (the Transitional Act) to conduct a review of all modern awards,other than modern enterprise awards or State Reference Public Sector Awards,as soon as practicable after 1 January 2012 (the 2012 Review).

[2] Three applications were made to vary the Restaurant Industry Award 2010 (the Award): 1

    (a) AM2012/180—Baking Industry Association of Queensland - Union of Employers (BIAQ);

    (b) AM2012/186—Restaurant and Catering Australia and Others (RCA);and

    (c) AM2012/213—Victorian Employers’Chamber of Commerce and Industry (VECCI).

[3] Submissions were made by the parties in support of their application and in opposition to other applications. In addition United Voice (UV),Australian Workers Union - Queensland (AWU),Australian Council of Trade Unions (ACTU),Australian Federation of Employers and Industries (AFEI),Business SA,and Richard Morris made submissions in support or in opposition to some of the applications.

[4] This decision determines each of the variations sought,other than variations which are being dealt with by Full Benches constituted to deal with particular matters in the 2012 Review.

Legislative provisions applicable to the 2012 Review

[5] The transitional review is being conducted under Item 6 of Schedule 5 to the Transitional Provisions Act. Item 6 provides:

    “6 Review of all modern awards (other than modern enterprise awards and State reference public sector modern awards) after first 2 years

    (1) As soon as practicable after the second anniversary of the FW (safety net provisions) commencement day,FWA must conduct a review of all modern awards,other than modern enterprise awards and State reference public sector modern awards.

    Note:The review required by this item is in addition to the annual wage reviews and 4 yearly reviews of modern awards that FWA is required to conduct under the FW Act.

    (2) In the review,FWA must consider whether the modern awards:

      (a) achieve the modern awards objective;and

      (b) are operating effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.

    (2A) The review must be such that each modern award is reviewed in its own right. However,this does not prevent FWA from reviewing 2 or more modern awards at the same time.

    (3) FWA may make a determination varying any of the modern awards in any way that FWA considers appropriate to remedy any issues identified in the review.

    Note:Any variation of a modern award must comply with the requirements of the FW Act relating to the content of modern awards (see Subdivision A of Division 3 of Part 2-3 of the FW Act).

    (4) The modern awards objective applies to FWA making a variation under this item,and the minimum wages objective also applies if the variation relates to modern award minimum wages.

    (5) FWA may advise persons or bodies about the review in any way FWA considers appropriate.

    (6) Section 625 of the FW Act (which deals with delegation by the President of functions and powers of FWA) has effect as if subsection (2) of that section included a reference to FWA’s powers under subitem (5).”

[6] The legislative provisions applicable to the transitional review were considered in a decision relating to the Modern Awards Review 2012 given on 29 June 2012. 2 In that decision,the Full Bench dealt with various preliminary issues relating to the approach to be adopted in the review. In particular,and for the purposes of the present matters,I note and adopt the following conclusions in that decision:

    [23] First,any variation of a modern award must comply with the requirements of the FW Act which relate to the content of modern awards. These requirements are set out in Subdivision A of Division 3 of Part 2-3 of the FW Act.

    . . .

    [25] Any variation to a modern award arising from the Review must comply with s.136 of the FW Act and the related provisions which deal with the content of modern awards (ss.136–155 of the FW Act).

    . . .

    [83] As to the historical context the award modernisation process was conducted by the AIRC under Part 10A of the former WR Act. The process took place in the period from April 2008 to December 2009 and was conducted in accordance with a written request (the award modernisation request) made by the Minister for Employment and Workplace Relations to the President of the AIRC. The award modernisation process was completed in four stages,each stage focussing on different industries and occupations. All stakeholders and interested parties were invited to make submissions on what should be included in modern awards for a particular industry or occupation. Separate processes,including variously,the provision of submissions,hearings and release of draft awards,were undertaken in respect of the creation of each modern award to ensure parties were able to make submissions and raise matters of concern relevant to particular awards. By the end of 2009 the AIRC had reviewed more than 1500 state and federal awards and created 122 industry and occupation based modern awards.

    [84] . . .the award modernisation process required by Part 10A of the WR Act has been completed.

    [85] Two points about the historical context are particularly relevant. The first is that awards made as a result of the award modernisation process are now deemed to be modern awards for the purposes of the FW Act (see Item 4 of Schedule 5 of the Transitional Provisions Act). Implicit in this is a legislative acceptance that the terms of the existing modern awards are consistent with the modern awards objective. The second point to observe is that the considerations specified in the legislative test applied by the Tribunal in the Part 10A process is,in a number of important respects,identical or similar to the modern awards objective which now appears in s.136.

    . . .

    [89] In circumstances where a party seeks a variation to a modern award in the Review and the substance of the variation sought has already been dealt with by the Tribunal in the Part 10A process,the applicant will have to show that there are cogent reasons for departing from the previous Full Bench decision,such as a significant change in circumstances,which warrant a different outcome.

    . . .

    [99] To summarise,we reject the proposition that the Review involves a fresh assessment of modern awards unencumbered by previous Tribunal authority. It seems to us that the Review is intended to be narrower in scope than the 4 yearly reviews provided in s.156 of the FW Act. In the context of this Review the Tribunal is unlikely to revisit issues considered as part of the Part 10A award modernisation process unless there are cogent reasons for doing so,such as a significant change in circumstances which warrants a different outcome. Having said that we do not propose to adopt a “high threshold”for the making of variation determinations in the Review,as proposed by the Australian Government and others.

    [100] The adoption of expressions such as a “high threshold”or “a heavy onus”do not assist to illuminate the Review process. In the Review we must review each modern award in its own right and give consideration to the matters set out in subitem 6(2). In considering those matters we will deal with the submissions and evidence on their merits,subject to the constraints identified in paragraph [99] above.”

[7] The modern awards objective,which is significant within the 2012 Review,is as follows:

    “134 The modern awards objective

    What is the modern awards objective?

    (1) 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

      (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 FWC’s modern award powers,which are:

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

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

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

[8] I propose to deal with each provision of the Award which is proposed to be varied.

Coverage and Title of the Award

[9] The Award at clause 4 sets the coverage of the Award as follows:

    “Coverage

    This industry award covers employers throughout Australia in the restaurant industry and their employees in the classifications listed in Schedule B- Classification Structure and Definitions to the exclusion of any other modern award.”

[10] The Award defines,at clause 3.1,the restaurant industry as follows:

    restaurant industry means restaurants,reception centres,night clubs,cafes and roadhouses,and includes any tea room,caf?,and catering by a restaurant business but does not include a restaurant operated in or in connection with premises owned or operated by employers covered by any of the following awards:

    Hospitality Industry (General) Award 2010;

    Registered and Licensed Clubs Award 2010;or

    Fast Food Industry Award 2010

[11] The BIAQ sought to vary the coverage of the Award.

[12] The BIAQ submitted that the definition of the restaurant industry should be as follows:

    restaurant industry means restaurants,reception centres,night clubs,cafes and roadhouses,and includes any tea room,caf?,and catering by a restaurant business.

[13] The BIAQ submitted that the coverage clause should be amended to read:

    “This industry award covers employers throughout Australia in the restaurant industry and their employees in the classifications listed in Schedule B—Classification Structure and Definitions to the exclusion of any other modern award. This Award does not cover employees covered by any of the following awards:

    Hospitality Industry (General) Award 2010;

    Registered and Licensed Clubs Award 2010;or

    Fast Food Industry Award 2010

[14] The BIAQ submitted that the current wording creates confusion.

[15] The BIAQ did not appear at the hearing of the matter nor call any evidence or make any further submissions in support of this application.

[16] The RCA sought to extend the coverage of the Award to cover stand alone catering businesses. The RCA propose the following amendments:

    1. By deleting clause 1 Title and inserting a new clause 1 as follows:

“This Award is the Restaurant &Catering Industry Award.

    2. By deleting the definition of restaurant industry in clause 3.1 and inserting the following definition of restaurant and catering industry:

    restaurant and catering industry means restaurants,stand alone catering businesses,reception centres,night clubs,cafes and roadhouses,and includes any tea room,caf?,and catering by a restaurant business but does not include a restaurant or catering business operated in or in connection with premises owned or operated by employers covered by any of the following awards:

    Hospitality Industry (General) Award 2010;

    Registered and Licensed Clubs Award 2010;or

    Fast Food Industry Award 2010

    3. By deleting clause 4.1 and inserting the following new clause 4.1:

    “This industry award covers employers throughout Australia in the restaurant and catering industry and their employees in the classifications listed in Schedule B- Classification Structure and Definitions to the exclusion of any other modern award.”

    4. By deleting clause 4.8 and inserting the following new clause 4.8 in lieu thereof:

    “4.8 This award does not cover employers in the following industries or activities or their employees:

    (a) retail industry;

    (b) fast food industry;

    (c) in-flight catering for airlines;

    (d) catering services provided by aged care employers;

    (e) hotels,motels,hostels and boarding establishments;

    (f) clubs registered or recognised under State or Territory legislation;

    (g) boarding schools,residential colleges,hospitals or orphanages;or

    (h) restaurants operated in or in connection with hotels,motels,hostels and boarding establishments,and/or clubs registered or recognised under State or Territory legislation.

    NOTE:where there is no classification for a particular employee in this award it is possible that the employer and that employee are covered by an award with occupational coverage.”

[17] The Award Modernisation Full Bench had initially made one award which covered the hospitality industry which included restaurants and catering businesses.

[18] The primary submission of the RCA was that the making of the Award was inconsistent with the Ministerial Request to the Australian Industrial Relations Commission (AIRC). It was submitted that the AIRC was compelled by s 576(c)(1) of the Workplace Relations Act 1996 to comply with the Ministerial Request issued in relation to award modernisation. At the time the then Minister for Workplace Relations and Employment directed the AIRC to develop a modern award for the Restaurant and Catering Industry that:

    “27A. . . .cover[s] the restaurant and catering industry,separate from those sectors in the hospitality industry providing hotelier,accommodation or gaming services.”

[19] It was submitted that the decision of the Full Bench to make the Award does not properly reflect the Ministerial Request. While it was submitted that the Request was considered by the Full Bench that decision is not binding on me because the error made by the Full Bench is a technical error and the “cogent reasons test”cannot apply to technical errors. 3

[20] A caterer gave evidence in support of this application. It was his evidence that the coverage of stand alone catering businesses by the Hospitality Industry (General) Award 2010 (the Hospitality Award) has resulted in higher wages costs. He said that overtime between midnight Friday night and midnight Saturday night was paid at 200% compared to 175% under the Award. Sunday penalties for permanent employees under the Award are 150% whereas the Hospitality Award requires payment of 175%. 4

[21] Another caterer said that the Award as it currently exists,if it applied to his business,would increase his costs but if the proposed variations were made he would be able to maintain his current staffing levels. 5

[22] Mr John Hart,the Chief Executive Officer of the RCA,gave evidence that “the interests and activities of caterers are the same as those of restaurateurs and cafe owners.” 6

[23] AFEI supported the variations of the RCA. It too submitted that the exclusion of stand alone catering businesses from the coverage of the Award was inconsistent with the Ministerial Request initiating the award modernisation process. AFEI agreed that there were similarities between stand alone catering and restaurant businesses and that this provides a compelling reason for the minimum terms and conditions and other provisions applicable to the two industries to be addressed through the Award. AFEI submitted that the two industries were generally covered by the common predecessor instruments and,while it accepted that there were two separate instruments covering the industries in New South Wales,they provided similar terms and conditions. It was submitted that the Hospitality Award provides more beneficial provisions for employees in many respects and therefore the inclusion of stand alone catering businesses in the Hospitality Award has contributed to cost increases in those businesses and reduced their flexibilities. The AFEI points to the classification structure of the Hospitality Award which includes many classifications which are not relevant to the catering industry and are not included in the Award. 7

[24] Business SA supported the application. It was submitted that catering businesses and restaurants derive their income from the sale and service of meals unlike other business covered by the Hospitality Award for whom the sale of meals represents only a small fraction of their income. 8 These figures,it submitted,showed that catering businesses had more in common with restaurants and little in common with pubs and accommodation services.

[25] Business SA’s support for the variation was conditional upon catering businesses being subject to the same transitional provisions that apply to them under the Hospitality Award.

Consideration

[26] In its decision issued on 20 June 2008, 9 the Award Modernisation Full Bench considered the initial submissions in relation to the appropriate award coverage in the hospitality sector. It concluded as follows:

    [31] Hospitality Industry. There was a range of submissions from the ACTU,unions and various employer groups in the hospitality sector. The Commission’s awards are classified into three industries the catering industry,the liquor and accommodation industry and the restaurant industry. A fourth industry is also potentially relevant,the fast food industry,although opinions differ as to whether that industry should be seen as part of hospitality,part of the retail industry or an industry in its own right. As we indicate later we have decided to consider the status of the fast food industry in the context of the drafting of the retail industry modern award. The majority of the employers and the principle union,the Liquor,Hospitality and Miscellaneous Union (LHMU),favour the creation of three modern awards in the hospitality industry. The awards would cover,respectively,the following industries:

      ●accommodation,hotels,pubs,taverns and gaming (including casinos);

      ●restaurants and catering;and

      ●clubs.”

    [32] This division is supported by the LHMU,the Australian Hotels Association (AHA),Clubs Australia and the Restaurant and Catering Industry Association of Australia. The Motor Inn,Motel and Accommodation Association of Australia and its affiliates in New South Wales and Queensland supported the creation of a fourth modern award dealing with the accommodation sector of the hospitality industry only.

    [33] There are good reasons,based on the evidence of AWAs and NAPSAs,to include the hospitality industry on the priority list. It is not necessary at this stage to resolve the issues as to the number of modern awards that should be made. Nevertheless we think the proposals for a split into three or more awards have the potential for significant overlap and duplication. At the level of the safety net it may be difficult to justify the creation of four separate modern awards if the peculiar circumstances of each part of the industry could be dealt with satisfactorily by minor modifications to some of the terms of one industry award.

    [34] We have decided to include the hospitality sector,constituted by the federal industries of catering,liquor and accommodation and restaurants on the priority list. This industry,at this stage,will also include the licensed club industry.

[27] In its statement 10 issued on 12 September 2008,at which time it published an exposure draft of the Hospitality Award,the Full Bench said in relation to the hospitality industry:

    [46] We have drafted a single award for the hospitality industry,although we have deferred consideration of whether licensed and registered clubs and off-shore island resorts should be included within the scope of that award. With those exceptions,which we address later,we have reached the provisional view that the nature of work in the hospitality industry and the terms and conditions of employment in federal awards and NAPSAs do not provide any insurmountable obstacle to the making of a single modern award,being a safety net,in the hospitality industry. There are some differences in the relevant awards’terms and conditions,but they are not so great as to require the making of a series of separate modern awards for the various sectors of the industry. We are optimistic that the practical impact of changed safety net conditions for some employers and employees can be addressed through appropriate transitional arrangements.

[28] On 10 October 2008,RCA filed submissions regarding the exposure draft calling on the AIRC to make a stand alone restaurant and catering modern award. That position was not supported by the LHMU as UV was then known.

[29] In its decision 11 of 10 December 2008,the Full Bench responded to the submissions filed by the parties in response to the exposure draft. It said as follows in relation to the scope of the award:

    Scope of the award

    [113] In our statement of 12 September 2008,which accompanied the exposure drafts,we expressed a provisional view that the nature of work in the hospitality industry and the terms and conditions of employment in federal awards and NAPSAs were such that a single modern award could be made in respect of the hospitality industry,although consideration of the clubs and off-shore resorts sectors were deferred until Stage 3.

    [114] In the post-exposure draft consultations,the Restaurant and Catering Industry Association of Australia (Restaurant and Catering Australia) argued again for the making of a separate restaurant and catering industry award and the Hotel,Motel and Accommodation Association of Australia (HMAA) sought separate award coverage for the accommodation sector.

    [115] Restaurant and Catering Australia submitted that the restaurant and catering sector constitutes a significant industry in its own right and is deserving of its own award. It asserted that the exposure draft inappropriately applied the terms of a hotel industry award to other sectors and that the Restaurants,&c.,Employees (State) Award (NSW) (the Restaurants NSW award) made following an arbitration in the New South Wales Industrial Relations Commission,should form the basis of a separate award regulating restaurants only. Restaurant and Catering Australia submitted that there were differences between hotels and restaurants,both in terms of awards and NAPSAs currently applying,with particular reference to the Restaurants NSW award,and the manner in which the sectors traded and staffed their establishments and that the making of an award in the terms of the exposure draft would impose cost increases on employers in the restaurant and catering sector of the industry in New South Wales (NSW) in particular and in Queensland,Western Australia and Tasmania as well.

    [116] HMAA submitted that a separate award for the accommodation sector would better recognise the changes that have occurred in the industry,allow for greater flexibility and facilitate a simpler award.

    [117] We have considered the further submissions of Restaurant and Catering Australia,HMAA and other organisations involved in the consultations and decided to make a single modern award for the hospitality industry,as proposed in the exposure draft.

    [118] We accept that there are some differences in trading and staffing arrangements between various sectors within the hospitality industry. Equally,however,there is some commonality between the sectors. It is also significant that there is a level of diversity in the operations of various businesses within sectors of the industry.

    [119] There is also some diversity in terms and conditions in federal awards and NAPSAs operating within the hospitality industry,as defined in the exposure draft. However,such differences apply equally across awards within the smaller sectors proposed as they do across sectors. There is a high level of commonality in federal award provisions covering the hotel,accommodation and restaurant sectors and some but less commonality in the relevant NAPSAs. To illustrate,in the restaurant sector there are significant differences between the terms and conditions in the Restaurants NSW award and those in NAPSAs operating in other States just as there are significant differences between the federal restaurant awards and State NAPSAs. For example,the additional penalties in respect of “late work”in the NSW award are not reflective of arrangements applying generally in either federal awards or NAPSAs in other States.

    [120] In our view,the classification structure in the exposure draft is capable of accommodating the types of employees engaged in each sector. Whilst the structure is more extensive than appears in some existing awards,in order to accommodate the broader operation of the award,employers previously subject to a more confined structure should be able to readily identify and apply those classifications utilised in their establishments.

    [121] We appreciate that additional costs will arise for some employers from the making of an award in the terms of the exposure draft,more so in some States than others,depending upon the terms and conditions currently applying in the NAPSAs. This situation would arise even if separate awards were made for the restaurant and accommodation sectors. The impact of changed safety net conditions for some employers,and in other cases employees,can be addressed through transitional arrangements.”

[30] On 28 May 2009 the then Minister varied the modern award request as follows:

      “1. After paragraph 27 insert:

      “Restaurant and catering industry

      27A. The Commission should create a modern award covering the restaurant and catering industry,separate from those sectors in the hospitality industry providing hotelier,accommodation or gaming services. The development of such a modern award should establish a penalty rate and overtime regime that takes account of the operational requirements of the restaurant and catering industry,including the labour intensive nature of the industry and the industry's core trading times.”

[31] In its statement of 25 September 2009 the Full Bench 12,having consulted with the parties,made the following statements:

    [182] On 28 May 2009 the Minister issued a variation to the consolidated request,which dealt specifically with the restaurant and catering industry. It varied the consolidated request by adding the following paragraph:

      “Restaurant and catering industry

      27A. The Commission should create a modern award covering the restaurant and catering industry,separate from those sectors in the hospitality industry providing hotelier,accommodation or gaming services. The development of such a modern award should establish a penalty rate and overtime regime that takes account of the operational requirements of the restaurant and catering industry,including the labour intensive nature of the industry and the industry’s core trading times.”

    [183] The effect of the variation was summarised in the Australian Government’s submission of 24 July 2009 as:

      “asking the Commission to create a separate modern award covering the restaurant and catering industry,separate from those sectors of the hospitality industry providing hotelier,accommodation or gaming services.”

    [184] In its statement of 26 June 2009,concerning the proceedings arising out of the variation,the Commission said:

      “Given the circumstances which have led to our consideration of the proposed award,we would be assisted by any indications on behalf of the Minister of the scope and terms of the proposed award,including terms relating to hours of work,penalty rates and overtime.”

    [185] In its Stage 4 submission of 24 July 2009 the Australian Government clarified the intention of the variation to the request in these terms:

      “Scope of the modern award

      10 The Minister’s variation to the request that ‘restaurant and catering’be removed from coverage under the HIGA (the Hospitality Award) is intended to refer to those restaurants and catering activities that are operated as part of a restaurant business.

      11 The variation is not aimed at stand-alone catering businesses such as those operating on a contract basis in the airline,defence or mining industries. Nor is it directed towards eateries established within licensed clubs,hotels or other similar premises.

      12 The Government considers that these types of restaurant and catering businesses have a very different operating base to restaurants and should remain covered by the broader Hospitality Award.

      ........

    Scope of the award

    [188] The 28 May 2009 variation to the consolidated request requires the Commission to create a modern award covering the restaurant and catering industry,separate from those sectors in the hospitality industry providing hotelier,accommodation or gaming services. The intent of that variation,as explained by the Government’s 24 July 2009 submissions,was to require the making of a modern award covering those restaurants and catering activities that are operated as part of a restaurant business. It follows that such an award should not cover restaurants which are operated as part of another business,such as a hotel or a catering operation.

    [189] The coverage clause of the exposure draft has been developed to achieve that end. Dealing first with restaurants,the clause defines restaurant by reference to a restaurant within a restaurant business. The effect will be to include all restaurants other than those operated in or in connection with premises owned or operated by employers covered by the Hospitality Modern Award;the Registered and Licensed Clubs Award 2010 and the Fast Food Industry Award 2010. The coverage clause of the Hospitality Modern Award will be varied to exclude restaurants,save to the extent that restaurants are operated in or in connection with premises owned or operated by employers otherwise covered by that award. In relation to catering the coverage of the catering industry will be limited to catering by a restaurant business which is defined as the provision by a restaurant of catering services for any social or business function where such services are incidental to the major business of the restaurant. Otherwise the catering industry will continue to be covered by the Hospitality Modern Award. We have also included in the coverage clause in the exposure draft an exclusion for contract caterers,whose principal and substantial business activity is that of providing catering services and/or accommodation services on a contract or fee for service basis. In light of this general exclusion,it is unnecessary to include a specific exclusion in respect of airport catering or catering under contract to the Department of Defence. The coverage clause of the Hospitality Modern Award will be varied to exclude catering by a restaurant business.

    [190] The scope clauses in the exposure draft and the Hospitality Modern Award,as it will be amended,are consistent with the intent of the first part of clause 27A of the consolidated request,as clarified by the Australian Government in its 24 July submission. It is also consistent with the scope of most existing awards and NAPSAs regulating restaurants,as set out in Attachment B of the 24 July 2009 submission of the LHMU.

    [191] As indicated already,we have called the exposure draft the Restaurant Industry Award 2010. Although the award will cover catering activities that are operated as part of a restaurant business,the broader catering industry will remain covered by the Hospitality Modern Award and it would be misleading to include catering in the title.”

[32] In its decision 13 of 4 December 2009,the Full Bench responded to the submissions it had received and said as follows:

      Restaurant Industry Award 2010

      [177] For the purposes of this section of our decision,we have referred to existing instruments in the abbreviated form recorded in our statement of 25 September 2009.

      [178] The submissions put following the publication of the exposure draft to a significant degree reflected positions advanced in the pre-exposure draft consultations,which we considered in formulating the exposure draft and addressed in our statement of 25 September 2009. We have closely considered the further submissions put to us since the publication of the exposure draft but have not been persuaded to depart from the position reflected in the exposure draft and the reasons given in our statement,except as indicated below.

      [179] A major issue which arose in the post-exposure draft consultations concerned the coverage of the catering industry. Restaurant and Catering Australia (RCA) and AFEI argued that the catering industry generally should form part of the restaurant award,rather than the Hospitality Industry (General) Award 2010 (Hospitality Award),although the AFEI submission was directed to function caterers. We are not persuaded to alter the scope of the two awards,in respect of the catering industry,for the reasons given in our statement of 25 September 2009. We remain of the view that the coverage in the exposure draft gives proper effect to the 28 May 2009 variation to the consolidated request.”

[33] It can be seen from this history that the Full Bench,in making the Award,had regard to the Ministerial Request and the submissions put by the parties. I am unable to accept the submissions of the RCA that the proposed amendment is a technical amendment.

[34] I accept the submissions of UV that the RCA’s submission is really a submission that the Full Bench was in error. I consider that I,as a single member of Commission,should not,in effect,overturn a decision made by the Full Bench who was charged the task of modernising awards. Other than the bald assertion that the coverage of the Award was inconsistent with the request,no detailed submissions were made to me as to why the Full Bench’s decision was in fact inconsistent with the request.

[35] It was submitted that the words of the request are clear - it was to “create a stand alone award for the restaurant and catering industry.” 14 The request did not say that stand alone catering business’must be included in the Award. If that is what was intended that is what it would have said. The Award in fact covers restaurants and catering businesses. So much is clear from clause 4.1 which ensures that restaurants which operate catering businesses are not obliged to comply with two separate awards.

[36] I therefore dismiss the application made by the RCA to vary the coverage of the Award as I am unable to conclude that such variations are warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

[37] In relation to the BIAQ application there is no evidence before the Commission that the current wording of the coverage clause has created any confusion and as such,the application is dismissed.

The BIAQ’s proposed variations

[38] The BIAQ proposed variations in relation to part-time employment,annualised salaries,junior rates of pay,allowances,breaks,payment of wages,overtime,and public holidays. No evidence was called to support the applications,no submissions were made and the BIAQ did not participate in the hearings. Accordingly I am unable to conclude that such variations are warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”The BIAQ’s application is dismissed.

Penalty Rates

[39] The RCA propose to change the penalty structure in the Award. Currently the Award provides at clause 34.1 for penalties to be paid for work on Saturdays and Sundays and public holidays and after 10pm on Monday to Fridays as follows:

Type of employment

Monday to Friday

Saturday

Sunday

Public Holiday

Monday to Friday 10pm to midnight per hour

Monday to Friday midnight to 7am per hour

 

%

%

%

%

  

Weekly

100

125

150

250

10% of the standard hourly rate

15% of the standard hourly rate

Casuals including 25% casual loading

125

150

175

250

10% of the standard hourly rate

15% of the standard hourly rate

[40] For some employers the penalty rates are transitioning.

[41] The RCA propose that no penalties be payable for work on Saturday and Sunday or for work performed between 10pm and 7am Monday to Friday. Instead they propose that a penalty be payable to an employee who works on the sixth consecutive day of work and the seventh consecutive day of work.

[42] The RCA propose a new clause 34.2 would be inserted as follows:

    “When an employee works for a period of six or more consecutive days,the employee will be paid the following percentages of the minimum wage in clause 20 –Minimum wages for the employee’s relevant classification in substitution for the percentage set out in clause 34.1:”

    Type of employment

    sixth consecutive day of work

    seventh consecutive day of work and subsequent consecutive days

    Public holidays

     

    %

    %

    %

    Full-time and part-time

    125

    150

    250

    Casual (inclusive of 25% casual loading)

    150

    175

    225

[43] In the event that the primary application is not successful,the RCA proposes that penalty rates be reduced to 125% for weekly employees on Saturday and Sunday and to 150% (inclusive of the casual loading) for casual employees and 225% for casual employees on Public Holidays.

[44] It was submitted that the current penalty rate provisions in the Award are operating in a manner which is inimical to the modern awards objective.

[45] It was submitted that the industry predominately operates on weekends and that penalty rates are deterring a number of employers from providing work to employees on weekends. It was submitted that the increased Sunday loading is not promoting social inclusion and overvalues work performed on a Sunday. It was submitted that the social disability specifically associated with Sunday work is no longer relevant in Australian society and that for the majority of people work on Sunday is no different to work on Saturday. It was submitted that the rates of pay in the Award,including penalty rates,are so high that they are deterring employers from engaging in collective bargaining.

Evidence

[46] Evidence was called from 20 restaurant operators and two stand alone catering businesses.

[47] Ten of the restaurant operators were located in Queensland,five in New South Wales (NSW),and five in South Australia. One stand alone caterer was located in Victoria,the other in Queensland.

[48] They gave evidence that labour costs are a significant proportion of their costs;that labour costs had increased as a result of the modern award;profits were negligible;if they open on Sunday it is at a loss;the majority of their staff are students or employees with carer’s responsibility and if the proposed changes were made they would employ more staff.

[49] One witness 15 operated a cafe and restaurant in the Northern Rivers District in NSW. Her business opens Tuesday to Sunday for breakfast and lunch. There are local government restrictions on her opening hours. She does not open on public holidays,except Easter Saturday and Sunday,because of the penalty rates. She said that the Award had increased her labour costs by 10%. No evidence was given about what industrial instrument applied prior to the Award. This witness said that she did not have the resources and expertise to negotiate an enterprise agreement. She did not give evidence that the Award was a barrier to negotiating an enterprise agreement.

[50] The witness said that she commenced operating in March 2007. She said she was still benefiting from the transitional provisions in the Award.

[51] It is not clear if the business is a constitutional corporation so it may be that the terms and conditions that had previously applied were those provided in the Australian Fair Pay and Conditions Standard or the NSW common rule award. For example the witness says that she has reduced costs by doing the cleaning herself because of the minimum call in the Award for casuals is two hours. Yet the Restaurants,&c.,Employees (State) Award (NSW) 16 had a minimum call for casuals of three hours. The NSW award did provide for penalties for working on Saturday,Sunday and Public Holidays albeit at a lower rate than the Award.

[52] Further it is not clear if the 10% increase in costs includes the cost increases associated with the minimum wage adjustments which increased on 1 July 2010 by $26.00 per week,on 1 July 2011 by $19.40 per week and by 2.9% on 1 July 2012. No attempt was made to disaggregate the increases which flowed from these minimum wage adjustments.

[53] There was no evidence given that any of her staff worked a sixth or seventh day or would do so if the variation were approved.

[54] A witness 17 who operates a restaurant on the Gold Coast,gave evidence of declining revenues in the past 5 years of 10% per year which are independent of the introduction of the Award. He also gave evidence of increasing costs which are independent of the introduction of the Award. It was his evidence that the introduction of the Award increased his wages bill by $1000.00 per week. As a consequence of all these factors,the restaurant has made a loss in the last two-three years.

[55] The loss of revenue caused him to reduce the number of staff employed which has caused him to have to work more hours. As result of the reduction in staffing levels his wages bill declined in 2011 compared with 2010,but the increase in labour costs has seen his labour costs remain at 35% of revenue.

[56] Prior to the introduction of the Award,his employees were paid under a collective agreement which had a flat rate of pay of $22.00 per hour. It is not clear if this agreement was a federal system agreement or a state system agreement.

[57] Most of the front of house staff and some back of house staff are university students. Some other staff work in the restaurant as a second job. Staff are keen to work weekends because of penalty rates.

[58] The witness said that if penalty rates were removed and only applied on the sixth and seventh day he could offer good staff higher wages based on their productivity. He also said there would be a lower compliance cost because of the reduced time needed to calculate wages.

[59] There was no evidence given that any of his staff worked a sixth or seventh day or would do so if the variations were approved.

[60] Again there was no attempt by this witness to disaggregate the increases to wages which flowed from the minimum wage adjustments from those which came from the introduction of the Award.

[61] A witness 18 from Byron Bay operates a restaurant seven days per week. Back of house staff work between 45-50 hours per week in summer compared with 36 hours per week in winter. Front of house staff work 4-5 shifts per week at 6-8 hours per shift. The majority of staff are local permanently employed with seasonal labour,including some on tourist visas in peak season.

[62] Back of house staff work 5-6 shifts per week while front of house work 4-5 shifts per week. All staff are permanent part time employees and the business has individual flexibility agreements in place to meet operational requirements. The employees are paid a flat rate of pay with no penalties paid on weekends. Casual employees are paid under the Award.

[63] Back of house staff are often paid above Award rates of pay. In addition staff share the tips and the total tip pool is approximately $230,000 per year.

[64] He employs university students,career hospitality industry employees and tourists. Some of his employees work in other jobs including other hospitality jobs.

[65] He said that while the GFC did not have an immediate impact on his business he now finds that the average customer spend is dropping.

[66] He said that the Award had increased the costs of casual staff and as a consequence he employs more part-time staff. He said that wages had gone from 37% to 43% of gross sales. There has also been a narrowing of the wages gap between front of house and back of house staff which has upset some of the back of house staff.

[67] As the business was bought in 2006 the underpinning industrial instrument would have been the NSW state award,which as set out above had a range of penalties albeit less than the Award.

[68] Again there was no attempt by this witness to disaggregate the increases to wages which flowed from the minimum wage adjustments from those which came from the introduction of the Award.

[69] He gave evidence that other costs,not related to the Award,had increased as well.

[70] He gave evidence that paying penalties on the sixth and seventh day along with the removal of the after 10pm penalty and the abolition of penalties for casual employees would mean he could roster additional staff hours,reduce his hours of work and increase profits. While some back of house staff may have received a penalty under the proposed variation because they worked 5-6 shifts a week (assuming there were no split shifts) there was no evidence about the proportion of employees who would receive the penalty payment.

[71] A witness 19 from Adelaide gave evidence that he had operated his business since 2006. It opens Monday to Friday and does not open on Saturday or Sunday. It was his evidence that the penalty rates payable in South Australia made opening on Saturday unprofitable. This predated the Award.

[72] While he would like to open the restaurant on Saturday and Sunday the current penalty regime does not permit him to do so.

[73] His staff are mainly full-time or part-time. He pays his back of house staff above Award rates of pay but most front of house staff are paid award rates. Staff include students,mothers and career hospitality staff.

[74] His costs have increased due to matters not associated with the Award. He said his labour costs had increased due to the increases in the minimum wage and the introduction of the Award. He said that on the introduction of the Award labour costs increased by 24%. No figures were produced to support this statement. It is difficult to see how these figures are substantiated as the only increase in penalties for a Monday to Friday restaurant were the transitioning casual loading at 1% per year with possibly some transitioning penalty rates after 10pm but these may have been offset by the transitioning down of the after 6pm penalty for casual employees. Again,there was no attempt by this witness to disaggregate the increases to wages which flowed from the minimum wage adjustments from those which came from the introduction of the Award.

[75] The witness also gave evidence of increasing compliance costs associated with calculating wages under the Award. However given that the Cafes and Restaurants (South Australia) Award 20 (South Australia Award) provided for penalties,it is not clear how this claim is made out.

[76] The witness said that if the proposed changes were implemented he could employ an additional staff member,thereby reducing his hours of work and he would consider opening on Saturday and Sunday thereby employing more staff.

[77] This witness also had difficulty with the classifications structure in the Award. He complains that a more experienced waiter gets paid less than an employee with minimal experience who handles money.

[78] A witness 21 from Townsville who has a stand alone catering business gave evidence. The modern award applies to the business is the Hospitality Award. The witness said he had a collective agreement in place and that if the current Award were to apply to his business,then he would be required to reduce his staff by 10% as costs would increase by that amount. He said that with the changes proposed to the Award he would be able to maintain his current employment position and continue to employ staff at current levels.

[79] A witness, 22 who operates a restaurant in Townsville which opens for lunch and dinner Tuesday to Friday and dinner Saturday gave evidence that the business stopped opening on Sundays because the volume of customers did not justify the high wage rates that applied on Sundays. As this occurred prior to the witness commencing work at the restaurant four years ago this presumably occurred prior to the Award coming into effect.

[80] Staff are employed on an enterprise agreement,made before the Award came into effect and all staff are paid $25.00 per hour and there are no penalties or overtime paid. He said his chefs are paid above this rate. If the agreement did not apply he said his wages bill would increase. However no roster analysis was provided to support this statement. He submitted that his staff earn between $50.00 and $200.00 in tips per night.

[81] He did not give evidence that any of his staff work six or seven days in a row or would do so if the variation were approved.

[82] He said that the majority of his staff are school or university students and they can only work at nights and on weekends. In addition,he employs some mothers who prefer to work nights and weekends when their partners can look after the children. He has no trouble attracting staff to work at nights and weekends even though they do not pay penalty rates.

[83] He said that other costs unrelated to the Award had increased and there had been reductions in revenue for reasons unrelated to the Award. His profit margin remains at about 4%.

[84] A witness 23 who operates a restaurant in Adelaide opens Monday to Sunday for lunch and dinner. He said Friday and Saturday are his busiest days. Other than two kitchen staff the rest of his staff are casual employees. All staff are paid award wages and receive tips of $15.00-$20.00 per night. There is no evidence that any of the staff work six or seven days in a row or would do so if the variation were approved.

[85] The majority of his staff are students and they find it difficult to work Monday to Friday as they have study and they are happy to work on weekends.

[86] He said his revenue had dropped over the last two years but this was unrelated to the Award.

[87] He also said costs had increased for reasons unrelated to the Award. However he also said his wages bill increased by 20-30% with the introduction of the Award and has continued to increase as a result of wage increases. No material was filed to support these figures.

[88] He said it was not possible to pass on all these cost increases to the customers and hence he had to find other ways to reduce costs. This includes employing staff for the minimum period he can and the owners working more hours. He also said compliance costs have increased. It is not clear on the evidence how compliance with the Award is more difficult than compliance with the South Australian Award.

[89] He said if the changes to the Award were approved he would likely engage more staff to reduce the hours worked by the business owners. They could also offer breakfast on weekends.

[90] He finds the classification structure of the Award irrelevant to his business and he wants employees to experience all facets of the operation but if they are required to handle money or serve alcohol they must be paid more. He also objects to inexperienced workers being paid the same as experienced workers.

[91] A witness 24 who operates a restaurant in Mt Gambier which opens seven nights per week said Saturday night is his busiest night. The majority of his staff are casuals though he has three permanent employees and three apprentices. He and his wife work in the business and they particularly work on Sundays to avoid paying penalty rates.

[92] Most of his employees are women with carer’s responsibility during the day who like to work nights and weekends because their husbands can look after the children. Some of his staff work second jobs during the day. All staff except some chefs are paid Award rates of pay.

[93] He said that when the Award commenced wages went from 33% of turnover to 37% of turnover. He said that prior to the Award he paid a casual loading of 20% and now he has to pay 25%. As the transitional provisions of the Award phased in the increase in the casual loading the witness was not paying in accordance with the Award if he immediately started paying a 25% loading to casuals.

[94] Prior to the Award staff were on AWA’s. He no longer has any staff employed on AWA’s. He said that the Award had reduced the level of weekend penalties previously payable in South Australia but he said this benefit had been more than offset by an increase in the base rate and casual loading. No analysis was provided to support this conclusion.

[95] He has difficulty understanding the Award classifications and he said his staff do not know what the difference is between Level 1 and 2. Also he does not know what the expression “appropriate level of training”in the Award means.

[96] He said that the introduction of the Award means the number of hours available for staff has decreased and he and his partner and other salaried staff work longer hours. There has been a reduction in service levels and they have reduced the size of the menu.

[97] He was unable to give evidence about the precise labour costs of the restaurant business because the financial data is combined with the accommodation business that he also runs.

[98] He said that energy costs had increased substantially. While he has implemented cost cutting measures there is no capacity for further cuts. He said that the restaurant only survives because of the accommodation business.

[99] He also said that the Global Financial Crisis (GFC) and a decline in the regional economy were affecting the business. He also said that some of his competitors were paying cash in hand to their staff which gave them an unfair advantage.

[100] He said that if penalties were only available on the sixth and seventh day,he and his partner would stop working Sundays and another staff member would be employed. Further he said that he would open for lunch on Sundays. This would have a flow on effect for local producers.

[101] There was no evidence that any of his staff worked six or seven days in a row or would do so if the variations were approved.

[102] A witness 25,who operates a restaurant in Cairns which is open for lunch Monday to Friday,for dinner seven days per week and also on public holidays except Christmas Day,said his trading patterns depend on tourist numbers. He said that tourism in Cairns had substantially declined. As well the type of tourists had changed substantially and they spend less money. He said there had been a decline in revenue of 15-20% over the past five years and the restaurant operates at a loss. Because of the non-award related factors which have reduced revenue they are not able to increase their prices to compensate.

[103] Other non-award related costs have increased significantly.

[104] He employs staff on a flat hourly rate of pay and engaged all staff as part-time or full-time employees. Chefs are paid well above the Award.

[105] He said that the Award meant that the flat hourly rate had to increase to accommodate the increased penalties. As a result he has had to reduce costs in other areas and reduce the number of hours of work offered to staff. He said that profitability had been reduced by 1.5-2%. 30% of his staff are backpackers and he said they do not care what day of the week they work. Some staff are mothers or university or TAFE students. He said staff do not have difficulty working on Saturday or Sunday in fact that is when they are available. Some of his staff have second jobs. He further said that a waiter would earn $20.00 per shift in tips.

[106] He did not apply the transitional provisions in the Award as he found it too complicated.

[107] He said that the proposed changes would mean he could employ more staff particularly on weekends to improve service to customers.

[108] He also said he was at a competitive disadvantage because of his competitors paying cash in hand.

[109] A witness 26 had operated a licenced restaurant on Magnetic Island from March 2010-July 2012. Magnetic Island has a peak tourism season in June/July and October/November. At other times the number of visitors to the island drops. She needed to make enough money in the peak season to offset the off season. In peak season she opened seven days a week but in the off season she only opened for dinners Thursday to Sunday and for breakfast and lunch on Saturday and Sunday.

[110] She said even in the short time she operated the business there was a decline in customers. She said that Cyclone Yasi in 2011 had a significant effect.

[111] She described other businesses that had closed down.

[112] When the Award took effect in July 2010 she had to reduce staff hours. She employed staff on a flat rate of pay that incorporated weekend penalty rates. She employed locals and often her staff had other jobs. When she started her business labour was 40% of her revenue but when it closed it was 30% of revenue. Other non-Award costs increased significantly over the time she operated the restaurant. As a result of the losses made she decided to convert the business into a take away food business.

[113] She said the elimination of weekend penalty rates and the introduction of the small business provisions would have enabled her to keep operating until the economic situation on the island improved. She said that even though this would have reduced her employees’income she would not have had difficulty getting employees.

[114] There was no evidence that any of her staff worked six or seven days in a row or would do so if the variations were approved.

[115] She said the transitional provisions are difficult to understand and increased compliance costs.

[116] A witness 27 operated a cafe in Calamvale,Queensland which is in a shopping centre. The cafe opened seven days per week but does not open after 5pm. His busiest days are Saturday and Sunday. The cafe opens on public holidays but only because it is a requirement of the lease.

[117] All the staff are casual employees and are paid the minimum award rate of pay. The employees who are tertiary students are only able to work Friday to Sunday while the school students can only work on the weekends. His other staff are in their first job and are not long term employees. He works every Sunday to minimise penalty rates.

[118] Labour costs are 42% of revenue on weekdays and 20% on weekends. This is because he employs juniors on weekends and he works Sunday.

[119] He said his labour costs increased by 8-9% when the Award was introduced. He said his junior employees received an additional $1.00 per hour. He found the transitional provisions too complicated to apply so he applied the Award rate from 1 July 2010.

[120] As a consequence of the increase in labour costs,he has reduced the number of hours he can offer employees which has reduced the service to customers and as a result he has trouble keeping staff because he cannot offer enough work to employees who rely on income from casual employment and weekend work.

[121] He also points to declining revenue which is independent of the Award. As this business is a franchise he is unable to adjust his prices.

[122] He says that the requirement for an employee to progress through the classification structure after three months does not take into account how many hours the employee actually works in the three months and is anomalous. Further the requirement to classify employees who handle cash at grade three prevents employees being able to service customers.

[123] He said if penalties were only paid on the sixth and seventh day he could increase his staff numbers on weekends and increase service levels.

[124] There was no evidence that any of his staff worked six or seven days in a row or would do so if the variations were approved.

[125] A witness 28 in Brunswick Heads,NSW runs a small cafe which opens seven days a week for breakfast and lunch. Saturdays and Sundays are his busiest days. All staff are employed as casuals and bar two are paid the minimum award rate. He says he does not have trouble getting people to work on weekends as most of his staff are students. He does not have an enterprise agreement because of the transaction costs associated with bargaining. While revenue in the business increased between 2007 and 2011 it has now plateaued. He says he has little capacity to increase prices.

[126] He said that some of his competitors did not comply with the Award. If penalty rates were removed he would employ more staff during the week. If the proposed changes for small business were introduced he would be able to invest more money in his business and therefore improve the service for his customers.

[127] There was no evidence that any of his staff worked six or seven days in a row or would do so if the variations were approved.

[128] A witness 29 gave evidence that she operated a restaurant in Brisbane which opens for lunch and dinner Monday to Friday and for dinner on Saturday.

[129] The business is busiest on Friday and Saturday. She would prefer to open Tuesday to Sunday for lunch and dinner. She currently does not open on Sunday because of the penalty rates. For the same reason she does not open on public holidays.

[130] She employees 13 full-time staff and 12 casuals. Her front of house staff are students,people from overseas on working visas,women with carer’s responsibilities or people with second jobs. The casuals have a high attrition rate. This increases her costs. Back of house staff are predominately full-time and are paid above Award wages.

[131] She said that her staff do not mind working weekends and at night because it suits their circumstances.

[132] Prior to the introduction of the Award,casual employees were paid a flat rate of $21.00 or $22.00 per hour. Once the Award came into operation,wages were dropped back to the Award rate because of the penalties. This has added to compliance costs.

[133] She said the revenue had declined because of the GFC and because of the 2011 Brisbane flood but she is unable to increase her prices. Labour costs have increased with the Award. Costs unassociated with the Award have also increased.

[134] If penalties were only payable on the sixth and seventh day then she would open on Sunday and hire more staff. It would also reduce compliance costs.

[135] There was no evidence that any of her staff worked six or seven days in a row or would do so if the variations were approved.

[136] A witness 30 operates a restaurant/cafe on the Central Coast of NSW. It opens seven days per week from 9am to 4pm. The busiest trading days are the weekend. The business has to make sufficient profit in summer to make up for the lack of profit in winter.

[137] He said that since the GFC there has been a decline in customer numbers and the customers are spending less.

[138] He employs ten staff some of whom are full time and some casual. He pays his front of house staff slightly above award rates of pay and his chefs substantially over award rates of pay. While he employs some career hospitality workers most of his front of house staff are university students who want to work at night and on weekends. He has however started to change his staffing profile and has commenced employing older staff.

[139] Labour costs and other costs have increased but it is difficult to increase revenue as the business is price sensitive.

[140] The Award caused him to reduce the number of hours he offered staff and increase the hours he works. If penalties were only payable on the sixth and seventh day then he would employ additional staff and reduce the hours he works. He also said he would extend his trading hours. This would have a flow on effect to his suppliers.

[141] There was no evidence that any of his staff worked six or seven days in a row or would do so if the variations were approved.

[142] A witness 31 operates a restaurant in Sydney which also offers take away food. The business opens seven days a week but does not offer dinner on Sunday night. It is not profitable to open on Sunday evening. He employs full-time and casual staff and pays above award rates to his chefs and managers but pays award rates to the front of house staff,apprentices and kitchen hands. Tips are shared and full-time staff can earn up to $300.00 per week in tips.

[143] Many of his casual staff are students who are only able to work nights and weekends. He finds it harder to get staff during the week than on weekends. Some of his staff work to supplement other jobs and commitments.

[144] Since the GFC,revenue has declined but costs have increased. He said that labour costs have increased since the Award commenced.

[145] He has difficulty with the classifications in the Award. As all his staff are required to take reservations,greet and seat customers,they are classified at level 3. Similarly all staff are required to receive monies. He also does not understand the expression “appropriate level of training”as it is possible for staff to obtain these qualifications at school and have no practical experience. He does not think that the proposal that small business not be required to pay more than the national minimum wage would be effective because the market requires that he pay staff more. It may enable him to employ young people to train them if he had the flexibility to determine the wage to be paid to these employees.

[146] A witness 32 operates a restaurant in Mt Gambier,South Australia. It opens seven days a week for lunch and dinner except Sundays when he does not open for lunch. They had previously opened for lunch on Sundays but it was not profitable. Fridays and Saturdays are his busiest times. He employs casual and permanent staff. The majority of his staff are mothers and people who have second jobs. He says working at night and on weekends suits the mothers as their children can be cared for by their fathers.

[147] He said there had been a decline in the number of customers which he puts down to the price increases that he introduced as a result of the introduction of the Award as well as other cost increases. He also pointed to some changes in the region which are suppressing demand.

[148] The wage he takes from the restaurant is below the Award rate. He said the business did not make a profit last year due to some costs unassociated with the Award.

[149] He does not charge a weekend or public holiday surcharge because of customer resistance.

[150] The introduction of the Award has caused him to reduce staff working hours and not to open on public holidays.

[151] He finds the classification structure to be rigid. As all his staff greet customers they are all classified at Level 3. He also does not understand the expression “appropriate level of training.”

[152] If penalties were only payable on the sixth and seventh day he would open for Sunday lunch and he would be able to reduce the number of hours he and his partner work in the business and offer more work to his employees.

[153] There was no evidence that any of his staff worked six or seven days in a row or would do so if the variations were approved.

[154] In addition to the lay evidence,Mr Ken Burgin,a hospitality business consultant,gave evidence. 33 He produced a spreadsheet which showed the impact of penalties on profits of Saturday,Sunday and Public Holiday penalties.34 His evidence showed that the higher Public Holiday penalty made trading on a public holiday unprofitable even with a surcharge. It was his opinion that “Aussies”don’t like paying surcharges and if imposed will reduce the amount they leave as a tip.

[155] The evidence of these witnesses was not challenged. What was challenged was the weight that should be given to that evidence.

[156] Mr Hart gave evidence and was cross examined. He gave evidence about the nature of the industry.

[157] The RCA also surveyed its members. The survey report contained the following disclaimer:

    “Two limitations of the survey are also presented in Section 1. Firstly,some analyses contained in the report are based on modest numbers. Therefore these particular analyses may be considered statistically unreliable and should be interpreted with caution. Secondly,as the sample of this survey was exclusively drawn from the R&CA membership data bases,it is not possible to generalise the survey results to the general population of restaurant and catering operators. Hence this report serves to create a picture of R&CA members’businesses,and may not be representative of restaurant and catering operations in general.”

[158] Based on the 221 responses,Mr Hart concluded that 39% of participants believed profitability would decrease and 31% believed it would remain the same. 70.9% said they would reduce the number of staff if labour costs continue to rise. 41% said that they responded to weekend and Public Holiday penalty rates by reducing employee hours and replacing with the owners picking up some of the work;7.4% said they either closed on Sundays or did not trade on weekends at all;51% said their labour costs were 31-50% of all costs and 22.9% said labour costs equated to 41-50% of total costs.

[159] He referred to a research project commissioned by the Australian Fair Pay Commission which showed that 20.9% of all cafes and restaurants exited the industry in 2006-7. The ABS figures for 2007-11 showed that 48.8% of businesses that entered the accommodation and food industry in 2007-8 were still operating at June 2011.

[160] Mr Hart gave evidence that the industry has a lower skill base compared to other industries and that employees tend to be younger or pursuing other interests or activities whilst working in the industry. It was his opinion that the high level of casualisation means that people work in the industry whilst pursuing other objectives. The labour force is traditionally drawn from students,school leavers,people in their first job,people who work more than one job and people with carer’s responsibilities.

[161] Mr Hart gave evidence of role of restaurants and cafes in creating a night time economy.

[162] Mr Hart gave evidence of his impressions of the industry,in particular that costs including labour costs are increasing and exceed increases in menu prices and therefore profits are declining. He said that one way business operators respond to this was by increasing the number of hours they work in the business and reducing rostered staff hours. The Award introduced,especially in Queensland,penalties where none existed before and these penalties apply at the very times people want to eat out.

[163] It was his opinion that if penalty rates were removed then business operators would increase the number of hours offered to staff and small business operators would be able to reduce the number of hours they work.

[164] The removal of penalty rates would enable employees to be remunerated by way of commissions or incentive payments.

[165] He also said that employees generally have Monday and Wednesday off as opposed to Saturdays and Sunday and therefore most hospitality workers socialise on Mondays. He also said people now spend less time on religious and sporting pursuits and that the increased use of dining out as entertainment means that we should encourage employers to open their businesses on weekends.

[166] Mr Hart said small businesses are different and don’t have the hierarchical structures of larger businesses. A system that provides for one minimum wage rate means the employer can negotiate above that rate with its employees in a way which encourages productivity.

[167] Mr Hart was cross examined and acknowledged that the proposal to have penalties payable on the sixth and seventh day was put to the Award Modernisation Full Bench. 35

[168] Mr Gregory Parkes,the Workplace Relations Director of the RCA gave evidence and was cross examined. 36 He reported that a survey of members found that the Award was difficult to understand and that the classification definitions did not accurately describe the duties of staff. For example members are unable to work out where a barista was classified.

[169] The primary concern was that the classification structure did not provide an industry recognised career path for employees. For example a trade qualified cook would obtain Level 4 status only after 36 months of training as an apprentice whereas an employee with at least three months experience who had obtained a Certificate III would also be classified at Level 4. There is also concern that the introductory classification which is limited to a duration of three months employment has no regard to the hours actually worked by employees. A further concern is the requirements that employees who received monies are classified at Level 2. As a consequence front of house staff cannot be employed at Level 1.

[170] Professor Phil Lewis 37 produced a report on the industry. His starting point was the unsurprising proposition that an increase in the cost of labour will reduce profitability. He also contended that a reduction in penalty rates would result in an increased demand for labour. He did accept that “attempting to estimate the likely impact of these changes with any accuracy is not possible given our knowledge of actual and potential demand and supply factors.”38

[171] He states that:

    “The removal of industry specific minimum rates would allow greater flexibility for owners to manage their businesses and allow wages to be determined by the market. Most economists believe that competitive markets,through the price mechanism,represent the best way of allocating resources. Businesses will maximise their profits by selling the goods and services consumers want,when they want,at the lowest prices. Production will be efficient because businesses will organise capital and labour in such a way as to reduce costs and maximise revenue in order to maximise their profits. Employment will be at a maximum because businesses are producing the highest output that people are willing to buy. In order to be able to hire workers businesses must offer wages and conditions which employees are willing to accept. That is the basis for allowing businesses flexibility to manage and prices (including wages) to be determined by the market.” 39

[172] In addition to the imposition of penalty rates having a significant negative effect on employment and turnover in the industry,he also comments on the compliance costs associated with such regulation.

[173] One of the factors influencing employer’s ability to reduce employee wages is the ability of workers to find jobs requiring similar skills. For the restaurant industry this would be the retail sector,hospitality,licenced clubs and the accommodation industries. Professor Lewis concluded that because there was a great deal of competition for youth and female labour there is limited scope for the restaurant industry to impose wages and conditions of employment which employees are not willing to voluntary enter into.

[174] Professor Lewis said that the rationale on which the introduction of penalty rates in Australia was first based no longer exists. Sunday is not a day of religious observance for most Australians. Similarly participation in sport and outdoor activity is minimal compared with time spent on audio/visual media. He said penalty rates were introduced at a time when the labour force was predominantly male,full-time in industrial jobs with little casual or part-time work. Most retail outlets shut at midday on Saturday and reopened on Monday. Weekends were for socialising,recreation,participating in sport and worship.

[175] Today’s labour market is dominated by the service sector,part-time work,casual work and working women.

[176] Professor Lewis says that employees only need to be compensated for working unsocial hours if businesses cannot attract people to work those hours at standard rate of pay.

[177] He says that the owners will benefit from the changes to penalty rates but not necessarily greatly because the industry is very competitive and most cost savings are eventually passed onto consumers in lower prices. Profit margins would be expected to fall to the rate they were before the fall in labour costs.

[178] Suppliers would benefit as there would be an increased demand for their goods. Tourism would benefit because customers would have a greater range of choices and lower prices.

[179] There would be unambiguously more employment as the industry’s turnover increased. There would be greater choice of shifts and more employment opportunities for the unemployed.

[180] While some employees’wage rates may fall they may receive an increase in earnings from working more hours.

[181] Consumers would benefit because they would pay lower prices,eat out more and at times which better suit their lifestyle.

[182] In his reply report, 40 Professor Lewis said that he “made no comment on the introduction of the Restaurant Award 2010. Indeed with all the other economic factors at play,such as changes in income and consumer sentiment,it would be difficult to do definitely identify any positive or negative effect of the introduction of the award.”41

[183] A report was prepared by Price Waterhouse Cooper (PWC) 42 on the impacts of the proposed changes.

[184] A survey was distributed to 3570 randomly selected restaurant cafe and catering business owners/operators that are members of RCA,the New South Wales Business Chamber and/or Victorian employer associations. There were 61 surveys completed and 251 partially completed surveys.

[185] It was said that the sample was representative of the “true population of restaurants,cafes and catering businesses.” 43

[186] The survey results were used in part to inform the model developed to assess the impact of the proposed changes.

[187] The survey showed that:

    ●Respondents would hire more staff if penalty rates were not imposed on weeknights,Saturday or Sunday.

    ●Wages have increased at a higher rate than goods and services sold since the inception of the Award.

    ●64% of respondents would extend trading hours if penalty rates were not imposed on weeknights,Saturday or Sunday.

[188] The proposed changes to penalty rates would reduce expenditure on wages by 14% on current operating models. This would have the following economy wide impacts:

    ●Additional jobs in the restaurant industry;

    ●Additional jobs across all industries;

    ●A fall in the CPI;

    ●Higher consumer purchasing power and consumption;and

    ●Greater economic activity and an increase in the GDP.

[189] The analysis suggests that while some existing staff would experience reduced take-home pay in the short term there will be an expansion of job opportunities with wages returning to forecast levels in the long run. 44

[190] UV called various officials to give evidence.

[191] Mr Mark Bydder 45 from Western Australia,now a hospitality organiser,had worked in hospitality for over 15 years. It was his evidence that if employees did not get paid a higher rate for working on Saturdays and Sundays they would need to find work that did pay higher wages for Saturday or Sunday or reduce their study commitments so that they could increase their working hours to obtain the same income or work additional hours to maintain the current earnings.

[192] Ms Louise Tarrant,the National Secretary of UV gave evidence 46 that the accommodation and food services industries are characterised by low levels of full-time workers,cyclical growth,growing employment which is concentrated in the cafe,restaurants and takeaway food services sector and low paid employment. Ms Tarrant agreed with Mr Hart that the traditional sources of labour for restaurants are “students,school leavers,people in their first job,people work more than one job and people with carers responsibilities.”Ms Tarrant said these are amongst the most vulnerable workers in Australia. She said that even a slight reduction in income can have a significant impact on their economic health,and cause significant stress. She said the casual employees have little bargaining power and no right to insist on being placed on a roster at a time or times of their choosing. They can be sent home early or asked to work if there is an unexpected increase in custom on any day. She says they have little choice to accept reductions in hours or potential disruption to family study or leisure commitments when they are asked to work additional hours.

[193] It was her evidence that if penalties were only paid on the sixth and seventh day the vast majority of restaurant employees would never qualify for penalty payments as it is rare for them to work more than five days a week.

[194] During the award modernisation proceedings UV put submissions to the Full Bench that penalty rates are a significant component of employees’take-home pay and a reduction in penalty rates would mean that employees would need to work more hours to maintain their take-home pay. Further,work on penalty rate days causes inconvenience and disability in relation to family and other relationships,recreational and leisure opportunities. Workers are prepared to work on Sundays and public holidays because of the penalty rates which provide an incentive for employees to accept the social inconvenience and disability working these days.

[195] Ms Tarrant said that a reduction in penalty rates would transfer money away from employees to employers. There is no guarantee that this would result in more hours for employees or higher base rates for employees. Further it was submitted that lowering the wages of employees in this sector would lead to lower rates of consumer spending across the entire economy. Ms Tarrant gave evidence that in 2008 the ABS estimated that approximately 73% workers in the accommodation and food services industry usually work on weekends. Ms Tarrant recounted statements from members in which they describe the impact of the loss of penalty rates on them.

[196] Ms Tarrant said that employers claim that labour shortages are a significant issue facing the sector. In 2012,the RCA agitated for a template labour agreement designed to bring in overseas workers to fill vacant jobs in the sector. UV contends that the proposed variations would only exacerbate these problems.

[197] Ms Tarrant relied on ABS figures to show that in the period 2006-7 to 2010-11,there had been a significant growth in income in the sector which had been matched by the growth of expenses and wages growth was only a small part. She said that the idea that businesses are reducing their trading due to employment costs associated with penalty rates is disingenuous as wages as a percentage of overall expenses has not substantially changed in the last five years. She says declining profits were caused by an increase in overall expenses for example rent,water,electricity,gas and insurance.

[198] Ms Tarrant’s evidence suggests that the reliance by the RCA on the high level of exits from the industry is misconceived. In 2007 the RCA itself commented that many entrants to the industry lack appropriate skills and leave within a year to 18 months. This churn was considered damaging. Ms Tarrant also said that business exits do not equal failure as exits are often a result of mergers and acquisitions. Only 11% of all business exits were due to insolvency. It was her evidence that the ASIC report in 2010 showed that only a small number of insolvencies were related to trading losses or poor economic conditions.

[199] Mr William Taylor, 47 an organiser in South Australia,had previously worked in hospitality industry for 14 years. He commented that as a worker in the industry he had worked nights,weekends and public holidays and would often miss out on social gatherings with friends and relatives due to the unsocial hours he worked. His income when he was the sole breadwinner was not adequate to cover his rent bills and food costs. Most casual employees have no set hours and no job security.

[200] Mr Peter Tullgren, 48 an industrial officer in Tasmania,gave evidence that most of his members work in restaurants that employed less than 20 people. He said there would be no capacity to bargain for increased wages or penalty rates if the Award provisions are reduced. A reduction in penalty rates or rates of pay would have a significant impact of their take-home pay,and would cause students to either have to give up studying or to look for additional work to make up the lost income.

[201] Ms Michelle Duggan, 49 an organiser with the AWU in Queensland,has spoken to members about the employers’claim. Most of her members are employed on a casual basis which enables the employer to either call in extra staff when needed and send staff home if trade does not meet expectations. Most members only receive their rosters a week in advance which makes it difficult to organise other areas of their life. If penalty rates were not available on weekends they would not want to work on Saturday or Sunday and they would have to work more hours to make the same money and this would have a detrimental impact on their lives. Her student members told her they chose to work shifts that offered the highest rates of pay but this meant they often missed friends and family’s functions. If they did not get the higher rate of pay for weekend work than they would have to either get a second job or reduce their study commitments to allow them to work more hours.

[202] Mr David Briggs, 50 from Galaxy Research,gave evidence about community attitudes to penalty rates in the restaurant industry. Included in a multi-client questionnaire were two questions directed at these issues. One question asked respondents whether being paid 50% more on Sundays was too high,about right or too low. The other question asked whether restaurant owners should be given special treatment when the Commission sets award rates of pay or should restaurant owners be required to conform to minimum standards similar to those that apply to other industries. In answer to the question about higher rates of pay for working on Sundays 67% said they were about right 20% said they were too high and 10% said they were too low. 81% of respondents said that the restaurant industry should be required to conform to the minimum standards similar to those that apply to other industries.

[203] Mr Briggs also provided a critique of the PWC survey.

[204] Professor William Mitchell 51 gave evidence that the low profit margins in the cafe and restaurant sector were largely due to the intense competition and an oversupply of businesses in the sector.

[205] It was his evidence that there was no discernible change in profitability able to be observed post-2010 nor was there any discernible change in employment growth. It was his view that if penalty rates were cut in food services underemployed workers would seek other opportunities in retail. It was his evidence that for the vast majority of workers the traditional period to socialise,participate in sport and to worship remains the weekends.

[206] Professor Mitchell also provided a critique of Professor Lewis’s report and Professor Lewis provided a critique of Professor Mitchell’s report.

History of the restaurant and catering industry award modernisation process

[207] The RCA 52 initially proposed to the Award Modernisation Full Bench that penalties for the restaurant and catering industry should only be paid for working on public holidays and for work on the sixth and seventh day of any week.

[208] The RCA told the Full Bench that “weekend penalties are already a factor in the declining profitability”in the sector. It said that because employees work the hours they want to work “the provision of a penalty rate,just because it is a day of the week that is a standard day off for others in the community,is nonsense.”

[209] Weekend penalty “should be set having regard to the circumstances,nature and operation of the industry including the typical opening hours.” 53

[210] The Award Modernisation Full Bench initially decided to make a single award to cover the hospitality award including restaurants and catering businesses. 54

[211] The exposure draft award published on 12 September 2008 proposed penalties as follows:

Type of employment

Monday to Friday

Saturday

Sunday

Public Holiday

Monday to Friday 10pm to midnight per hour

Monday to Friday midnight to 7am per hour

 

%

%

%

%

  

Weekly

100

125

175

250

.25% of the standard hourly rate

.35% of the standard hourly rate

Casuals including 25% casual loading

125

150

175

275

.25% of the standard hourly rate

.35% of the standard hourly rate

[212] The Full Bench rejected the RCA submissions for a separate award and acknowledged that the additional costs would be imposed on some employers but that the impact would vary from state to state depending on the existing terms and conditions which would be addressed through the transitional provisions. 55

[213] As a result of the revised Ministerial Request in June 2009,the Full Bench advised that it would make a separate restaurant and catering industry award. An exposure draft was published in September 2009. It proposed penalties as follows:

Type of employment

Monday to Friday

Saturday

Sunday

Public Holiday

Monday to Friday 10pm to midnight per hour

Monday to Friday midnight to 7am per hour

 

%

%

%

%

  

Weekly

100

125

150

250

10% of the standard hourly rate

15% of the standard hourly rate

Casuals including 25% casual loading

125

150

175

250

10% of the standard hourly rate

15% of the standard hourly rate

[214] In that decision,the Full Bench had regard to the submissions made by the RCA. In its decision of 25 September 2009 the Full Bench said:

    “The R&CA’s approach is directed at substantially reducing or eliminating penalty payments provided for in existing instruments applying to the restaurant industry during times when restaurants are open. That approach ignores the inconvenience and disability associated with the work at nights and on weekends - which are the basis for the prevailing provisions in pre-reform awards and NAPSAs. Nor does the R&CA approach take into account the significance of penalty payments in the take-home pay of employees in the restaurant industry. A modern restaurant award based on the penalty rates proposed by the R&CA would give the operational requirements of the restaurant and catering industry primacy over all other considerations which the Commission is required to take into account,including the needs of the low paid and the weight of regulation. A more balanced approach is required.” 56

[215] In its decision 57 of 4 December 2009,the Full Bench commented on the responses it had received the exposure draft and said:

    “The RCA reargued the position in relation to penalty rates which it had put in the pre-exposure draft consultations. That position is set out in paragraph 229 of our statement of 25 September 2009.” 58

Consideration

[216] The starting point of the RCA’s approach to the two year review is that it would be wrong to assume that an award made under Part 10A of the Workplace Relations Act 1996 satisfies the modern awards objective. 59 The RCA acknowledge that this approach is inconsistent with the decision of the Full Bench which reviewed penalty rates in the Retail,Hospitality,Fast Food,Food,Beverage and Tobacco Manufacturing Hair and Beauty Industries.60

[217] I am not prepared to depart from the approach adopted by that Full Bench as I consider it set out the correct approach to be taken to the two year review and that approach has been endorsed by subsequent Full Bench decisions.

[218] The RCA made extensive submissions to the Award Modernisation Full Bench,both in support of a restaurant and catering industry award separate from the general hospitality industry award and in relation to the content of the Award. It put forward witness evidence about the state of the restaurant and catering industry and called evidence from restaurant and catering operators. The RCA argued against the penalty rates in the exposure draft for the general hospitality award and in the exposure draft of the restaurant award.

[219] The RCA put forward evidence about the trading hours of restaurant businesses and their reliance on weekend trade. It put forward evidence that the proposed award imposed penalties at the very times that restaurants are busiest.

[220] The RCA put forward evidence about the nature of employment in the industry and that employees are often only available to work at night and on weekends. It put forward evidence about the state of the industry and the high turnover of businesses in the industry. It initially submitted that penalties for the restaurant and catering industry should only be paid for working on public holidays and for work on the sixth and seventh day of any week.

[221] After the amendment to the Ministerial request which directed the establishment of separate awards,the RCA proposed a modern restaurant and catering award which provided that casual employees receive no penalties. It submitted that the type of engagement of casual employment negates the need for penalties on specific days as casual employees elect to work a particular shift on any day with no distinction whether it is a Tuesday,Friday or Saturday. Further it proposed a penalty rate for weekly employees working on a Sunday at 50% and 250% for public holidays. 61

[222] Those submissions were not adopted by the Award Modernisation Full Bench.

[223] The RCA seeks to vary the Award so that penalties are payable on the sixth and seventh day worked. There was no evidence put forward about the incidence of employees working a sixth and seventh day. For full-time employees the sixth and seventh day would normally be paid at overtime rates as full-time employees must have eight full days off per four week period. Given the nature of employment in the industry particularly the high levels of casual and part time employment it would not be unreasonable to assume,given no evidence to the contrary,that very few employees would work the sixth and seventh day and in those circumstances the application in effect seeks to eliminate penalties for the vast majority of employees.

[224] It is not disputed that employees in the restaurant and catering industry are low paid. They are disproportionately dependent on the minimum rates of pay set in the Award.

[225] The RCA submit that the changing nature of labour market and the fact that the restaurant industry is a seven day a week industry means that penalties for working Saturday,Sunday and late nights are no longer relevant.

[226] I do not accept the submissions of RCA that there are no longer any disabilities associated with working unsociable hours. More importantly,I am not satisfied that there has been a significant change in the disabilities associated with working unsociable hours since the making of the Award.

[227] Professor Lewis commented on the decline in attendance at religious services and the decline in participation in sport and other activities but there is no evidence of a decline in those activities since the Award was made. Equally the comments made about students,carers and those requiring a second income being available to work predominantly at nights and on weekends has not changed since the Award was made.

[228] Evidence in the form of surveys conducted of RCA members was before the Commission. I endorse the comments of the Full Bench in the 2012-13 Annual Wage Review about the reliance that can be placed on member surveys. 62 The conclusions of the bench marking survey conducted by the RCA were based on 221 members and itself warns that it is not possible to generalise the survey results to the general population of restaurant and catering operations.

[229] Similarly,I am unable to conclude the findings of the PWC survey of 312 restaurants and cafes drawn from the RCA’s membership list is representative of the general population of restaurant and catering businesses.

[230] The evidence of the operators was not challenged in cross examination. However that evidence was limited in scope. Ten of the restaurant operators were located in Queensland,five in NSW,and five in South Australia. One stand alone caterer was located in Victoria the other in Queensland. The evidence established that in June 2007 there were 13,987 restaurants and cafe businesses in Australia. 63 36.3% were in NSW,27.4% were in Victoria and 18.4% were in Queensland.

[231] The evidence of operators was disproportionately from Queensland. This is probably unsurprising as there was no suggestion that the witnesses were randomly selected and it is in Queensland that the changes in the penalty rate structure were greatest. The witnesses from Queensland said that other factors such the downturn in the tourism dollar had a negative impact on their business. It was also clear that some of the operators had not taken advantage of the transitional provisions in the Award and have been paying above Award penalty rates.

[232] The operators did not,in the main,produce financial data to back up their conclusions. However,I accept that any restaurant operator who had faced higher penalty rates would need to make adjustments to their business if they wished to maintain their profit levels.

[233] While I have had regard to this evidence it is not possible to reach conclusions about the industry as a whole based in this evidence.

[234] Further the evidence of the operators and the surveys of what they would do if penalty rates were payable on the sixth and seventh day was speculative.

[235] It is surprising given that there have been times in Australia when penalty rates were not mandatory that no empirical evidence was able to be called to support the theory put forward by Professor Lewis that if wages costs are reduced employment would increase. In the period March 2006 until 1 January 2010 for new constitutional corporations there were no penalties payable as these business were only required to comply the with Australian Fair Pay and Conditions Standards and since 1 January 2010 they have been transitioning from 0% penalty rates to the full penalty regime in the Award.

[236] Further in Victoria,state common rule awards were abolished in 1993 and were not re-established until 1 January 2005. Employees who were employed by the same employer when the common rule award was abolished had their conditions rolled over but new employees were only entitled to the minimum terms and conditions set out in Schedule 1 of the Employee Relations Act 1992 (Vic) and then in Schedule 1A of the Workplace Relations Act 1996.

[237] No empirical evidence was called that showed that during this time Victoria had created additional jobs in the restaurant industry and other industries or contributed to greater economic activity or increased Victoria’s GDP.

[238] Despite these periods of deregulation no empirical evidence was provided which supports Professor Lewis’s proposition that reduced labour costs led to an increase in employment.

[239] In the 2009-10 Annual Wage Review 64 the Full Bench said this about the relationship between award minimum wages and employment levels:

    [246] Our attention was drawn to extensive literature and studies concerning the relationship between minimum wage rises and employment levels,including modelling undertaken for the AFPC which found that minimum wage adjustments from 2005 to 2008 had only small effects on unemployment in the short-term,in the context of a strong labour market,although the employment effects become larger during a recession. The relevance of some of the studies is limited insofar as they are directed to the effects of increasing a single minimum wage in circumstances which are quite different to those which characterise the Australian industrial relations systems,including the range of minimum rates at various levels throughout the award system. Although a matter of continuing controversy,many academic studies found that increases in minimum wages have a negative relationship with employment,but there is no consensus about the strength of the relationship. Strong employment growth over the past decade in Australia,in the context of annual increases in minimum wages (other than in 2009) suggests that any impact of moderate minimum wage increases on employment levels is swamped by other factors affecting the demand for labour. We judge that in current economic circumstances,the increase in minimum wages we have decided on will not threaten employment growth.”

[240] In the 2012-13 decision the Full Bench concluded as follows:

    “The research presented by parties to this Review has not convinced the Panel to alter its position from previous reviews that a modest increase in minimum wages has a very small,or even zero,effect on employment.” 65

[241] I acknowledge that except for small business the RCA is not proposing to reduce the minimum wage for employees,however if penalty rates were only payable on the sixth and seventh day only,this would have a significant impact on the take home pay of the employees in the industry. It is also not sufficient to assert that the employees may be offered additional hours to compensate for the reduction in their take home pay. There was insufficient evidence about the capacity of these employees to take up those additional hours of work. The need to work additional hours for the same income may also have detrimental effects. Professor Lewis commented on the optimal number of hours a student can work without impacting negatively on his or her studies. 66 Further those with carer’s responsibilities would be required to find additional childcare.

[242] While I accept that the variation proposed would reduce employment costs and reduce the regulatory burden on businesses (though I note that once the transition period is over it will be simpler for employers and employees to understand the terms and conditions which apply) ,this does not necessarily lead to an improvement in productivity.

[243] The variations proposed would have a negative impact on the relative living standards and the needs of the low paid who would need to increase the hours worked simply to maintain their current income.

[244] There was no evidence that the proposed changes would encourage collective bargaining. The only evidence of collective bargaining in the industry before me was of agreements made to pay employees a flat rate of pay to compensate them for the removal of penalties. This may suggest that the effective removal of penalties would be a disincentive to collective bargaining.

[245] I am not prepared to make the variation sought by the RCA to remove penalties for Saturday,Sundays and after 10pm and replace them with a penalty for work on the sixth and seventh day.

[246] I endorse the comments of the Full Bench of the AIRC set out at paragraph [212] above. Those comments were made in the context of the RCA at that stage proposing a Sunday penalty of 50%. What is proposed now is more generous to employers than what was proposed then. To adopt the variation proposed by the RCA “would give the operational requirements of the restaurant and catering industry primacy over all other considerations which the Commission is required to take into account,including the needs of the low paid and the weight of regulation.”

[247] The RCA has not established cogent reasons for revisiting the penalty regime it proposed in to the Award Modernisation Full Bench. The grounds on which they seek the variations do not identify a significant change in circumstance;rather they are largely merits considerations which existed at the time the Award was made.

[248] I am unable to conclude that such variations are warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

[249] The RCA put forward an alternative proposal to reduce Sunday penalties to the same rate as Saturday penalties.

[250] While such a change would have a lesser impact on employees and operators,for the reasons set out above,I am not satisfied that the proposed variations are warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other then “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

[251] While there is some evidence that some restaurants may open on Sundays if penalty rates were reduced it is far from compelling. I accept however that if those restaurants did open on Sunday that would increase employment opportunities. However there is little evidence before me about the impact of the differential penalty rates on the numbers of persons employed on Saturday compared with Sunday. A reduction of Sunday penalties would still impact on the low paid albeit less than if the primary proposal of the RCA were adopted.

[252] The question of whether the disabilities associated with working on Sunday are greater than working on Saturday requires more consideration than has been given in this matter. The four yearly review which commences next year will provide an opportunity for these issues to be considered in circumstances where the transitional provisions relating to the relevant awards will have been fully implemented.

The Small Business Exemption

[253] The RCA proposed that clause 20.1 of the Award should be varied so that the rates of pay set out in clause 20.1(a) not apply to a small business employer. A small business employer would be defined as follows:

    small business employer:

    (a) subject to subsection (b), small business employer has the meaning prescribed by section 23(1) of the Fair Work Act 2009 (Cth);

    (b) for the purpose of calculating the number of employees employed by the employer for the purposes of this definition:

      (i) the reference to “15 employees”in section 23(1) of the Fair Work Act 2009 (Cth) is to be read so as to refer to 15 full-time equivalent employees;and

      (ii) the calculations specified in section 23(2) of the Fair Work Act 2009 (Cth) do not apply.”

[254] The variation proposed by the RCA is as follows:

    “An employee employed by a small business employer will not be paid less than the rate prescribed by the current national minimum wage order (subject to any lesser wage rates payable under clauses 20.2,20.3 and Schedules C,D and E). Notwithstanding any provision of this award including clauses 20.2,20.3 or Schedules C,D or E providing for rates of pay in excess of the rate of pay specified in clause 20.1(b),a small business employer will not be required to pay an employee at a higher rate than that prescribed by the current national minimum wage order.”

[255] At the time of writing this decision the national minimum wage is $16.37. The minimum wages in the Award are as follows:

    Introductory Level $16.37

    Level 1 $16.85

    Level 2 $17.49

    Level 3 $18.09

    Level 4 $19.07

    Level 5 $20.26

    Level 6 $20.80

[256] The proposal would see the minimum rates payable to employees be reduced by between 2.8% and 21.3%. I accept that for some employees real wages would not drop as the market forces would require some employees to be paid above award rates of pay particularly chefs. However for many front of house staff and back of house staff like kitchen hands real wages would be reduced. The lower base rate will of course reduce the value of any penalty is paid to these employees.

[257] It was submitted that small business operators are struggling to operate at a profitable level because in part they are unable to share rising costs with their customers. As a result small business operators reduce the hours offered to employees and increase the hours they and other family members work in the business. High base rates,it was submitted,deter collective bargaining.

[258] It is not clear what percentage of restaurant and catering businesses employ less than 15 equivalent full-time staff (EFT). The RCA said that 67.5% employ less than 10 people. 67 The 2006-7 ABS figures showed that 91.2% of restaurants employed between 0 and 19 employees.68 Given the proposal that the count be based on EFT it is safe to assume that 90% of businesses would benefit from the exemption.

[259] There was little evidence of enterprise bargaining in the industry and no evidence to suggest that reducing the minimum rates of pay in the industry would encourage collective bargaining. There was little evidence that there was collective bargaining prior to the making of the Award. The only bargaining referred to was the introduction of a flat rate of pay above the minimum rate to buy out penalty rates. Except for some evidence that some operators did not understand the classification structure little evidence was given about the impact of the proposed variation.

[260] I accept that this proposal was not put to the Award Modernisation Full Bench. The RCA proposed a classification structure largely based on the NSW state award. However I am not satisfied that there have been such changes in the industry as to warrant a departure from a skill based classification structure which was a feature of both federal awards and the NAPSA’s that have applied in the industry for over 20 years.

[261] I am not satisfied that the reduction in the minimum wages would increase employment but I am satisfied that the variation proposed would have a negative impact on the incomes of the low paid. I am not satisfied that the variation would encourage collective bargaining. There was little evidence of collective bargaining in the sector during the periods of deregulation described earlier.

[262] I am unable to conclude that the variation is warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

[263] I should further add that the variation itself would create uncertainty. Parts of the industry are cyclical and have significantly different staffing profiles in peak season compared to the off season. It is not clear from the variation sought when the business would be designated a small business. In the unfair dismissal jurisdiction this is not a problem as the assessment is made at the time of the dismissal. However there is nothing in the proposed variation that addresses this issue. Presumably therefore whether a business is a small business employer is determined at the commencement of employment. If by the time another person is employed the business goes over the 15 EFT,that employee would be entitled to a higher rate of pay that the first employee even if he or she was doing the same work.

[264] If this variation was not adopted,the RCA propose that in the alternative the federal minimum wage be paid to employees at Levels 1,2 and 3 with the remaining levels unchanged. Level 4 is the trades level in the Award.

[265] The ABS figures say that 11.2% of employees are qualified chefs and cooks and 12.2% are managers/supervisors. 69 Assuming this broadly represents the employees who are classified at level 4 and above then 23.4% of the employees would be paid above the national minimum wage.

[266] No separate rational for this variation was put forward. While it is true that this variation would impact on less employees it is clear it would impact disproportionately on those who do not benefit from currently being paid over award wages. The limited evidence before the Commission suggests that it is employees at Levels 1,2 and 3 who are least likely to be paid above award wages.

[267] This proposed variation would also create the uncertainty discussed above.

[268] For the reasons set out above,in relation to the submissions on the substantive variation,I am unable to conclude that the variation is warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

Classification structure

[269] The RCA propose to delete the current classification structure in the Award and replace it with a new classifications structure. As with the Award the proposed classification structure has job titles and a list of indicative tasks.

[270] The critical changes to the structure are as follows:

    ●An employee at the introductory level would be required to have completed three months full time equivalent hours before progressing to Level 1,unlike the Award which requires three months;

    ●An employee can receive monies at Level 1 unlike the Award which classifies this job at Level 2;

    ●It adds the job title ‘barista’to Level 2 and 3;

    ●Level 3 employees who have a Certificate III must also have three or more years industry experience.

[271] UV provided supplementary submissions on 27 May 2013 which traced the history of the classification structure in the Award and the hospitality industry generally. The RCA,in response did not contest the material provided by UV but said that “the genesis and history of the classification structure in Victoria consolidates other sectors including hotel and accommodation outlets which create the very problem raised in our earlier submissions about generic classifications not relevant to the sector it now regulates.” 70

[272] The RCA proposed to the Award Modernisation Full Bench a classification structure which had seven levels with money handling at Level 2 which would the equivalent of Level 1 in the Award. The Full Bench did not adopt the classification structure proposed by the RCA.

[273] I will address specific issues raised by witnesses about the classification structure which were said to be anomalies.

Three months qualifying period

[274] The RCA submits that this in an anomaly as it permits an employee who works one shift per week to move to Level 1 after three months while an employee who works 38 hours per week also moves to Level 1 after three months.

[275] The first thing that needs to be said is that this is not an anomaly arising from the award modernisation process. Such provisions have been a feature of awards since the introduction of skill based classification structures. For example,the Restaurants Award etc (State) Award provided that a Level 1 employee had to have three months on the job training before moving to Level 2.

[276] Further it worth noting that such a time period is provided in the Hospitality Award and the Registered and Licensed Clubs Award 2010 as well as other awards with significant levels of casual and part time staff such as the Aged Care Award 2010 and the Amusement,Events and Recreation Award 2010.

[277] There was no evidence put before me to establish that an employee working limited hours over the three month period did not,in that time,develop the necessary skills to undertake the work of a Level 1 employee. In any event that Award provides that by mutual agreement a maximum of another three months can be taken. It may be that it does not take a full time employee three months to develop the skills necessary to perform work at level 1 but the Award does not mandate that an employee remain at the introductory level for three months as it provides that this is the maximum period of engagement.

[278] I am not satisfied that this requirement is an anomaly.

Handling money at Level 1 instead of Level 2

[279] The RCA complains that the current classification structure prevents a Level 1 employee from handling cash and therefore in many restaurants employees will need to be classified at Level 2.

[280] Be that as it may,the RCA has not put any submissions that the relativity that has been established for work,at this level,was not properly fixed. While I accept that for many restaurants waiting staff will receive monies,that is not an argument that the relativity for the classification was not a properly set.

[281] It is worth noting that the current rate of pay for a Level 1 employee is $43.20 below a Retail Worker Level 1 who is able to receipt monies and a restaurant employee Level 2 employee is $18.60 below the Retail Worker Level 1.

Baristas

[282] The Award does not list all the various job titles in the industry.

[283] While I accept that some cafe and restaurant owners may not understand the classification structure and that the description of the tasks does not say barista,there is no doubt that a barista can be classified under the Award as a food and beverage attendant grade 2 or 3.

AQF Certificate II and III

[284] The RCA submitted that the requirement in the classification structure to classify an employee with an AQF Certificate II at Level 3 and an AQF Certificate III at Level 4 is an anomaly as it permits employees with no industry experience to be paid at a higher classification level than those with experience.

[285] The RCA submits that it is an anomaly that an employee with an AQF certificate III and who does not have any industry experience is paid at the trade level which is the level an employee who completed a apprenticeship as a chef will be paid.

[286] With the introduction of skill based qualifications linked to the Australian Qualifications Framework Standard we moved away from a time served classification progression to a skill based classification progression. A person who has an AQS Certificate III has been assessed as having certain skills. It is not relevant whether the employee was assessed as having those skills after one year or after six months. The question is not the time it has taken to obtain the qualification but whether the employee has demonstrated that he or she has the skill.

[287] Across the Award system Certificate III is recognised as a trades equivalent qualification.

[288] No evidence was put that employees with an AQF Certificate III relevant to the classification in which they are employed do not have skills necessary to do the work at Level 4.

[289] If the RCA has an issue with the assessment of the skills that matter needs to be taken up elsewhere.

[290] I am unable to accept the submission that these provisions are an anomaly.

[291] It was also submitted that the classification structure is operating in a manner which is inimical to the modern awards objective because the classification structure is difficult to understand. I have already explained why I am not prepared to generalise from the survey conducted by the PWC of RCA members to which 98 responded that the classification structure is difficult to understand.

[292] I do not propose to make the variations to the classification structure proposed by the RCA as I am unable to conclude that the variation is warranted on the basis that the Award is not achieving the “modern awards objective”or is operating other than “effectively,without anomalies or technical problems arising from the Part 10A award modernisation process.”

Junior employees

[293] The Award currently provides that a junior employee who is employed in a bar or other places where liquor is sold who works as a liquor service employee is paid as an adult.

[294] The RCA propose that this requirement be deleted and that a junior employee who works as a liquor service employee be paid at junior rates. It was said the current provision restricts the employment of junior employees as the employer will prefer to employ an adult employee if the junior employee is paid at adult rates of pay.

[295] No evidence was called to support this proposition. It is unclear how such a variation would promote social inclusion through increased workforce participation as it would simply see one group of employees replaced by another group of employees. Given that the provision has been long standing,it is difficult to accept the inclusion of such a provision by the Award Modernisation Full Bench did not protect the position of young people in the labour market as it did not change the pre-existing provision.

Public Holidays

[296] VECCI proposed to vary clause 34.4(d) to insert the words “and it is not a prescribed public holiday”as follows:

    “An employee other than a casual working on Christmas Day when it falls on a weekend and it is not a prescribed public holiday will be paid an additional loading of 50% of their ordinary time rate for the hours worked on that day and will also be entitled to the benefit of a substitute day.”

[297] VECCI submitted that the current award provision is ambiguous. The Public Holidays Full Bench 71 considered a similar application made to vary the Hospitality Award. In that matter,like here,the variation is intended to clarify the existing provision and not to change the substance of the existing provision. On 15 August 2013,that award was varied as sought by VECCI.72

[298] There was no opposition to the proposed variation. I note that in the variation proposed by the ACTU in the public holidays case,the ACTU accepted that clauses of this nature were intended to require the penalty to be paid when Christmas day is not a prescribed public holiday 73 and this was accepted by the Full Bench of FWA in 2010.74

[299] I am prepared to make the variation proposed by VECCI as the proposed variation removes the current ambiguity.

[300]
A determination varying the Award,to give effect to this decision,will be issued shortly.

DEPUTY PRESIDENT

Appearances:

L. Izzo,Y. Shariff and D. Mahendra for Restaurant and Catering Australia and others.

J. Nolan,G. Noble and N. Swancott for United Voice.

P. Thomson for Australian Federation of Employers and Industries.

T. McKernan for Australian Workers Union,Queensland Branch.

N. Barkatsas for Victorian Employers’Chamber of Commerce and Industry.

H. Wallgren for Business SA.

Hearing details:

2012.

Melbourne by video link to Sydney:

July,31.

Melbourne by video link to Adelaide,Sydney and Brisbane:

November,12.

2013.

Melbourne by video link to Brisbane,Adelaide and Sydney:

March,21;and

Melbourne by telephone:

March 28.

Sydney by video link to Melbourne,Brisbane,Townsville and Adelaide:

May,13,14,15,16,20,21,22,23.

 1  MA000119.

 2  [2012] FWAFB 5600.

 3  Submissions in Reply on behalf of the applicants at 2.3 to 2.8.

 4  Exhibit A19 at [25].

 5  Exhibit A25.

 6  Exhibit A4 at [31].

 7  Submissions of AFEI - 18 February 2013 at [13].

 8  Submissions of Business SA at [3].

 9  [2008] AIRCFB 550 at [31] - [34].

 10  [2008] AIRCFB 717 at [46]

 11  [2008] AIRCFB 1000 at [113] - [121]

 12  [2009] AIRCFB865 at [182] - [186] and [188] - [191].

 13  [2009] AIRCFB 945 at [177] - [179].

 14  Transcript PN 338.

 15  Exhibit A21.

 16  AN120468.

 17  Exhibit A22.

 18  Exhibit A23

 19  Exhibit A24.

 20  AN150025.

 21  Exhibit A25.

 22  Exhibit A26.

 23  Exhibit A27.

 24  Exhibit A28.

 25  Exhibit A7.

 26  Exhibit A8.

 27  Exhibit A9.

 28  Exhibit A10.

 29  Exhibit A11.

 30  Exhibit A12.

 31  Exhibit A13.

 32  Exhibit A14.

 33  Exhibit A15.

 34  Ibid at [8].

 35  Transcript PN 810.

 36  Exhibit A3.

 37  Exhibit A5.

 38  Ibid at page 28.

 39  Ibid at page 28.

 40  Exhibit A6.

 41  Ibid at page 5.

 42  Exhibit A1.

 43  Ibid at page 10

 44  Ibid at i and ii.

 45  Exhibit UV9.

 46  Exhibit UV3.

 47  Exhibit UV1.

 48  Exhibit UV2.

 49  Exhibit AWU1.

 50  Exhibit UV6,7 and 8.

 51  Exhibit UV10.

 52  RCA submissions to the Award Modernisation Full Bench 1 August 2008.

 53  Ibid at 87-96.

 54  [2008] AIRCFB 717.

 55  [2009] AIRCFB 640.

 56  [2009] AIRCFB 865 at [232].

 57  [2009] AIRCFB 945 at [187].

 58  Ibid.

 59  Outline of Applicant’s submissions at [9].

 60  [2013] FWCFB 1635.

 61  Submissions to the AIRC 24 July 2009.

 62  [2013] FWCFB 4000 at [441].

 63  Exhibit A4 at JH-2.

 64  [2010] FWAFB 4000 at [246].

 65  [2013] FWCFB 4000 at [464].

 66  Transcript PN 1357.

 67  Exhibit A5 at page 9.

 68  ABS Cafes,Restaurants and Catering Services 2006-7 8655.0.

 69  ABS op cit.

 70  Supplementary submissions of the RCA.

 71  [2013] FWCFB 2168 at [94].

 72  PR540249.

 73  [2013] FWCFB 2168 at [80].

 74  [2010] FWAFB 9290 at [43].

Printed by authority of the Commonwealth Government Printer

<Price code G, MA000119  PR542983 >

About this document
(1)
Code:
PR542983D
Title:
MA000119 - Decision - 10 Oct 2013
Effective:
10 Oct 2013
Updated:
16 Jan 2015
(0)
MA000119 - Decision - 10 Oct 2013
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