Piece Rates in Horticulture

(AM2020/104)

This matter involved an application brought by the Australian Workers’ Union (AWU) under section 158 of the Fair Work Act 2009 to vary clause 15.2 of the Horticulture Award 2020. The variation sought by the AWU would have installed a ‘floor’ for piece rate workers in horticulture, whereby a worker whose pay dropped below that of the minimum hourly rate, would be paid the minimum hourly rate regardless of their output.

Piece-rate payments are a form of remuneration used in some agricultural Awards for roles such as shearers and fruit-pickers that attach a rate of pay to the number of units or pieces of work that are completed by an employee, rather than the total number of hours worked in a certain period. They enable the workers’ productivity (high or low) to determine their pay.

Under the Horticulture Award 2020 (The Award), the amount at which the piece rate is set must enable the average, competent worker to earn at least 15% more than they would earn under the minimum hourly rate.

When used in compliance with the Award, piece rates allow workers to potentially earn far more than they would under an hourly wage arrangement. They also provide a significant mutual benefit for employers, as harvest periods in horticulture often take place during a brief window ranging from a few weeks to several months during which produce must be picked and packed as quickly as possible – lest it be left to rot and waste.

In this sense, piece rates are a highly efficient tool in the horticultural employment framework with advantages for both employers and employees.

On 16 December 2020 the Australian Workers’ Union (AWU) filed an application in the Fair Work Commission seeking that the following changes be made to the Award:

“1. Delete the existing clause 15.2(i) and inserting the following:

15.2(i) A full-time, part-time or casual employee working under a piecework agreement must be paid for each hour of work performed at least the minimum rate payable for the employee’s classification and type of employment under this award. The minimum rate payable includes the casual loading prescribed in clause 11.3(a)(ii) for a casual employee.

2. Insert the following as a new clause 15.2(k):

15.2(k) The employer must keep a record of all hours worked by a pieceworker as a time and wages record.“

It was the view of industry and employer representative groups, including the National Farmers’ Federation, that these changes would effectively nullify the benefits of piece rates in horticulture while failing to address what was fundamentally an issue of compliance, rather than a flaw in the existing Award framework.

Recognising that any changes to the piece rate provisions in the Award could be significantly disruptive to the horticulture sector by burdening employers with additional costs, paperwork and inefficiencies, preparations were swiftly made to oppose the AWU application.

Within a matter of weeks, the AWU was joined by the United Workers’ Union (UWU) who filed an application in support of the proceedings, while the NFF, AiGroup and the Australian Fresh Produce Alliance (AFPA) joined the proceedings to oppose the application.

The NFF, anticipating the likelihood that the proceedings could prove a fiercely-fought and costly enterprise, submitted an application for assistance to the Australian Farmers Fighting Fund (AFFF) on 26 February 2021 for funding to ensure that they would be capable of seeing the matter to its conclusion.

The NFF proceeded to engage the services of counsel. Over the following 5 months to July 2021, a case was prepared against the Unions.

The hearing before the FWC ran over four days from 13 to 20 July 2021 with a final half day for closing submission on 30 July 2021.

The hearings were largely concerned with the examination of witnesses and experts who had provided statements in support of each parties’ positions. The Full Bench was comprised of Justice Ross (FWC President), Vice President Catanzariti, and Commissioner Riordan.

In the proceedings, the Union and worker representatives argued that piece rates, as a compensation mechanism, inevitably result in widespread underpayment. Their witnesses mostly consisted of Union delegates who made broad claims about alleged instances of underpayment.

Under cross examination by the employer parties, it was conceded that the allegations of underpayment which were referred to by the Union witnesses had – by-and-large – not been substantiated in any way and that these witnesses had made little-to-no effort to engage with existing compliance mechanisms.

The Union Parties also relied on experts who pointed to academic studies which concluded that underpayments are common in the horticulture sector where piece rates are used. The Employer Parties challenged the methodology and conclusions which those academics had reached within their own expert reports.

The NFF and employer parties argued that piece rates are an important tool to manage productivity, employment cost-benefit assessments, and productivity outcomes within the highly seasonal horticulture sector.

It was conceded that there are occasional instances of noncompliance and underpayment, as in any industry, but strongly qualified with the argument that these should be addressed with more communicative and effective compliance measures rather than through changes to the award itself (which would be ineffective without said enforcement measures at any rate). Those arguments were supported by testimony of diverse group of growers from all across Australia and representing a wide range of commodities.

The Union parties did not have any significant response to these practical, economically grounded arguments, and were forced to rely exclusively upon the argument of alleged, widespread underpayments. 

A decision is expected on this matter by the end of 2021.

Despite the solid case run by the employers, it may prove difficult to neutralise the negative community sentiment towards piece rates and the lack of a firm ‘safety net’. While the employers made the stronger arguments overall, there is a reasonable chance that some changes may be made to the clause which is the subject of the AWU application. A clause which result in greater structure and transparency in the way piece rates are set would not be a unrealistic compromise, provided the FWC gets the terms of any change right.

This entry will be updated to reflect the Commission’s decision once it has been issued.