Union Challenges Sephora’s Overtime Agreement: What Employers Need to Consider

| April 8, 2025

A recent development in employment law has emerged as the Shop, Distributive and Allied Employees’ Association (SDA) lodges a formal objection to Sephora’s proposed overtime agreement. The union argues that the agreement, which shifts from a percentage‐based overtime penalty to a fixed dollar rate, effectively results in a pay freeze that was not clearly explained to employees.

With the Fair Work Commission (FWC) now empowered under the 2022 Secure Jobs, Better Pay reforms to amend agreements to address such concerns, employers should take note of how these disputes may affect their workforce arrangements.

Background

The SDA contends that Sephora’s latest overtime offering fails to meet the Fair Work Act’s “genuine agreement” requirements. Specifically, union submissions indicate that the agreement omits a critical explanation to workers that they are being asked to accept a pay freeze in the overtime rate. 

Key Legal Concerns

• Genuine Agreement
  The objection stresses that employees did not receive full disclosure on the “significant change” in the overtime calculation method. 

• BOOT Issue
  Comparisons between the fixed rate offered under the agreement versus the higher levels dictated by the General Retail Industry Award 2020 (the Retail Award) suggest that workers are set to receive less remuneration than is standard. 

• Part-Time Employment
  Additionally, the union highlights concerns that radical flexibility provisions could blur the distinctions between permanent and casual roles, undermining established award conditions. 

Key Developments

To inform its review, the FWC has undertaken several research initiatives: 

• Union Actions
  The SDA has lodged an objection based on the claim that, despite a 53% majority vote, the agreement was not underpinned by a truly informed or voluntary employee consent as required by Section 186(2) of the Fair Work Act. 

• Regulatory Powers 
  Under section 191A, the FWC now has the power to unilaterally amend agreements if the employer fails to provide further undertakings. This enhanced oversight is designed to ensure that any BOOT or genuine agreement issues are properly remedied. 

• Comparative Pay Evidence
  For example, the union has noted that a level one (1) casual working after 6 pm would receive $33.75 under the proposed agreement versus $38.48 under the Retail Award. Such discrepancies underscore the potential financial impact on workers and raise broader concerns about compliance with minimum wage and overtime entitlements. 

What This Means for Employers

Employers should be proactive in understanding both current regulatory challenges and the potential impacts of such disputes on their approach to enterprise bargaining. Consider the following steps: 

✔ Monitor Regulatory Developments
Stay up to date with FWC hearings and rulings. The outcome of this case, particularly if the FWC opts to amend the agreement, may set an important precedent for similar disputes. 

✔ Engage in Proactive Dialogue
If your business is currently negotiating or considering changes to overtime or flexible work conditions, ensure that all changes are clearly explained to your employees to avoid misunderstandings that could lead to legal challenges. 

Key Takeaways

• Transparency is Critical: Employers must clearly communicate any changes to overtime calculations, especially when it involves a shift from percentage-based to fixed rates. 

• Regulatory Oversight is Increasing: With the FWC’s new powers, there is a stronger emphasis on ensuring employees provide a “genuine agreement” when accepting any revised conditions. 

• Review and Adapt: When preparing to renegotiate new enterprise agreements ensure proposed practices align with current legal standards and award conditions, and explanatory documents adequately spell out the practical impact of proposed changes. 

Final Thoughts

This dispute over Sephora’s overtime agreement offers an important reminder: as employment law evolves, so too must the policies that underpin workplace remuneration. Employers should take this opportunity to re-assess their current practices, ensuring they provide full transparency and compliance with statutory requirements. 

At IRiQ Law, we assist employers in navigating these complex legal landscapes. Our tailored advice helps you stay ahead of regulatory changes and safeguard your business against potential legal challenges. If you need help reviewing your overtime policies or wish to discuss compliance obligations, contact our team today.