[2019] FWCFB 7096
FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.156—4 yearly review of modern awards

4 yearly review of modern awards—Group 4—Social, Community, Home Care and Disability Services Industry Award 2010—Substantive claims
(AM2018/26)

JUSTICE ROSS, PRESIDENT
DEPUTY PRESIDENT CLANCY
COMMISSIONER LEE

SYDNEY, 18 OCTOBER 2019

4 yearly review of modern awards – award stage – group 4 awards – substantive issues – Social, Community, Home Care and Disability Services Industry Award 2010

Background

[1] In a decision issued on 2 September 2019 1 (the September 2019 Decision) we decided to vary the rates of pay in the Social, Community, Home Care and Disability Services Industry Award 2010 (the SCHADS Award) for casual employees working overtime and on weekends and public holidays.

[2] At the time of the September 2019 Decision, the SCHADS Award provided that casual employees were paid overtime rates for all time worked in excess of 38 hours per fortnight or 10 hours per day; but that the overtime rates for casuals were in substitution for the 25 per cent casual loading (clause 28.1(b)(iv)(B)). We decided to delete clause 28.1(b)(iv)(B) with the effect that overtime rates are paid in addition to the 25 per cent casual loading. We expressed the provisional view 2 that the increase in overtime rates for casuals be operative from 1 December 2019.

[3] In the September 2019 Decision we also decided to vary clause 26 – Saturday and Sunday work and clause 34.2 – Payment for working a public holiday, to ensure that casual employees receive the 25 per cent casual loading in addition to the rates for Saturday and Sunday work, and for working on public holidays. We expressed the provisional view 3 that the increase in weekend and public holiday penalty rates for casuals should be phased in; in two instalments, the first on 1 December 2019 and the second on 1 July 2020.

[4] A draft variation determination reflecting our provisional views was set out at Attachment C to the September 2019 Decision.

[5] Interested parties were invited to file submissions in relation to the above provisional views and the draft variation determination by 4 pm Friday 20 September 2019. Any reply submissions were to be filed by 4 pm Friday 4 October 2019. These matters were the subject of a hearing on 14 October 2019.

Submissions

[6] Submissions were filed by:

•  Australian Business Industrial and the NSW Business Chamber – 20 September 2019

•  Australian Industry Group (Ai Group) – 20 September 2019

•  Australian Federation of Employers and Industries (AFEI) – 23 September 2019

•  Health Services Union (HSU) – 23 September and 4 October 2019

•  United Voice – 23 September and 3 October 2019

•  Victorian Hospitals’ Industrial Association (VHIA) – 20 September 2019

[7] ABI seeks an extension of the proposed transitional arrangements and submits that the changes should commence operation on 1 July 2020 on the basis that this ‘would allow businesses a reasonable period of time to organise funding and budgeting for the increased cost’. 4 In short, ABI seeks a deferred commencement date of 1 July 2020 at which time the changes would commence in full. In support of its position ABI submits:

‘Many employers in this industry are not-for-profit and, in order to obtain funding, are required to strictly adhere to budgets for the financial year. If the changes are made in accordance with the provisional view, many businesses will not be able to sustain the increase in monetary costs for the time period from 1 December 2019 to 30 June 2020.

This increase in costs, whether it is small for some employers and larger for others, was not taken into account when budgets were prepared in advance of this financial year, and will therefore be unsustainable without additional funding.

In the course of these proceedings, the Commission undertook a survey of employers in the industry and prepared a document recording the results titled ‘Survey analysis of the Social, Community, Home Care and Disability Services Industry Award 2010’ (Survey).

The results of the Survey recorded that of the enterprises that employed casual employees in the period of the survey:

(a) around three quarters of those enterprises had their casual employees working Saturdays; and

(b) around 70 per cent responded that casual employees worked on a Sunday.

Given this considerable percentile of casual employees being engaged on the weekends, the introduction of these entitlements will be a significant cost imposition on businesses, particularly those that are solely reliant on funding.

For those reasons, our clients submit that the changes should be implemented from 1 July 2020 to allow businesses time to arrange funding for this cost increase.’ 5

[8] During the course of oral argument at the hearing on 14 October 2019, Mr Scott, on behalf of ABI, supplemented ABI’s written submission and submitted that from a payroll administration perspective, a deferral with no phased instalments was a more appropriate and efficient means of giving effect to the Commission’s decision.

[9] AFEI opposes the provisional view and proposes the following transition arrangements:

[10] AFEI also proposes that the increase in the casual overtime penalty be deferred until 1 July 2020.

[11] In the alternative, AFEI proposes ‘the penalties increase by 5% initially, on 1 January 2020, with further increases of 10% on 1 July 2020 and 1 July 2022’. 6

[12] The following reasons are advanced in support of AFEI’s proposals:

(i) The need to provide reasonable notice for employers to accommodate the unexpected and significant increase in labour costs.

(ii) Increases during the current 2019-2020 financial year are likely to be unbudgeted and potentially unfunded.

(iii) Longer lead time will provide service providers and funding agencies an opportunity to plan for the increases.

(iv) The sectors affected by the increases in the penalty rates often have a substantial reliance on casual employment in servicing some of the most vulnerable sections of the community. A longer timeframe will assist service providers in avoiding more adverse effects on their service delivery.

[13] Ai Group propose that the increase in the weekend and public holiday penalty rates for casuals be phased, but that the 1 December 2019 and 1 July 2020 dates be amended to 1 July 2020 and 1 December 2020. In the alternative, Ai Group propose that the entirety of the increase in the weekend and public holiday penalty rates be implemented from 1 July 2020. Ai Group also propose that the implementation date for the commencement of the increases to overtime rates for casuals be deferred until 1 July 2020.

[14] Ai Group 7 advances seven propositions in support of its position:

(i) The changes will have a significant adverse impact upon employers who make substantial use of casual employment arrangements, particularly those that make substantial and systematic use of casual employment arrangements on weekends.

(ii) Many employers in this sector that provide services to National Disability Insurance Scheme (NDIS) participants are ‘struggling, or indeed failing to maintain profitable operations’.

(iii) It is difficult for many employers to cover unforeseen and unbudgeted cost increases. It is fair that they be afforded significant advanced notice of substantial cost increases.

(iv) Employers will need time to assess and, if warranted and possible, implement changes to their workforce structure or service offering in light of the changes, including the substitution of casual labour with permanent labour. It cannot be assumed that an employer’s workforce will accept such a change which may impede implementation and as such this may not be change that can be implemented easily or quickly.

(v) A greater period of time will provide an opportunity to seek a change in funding arrangements (or more specifically NDIS pricing restrictions) to cover the increased costs from the Commission’s decision.

The Full Bench has already recognised that unfunded costs increases may result in a reduction in services to vulnerable members of the community; that the level of funding is a product of the political processes; that it may take time for funding changes to be implemented and that such matters can be addressed by appropriate transitional arrangements. (see September 2019 decision at [137] – [141])

(vi) It is foreseeable that as a result of the September 2019 Decision some employers will elect to cease the provision of some services to NDIS participants, unless there is a change to NDIS funding arrangements, therefore:

‘It is … in the interest of such employers, the NDIS participants who will lose access to such arrangements and ultimately the casual employees that may lose or at least see the curtailment of their employment opportunities with such employers for there to be sufficient time for the carefully consideration and orderly implementation of such changes’

(vii) The delayed implementation of the increase may enable the commencement of changes flowing from the September Decision to be coordinated with the commencement of any other changes to the Award that may fall from these proceedings. In the interests of simplicity, it is desirable that, as far as possible, the outcomes of this stage of the review of the Award not be implemented in a piecemeal manner. This will also enable employers to make a more holistic assessment about what changes they may make to their operations as consequence of the cumulative impact of any changes to the Award flowing from review.

[15] The VHIA opposes the provisional view and submits that any phasing in of the changes occur after 30 June 2020 and that any increases be phased in from 1 July 2020 over a 2 or 4 year period.

[16] For ‘administrative purposes’ VHIA also proposes that the changes take effect on the first Full pay period on or after the particular dates that are decided for implementation. 8

[17] In relation to this point it is convenient to note here that s.165 of the Act provides:

165 When variation determinations come into operation, other than determinations setting, varying or revoking modern award minimum wages

Determinations come into operation on specified day

(1) A determination under this Part that varies a modern award (other than a into operation on the day specified in the determination.

Note 1: For when a modern award, or a revocation of a modern award, comes into operation, see section 49.

Note: For when a determination under this Part setting, varying or revoking modern award minimum wages comes into operation, see section 166.

(2) The specified day must not be earlier than the day on which the determination is made, unless:

(a) the determination is made under section 160 (which deals with variation to remove ambiguities or correct errors); and

(b) the FWC is satisfied that there are exceptional circumstances that justify specifying an earlier day.

Determinations take effect from first full pay period

(3) The determination does not take effect in relation to a particular employee until the start of the employee’s first full pay period that starts on or after the day the determination comes into operation. (Emphasis added)

[18] In relation to the overtime change the VHIA submits:

‘Further, in relation to the overtime changes, we recommend the order provide sufficient clarity on how the casual overtime rate is to be calculated. Taking into account an example for a SACS Level 1, Pay Point 1 working one hour of overtime on a Monday we believe the words may result in employers paying either:

•  ordinary rate (21.20) + casual loading (5.30) + overtime loading at the ordinary rate (10.60) = $37.10 per hour; or

•  ordinary rate inclusive of casual loading (26.50) time the penalty rate (time and a half – 1.5) = $39.75 per hour.’ 9

[19] The HSU and United Voice support the provisional view in respect of the transitional arrangements for the introduction of the increase in weekend and public holiday penalty rates and overtime rates for casual employees.

[20] In its reply submission United Voice opposed the employer proposals for further delays in the implementation of these increases and submits:

‘Significant delays in the implementation of the variations will mean that casual employees will not be provided with a fair and relevant safety net for a longer period of time. This will have ramifications for the relevant casual employees, in that they will receive lower incomes than they should rightly be entitled to.

We note that the transitional arrangements in paragraphs [199] –[200] as outlined in the Decision of 2 September provide employers with a period of 3-9 months to implement the changes. This is a reasonable period of time for employers to adjust to the changes, particularly because these changes are in respect of casual employees, and employers have a high level of flexibility in how and when casual employees are engaged.’ 10

[21] In the course of oral argument counsel for the HSU submitted that the finding in the September 2019 Decision that a significant proportion of employees covered by the SCHADS Award are ‘low paid’ within the meaning of s.134(1)(a), is a factor that should weigh heavily against the employer submissions to further defer these changes and in favour of introducing these changes as quickly as possible. It was also submitted that little weight should be given to the employer submissions about tight operating budgets given the absence of any evidence of detailed costing or the financial impact of these changes.

Consideration

[22] In the Penalty Rates – Transitional Arrangements decision 11 the Full Bench made the following observation about the determination of transitional arrangements:

‘the determination of appropriate transitional arrangements is a matter that calls for the exercise of broad judgment, rather than a formulaic or mechanistic approach involving the quantification of the weight accorded to each particular consideration.’ 12

[23] The Full Bench went on to observe that the following matters were relevant to its determination of transitional arrangements in relation to the reduction of penalty rates.

(i) The statutory framework: any transitional arrangements must meet the modern awards objective and must only be included in a modern award to the extent necessary to meet that objective. The Full Bench also noted that it must perform its functions and exercise its powers in a manner which is ‘fair and just’ (as required by s.577(a)) and must take into account the objects of the Act and ‘equity, good conscience and the merits of the matter’ (s.578).

(ii) Fairness is a relevant consideration, given that the modern awards objective speaks of a ‘fair and relevant minimum safety net’. Fairness in this context is to be assessed from the perspective of both the employees and employers covered by the modern award in question. 13 The Full Bench said “while the impact of the reductions in penalty rates on the employees affected is a plainly relevant and important consideration in our determination of appropriate transitional arrangements, it is not appropriate to ‘totally subjugate’ the interests of the employers to those of the employees.”14

[24] We adopt the above observations and propose to apply them to the matter before us.

[25] As mentioned earlier, in the September 2019 Decision we expressed the provisional view that the increase in the weekend and public holiday penalty rates for casuals should be phased in as follows:

[26] We also expressed the provisional view that the increase in overtime rates for casuals be operative from 1 December 2019.

[27] As mentioned in the September 2019 Decision, we accept that these variations will increase employment costs and to the extent that full time or part-time permanent employees are substituted for casuals, the variations may reduce flexibility.

[28] As to the incidence of casual employment in the enterprises covered by the SCHADS Award, the Australian Disability Workforce Report of July 2018 notes that:

•  48 per cent of disability support workers are permanent (full time or part time) and 46 per cent are casual; and

•  the trend towards casualisation is not universal across the sector and is more prevalent in small and medium organisations and absent in large organisations. 15

[29] The results of the survey administered as part of these proceedings 16 published in a report on 26 June 2019, are also relevant.

[30] The Survey Results show that in the 4 week period from 4 to 31 March 2019, around three-quarters (75.4 per cent) of enterprises that responded to the survey employed casual employees that were covered by the SCHADS award. Of the enterprises that employed casual employees in that 4 week period, one quarter had casual employees that worked in excess of 38 hours per week or 76 hours per fortnight. Around three-quarters of enterprises (76.4 per cent) responded that casual employees worked on a Saturday during this period, and around seven in ten enterprises (69.9 per cent) responded that casual employees worked on a Sunday. It is apparent that some casual employees covered by the SCHADS Award are working overtime hours and working on weekends.

[31] We also acknowledge that many employers covered by the SCHADS Award are not-for-profit organisations who rely on funding from a range of sources to provide their services. The Survey Results show that almost nine in ten (87.2 per cent) enterprises that responded to the survey receive a significant proportion of their income from the Commonwealth, State or Local Government. Further, we accept that an increase in employment costs within a budget cycle may place such organisations under financial pressure. It is appropriate that a reasonable transition period be determined in order to provide such organisations with an opportunity to seek an increase in funding.

[32] It is also relevant that the social, community, home care and disability services industry is undergoing structural change by reason of reforms that have been (and continue to be) implemented across the country.

[33] Against these considerations, the fact that a significant proportion of employees covered by the SCHADS Award may be regarded as ‘low paid’ within the meaning of s.134(1)(a) is a consideration in favour of not deferring or phasing-in these variations. 17

[34] Further, in the September 2019 Decision we accepted that the existing rates for casuals working overtime and for work on Saturdays, Sundays and public holidays are not fair and proportionate to the disability experienced by casual employees working at these times. 18 This too is a consideration which tells against the deferral or phasing in of the variations.

[35] In our view, an appropriate fair and just balance between these considerations is to provide that the increases in overtime, weekend and public holiday rates for casuals will commence operation, in full, from 1 July 2020.

[36] We accept ABI’s submission that it is more efficient, from a payroll administration perspective to defer the increases rather than introduce them by phased instalments. A deferral until 1 July 2020 provides a reasonable time period for the enterprises affected to seek a compensatory change in funding arrangements (or more specifically NDIS pricing restrictions) and to consider/implement the substitution of casual employees for permanent full time and part time employees.

[37] Considerations of fairness to the employees affected have led us to reject the proposals advanced by AFEI, Ai Group and the VHIA for a longer transitional period.

[38] Finally, we are not persuaded that it is necessary to vary the SCHADS Award to address the ‘recommendation’ put by the VHIA that ‘the order provide sufficient clarity on how the casual overtime rate is to be calculated’ (see [18] above). No other party agitated this point and the issue raised was not the subject of much elaboration in the VHIA’s written submission and it was not represented at the oral hearing. In the event the issue raised proves troubling in practice an application may be made to vary the SCHADS Award.

[39] We will shortly issue a variation determination giving effect to this decision.

PRESIDENT

Appearances:

M. Robson for ASU

N. Dabarera for United Voice

L. Doust for HSU

R. Liebhaber for HSU

K. Scott for ABI, NSWBC, ACSA, LASA

B. Ferguson for Ai Group

S. Lo for AFEI

M. Pegg for NDS

M. Tiedeman for ABI, NSWBC, ACSA, LASA

Hearing details:

Sydney

2019

14 October

Printed by authority of the Commonwealth Government Printer

<PR713321>

 1   [2019] FWCFB 6067

 2   Ibid at [200]

 3   Ibid at [199]

 4   ABI submission at para 2.5

 5   ABI submission at paras 2.6-2.11

 6   AFEI submission at para [7]

 7   Ai Group submission at paras 9-16.

 8   VHIA submission at paras 5-8

 9   VHIA submission at para 9

 10   United Voice submission 3 October 2019

 11   [2017] FWCFB 3001

 12   Ibid at para [142]

 13   Ibid at paras [117]-[119]

 14   Ibid at para [148]

 15   National Disability Services (2018) Australian Disability Workforce Report July 2018 at p 6 (see September 2018 Decision at [67])

 16   See [2019] FWCFB 6067 at [28]-[29]

 17   [2019] FWCFB 6067 at [160]

 18   Ibid at [172]