Productivity Commission recommends changing weekend penalty rates and removing Small Business Fair Dismissal Code

The Productivity Commission has recommended changes be made to weekend penalty rates for businesses in the retail, hospitality and entertainment industries.

The recommendations form part of the commission’s final report for its inquiry into the Australian workplace relations system, which the government released today.

However, the commission has not recommended any changes be made to penalty rates for overtime workers, night shifts or shift loadings or for people who work in nursing, teaching or emergency services workers, which is consistent with the commission’s draft report in August.

Employment minister Michaelia Cash released the report’s findings this afternoon and said the government will consider the recommendations.

Cash said if the case was outlined for sensible and fair changes to penalty rates, the changes could be taken to the next election.

Weekend penalty rates

The Productivity Commission has recommended Sunday penalty rates in the hospitality, entertainment, retailing and restaurant and café industries be “aligned with those on Saturday”.

Each industry should have a weekend penalty rate, according to the commission.

The report said penalty rates “have a legitimate role in compensating employees for working long hours or at asocial times”, however, the existence of higher Sunday rates is problematic as the rates are “inconsistent” across industries and are “anachronistic in the context of changing consumer preferences”.

The commission said Sunday penalty rates also “frustrate the job aspirations of the unemployed and those who are only available for work on Sundays”.

Public holidays

The Productivity Commission has not recommended any changes be made to penalty rates for public holiday work, saying these days are “intended to encourage shared community activities [and] as such, there are strong grounds for deterrence against their use for working, but with some flexibility to provided some services on these days”.

Unfair dismissal laws

The commission has recommended a number of “moderate and incremental reforms” to the current operation of unfair dismissal laws, which it says would leave “much of the existing legislation and its legitimate protections intact”.

Most importantly, the Productivity Commission recommends removing the Small Business Fair Dismissal Code, subject to several other reforms being introduced.

“The basic premise of assisting small business to navigate the complexities of unfair dismissal legislation is reasonable but the Code does not achieve that outcome and provides a false sense of security,” the commission said.

The recommendations the commission says should be introduced are:

–       Amend the Fair Work Act so procedural errors alone are not enough to award compensation or reinstate employments “in what would otherwise be regarded as a valid dismissal”;

–       Allow for an upfront assessment of whether there is a valid reason for dismissal;

–       Consider introducing non-refundable lodgement fees to the Fair Work Commission to reduce administrative burden and “limit automatic recourse” to the commission;

–       A two-tier fee structure for applicants to the Fair Work Commission, which would include an initial fee for accessing conciliation and a further fee if the case proceeds to arbitration;

–       The emphasis of reinstatement of workers as the primary goal should be removed as reinstatement is “rarely achieved and in many cases would not be desirable”. 

Minimum wage and industry awards

The commission has recommended the government establish a new statutorily independent Workplace Standards Commission (WSC), which would have responsibility for reviewing and varying the national minimum wage and awards.

The WSC would be separate from the Fair Work Commission and the Fair Work Ombudsman, which would continue to perform the same functions.

Anti-bullying provisions

The Productivity Commission has not recommended any changes be made to the Fair Work Commission’s current approach to enforcing anti-bullying protections for workers.

The commission said the approach of the Fair Work Commission so far has been “considered and effective”, however, “sufficient time has not elapsed to reach a final judgment on the effectiveness of the provision or to assess whether the low probability of success may stem the flow of applications”.

“A post-implementation review is already scheduled and this would provide a timely opportunity to assess the operation of the jurisdiction,” the commission said.

Enterprising bargaining for small business

Similar to its draft report, the Productivity Commission’s final report recommends a new type of workplace agreement be adopted for small and medium businesses, called the enterprise contract (EC).

An EC would include elements of both individual workplace contracts and enterprise agreements.

“An EC would see employers vary awards for classes of employees (for example, casual employees or weekend employees), and this would allow employers to innovate at the firm-specific level in a way not otherwise available under awards,” the commission said

The commission said workers covered by an EC would still be covered by the National Employment Standards, as well as other provisions in the Fair Work Act, such as the unfair dismissal rules and general protections, as well as the minimum wage.

Sham contracting

The commission has recommended changing the requirements around prosecuting an employer for engaging in sham contracting, from a test of “recklessness” on behalf of the employer to a test that they have acted with “reasonableness”.

The commission said the “reckless” behaviour test “appears to be a high hurdle for legal action”.

“Changing from a test of ‘recklessness’ to a test of ‘reasonableness’ would help discourage sham contracting, including through the regulators’ out-of-court actions,” the commission said.