The Pay Protection Bill 2017 will amend the Fair Work Act 2009 to protect minimum employee standards such as penalty rates and overtime, and close loopholes that have allowed hundreds of thousands of employees to be paid less than the award.
The underpayment of hundreds of thousands of low paid employees in Australia has reached an astonishing scale. In the fast food and retail sector, estimates place the loss to over 250,000 employees at more than $300 million per year, with some employees missing out on as much as $10,000 per year. It is abundantly clear that protections aimed at preventing such underpayment in Australian workplaces are insufficient.
The scale of underpayment shows that the Fair Work Act 2009 is failing to meet its objective of:
…ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders.
Loopholes in the Fair Work Act 2009 have resulted in employees covered by an Enterprise Agreement (EA) being paid below the relevant award. Specifically, the loophole in section 206 which stipulates the:
Base rate of pay under an enterprise agreement must not be less than the modern award rate or the national minimum wage order etc.
The base rate of pay as defined in the Fair Work Act 2009 does not include what could be considered minimum standards, such as penalty rates, overtime, loadings and allowances. As these minimum standards are not protected, employees covered by an EA can earn less under the agreement than they would earn under the applicable award.
The Australian Nursing and Midwifery Federation (ANMF) stated that their experience in enterprise bargaining 'has led us to have a strong view that there are a number of what we would call minimum standards that are at risk through enterprise bargaining. Particularly in terms of nursing, they are leadings, allowances, weekend penalties and other types of payments where it is open for employers to secure reductions in those terms and conditions of employment.'
Underpayment of this kind is currently evident within the retail and fast food sector, where it is common practise to negotiate agreements that cut weeknight and weekend penalty rates in return for an increase in the base rate of pay. This leaves many employees who predominantly or only work during times that would otherwise attract penalty rates, significantly worse off.
Many companies have pointed to the Fair Work Commission’s (FWC) approval of their EA as evidence that is does not leave employees worse off. In order for the EA to be approved, the FWC must be satisfied it passes the Better Off Overall Test (BOOT) which determines that each award covered employee, and each prospective award covered employee, would be better off overall if the agreement applied to the employee than if the relevant modern award applied.
When determining whether an agreement passes the BOOT, the FWC requires the employer, and in some instances the union, to provide a Statutory Declaration stating that they believe the agreement passes the BOOT. It is reasonable to assume that companies complete the necessary calculations to inform their position that no employee is worse off under the agreement compared to the award. However, McDonald’s confirmed during this inquiry that no such calculations have been done.
Unfortunately, this is not an isolated incident, Woolworths were unable to confirm whether any analysis had been completed comparing their agreement to the award, prior to the submission of the statutory declaration.
The role of statutory declarations in assessing whether an agreement passes the BOOT is significant. The apparent disregard these companies show when completing the statutory declaration is extremely concerning. Both ANMF and RAFFWU submissions raised concerns, noting that where the information is inaccurate, deficient or misleading, the Commission’s capacity to fairly and accurately assess an agreement is compromised.
The Department of Employment submission demonstrates the prevalence of underpayment within the fast food, retail, hospitality and pharmacy sector. The Departments analysis shows that 70 agreements, covering over 430,000 employees of large companies, pay hourly rates below the award for hours worked on a Sunday. In return, the agreement offers an increase in the base rate of pay during the week. Further analysis by the Department shows that across those 70 agreements, employees would need to work an average of ‘4 hours and 15 minutes at the higher hourly rate of pay during the week to make up for EACH hour of lost pay on a Sunday.
Whilst giving evidence to the committee, Mr Suter, an employee at Coles supermarket explained 'every hour of every shift I work attracts reduced penalty rates compared to the award. After six pm on a weekday, the award provides for a penalty of 25 per cent. I get zero. On a Saturday, the award provides for a penalty of 25 per cent. I get zero. One a Sunday, the award provides for a penalty of, now, 95 per cent. I get 50 per cent.'
Unfortunately, Mr Suter is not an isolated example. The Retail and Fast Food Workers Union (RAFFWU) submission calculated the estimated loss of wages across Woolworths stores alone is over $65 million per annum.
Similar calculations were carried out using McDonald’s rosters, timesheets and payslips which found wage loss across McDonald’s stores is estimated to be over $60 million per annum.
Rosters provided by Coles are the basis for calculations which conservatively estimate wage loss across Coles to be over $80 million per annum.
KFC confirmed they had not paid employees Sunday penalty rates in nearly 8 years or paid employees according to wages under the award for over 20 years.
Despite mounting evidence of significant underpayment, employers are reluctant to acknowledge the agreements they negotiated left their employees worse off. When asked, Mr Cawood from McDonald’s Australia refused to concede that any employees were worse off under the agreement when compared to the award, 'I just don’t accept that there are workers that are worse off. As I’ve said a couple of times now…' Mr Cawood then confirmed that McDonald’s had not completed any calculations to inform that opinion.
Whilst it is true employees vote on an EA, it is not true to say that employees were provided with materials that explained some employees would be worse off than under the award. Mr Suter stated that despite a series of meeting to discuss the now defunct 2014 EA, 'at no time did any representative of Coles or the Shop, Distributive and Allied Employees’ Association (SDA) advise us that our conditions we below those set out in the award. At no time did Coles or the SDA advise us that our take-home pay would be less than if we were on the award.'
Over and over again we are seeing big companies saving millions on dollar a year whilst their employees are financially worse off. The current provisions in the Fair Work Act 2009 cannot be relied upon to protect employees from significant underpayment at the hand of their employers.
This cannot be allowed to continue. Implementing the Pay Protection Bill 2017 will protect employees’ full rate of pay from being traded for so called “benefits” that many employees will never receive.
The Pay Protection Bill 2017 will prevent further underpayments by protecting the full rate of pay for employees covered by an enterprise agreement. The full rate of pay as defined by the Fair Work Act 2009 includes loading, allowances, overtime and penalty rates.
A number of unions including RAFFWU support the passage of this bill. The RAFFWU submission noted the bill would 'immediately return hundreds of millions of dollars in wages to our lowest paid.'
ANMF stated 'there needs to be some regulatory changes to protect employees from their minimum entitlements being reduced…So we would support further protections around those minimum entitlements to ensure that employees have reasonable and fair pay and conditions.'
The issue of retrospectivity has been raised as a criticism of the bill. The bill’s amendments to the Fair Work Act 2009 will apply to enterprise agreements currently in force, but only from the date the amendments commence. Additionally, Subsection 30(2) of the bill operates as a ‘savings’ provision should a court determine that the amendments may only apply to agreements made on or after the commencement of the bill.
The Department of Employment has claimed the passage of the Pay Protection Bill 2017 will result in employees going backwards, not forwards. However, the Departments’ own analysis has shown over 430,000 employees in the fast food, retail, hospitality and pharmacy sector are currently covered by agreements that pays rates below the award for hours worked on a Sunday. It is therefore difficult to reconcile the Departments’ claims regarding the passage of the bill with the evidence it has provided to the committee.
The Fair Work Act 2009 protects an employee’s base rate of pay from being reduced or traded under an EA. Broadening those protections to include other minimum standards such as penalty rates, overtime and loading, would ensure no employee will be worse off under an EA compared to the award.
Recommendation 1
The Fair Work Amendment (Pay Protection) Bill 2017 should pass in order to protect minimum employee standards such as penalty rates and overtime, and close loopholes that have allowed hundreds of thousands of employees to be paid less than the award.