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The Federal Court has today dismissed a challenge by the Unions – United Voice and the Shop, Distributive and Allied Employees Association – to the Fair Work Commission’s decision to cut penalty rates in the retail, hospitality, fast-food and pharmacy sectors.

The Unions argued that the Fair Work Commission’s decision to cut Sunday and public holiday penalty rates was ‘legally unreasonable’ in that it did not take into account the effects it would have on low-paid employees. The Federal Court justices could not re-examine the merits of the case, but only considered whether the Fair Work Commission made a jurisdictional error in coming to its decision. Justices North, Tracey, Flick Jagot and Bromberg held that the Fair Work Commission made no such error and as such the penalty rate cuts stand.

The Fair Work Commission’s decision cut Sunday pay rates for full-time and part-time workers covered by the Hospitality Industry (General) Award from 175% to 150%. Permanent staff covered under the General Retail Industry Award will have their Sunday penalty rates reduced from 200% to 150%, while workers covered under the Fast Food Industry Award will see a Sunday penalty rate reduction from 150% to 125%.

The decision also reduced the Sunday penalty rate for casual staff from 175% to 150% in the Fast Food industry, and from 200% to 175% in the retail industry. However, the casual penalty rate for Hospitality staff will remain at 175%.

These changes to Sunday penalty rates are being phased-in over the next few years, with the last of the cuts until 1 July 2019.

The cuts to public holiday rates in the restaurant, hospitality, pharmacy and fast food sectors became effective on 1 July this year.

The Federal Court decision means employers can move forward with the penalty rate cuts with greater confidence if they so wish.

Source: Michelle Blewett, Senior HR Advisor – Better HR

Published: 17 October 2017

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