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Introduction

Read the full decision here.

In [2020] FWCFB 4350, the Full Bench of the Fair Work Commission has dealt with the ambiguity that is the casual loading and penalty rates. In this case overtime rates of pay.

In its decision headed “4 yearly review of modern awards – common issue – overtime for casuals – draft determinations” The FB of the FWC set out to identify and resolve potential ambiguities in a number of modern awards in relation to the overtime entitlements of casual employees as part of the 4 yearly review of modern awards. It specifically deals with those remaining modern awards identified in a statement which was issued on 6 December 2019 (December Statement) in relation to which there remain outstanding issues. The awards listed in the December Statement fall into three categories:

  • Category 1 consists of 35 awards in relation to which there are contested issues requiring determination. These include the 34 awards set out in paragraphs [3], [8], [12], [14] and [15] of the December Statement. In addition, we have placed the Local Government Industry Award 2010 (now Local Government Industry Award 2020 in this category because, although there is a consensus position amongst the parties, the Fair Work Ombudsman has published a pay rates guide to the award which is at odds with the parties’ position.
  • Category 2 consists of 55 awards where there has been a consensus reached (either by way of agreement or the non-expression of any opposition to a party’s position) as to the meaning and effect of the existing provisions concerning the overtime entitlements of casual employees. These are the awards identified in paragraphs [4], [6], [16], [17], [21], [22] and [23] of the December Statement, except for the Local Government Industry Award. In some cases, variations to the awards are agreed or not opposed to give effect to the consensus position.
  • Category 3 consists of the 3 awards listed in paragraph [19] of the December Statement about which no submissions have been made.

In addition, there is a fourth category of three awards which were referred to in a statement which was issued on 14 October 2019 2 (October Statement). In relation to these awards, paragraph [2] of the October Statement said that: “interested parties advised that they were in agreement as to the meaning and effect of the current casual overtime provisions in the following awards, and no modification of the exposure drafts for those awards was required”. This decision seeks to finalise the position with respect to these category 4 awards.

To get the full picture, you will need to review the decision in full, however on my quick reading the amendment is not intended to alter award that clearly state that overtime is additional to the base rate of pay. That is, this is a case of clearing up any ambiguity on the subject.

Historically

The Full Bench describes historical work:

“We note at the outset that in respect of a number of awards, various parties have submitted that the Full Bench of the Australian Industrial Relations Commission which conducted the award modernisation process pursuant to Part 10A of the Workplace Relations Act 1996 (AIRC award modernisation Full Bench) adopted a standardised approach or “general rule” as to the payment of the casual loading and overtime penalty rates. This standard approach was said to be discernible in the following passage of a decision issued on 19 December 2008:

‘[50] In all the circumstances we have decided to confirm our earlier indication that we would adopt a standard casual loading of 25 per cent. We make it clear that the loading will compensate for annual leave and there will be no additional payment in that respect. Also, as a general rule, where penalties apply the penalties and the casual loading are both to be calculated on the ordinary time rate.”

“While it is certainly the case that the 25% casual loading is, with a few exceptions, the standard in modern awards, it cannot be said notwithstanding the above passage that any standard or general approach was actually applied by the AIRC award modernisation Full Bench concerning the relationship between the casual loading and overtime penalty rates. The modern awards made as a result of the award modernisation process are marked by a high degree of diversity in this respect, as will become apparent in the analysis of the disputed awards. Some modern awards, at least originally, did not provide for casual employees to receive overtime penalty rates at all. Of those that provide for overtime penalty rate entitlements for casual employees, they may be divided into three categories:

  • awards where overtime penalty rates are payable in substitution for the casual loading;
  • awards where the casual loading and the overtime penalty rate are added separately to the minimum hourly rate (the cumulative approach);
  • awards where the overtime penalty rate is applied to an ordinary hourly rate consisting of the minimum hourly rate and the casual loading (the compounding approach).

Advice

All modern awards are progressing from the “2010” to “2020” revisions. You are advised to download the latest version of the award from the Fair Work Commission website. Wage tables and subscription options are also available on the Fair Work Ombudsman website.