Insights & News

May 2, 2025

In the final weeks of the 2025 federal election campaign, the Albanese Government has pledged that if re-elected, it would legislate protections for penalty rates in modern awards. While it remains unclear how this will be implemented, the intent is clearly to restrict the Fair Work Commission (FWC) of its discretion to set penalty rates in modern awards, particularly to reduce existing penalty rates.

On 19 April 2025, Federal Workplace Relations Minister Murray Watt announced that:

“A re-elected Albanese Labor Government will legislate to protect penalty rates in awards, ensuring the wages of three million workers do not go backwards.”

Framed as a safeguard against erosion of the minimum safety net, this pledge has prompted significant backlash from employer groups and the Federal Opposition, who warn it undermines the authority of the FWC, reduces award flexibility for employees and increases the burden on employers from a compliance perspective.

The Albanese Government and unions dispute this characterisation of the policy and claim that it simply sets guidance for the FWC to consider in setting penalty rates, this guidance being: do not reduce penalty rates.

If legislated, this policy is significant because it takes discretion for the determination of minimum pay and conditions away from the independent FWC and locks it into legislation which can only be changed by parliament. The FWC has the expertise to independently assess the rapidly changing economic needs of business and workers and make decisions at any time. Making changes to legislation is far more difficult. The policy will make it more difficult for employers and employees who benefit from the certainty and simplicity of higher base annualised salary arrangements that compensate for penalty rates and are likely to push employers away from collective bargaining and into more individualised employment arrangements.

How did we get here?

The catalyst for the election commitment arose from the recent application to the FWC from the Australian Retailers Association’s (ARA) which proposes to amend the General Retail Industry Award 2020 and introduce an opt-in annualised salary arrangement for managerial and higher-level retail employees, which in effect would absorb penalty rates in exchange for higher base pay.

Minister Watt opposed the ARA’s application in his public submission to the FWC, claiming that it could lead to a reduction in worker entitlements, notwithstanding the ARA’s claim that the employees relevant to the application would receive considerably higher wages as a base line, that the arrangement would be opt-in and would have safeguards in place to ensure that employees would be better off overall.

Unions have also raised similar concerns as Minister Watt with recent employer applications to vary the Clerks Private Sector Award and the Banking, Finance and Insurance Award to enable employees under higher classifications to voluntarily agree to be paid a single weekly rate at least 55% above the award rate of pay, designed to offset certain entitlements, including penalty rates (commonly referred to as the ‘exemptions rate case’).

Despite these recent catalysts, this is not the first time Labor has announced a policy seeking to legislate protections for penalty rates.

Former Labor opposition leader, Bill Shorten, committed to reversing a 2017 FWC decision to reduce Sunday penalty rates in modern awards covering the retail and hospitality sectors if elected Prime Minister at the 2019 Federal election.

The 2017 FWC decision, which was upheld by the Full Federal Court, was criticised by the union movement, who campaigned publicly on the issue to pressure the major parties to legislate to reverse the decision.

This recent announcement from the Albanese Government goes further than just reversing a single decision of the FWC to reduce penalty rates under a particular modern award, to a general commitment to, seemingly, stop the FWC from exercising its discretion to reduce penalty rates under any modern award in the future.

Coalition’s stance on penalty rates

Peter Dutton, the Leader of the Opposition, labelled the recent proposal to legislate the protection of penalty rates a “stunt” and a “red herring”.

Mr Dutton confirmed that if the Coalition was elected to Government this Saturday (3 May 2025), it would preserve the status quo and allow the FWC to set wages and entitlements, including penalty rates, in modern awards as necessary.

Potential implications

While the Albanese Government and unions argue that the policy is needed to ensure that workers don’t lose pay when they work unsociable hours, such as on the weekend and public holidays, employer groups have raised concerns about the impact on the FWC in its role as independent wage-setter and on flexibility in the workplace.

The Fair Work Commission’s role

If legislated, this policy will effectively remove the powers given to the FWC to set penalty rates in modern awards. The FWC frequently uses this discretion and power to respond to the evolving needs and conditions of the economy and industry where required.

Employer groups have criticised the policy, noting that the FWC is required to review modern awards on a fair and impartial basis, taking into consideration the needs and practical concerns advocated by both employees and employers regarding the factors set out by section 134 of the Fair Work Act 2009 (Cth).

Therefore, any reduction to penalty rates by the FWC would need to be warranted by current economic and industry needs and any baseless request by employers to reduce penalty rates would be rejected, as the FWC has done previously in the past.

There is a concern, therefore, that this policy hamstrings the FWC ability to react to economic and industry needs.

Reduced flexibility for employees and employers – the end of annualised salary arrangements?

Employer groups also argue that this policy will restrict flexibility as implementing a hard base line entitlement for penalty rates would discourage employers from exploring other more convenient and generous payment arrangements under modern awards.

The recent ARA Application is a prominent example of this, where employees can opt-into a considerably higher annual salary in exchange for the offset of all penalty rates.

In the ARA Application, ARA submits that under this model, the average retail manager employee that opts into this arrangement would be paid $5,841.65 per year more than their counterparts who are paid strictly in accordance with the rates prescribed in the modern award.

In essence, this policy would stop the FWC from varying modern awards to provide for annualised salary arrangements which offset penalty rates but result in employees being considerably better off overall.

Annualised salary arrangements, even where they are more generous than modern award rates, are often attractive to employers due to their ability to streamline compliance with numerous, complicated rates set under the modern award.

It is not yet clear whether a re-elected Albanese Government would go so far as to wind back existing annualised salary arrangements under modern awards, or simply stop the FWC from making further variations which may have the effect of reducing penalty rates, even in circumstances where employees are still better off overall.

Conclusion

While the exact scope of the policy is yet unknown, if legislated, the Albanese Government’s pledge to protect penalty rates will have a direct impact on annualised salary arrangements for modern award covered employees. Employers could see less scope to offer annualised salary models that offset penalty rates under the modern award, even where such models result in higher overall pay.

Because a collective solution under modern awards is not available, employers and employees who want annualised salary arrangements will be more likely to seek out advice about how they can achieve an annualised salary through an individual contract or flexibility agreement, which can be done. By driving parties in this direction, and away from union collectivism, the policy might become an “own goal” for the unions.

The views expressed in this article are general in nature only and do not constitute legal advice. Please contact us if you require specific advice tailored to the needs of your organisation’s circumstances.

April 14, 2025

Employers are generally familiar with the anti-discrimination provisions of the Fair Work Act 2009 (Cth) (FW Act) and various state and federal anti-discrimination laws. But what is often missed is that discriminatory conduct in the workplace can also amount to a criminal offence under the model Work Health and Safety legislation.

Unlike discrimination under workplace relations laws, which typically results in civil liability, discriminatory conduct under the model Work Health and Safety legislation can in some circumstances be criminal in nature. That means that instances of discrimination can lead to prosecution, a finding of guilt and/or a criminal conviction and fine.

Discrimination under the WHS Legislation

The WHS legislation prohibits a wide range of ‘discriminatory conduct’ when done for a ‘prohibited reason’ tied to work health and safety.  Discriminatory conduct includes:

• dismissing or standing down a worker;
• altering a worker’s role to their detriment;
• treating a prospective worker less favourably; and
• refusing or terminating a commercial arrangement.

Prohibited reasons include a person’s involvement in WHS activities, such as:

• raising or proposing to raise WHS concerns;
• assisting a WHS inspector / regulator;
• acting as a health and safety representative (HSR) or committee member; and
• taking steps to ensure compliance with the legislation.

Crucially, the model Work Health and Safety legislation also captures those who request, authorise, assist, encourage or induce another person to engage in discriminatory conduct. This means that a person cannot get around potentially being penalised because that person did not directly engage in the discriminatory conduct themselves. Practically, this means that managers, supervisors, and even senior executives may be personally liable for authorising discriminatory conduct of another worker if the conduct is ignored.

In addition to criminal penalties, affected individuals may bring a civil claim under the model Work Health and Safety legislation if they believe they have been subject to discriminatory or coercive conduct for a prohibited reason. The orders that may be sought include compensation, reinstatement or an offer of employment in the case of a prospective worker, or any other order the relevant court or tribunal considers appropriate.

First prosecution for discriminatory conduct under the model Work Health and Safety framework

A recent decision of the NSW District Court serves as a pointed reminder. In SafeWork NSW v Qantas Ground Services Pty Ltd (No. 4),^[1] Qantas Ground Services (QGS) was convicted of engaging in discriminatory conduct against a worker who had exercised his powers as a health and safety representative by directing workers to cease unsafe work at the onset of the COVID-19 pandemic. The court found that QGS stood the worker down for a prohibited reason under the Work Health and Safety Act 2011 (NSW) and in doing so, effectively punished him for lawfully exercising a power under that Act.

The consequences were serious. QGS was fined $250,000 and was ordered to pay $21,000 in compensation to the worker for both economic loss and the hurt and humiliation he experienced. The Court noted that this was the first prosecution of its kind under the national model Work Health and Safety framework. As such, the penalty was intended to send a strong message to other persons conducting a business or undertaking (PCBUs).

What PCBUs need to do

Organisations must respond to work-related conduct in a proactive way, just like how they would treat the exercise of workplace rights under the FW Act. Key personnel, particularly in human resources, safety leadership, and operational management, must be aware that adverse action taken against a worker in response to WHS activity could expose them — and the organisation — to prosecution under model Work Health and Safety legislation. This means that training, documentation, and careful handling of performance and conduct issues are essential, particularly when WHS issues have been ventilated or are in the background.

[1] [2024] NSWDC 53.

The views expressed in this article are general in nature only and do not constitute legal advice. Please do not hesitate to contact us if you require specific advice tailored to the needs of your organisation in relation to the implications of these changes for your organisation.

In a decision that provides welcome clarification for employers navigating the blurry edges of personal leave entitlements, the Fair Work Commission (FWC) has handed down its decision in Australian Workers’ Union v Cement Australia Pty Limited T/A Cement Australia [2025] FWC 137.

The case turns on whether an employee was entitled to use personal leave during a 10-week recovery from elective surgery, and more importantly, whether the employer could lawfully refuse that request, in light of previous high absenteeism.

The answer? Yes, it could.

The facts

The Applicant, a long serving mine operator employed by Cement Australia covered by the Cement Australia Gladstone Union Collective Agreement 2022 (the Agreement), underwent elective knee surgery in May 2024, prior to his planned retirement taking place in August 2024. He requested three months’ paid personal leave to recover from the surgery.

However, the Employer, Cement Australia, in considering the Employee’s prior history of excessive sick leave, declined to approve more than a single day of leave, relying upon the Excessive Personal/Carer’s Leave Absenteeism clause of the Agreement.

In the preceding year to this request, the Employee had taken 58 days of personal leave. When Cement Australia compared the Employee’s total hours of personal leave taken during his duration of service with Cement Australia and compared it to the National Employment Standards (NES), the Employee was in a deficit of 1,500 hours. Cement Australia told the Employee to use annual leave, long service leave, or take unpaid leave for the requested period.

The Australian Workers’ Union (AWU), acting on the Employee’s behalf, lodged a dispute under s739 of the Fair Work Act 2009 (Cth) (FW Act), arguing that Cement Australia had misapplied the Agreement and unlawfully withheld leave.

The legal landscape

Under the NES, employees (other than casuals) are entitled to 10 days of paid personal/carer’s leave per year for illness or injury. However, this entitlement can be supplemented by an enterprise agreement, as was the case here, with the Agreement offering generous unlimited paid personal leave access, albeit with caveats.

The Agreement sets out a framework for personal leave use, and while it affirms generous access to paid leave for genuine illness or injury, it also empowers the Employer to:

• monitor high levels of absenteeism;
• counsel or discipline employees who display patterns of misuse; and
• review and, if necessary, cease payment for further leave where concerns persist.

Notably, the Agreement contains provisions that allows for a review after three months of continuous personal leave to determine whether payment should continue.

The AWU’s position

The AWU’s primary argument was one of timing and process: Cement Australia had jumped the gun.

According to the AWU, the Employer could not decline personal leave pre-emptively. Rather, it needed to approve the leave first and only later review the appropriateness of continued payment once three months had passed. The AWU asserted that the Employee had a genuine need for leave and that any concern about excessive use should have been addressed through post-facto review, not upfront refusal.

Cement Australia’s defence

Cement Australia’s position was pragmatic, it had already counselled the Employee in December 2023 about his extensive sick leave. That was, in its view, sufficient to activate its right under the Agreement to justify denying further paid leave for an elective procedure, especially one immediately preceding his anticipated retirement.

They stressed that the Agreement does not create an unqualified right to take unlimited paid personal leave. Cement Australia viewed the Excessive Personal Leave Absenteeism clause in the Agreement as a proactive tool, not a retrospective one, allowing them to refuse future paid leave based on past conduct, provided the Employee has been appropriately warned.

The FWC’s findings

Commissioner Hunt agreed with Cement Australia’s argument. Key takeaways from the ruling include:

• The Agreement allowed pre-emptive refusal of paid personal leave, where the Employee has been counselled for high absenteeism. It is not necessary to wait until leave has been taken to make that call.
• The three-month review clause under the Agreement is a separate mechanism, it only applies to assessing whether continuation of already-approved leave remains appropriate. It does not override the Employer’s discretion.
• The elective nature of surgery is irrelevant, as the Commissioner noted that “Employees are entitled, pursuant to the NES to take paid leave from work whether any medical treatment is planned or elective”. Elective procedures, including cosmetic surgeries, may still qualify, provided there is a genuine incapacity to work and supporting medical evidence.
• Intent to retire may be relevant, but only as part of a broader assessment or in considering whether a return to work is likely.

The FWC ultimately held that Cement Australia had acted lawfully in refusing paid personal leave, having properly invoked its rights under the Agreement and given the Employee fair warning.

Key takeaways from the Decision

The Cement Australia decision is a timely reminder that while personal leave entitlements under enterprise agreements may exceed the NES, they are rarely without limits.

Here are the practical lessons for employers:

1. Agreements do not need to be toothless: If your enterprise agreement includes a provision to manage excessive leave, use it, but follow due process. Document counselling and make it clear that future entitlements may be affected. Had Cement Australia failed to counsel the Employee, the decision of the FWC may have been very different.
2. Set expectations early: If an employee has a pattern of high absenteeism, don’t wait for another leave request to raise concerns. Formal correspondence that flags a potential cessation of paid leave strengthens your position and reinforces the company’s position to the employee and, if relevant, the union.
3. Leave denial must be based on genuine grounds: Even with discretion, employers should have a solid evidentiary basis (e.g. excessive leave history, failure to engage in return-to-work processes) for denying personal leave, especially when there’s medical evidence of incapacity.
4. Elective procedures are still ‘sick leave’: Don’t assume you can deny sick leave just because the procedure is elective. If the recovery renders the employee unfit for work, and they’ve supplied evidence, the NES and most agreements will entitle them to paid leave, unless other enterprise agreement clauses (like the excessive absenteeism clause in this Agreement) apply.

In short, employers can say no to sick leave, but only if the enterprise agreement or other industrial instrument says so, and you’ve followed the required procedural processes. We’re sure Cement Australia breathed a sigh of relief when this decision was released and that there is no doubt that they will be bargaining in all future enterprise agreements to keep the Excessive Absenteeism clause in.

The views expressed in this article are general in nature only and do not constitute legal advice. Please do not hesitate to contact us if you require specific advice tailored to the needs of your organisation in relation to the implications of these changes for your organisation.