Penalty rate cuts: exempting current workers could reduce hardship, expert says

The Fair Work Commission could prevent hardship from the cut in penalty rates by exempting current workers rather than phasing in the reductions over years, a labour law academic has said.

The expert legal opinion will embolden a push by Labor and the Greens to try to prevent penalty rate cuts in future and to protect current workers from the commission’s landmark decision on Thursday to cut Sunday and public holiday penalty rates in four awards.

Although both measures are opposed by the government and therefore won’t be achieved in legislation this term, Adelaide Law School professor and labour law expert, Andrew Stewart, told Guardian Australia the commission already had the power to spare current workers.

On Thursday, the commission reduced Sunday and public holiday penalty rates in the retail, pharmacy, fast food and hospitality (excluding cafes and restaurant) industries by between 25% and 50%.

The decision was welcomed by business groups, who seized on the findings that rate cuts would extend trading hours and service levels and could also increase employment.

The Business Council chief executive, Jennifer Westacott, said the commission had “taken a step in the right direction towards modernising penalty rates to better reflect our 24/7 existence”.

But unions argued the cuts would slash take-home pay of low-paid workers by up to $6,000 a year.

At a media conference on Wednesday, Shorten to do “everything in our power, in the parliament and in the courts, to remedy this bad decision because Australian workers shouldn’t be suffering wages cuts”.

The commission has not yet decided on transitional arrangements to apply the cuts and will take further submissions on the question.

Stewart said the commission has the power to grandfather orders to exempt workers hired before the decision from cuts, through a provision known as take home pay orders.

The five-member full bench of the commission said that “if ‘take home pay orders’ are an available option then they may mitigate the effects of a reduction in Sunday penalty rates”.

“But we do not favour any general ‘red circling’ term which would preserve the current Sunday penalty rates for all existing employees.”

Stewart said this meant the commission’s “provisional view” was it would be best to phase the cuts in across-the-board rather than create two classes of worker: those hired before and after the decision, who would be paid different rates.

He said grandfathering was used to ensure workers did not lose take-home pay when thousands of awards were consolidated into 122 modern awards after the Fair Work Act was introduced in 2009.

Shorten called on the federal government to make submissions to the commission that current workers should not receive a cut to their take-home pay.

“We’re optimistic – we are going to do our best to convince the [commission] not to implement this decision,” he said. “If we are unsuccessful, we will also be changing the law in parliament to change the rules that the [commission] operates under.”

Labor proposes legal changes so that cuts to penalty rates should be accompanied by beneficial pay and conditions so workers are not left worse off.

Shadow employment spokesman, Brendan O’Connor, went further, adding that the government should “join Labor and ensure that this decision and its affects do not continue”.

Greens industrial relations spokesman, Adam Bandt, told a media conference on Thursday his party would “legislate to reverse the decision”.

The Greens policy before the last election was to put a floor on penalty rates or require that Sunday rates be higher than Saturday levels.

Guardian Australia understands the Greens will prepare a bill for release on Friday or Monday and are confident if legislation were passed before orders begin to take effect from 1 July the cuts could in effect be prevented.

Stewart said there was “no constitutional impediment” to legislation overriding the decision, but in practice no such bill would pass the lower house. He said it would be a “terrible idea” to do so, because “it would amount to parliament taking responsibility for wage-setting under the award system”.

Labor has so far supported the independent Fair Work Commission, making it unlikely it would join such a move, but Stewart said the opposition may be open to less radical changes like requiring the commission to grandfather the orders.

On Thursday employment minister, Michaelia Cash, reiterated the government’s support for the independence of the commission. “The government has no plans to change the way penalty rates are set,” she said.

One Nation moved to shut down any suggestion of overturning the decision, after senator Brian Burston said in a statement the independent umpire’s decision should be accepted.

“The ruling will cause some hardship among casual workers, and it is good to see there will be a transition period to allow adjustment” he said.

“On the other hand, the reduction will stimulate business activity on Sundays, and could result in more people being employed.”