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Macca's will have to pay tens of thousands of workers full penalty rates after its enterprise agreement was terminated by Fair Work

James Hennessy

Fast food giant McDonald's will have to pay tens of thousands of workers full penalty rates for the first time in decades after its enterprise agreement was terminated.

The Fair Work Commission on Thursday ordered the franchisor to revert its 109,000 workers back to the fast-food award by February next year after finding its expired agreement paid some workers worse than the industry minimum.

However, the commission rejected employee calls to make the termination retrospective after finding that exposing McDonald's to backpay claims would be "unjust".

The McDonald's agreement was part of a long line of deals with the Shop Distributive and Allied Employees Association (SDA) that traded penalty rates for higher base rates and other benefits but left some workers who regularly worked weekends worse off than the award.

The Retail and Fast Food Workers Union, which assisted McDonald's crew trainer Xzavier Kelly in making the termination application, estimated that restoring penalty rates will cost McDonald's between $120 million and $150 million.

The Retail and Fast Food Workers Union, which assisted McDonald's crew trainer Xzavier Kelly in making the termination application, estimated that restoring penalty rates will cost McDonald's between $120 million and $150 million.

"We exposed this three-and-a-half years ago," RAFFWU secretary Josh Cullinan said. "To actually get these penalty rates back into workers' pockets and get secure shifts for part-timers and casual conversion for casuals is absolutely significant."

The award will mean some 20,000 part-timers must also be given fixed shifts, as opposed to minimum weekly hours.

McDonald's and the Shop Distributive and Allied Employees Association initially opposed Mr Kelly's termination bid but eventually supported it after the company unilaterally withdrew its new proposed EA, which also restored full penalty rates.

The EA withdrawal, despite majority employee support, is understood to relate to a recent ruling that imposed strict technical hurdles over voter eligibility to agreement ballots and which was considered fatal to McDonald's proposed EA.

$2 an hour worse off

A McDonald's spokesman said its decision was "in response to increasing uncertainty around the approval of EAs within the current industrial relations landscape".

An SDA spokeswoman said "the whole process has been disappointing for McDonalds employees who for many years reaped the benefits of improved wages and conditions under EAs".

"The SDA will continue to engage McDonalds on behalf of its members and represent their workplace interests through the Fast Food Industry Award."

During the termination hearing, Mr Kelly provided RAFFWU analysis that showed he would be paid $2.31 an hour more under the award than under the agreement and $1.42 more than McDonald's new over-agreement rates introduced in July.

Deputy president Alan Colman did not make findings on how many workers would benefit from the award but accepted Mr Kelly would be better off and that employees "analogous to his [circumstances] would similarly be better off".

Workers on higher classification levels would also get paid more under the award minimum.

Mr Kelly had argued termination should be backdated to June 2017 because McDonald's had enjoyed an "unfair competitive advantage" and had "deliberately sought to 'depress' conditions of employment".

However, the deputy president found the Fair Work Act did not confer power to make terminations retrospective and even if it did, it would be unfair to McDonald's.

"It would create exposure to liability for civil penalties for non-compliance with the award in respect of conduct that was lawful. Such an order would be unjust."

Workers may also risk employer demands to repay above-award amounts so as to offset any backpay claims.

The deputy president rejected Mr Kelly's calls to terminate the agreement immediately and set the date for February 3, 2020 to allow McDonald's time to reconfigure its payroll systems.

This story was originally published in the Australian Financial Review. Read the original story here.