February 25 2017
Anna Patty, Damien Murphy
Herbert Hoover an American mining engineer, was appointed general manager of the West Australian gold mine Sons of Gwalia in May 1896. His first executive decision? Stop double time on Sundays.
Hoover became US president and is primarily remembered for taking the world into the Great Depression. Despite him and generations of employers since, Sunday penalty rates went on to become as Australian as lamb chops.
Penalty rate cut: how did it happen?
Workplace reporter Nick Toscano contextualises the Fair Work Commission's announcement on Thursday that Sunday penalty rates paid in retail, fast food, hospitality and pharmacy industries will be reduced from the existing levels.
But double time appears to have run out for Sundays.
The Fair Work Commission on Thursday ruled that Sunday penalty rates in retail, fast food, hospitality and pharmacy industries would be reduced. The ruling does not necessarily mean a stampede by other industries to get a piece of the cut-rate action – who would dare begrudge nurses and emergency services their Sunday bread?
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But while unions estimate up to 700,000 workers will lose money when the new rates take effect on July 1, the changes are also a snapshot of how Australian life and values have transformed down the years.
The 1845 NSW Master and Servants legislation stipulated Sunday Observance, and Sunday penalty rates became widely established in 1919 amid massive strikes protesting unemployment after the World War I.
In more recent times, Sunday rates became a political football as the gradual erosion of weekend penalty rates became a reflection of the higher value consumers place on being able to shop seven days a week and eat out.
Employment law expert Professor Andrew Stewart from the University of Adelaide said the Fair Work Commission needed to consider whether Sunday was still "different" to Saturday and demanded a higher penalty rate.
Women are disproportionately represented in low-paid retail and hospitality jobs.
After the Coalition government commissioned a review of penalty rates, the Australian Productivity Commission recommended that higher Sunday rates should be reduced to the same rates paid on Saturday.
While parents who ferry their children to sports events on Saturdays may argue Saturdays are now as important in terms of family time as Sundays, the Fair Work Commission found Sundays were still worth more.
Coffee blues: The cut in Sunday penalty rates will be borne mainly by young waitstaff.
In deciding to reduce Sunday penalty rates for retail and hospitality industries, the commission found working on Sunday was more adverse to workers than Saturday. But "much less than in times gone past".
In most cases, Sunday rates have been reduced but still remain higher than Saturday rates, which were not changed.
"People still do think differently about Sunday. Many people still do think of Sunday as the day of rest," Stewart says.
"On the other hand you have this relentless demand from all of us as consumers for shops, cafes and restaurants to be open. It comes down to the fact that we as community members tend to think of the weekend as separate but we still want to shop and go out to eat on weekends."
Thursday's Fair Work Commission decision will be borne by young people who pull beers into the early morning hours, wait on tables and serve coffees on weekends and make up the majority of weekend shift workers.
The burden will also fall on women who are disproportionately represented in low-paid retail and hospitality jobs. Many rely on penalty rates and the flexibility part-time jobs offer to balance work and family.
"There are a lot of women who work Sunday shifts because they don't have to pay for childcare to do so," Lyn Craig, director of the University of NSW Social Policy Research Centre says. "Their penalty rates are being cut at the same time that welfare and family payments are being cut.
"This will impact on single parents and young people who depend on those things at a time of the lowest wages growth we've had for a long time."
Under the changes, permanent staff in the retail sector will have Sunday penalty rates dropped from 200 per cent to 150 per cent of their standard hourly rate. Pay for casuals will fall by 25 percentage points to 175 per cent.
In hospitality, employees will face a reduction in Sunday pay from 175 per cent to 150 per cent, while casuals' pay remains unchanged. Fast-food workers' Sunday rates will go from 150 per cent to 125 per cent for full-time and part-time staff, and casuals will go from 200 per cent to 175 per cent.
Public holiday penalty rates of "double-time and a half" in these industries will also be slashed by 25 percentage points.
Stephen Clibborn, from the University of Sydney business school who has surveyed university students, says it is well known that the underpayment of wages and penalty rates are prevalent in retail and hospitality jobs: "Without effective enforcement of award pay and conditions, today's decision must be viewed to some extent in a bubble, separate from the reality of our labour market."
The cuts do not yet extend to restaurants, as employer groups did not provide a strong enough case to convince the umpire. They will have another opportunity to try again later this year.
John Hart, of the Restaurant and Catering Industry Association, said his organisation would take "another bite of the cherry" when it makes another submission next month.
The commission's ruling has fuelled a political war over industrial relations in Canberra.
Mindful of the damage wreaked by John Howard's Work Choices legislation, the Coalition dithered on Sunday rates, passing the buck to commissions. And while the Greens have remained adamant in opposing cuts to penalty rates, Opposition Leader Bill Shorten shifted his original position, first saying he would abide by the umpire's decision, then this year saying he would oppose any cuts if they left workers worse off. He says there could not be a worse time to introduce the changes.
"The Liberal Party is frothing at the mouth they're that excited about the possibility of penalty rates being cut," Shorten told a press conference. "Millions of Australian families rely on penalty rates to put food on the table – Labor will fight for these people and their penalty rates."
Shorten also pointed out that the Coalition government commissioned the Productivity Commission to investigate the case for cutting penalty rates with its evidence forming part of the basis for the Fair Work Commission's decision.
Federal Employment Minister Michaelia Cash accused Shorten of hypocrisy, saying the decision to adjust penalty rates was his fault. She says her government was always going to leave the penalty rates decision in the hands of the Fair Work Commission.
"It is an inconvenient truth for the Labor Party that in 2013 Bill Shorten as Workplace Relations Minister amended the Fair Work Act to specifically require the Fair Work Commission to review penalty rates as part of the four-yearly review process," she says.
Employer groups have long argued penalty rates are too high and no longer reflect community standards in a 24/7 economy.
James Pearson, who heads the Australian Chamber of Commerce and Industry, says reducing penalty rates would help businesses "open their doors longer, take on more staff and give them more hours".
However, some businesses that gave evidence at the Fair Work Commission hearings admitted it was unlikely they would put on more staff if penalty rates were cut. And Citigroup last year conducted financial analysis which found big retailers including Myer and JB Hi-Fi were likely to deliver any savings from penalty rate cuts to shareholders.
Former ACTU Assistant Secretary Tim Lyons, who is a research fellow at the think tank Per Capita, says the Citigroup report revealed that reductions in penalty rates would not save or create more jobs. He says a lack of dollars in workers' pockets was the problem, not a solution to housing affordability, sub-trend economic growth and tax revenue shortfalls.
"This is a very poor decision where the unrelenting attacks on penalty rates and the commission from government and employer groups seems to have played a role," Lyons says. "In reality, there is no evidence that this will result in more jobs or more hours for existing workers. It's just a pay cut for people that can't afford it."
Employment law academics including Stewart and Professor John Buchanan, from the University of Sydney business school, are also sceptical, saying time will tell whether businesses will put on more staff on Sundays.
"The question is, are we going to see either extra jobs created or extra hours of work being offered to offset the pay reductions, and will the commission itself – come the annual wage review – perhaps look at an extra hike to basic pay rates," Stewart says.
"I'm persuaded there will be some businesses that extend their operations on Sunday, but how many of them and how many jobs that creates and whether that offsets the fall in pay for existing workers, I'm genuinely unsure about.
"And at the end of the day, that's how this decision needs to be judged. Do the potential employment effects offset the reductions in take-home pay?"
John Barker, a retired physicist who worked in the US, says America has come to be a signpost for Australia's future socioeconomic structure.
He says one of his daughters stayed on in the US, became a citizen and "managed a Subway store with 20 staff: $A10 per hour, 60 hours/week, one week per year holiday, no health insurance, no superannuation and no penalty rates.
"It is perfectly clear that we are drifting to the US work regime. Notionally, the US has a slightly lower unemployment rate than Australia, but with increasingly entrenched poverty," he says. "The penalty rates changes might increase employment slightly, but it is clear that the 'drift' is becoming 'pressure'."
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