Unions have lost their legal bid to overturn the Fair Work Commission's decision to cut penalty rates for hospitality, retail and fast-food workers.

The Federal Court has found the commission met its legal obligations when it handed down its decision to cut Sunday and public holiday penalty rates for full-time and part-time workers in February.

It dismissed a case brought by United Voice and the Shop, Distributive and Allied Employees Association, which argued the commission's decision was "legally unreasonable" and had failed to consider how cutting the rates would affect low-paid employees.

Loading

In a three-day hearing last month, the unions also argued the commission had not fulfilled other obligations under the act in coming to its decision.

In handing down the judgement, Federal Court Judge Mordy Bromberg said the court's role was restricted to determining whether the commission had made an administrative error.

"The Fair Work Commission alone was vested with the responsibility for assessing all relevant matters and reaching all the conclusions necessary to decide whether or not to make the determinations that it did," he said.

"The court may not enter into the merits of the determinations made by the Fair Work Commission.

"In the view of the court, the Fair Work Commission's decision read as a whole reveals no jurisdictional error."

'Low blow' for workers

United Voice national secretary Jo Schofield described the judgement as a "new low blow" for Australians who work weekends.

Sunday penalty cuts: Full and part time Casual Retail 200pc down to 150pc 200pc down to 175pc Hospitality 175pc down to 150pc No change Fast-food 150pc down to 125pc 175pc to 150pc Pharmacy 200pc down to 150pc 200pc to 175pc

"United Voice believes that the system has once again failed to protect workers and warns that business groups will attempt further attacks on worker entitlement in other industries," she said.

"When our industrial relations laws are used by employers to cut pay and undermine the existing entitlements of workers in our country, when the courts refuse to intervene and when our Government refuses to utter a word in support of these workers, the system is broken.

"We will continue to challenge this harsh and unfair pay cut and will continue to speak out on behalf of all workers."

The Shop Distributive and Allied Employees Association (SDA) said it would continue to fight to change the laws with United Voice.

The Australian Hotels Association said the ruling upheld the "long-standing independence" of the Fair Work Commission and confirmed the new penalty rates were "fair and relevant" for employers and employees.

The Australian Retailers Association (ARA) applauded the court's decision, saying if the appeal had succeeded it would have stifled the already challenging growth in the sector.

"The ARA hopes the ALP and other political parties that are seeking to overturn this decision are sensible enough to accept the umpire's decision and allow retailers to get on with the job of employing more people," executive director Russell Zimmerman said.

Cuts to be introduced over time

The cuts could affect hundreds of thousands of workers, but estimating how many is difficult.

The Australian Council of Trade Unions (ACTU) argues nearly 500,000 people are being affected by the changes, and alleges those workers are losing up to $6,000 a year.

However, in a submission to the commission in March, the Government estimated the number of affected workers would be between 300,000 and 450,000 people.

The commission's ruling cut Sunday pay rates for full-time and part-time hospitality workers from 175 per cent of their standard wage to 150 per cent.

In retail, the ruling reduces Sunday wages from 200 per cent of workers' standard rate to 150 per cent, for both full-time and part-time staff.

For the fast food industry, it cuts pay for workers classed as "level one" from 150 per cent to 125 per cent.

In the retail and fast food industry, casuals would also have a pay cut, but in hospitality, the rates would remain the same.

The public holiday cuts came into effect on July 1 this year.

The Sunday penalty rate cuts are being introduced over several years.