The hospitality reform to-do list

From award simplification to casual employment and wages, Australia's hospitality industry requires significant reforms to help support future growth, write Martin Osborne and Amy Leonard.

Potential industrial relations reforms in the restaurant sector are on the horizon as early as next year. Their extent and the impact they might have on the industry’s recovery and sustainability remains to be seen.

JobMaker working groups

In a briefing to the National Press Club on 26 May, Prime Minister Scott Morrison described the current industrial relations system as “not fit-for-purpose, especially given the scale of the jobs challenge that we now face as a nation”. He announced the government’s JobMaker initiative, which included five working groups chaired by Attorney-General and Minister for Industrial Relations Christian Porter and comprised of representatives from employer organisations and unions.

The working groups were tasked with examining the following areas:

• Award simplification
• Enterprise (or collective) agreement-making
• Casuals and fixed-term employees
• Compliance and enforcement
• Greenfields agreements for new enterprises.

The goal of the working groups was to develop a practical reform agenda for Australia’s industrial relations system through discussion, negotiation and ideally agreement, although either way the PM has said the government will take forward a “job-making” reform agenda from the process.

Limited information has been available about the group discussions, with the members being subject to confidentiality restrictions. Key areas for the restaurant and hospitality industry are discussed below.

Navigating the award system

The area of award simplification will be of particular interest to the restaurant and hospitality industry, given the high number of small to medium-sized businesses and the heavy reliance on modern award terms rather than collective bargaining.

In response to the COVID-19 pandemic, flexibility provisions in relation to matters such as hours of work and leave were inserted into the Hospitality Industry (General) Award 2020 (Hospitality Award) and Restaurant Industry Award 2020. However, the operation of these schedules was time-based and expired at the end of September.

Porter identified the Hospitality Award as a particular focus, stating that it “has 61 classifications for adults, all of which have 14 potential hourly rates for each of the 61 classifications and there are further rate classifications for casuals and junior employees and apprentices”, and “it makes sense to sit down in a room and try and work out how you might simplify that particular award because those industries are in such severe distress”.

There are reports of proposals within the working group for a small business award, or small business provisions in industry awards (including hospitality), which would allow employers to pay employees a single higher loaded rate rather than having to calculate a multitude of pay rates, penalties and allowances. These proposals may reduce the risk of underpayments and the compliance burden.

Compliance and wage theft

The issue of underpayments and compliance is also key for the industry. An audit undertaken by the regulator, the Fair Work Ombudsman (FWO), between April 2018 and March 2020, included 272 businesses in the accommodation and food services sector, of which 61 per cent were assessed as non-compliant. The audit was part of the FWO’s Workplace Basics campaign, and assessed compliance with obligations for base hourly rates, penalty rates, overtime, record-keeping and pay slips. The FWO has identified “fast food, restaurants and cafes” as a priority sector for 2020–21.

There have been a number of high-profile instances of underpayment in recent years, including in the restaurant and hospitality industry. This has led to calls for tougher penalties, and the introduction of “wage theft” legislation in Queensland and Victoria, which imposes criminal penalties for deliberate underpayment of wages. Similar legislation is before the WA parliament, and is also in place in the ACT. It is expected that a national response to the issue will be considered as a result of the working group discussions.

Casuals

The industry has a high concentration of casual employment and any reforms in this regard will be an area of interest.

The recent Full Federal Court decisions in WorkPac Pty Ltd v Rossato [2020] FCAFC 84 and WorkPac Pty Ltd v Skene [2018] FCAFC 131 highlight the risk of employers facing claims for paid leave and paid public holidays, where employees purportedly engaged as casuals work regular and predictable hours over a sustained period. They also highlight the uncertainty as to whether a casual loading is able to be brought to account in such claims to prevent “double dipping”. The Rossato decision is before the High Court and awaiting confirmation of whether special leave is granted for an appeal.

It has been reported that the working group considered a proposal, with draft legislation, that regular and systematic casuals could choose to convert to permanent employment after nine months and lose their casual loading, and if they refused, could not retrospectively claim permanent entitlements.

Where to next?

The working groups’ deliberations wound up at the end of September, with Porter stating that the government “will take away and consider where there has been agreement, where there hasn’t been agreement, where there’s been disagreement inside the business and employer community which has arisen on some issues, and we’ll try and kind of synthesise all of that into a product in each of the five streams”.

A spokesperson for Porter has said that he hopes to introduce legislation into Parliament by the end of the year, with a view to securing passage early next year. The Attorney-General appears to be targeting 1 February 2021 as a date for reforms regarding the simplification of awards in distressed industries such as hospitality, as this is the delayed date on which the national minimum wage rise will take effect in those distressed industries.

It remains to be seen what the government reform agenda will ultimately look like as a result of the discussions, and whether it will be able to secure agreement to pass those reforms. That said, the restaurant and hospitality industry has been specifically recognised as a distressed industry that would benefit from simplification, and so there is the prospect of reforms that may assist both its recovery and survival.

Martin Osborne is a partner and Amy Leonard a senior associate at Norton Rose Fulbright.