While the intention of the Amendment is broad, the operation is fairly limited. The Amendment requires the Fair Work Commission (“FWC”) to ensure that penalty and overtime rates are not reduced or substituted when they make, vary or revoke a modern award.
The details
The FW Act now contains an additional section which provides that in exercising its powers to make, vary or revoke modern awards, the FWC must ensure that penalty or overtime rates are not reduced and that modern awards do not include terms that substitute employees’ entitlements to receive penalty or overtime rates where those terms would have the effect of reducing additional remuneration employees would otherwise receive.
In practice, the Amendment seeks to prevent the FWC from including terms in a modern award which roll up overtime and penalty rates into a single rate for employees working overtime, unsocial, irregular or unpredictable hours, public holidays or shiftwork.
What employers need to know
While it is important to be aware of that the Amendment does, it is also important to be aware of the limitations of the Amendment. The Amendment does not:
trigger any full-scale review of modern awards. Rather, the Amendment imposes an additional requirement that the FWC must consider when marking, varying or revoking modern awards;
limit the operation of flexibility terms within a modern award which allows an employer and individual employee to make an individual flexibility arrangement. These arrangements allow flexibility in relation to overtime and penalty rates, provided an employee is “better off overall” under the individual flexibility arrangement than the modern award;
affect the bargaining process and the ability for employers and employees to negotiate an enterprise agreement with terms that suit an individual enterprise provided the enterprise agreement passes the “better off overall” test;
alter the contractual arrangements with individual employees who receive a salary to cover their modern award entitlements; or
alter the ability to make annualised wage arrangements (if permitted by a modern award).
Having said this, there is likely to be a greater focus on clauses which seek to roll-up overtime and penalty rates into a single payment or where a higher wage or salary is paid in satisfaction of these rates. Care should be taken when preparing these types of clauses regardless of whether they are in an enterprise agreement, contract or other agreement as they may be subject to greater levels of scrutiny.
