Fair Work Commission to rule on an historically significant application seeking fundamental changes to piece work arrangements in the horticultural industry
An imminent decision1 to be handed down by the Full Bench of the Fair Work Commission will likely have major implications for primary producers and labour hire providers to the horticulture industry, which is already under real strain due to chronic labour shortages attributable to the pandemic.
In December 2020, an application was lodged by the Australian Workers’ Union to vary the Horticulture Award 2020 (Award).
The application seeks to amend the longstanding and unique piece work provisions in clause 15.2 of the Award (Piecework Clause).
The application was heard in July 2021, after the Fair Work Commission received numerous submissions from interested parties including state governments, unions, primary producers and employer groups.
In anticipation of this important decision being published, we summarise the main arguments for and against amending the Piecework Clause, and discuss a potential ‘middle of the road’ outcome which may ultimately appeal to the Fair Work Commission.
The Piecework Clause presently permits the parties to an employment relationship to enter into an agreement for the employee to be paid a piecework rate fixed according to the volume of fruit or vegetable product picked by that person in lieu of being paid minimum hourly rates of pay.
The piecework rate must be set at a level to enable an ‘average competent employee’ to earn at least 15% more than the otherwise applicable minimum hourly rates of pay (individual employees are not guaranteed any wage outcome).
The application seeks to controversially amend the Piecework Clause in two material respects:
The following key principles can be collectively drawn from the Hu Judgments:
The Hu Judgements also dealt with the legal consequences of non-compliance with the Piecework Clause. A piecework rate which is set at a rate less than the rate required by the operation of Piecework Clause is a breach of the Award and a contravention of the Act. The only recompense for the employee is that they are entitled to an award of compensation calculated as the difference between the piecework rate that was paid and the piecework rate that ought to have been paid (not compensation in accordance with the minimum hourly rates of pay set by the Award).
The case for varying the Award was largely made by the AWU and another interested party, the United Workers’ Union (Union Parties).
The principal case advanced by the Union Parties was allegedly compelling evidence of widespread industry practice of setting the piecework rate too low, in breach of the Piecework Clause, resulting in pieceworkers being overwhelmingly paid less than the minimum hourly rates applicable to timeworkers.
The Union Parties highlighted alleged evidence of abuse and exploitation of piecework arrangements by unscrupulous operators in the industry, including:
In addition, the Union Parties submitted that the Piecework Clause was unworkable and frequently misapplied by employers which contributed to the inadvertent setting of insufficient piecework rates. They argued that this was because:
In summary, due to allegedly high levels of intentional and unintentional non-compliance with the Piecework Clause, the Union Parties argued that the Award did not currently provide a fair and relevant safety net of minimum terms and conditions of employment, as required by the modern award objectives prescribed by the Fair Work Act.
The Union Parties submitted there was a strong case for a ‘floor’ to be inserted in the Piecework Clause, which was based on the minimum hourly rates of pay in the Award.
The Union Parties additionally submitted that the proposed variation requiring hourly work records to be kept was warranted and justified, because a failure to keep such records practically inhibits the ability of an employee to determine whether they are being paid the minimum wages required under the Piecework Clause.
The case against varying the Award was largely made by the Australian Fresh Produce Alliance (AFPA), along with other employer associations like the National Farmers’ Federation and some primary producers (Employer Parties).
The Employer Parties opposed the Application essentially on the dual basis that the variation would effectively abandon the longstanding concept of a safety net based on piecework rates, and that the Union Parties’ case was substantially overstated in terms of systemic industry wide non-compliance.
They argued that the concept of a piecework based safety net with a 15% uplift remained sound and continues to meet the unique needs of the horticulture industry, where product is often highly perishable and must be picked within a narrow time window to maximise yield, quality and pricing.
The Employer Parties pointed to reforms such as various state based regulatory schemes which have recently introduced mandatory licensing of labour hire providers which they argued will help improve the overall level of compliance with the Award (by removing rogue operators intentionally engaging in exploitative labour practices).
They also argued there would be unintended negative consequences (causing significant industry wide disruption) of abolishing a safety net based on piecework rates:
AFPA additionally submitted that, at its highest, all that the Union Parties’ evidence showed was that the application of the Piecework Clause may disadvantage employees because piecework rates are, in practice, being set too low. It argued that this was not a reason to throw out the whole concept of a piecework based safety net, but rather it was a reason to vary the Piecework Clause in a more modest way to provide mechanisms that will contribute to improving its implementation.
Unlike other Employer Parties, AFPA implicitly acknowledged that a limited variation introducing a mandatory requirement to record hours of work was fair and reasonable to ensure that the piecework agreements were properly implemented.
AFPA proposed an alternate form of variation be adopted, should the Fair Work Commission be persuaded that there was sufficient evidence to justify changes being made to the Piecework Clause.
AFPA’s alternate proposal has five major parts, which it submitted can be either combined or chosen from:
1. The Award could prescribe a specific process that must be used to determine the piecework rate along say the following lines:
2. The employer could be required to review and adjust the piecework rate at prescribed intervals (for example, every pay period) to make sure that it is set appropriately.
3. To provide further protection to novice employees who have not yet become competent, the employer could be required to pay these employees at the level of the slowest competent employee.
4. The employer could be required to keep a record of all hours worked by a pieceworker, as well as the calculations set out above.
5. The Award could make it clear that the employer is required to pay a pieceworker at the applicable minimum hourly rate (instead of the piecework rate) for any work that does not yield any piecework output and is not an inherent part of the piecework.
Notably, the Union Parties are seeking to achieve essentially the same outcome unsuccessfully sought by the Fair Work Ombudsman in the civil enforcement proceedings giving rise to the Hu Judgements.
In those proceedings, the Ombudsman argued at trial and on appeal that a non-compliant piecework agreement meant that affected pieceworkers had to be compensated for wage underpayments on the basis of the minimum hourly rates of pay in the Award. This was soundly rejected by the Federal Court and an application for special leave to appeal to the High Court was refused. HopgoodGanim Lawyers acted for the successful defendants in the Hu Judgements and we are uniquely placed to comment on the issues currently awaiting determination by the Fair Work Commission.
In our considered view, there is a real likelihood that the Piecework Clause will be overhauled in certain respects by the Fair Work Commission. AFPA’s alternate proposal is eminently sensible in terms of addressing issues which are problematic in terms of unintentional non-compliance with the Piecework Clause and will avoid significant disruption to the agricultural industry from completely abandoning the longstanding piecework based safety net.