“Disgrace”: Fair Work Commission takes aim at hospitality employer’s ancient EBA
A prominent hospitality employer has had its 1999 enterprise bargaining agreement terminated by the Fair Work Commission (FWC) with the FWC issuing a clear warning to employers operating on “zombie” agreements that have long passed their nominal expiry dates.
The EBA was made in December 1999 and reached its nominal expiry date in December 2002. The application to terminate the EBA was made by a casual employee of the business. Commissioner Hunt of the FWC dealt with the application. The employer initially opposed the application, before deciding to withdraw its opposition. Commissioner Hunt heard the employees under the EBA were presently being paid the base rates of pay from the modern award known as the Hospitality Industry (General) Award 2020 for all hours worked, with no penalties for weekends, public holidays, or overtime. (Section 206 of the Fair Work Act requires that the base rate of pay for an employee under an enterprise agreement not be less than the base rate of pay under the modern award.)
Arrangement “unconscionable”
In determining the application, the Commissioner was scathing in her assessment of the EBA and its impact on employees:
For more than two decades, the Employer has had the benefit to it, and to it only in depriving employees of payment of penalty rates for work performed at night, on weekends and on public holidays. My observation of the Agreement is that it provided no benefit to the employees at all.
The effect of employees working without the payment of penalty rates is staggering. Sunday rates for a casual Level 1 employee covered by the Agreement amount to a loss to the employee of more than $11 per hour, when compared with the Award. On public holidays, the loss to a casual Level 1 employee is in excess of $26 per hour.
It is difficult to understand how an employer could have, for so many years, knowingly deprived a large number of employees of penalty rates, to which they would have otherwise been entitled under the relevant award, simply because it lawfully could do so. The Second Employee has stated that they receive $28.08 per hour and an additional $2 per hour on weekends, however, the Employer advised that no penalty rates are paid. In any event, even if a $2 per hour premium is paid for Sunday work, the employee would be entitled to $38.01 for Sunday work under the award. Paying employees a $2 per hour premium is not demonstrating any benevolence; in my view it is unconscionable this arrangement has continued in place without an application by the Employer to terminate the Agreement.
Commissioner Hunt decided to terminate the EBA with the employer being given 4 weeks to prepare for its termination.
In obiter commentary included in the Commissioner’s decision, Commissioner Hunt described the effect of the employer having the benefit of an EBA made in 1999, with no payment to employees for penalty rate, as a “disgrace”. The Commissioner said it had resulted in the employer having an “enormous competitive advantage” over those employers paying employees penalty rates under awards and their own agreements.
Warning for employers
In comments that should be considered carefully by employers with old agreements that substantially undercut modern award outcomes, the Commissioner said:
I consider it necessary for a light to be shone on these kinds of archaic arrangements. Presently, it is incumbent upon employees, often casual employees, to make an application to the Commission, to request termination of an agreement where an employer does not have the intestinal fortitude to recognise what a significant benefit it has had for a substantial period of time and make its own application. The result of an employer making its own application is that it would signal to its employees that it recognises the inferior entitlements owed to its employees, and that it wishes to meet and rise to community standards contained within awards. At the very least, it would demonstrate that it accepts that it should pay to employees the same rates that a new business would be required to pay to its employees.
Application by Henry Thom [2022] FWCA 1543