The huge consequences of the supermarket wage decision

The Australian, July 26, 2016

Penny Vickers, a Brisbane mother of two who stacks Coles’ shelves at night, threatens to overturn major retail wage payments in Australia. If she succeeds, and of course there are no certainties, it will substantially boost the shift allowances and penalty rates being paid by Coles, Woolworths, Bunnings, Target, Kmart, Big W, parts of the Metcash group and many other large retailers. It may affect the Australian inflation rate depending on whether higher costs can be passed on.

My guess is that for shareholders in Woolworths the looming Coles case before the Fair Work Commission is just as important as yesterday’s big provisions, especially as the weekend award penalty rates are much more onerous than those in the hospitality sector.

The high weekend penalties are currently not being paid under the enterprise agreements signed by the big retailers. And, as I will describe later, it may also affect a major funding source for the ALP.

Penny Vickers is a former paralegal who enjoys stacking at Coles between 6pm and 10pm while her husband minds the children. She is a stay-at-home mum during the day.

Vickers is being advised by her father, Allen Truslove, who is one of Australia’s sharpest actuarial minds. He was Acting Victorian Government Statist and Actuary before being head hunted to serve as Chairman of the Nominal Defendant Investment Board of the Queensland State Actuary & Insurance Commissioner.

Truslove currently has his own practice and is actuary to a substantial proportion of the registered friendly societies in Victoria, New South Wales and Queensland.

The Vickers-Truslove daughter and father combination will expose any weaknesses in Coles’ executive presentations — they are a formidable team.

My regular readers will know I have been following developments in this saga for some time because, apart from online shopping, there is no more important shift taking place in Australian retailing. This is because the pattern of consumer spending is switching to weekends.

For new readers and those who need reminding let me take you back over my earlier commentaries, including: Unravelling the Coles and Woolworths penalty rate mess, June 10.

In 2011, Australian’s largest union, the Shop Distributive & Allied Employees Association, signed an enterprise bargaining agreement with Coles, which was duplicated across major retailers and approved by the Fair Work Commission. With some changes, it was rolled into the 2014 EBA, which was again, approved by Fair Work and duplicated by other retailers.

The 2011 and 2014 EBA’s paid fulltime staff working during the day at a rate that was higher than the award and the overall payments to Coles’ staff were higher than the award stipulated. However, those working nights and weekends were often paid under the award. And, so, under the retail award, a person working on a Saturday receives 125 per cent of the award base rate. Under the Coles agreement, Saturday work by a fulltime worker carries only the weekday payment — no penalty rate (a casual employee receives a penalty rate struck at 120 per cent of the higher Coles base pay).

On Sunday, the difference becomes much larger. Under the retail award, Sunday work is paid at double the weekday base payment. The Coles/Woolworths EBA pay agreements state that on a Sunday the wage rate is 150 per cent of its higher-than-award base pay, which is substantially less than the award stipulation of 200 per cent, even allowing for the higher Coles base rate.

Strangely, under the hospitality award, Sunday work is paid at 175 per cent — much lower than the retail award.

Under the EBA, casuals receive 170 per cent of the Coles base pay, which is very close to the hospitality award but still clearly below the 200 per cent retail award.

Under the Fair Work Act, if any worker is worse off than the award as a result of an enterprise agreement it can be set aside

So, some two months ago, perhaps not surprisingly, the Coles 2014 EBA was set aside by the Fair Work Commission (reversing its previous decision) because weekend workers were worse off.

In response, Coles, relying on a Federal Court precedent, has gone back to its 2011 EBA, which carries clauses that effectively mean that the status quo can be maintained. Coles’ workers have continued to receive their present rates of pay, including a July pay rise that was scheduled in the defunct 2014 EBA (Coles goes back to the future with wage deal, June 9).

Penny Vickers was not involved in the case that set aside the 2014 agreement but is now seeking to have the 2011 agreement set aside.

Coles have made a submission to Fair Work that it should have legal representation. Vickers has no legal representation and says that it is the right of any worker who believes they are being paid below the rate stipulated in an award to go before the Commission without lawyers. This matter is currently being considered by the Fair Work Commission and may take some weeks to resolve.

Vickers says that she voted for the 2014 enterprise agreement but was not told that she was being paid below the award. She has presented the documentation given to workers and seeks back pay which, if upheld, would result in an enormous wage bill for Coles.

Woolworths is currently negotiating an EBA but everything is on hold while it awaits the outcome of the Coles case. Coles maintains that it has been making wage payments under an agreement approved by the Fair Work Commission, so, whatever the outcome, there should be no back pay.

The Vickers case is about whether a 2011 agreement that was terminated when the 2014 agreement was signed is still valid. Public interest will be an important issue but those who are familiar with enterprise agreements tell me that Coles will struggle to gain approval for a terminated 2011 agreement that pays 20,000 to 30,000 people below the award and which gives big retailers a substantial advantage over small retailers who must pay the full award.

Against that, the retail shift allowances are set so high that they open the flood gates to online shopping. The union is backing the company in trying to uphold the 2011 agreement even though Vickery is a union shop steward.

If the 2011 agreement is set aside, the payments to Coles workers will go back to the award which will result in higher pay for weekend workers — usually students or part timers — and lower pay for fulltime weekday workers who are often working mothers. That’s a recipe for staff unrest.

The union is one of the richest in the land because all workers, but particularly full time workers, are encouraged to join the union.

If the agreement is set aside and Monday to Friday workers receive a pay cut, union membership may fall.

Those working at the weekend will not be happy that their union wants them paid below the award and that it is arguing against their interests.

The Shop Distributive & Allied Employees Association is one of the biggest funders of the ALP.