Beechworth Bakery Employee Co Pty Ltd T/A Beechworth Bakery

[2017] FWCA 2418

[2017] FWCA 2418

DECISION

Fair Work Act 2009
s 185 - Application for approval of a single-enterprise agreement
Beechworth Bakery Employee Co Pty Ltd T/A Beechworth Bakery

(AG2016/3647)

BEECHWORTH BAKERY EMPLOYEE CO PTY LTD ENTERPRISE AGREEMENT 2016

Restaurants
DEPUTY PRESIDENT SAMS	SYDNEY, 2 MAY 2017

Application for approval of the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 - remittal from Full Bench - reconciliation clause removed - further undertakings - assessment of Better off Overall Test - ss 186 and 187 of the Act satisfied - Agreement approved.

[1] This decision concerns an application for the approval of the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 (the 'Agreement') pursuant s 185 of the Fair Work Act 2009 (the 'Act'), filed by Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery (the 'applicant'), which has been remitted to me following an appeal by the Shop, Distributive and Allied Employees Association (the 'Union') which was upheld by the Full Bench in Shop, Distributive and Allied Employees Association v Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery [2017] FWCFB 1664 (the 'appeal decision').

[2] The pertinent commentary and conclusions of the Full Bench are set out at paras [41]-[46] of the appeal decision. It is apparent that the gravamen of the Full Bench's concern leading to the decision to grant permission to appeal and to uphold the appeal, related to an undertaking proffered by the applicant in the initial approval proceedings concerning the terms and effect of a reconciliation clause. While the undertaking was in six parts, the offending part (or in the words of White J in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161 ('SDA v Aldi'), a 'makegood' clause) was set out at para 6 as follows:

'6. Where an Employee considers that over a four (4) month period they are not better off overall under this Agreement than under the applicable Award, they may request a comparison of the wages received for that roster cycle under this Agreement and the wages they would otherwise have been provided with under the Award. Any shortfall in wages which would otherwise be payable under the Award plus an additional amount equal to 1.5% of the total shortfall will be paid to the Employee in the next pay period after the review is completed. If the Employee and Employer cannot reach agreement on the total amount which should be paid by the operation of this undertaking, the Dispute Resolution Procedure in clause 12 of the Agreement will be followed and the parties will agree to the Fair Work Commission arbitrating and making a binding determination to resolve the matter.'

[3] The original undertaking was proffered on the basis that the Commission may not have been satisfied that the Agreement passed the Better Off Overall Test ('BOOT') - a necessary precondition to the approval of an enterprise agreement, pursuant to s 186 of the Act. It is clear that the Full Bench did not reject the concept of a reconciliation clause, per se, as other agreements have been approved with such a term being accepted as meeting the Commission's concerns as to the BOOT being satisfied; see: Main People Pty Ltd [2015] FWCA 8917 and Glassons Australia Limited t/a Glassons [2016] FWCA 5873. However, the Full Bench's concerns focussed on what is described as two flaws in the undertaking:

(a) the enforceability of a term of an agreement where the obligation to 'make good' any shortfall lay with the employee to request a review, rather than the employer being obliged to undertake the review; and

(b) the review being conducted by reference to a four-month period, rather than the employee's usual pay cycle.

[4] The conclusions of the Full Bench decision are found at para [47] as follows:

'For the reasons given we consider that the Decision was attended by appealable error. We are persuaded that permission to appeal should be granted because the appeal raises important issues about the approval of an enterprise agreement with undertakings as contemplated by s.190 of the FW Act. Furthermore, the error we have identified is jurisdictional in nature as it goes to the power of the Commission to approve the Agreement. We are also persuaded that the appeal should be upheld and the Decision to approve the Agreement should be quashed. As the Deputy President did not conclude that the Agreement passed the better off overall test independently of the undertaking, nor did he make any finding that under s.189 that the Agreement should be approved even though it did not pass the better off overall test, there was no proper basis to approve the Agreement. We consider the appropriate course is to remit the application for the approval of the Agreement to the Deputy President to deal with in light of our decision.' (My emphasis)

[5] On 12 April 2017, the Commission listed the application for further telephone hearing. At the hearing, Mr A Duc, of Counsel appeared for the applicant with Mr M Matassoni of Beechworth Bakery and Mr H McPherson of Broad Reach Employee Relations and Mr A Burke appeared for the Union. The Commission indicated to the parties that the applicant may wish to proffer a revised undertaking reflecting the concerns expressed by the Full Bench. Accordingly, I directed that if the applicant decided to do so, it should provide a fresh undertaking by 13 April 2017 and, the Commission would then, pursuant to s 190(4) of the Act, seek the views of the known bargaining representatives for the Agreement by 21 April 2017. It is to be observed that s 190(4) of the Act does not ascribe any different or greater weight to one employee bargaining representative's views of an undertaking over another's, notwithstanding the bargaining representative may be a union or a single individual representing him/herself or a group of employees.

[6] The Commission received the views of Ms Simone Coutts, a nominated employee bargaining representative, and a submission from the Union. Ms Coutts said:

'As a bargaining rep for the agreement and an employee with Beechworth bakery for over 6 years I believe the new agreement to be extremely fair and positive for all employees. The agreement still has the full support by the employees as indicated by the strong voting process in may [sic] 2016.'

[7] The Union submitted that:

(a) The Commission required a reconsideration of the applicant's undertaking to meet the Full Bench's concerns with the reconciliation clause, by providing an (employer) proactive weekly reconciliation mechanism;

(b) The Union understood that the applicant was prepared to proffer such an undertaking;

(c) The Commission directed the applicant to provide its new undertaking by close of business on 13 April 2017 and the Union would be provided with an opportunity to respond by 21 April 2017; and

(d) Contrary to the Union's understanding, the applicant not only declined to recast the undertaking, but withdrew entirely para 6 of the original undertaking.

[8] The Union further submitted that it was now not possible for the Commission to approve the Agreement, because the Full Bench had acknowledged that I had found that absent any proffered undertaking in relation to a reconciliation or 'makegood' process, I could still not be satisfied that the Agreement passed the BOOT.

[9] It was said that as I had found the offending reconciliation term met the BOOT and the Full Bench expressly rejected that finding, it could not logically be possible for the position to be improved such as to satisfy the BOOT (simply by removing the offending clause). Further, the Full Bench found it was 'by no means apparent' that the offer of a 1.5% increase over a lengthy period of time would be sufficient to compensate employees for losses they might experience in comparison to the Restaurant Industry Award 2010 [MA000119] (the 'Award'). In light of the withdrawal of even the 1.5% increases, the Agreement must fail the BOOT.

CONSIDERATION

[10] There are three matters raised in the Union's submissions that I do not accept.

[11] Firstly, despite the Union's submission that in the telephone hearing I had directed the applicant to file a specific undertaking, reflecting the terms the Union believed would meet the Full Bench's concerns, the applicant was under no direction or obligation to proffer a revised undertaking. Moreover, it was open to the applicant to decline to proffer any undertaking or propose quite different undertakings. It is not a function of the Commission to insist on what form of undertaking (if any) an employer proposes to meet the concerns the Commission may have as to an agreement passing the BOOT. Indeed, as recorded by the Full Bench in the appeal decision at para [7], I had proposed an alternative to the reconciliation clause (and there may be others) such as guaranteeing a certain number of shifts during ordinary hours Monday to Friday (at a higher base rate). Of course, it hardly needs stating that the risks are obvious, if the employer elects not to provide appropriate undertakings - as happened in Hart v Coles Supermarkets Australia Pty Ltd & Anor [2016] FWCFB 2887 ('Hart v Coles').

[12] Secondly, the Full Bench did not acknowledge that I had found that absent any proffered undertaking in relation to a reconciliation or 'makegood' process, I could not be satisfied that the Agreement passed the BOOT. The error found by the Full Bench was that as I had not concluded that the Agreement passed the BOOT independently of the undertaking, nor did I make any finding under s 189 of the Act that the Agreement should be approved even though it did not pass the BOOT, there was no proper basis to approve the Agreement; see: para 4 above.

[13] Thirdly, the Union put that as I had 'already satisfied' myself that the Agreement failed the BOOT (presumably without the previous undertaking), the only course of action open to the Commission was to dismiss the application for approval of the Agreement. This claim misstates my earlier position, which I do not understand was addressed by the Full Bench. So much is obvious from what the Full Bench said at para [35]:

'It seems to us clear enough from a review of the transcript that during the course of the hearing on 24 October 2016, through a combination of questions raised by the SDA and concessions made by the respondent, that the Deputy President had concerns about whether the Agreement passed the better off overall test. It was not necessary for the Deputy President to have formed a concluded view that was the case. Contrary to the submission advanced by the SDA in this appeal, we do not consider that it was necessary for the Deputy President to have made “findings” as to the manner in which the Agreement did not pass the better off overall test. It was sufficient for the purposes of enlivening the jurisdiction concerning the provision of undertakings for the Deputy President to have identified his concern with enough particularity so that the respondent could seek to address that concern by proffering an undertaking. We consider that the Deputy President's concern was clearly enough articulated during the course of the hearing to enable the respondent to respond to that concern by providing an undertaking.'

[14] In addition, it should not be lost sight of that the original undertakings, proffered by the applicant on 7 November 2016, did not include any reconciliation provision. These undertakings, which are retained in the current undertaking, dealt with the matters raised by the Union and the Commission during the proceedings on 24 October 2016. These undertakings address the following matters:

• the specific circumstances of one employee who only works on Sundays (and anyone else who might elect to do so);



• the very unlikely event that an employee would only work on public holidays;



• increasing rates of pay for drivers;



• adjustments to provisions dealing with early shift times for tradespersons; and



• increasing rates of pay for Team Supervisors.

[15] As I do not understand there to be any concerns of the Full Bench as to these undertakings (or any objections from the employee bargaining representatives), it is appropriate that they be taken into account for the purposes of whether the Commission is satisfied the BOOT has been met.

Better Off Overall Test

[16] For the purposes of being satisfied that the BOOT has been met, I set out below the benefits and detriments under the proposed Agreement.

Benefits

(a) ordinary base rates of pay which are significantly above the rates set out in the reference instrument;

(b) higher base rates applied to all forms of leave, superannuation, overtime, casual loadings, etc.

Detriments

(a) ordinary base rates of pay for all weekend and public holiday work;

(b) no annual leave loading;

(c) public holiday penalty rate of 200% rather than 250%.

[17] I note the terms of the undertaking provided by the applicant on 13 April 2017. I also observe that rates of pay under Schedule A of the Agreement are to be increased by 1.5% on 1 July 2017, 1 July 2018 and 1 July 2019.

[18] In balancing the benefits against the detriments in the Agreement, the exercise is not a 'line by line' or 'clause by clause' comparison, but an overall assessment as to whether the BOOT has been satisfied. Hart v Coles did not reject, alter or amend that statutory instruction; see: Armacell AustraliaPty Ltd & Ors [2010] FWAFB 9985 at para [41]; AKN Pty Ltd [2015] FWCFB 1833 at paras [43]-[44]; National Tertiary Education Industry Union v University of New South Wales [2011] FWAFB 5163 at para [46].

[19] To demonstrate this further, the Macquarie Dictionary's definition of 'overall' is 'covering or including everything; altogether; an overall estimate; the position viewed overall'.

[20] By focussing only on a rate of pay for work on a particular day in an agreement with a higher rate of pay for work on the same day under the Award and ignoring all of the agreement's other beneficial (and detrimental) terms, is in my opinion, an erroneous approach.

[21] In the context of understanding the BOOT, it is also helpful to reflect on what was said in the Explanatory Memorandum to the Fair Work Bill 2009. At para 152, it is said:

'The BOOT will be an 'on the papers' assessment of the pay and entitlements of an agreement and will avoid the complicated assessment procedures adopted for the Fairness Test, such as accepting written submissions from employees on the personal value of intangible benefits. Undertakings will not be a feature of the approval process except where FWA is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement. Before accepting an undertaking FWA must seek the views of bargaining representatives for the agreement.'

[22] At para 818, the Explanatory Memorandum records:

'Although the better off overall test requires FWA to be satisfied that each award covered employee and each prospective award covered employee will be better off overall, it is intended that FWA will generally be able to apply the better off overall test to classes of employees. In the context of the approval of enterprise agreements, the better off overall test does not require FWA to enquire into each employee's individual circumstances.' (My emphasis)

[23] This is consistent with what Lawler VP said in University of New South Wales re University of New South Wales (Professional Staff) Enterprise Agreement 2010 [2010] FWAA 9588 at para [96]:

'It is trite to observe that awards typically contain both monetary and non-monetary terms and conditions. Obviously enough, the BOOT calls for an overall assessment. Comparing monetary terms and conditions is, at the end of the day, a matter of arithmetic. There is an obvious problem of comparing apples with oranges when it comes to including changes to non-monetary terms and conditions into the “overall” assessment that is required by the BOOT. In such circumstances the Tribunal must simply do its best and make what amounts to an impressionistic assessment, albeit by taking into account any evidence about the significance to particular classes of employees covered by the Agreement of changes to particular non-monetary terms that render them less beneficial than the equivalent non-monetary term in an award. In my view, it may also be relevant to consider the terms of any existing agreement and whether there is a relevant change of position when compared to that existing agreement.' (my emphasis)

[24] In re-determining this application, I have reviewed the original calculations provided by the applicant and the Union, based on the correct reference instrument being the Restaurant Industry Award. I have taken into account Mr Matassoni's evidence going to employee rosters and the BOOT; see: para [4] of the first instance decision [2016] FWCA 8862 and the submissions of all parties. I have also reviewed the original modelling (prepared on 4 August 2016) by the Commission's Enterprise Agreement Triage Team, which discloses that in all the selected modelled examples, the Agreement's rates are higher than the Award rates; albeit not by much. This appears to be consistent with the applicant's submission that it used the Commission's own calculator for the purposes of its BOOT analysis. Of course, this was before the undertaking, which increased the rates for Drivers and Team Supervisors, so the differences for these employees will be greater.

[25] In considering all the evidence, submissions, calculations, the terms of the 13 April 2017 undertakings and the views of the employee bargaining representatives, I am satisfied, pursuant to s 186(2) of the Act, that the Agreement passes the BOOT and there are no other reasons why the Agreement should not be approved. The Agreement provides for the mandatory flexibility and consultation terms at clauses 10 and 11 respectively, and a disputes resolution procedure at clause 12 provides for conciliation and arbitration by the Commission.

[26] As the Commission is satisfied that ss 186 and 187 of the Act have been met, the Commission must approve the Agreement.

[27] The 13 April 2017 undertaking will be marked as Annexure A to this decision and pursuant to s 191(1) of the Act, the terms of the undertaking are taken to be terms of the Agreement.

[28] As the Union has given notice, pursuant to s 183 of the Act, that it wishes to be covered by the Agreement, I note pursuant to s 201(2) of the Act, that the Shop, Distributive and Allied Employees Association shall be covered by the Agreement.

[29] Accordingly, I approve a single-enterprise agreement to be known as the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016. Pursuant to s 54 of the Act, the Agreement shall operate from 9 May 2017 and have a nominal expiry date of 9 December 2020.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

<Price code G, AE424212  PR592590>