Challenge Community Services
[2018] FWC 2720
•17 MAY 2018
| [2018] FWC 2720 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
Challenge Community Services
(AG2017/5229)
| Deputy President Masson | MELBOURNE, 17 MAY 2018 |
Application for approval of the Challenge Community Services Enterprise Agreement 2017.
An application (the Application) has been made for approval of the Challenge Community Services Enterprise Agreement 2017 (the Agreement). The Application was made pursuant to s 185 of the Fair Work Act 2009 (the Act). It has been made by Challenge Community Services Pty Ltd (the Applicant). The Agreement is a single enterprise agreement.
A notice of employee representational rights was provided to employees on 1 March 2017[1] and the notice complied with the regulations.[2] Employees were provided with access to the Agreement and information about the effect of the terms of the Agreement on 28 September 2017.
The Applicant has stated that employees were notified of the voting process and timeframe in an email to all staff on 28 September 2017. Voting occurred between 11 and 19 October 2017 and a majority of those who voted approved the Agreement.[3]
The Applicant filed a statutory declaration in support of the Agreement. The statutory declaration noted that the relevant award for the purpose of the “better off overall test” (BOOT) was the Social, Community, Home Care and Disability Services Industry Award 2010 (the Award).[4]
The statutory declaration noted that provisions in the Agreement were more beneficial than the Award or were not conferred by the Award. Some less beneficial terms were also identified.
The Australian Services Union (ASU) filed a statutory declaration supporting approval of the Agreement on 16 January 2018. In doing so, the ASU raised BOOT concerns in relation to clause 12 Training and clause 13 First Aid Training.
In reviewing the Agreement for approval, the Fair Work Commission (Commission) identified a number of issues in relation to the Agreement and supporting documentation. These included pre-approval requirements, and BOOT assessment considerations. The Commission wrote to the Applicant on 2 March 2018 and identified the following issues requiring its response:
(1) No addresses for the Agreement signatories were provided.
(2) The Applicant had failed to include all relevant information in its Form F17 Statutory Declaration regarding notification to employees of the time, place and method by which the Agreement ballot would be conducted as required under s180(3) of the Act.
(3) Classification matching of Agreement classifications and pay rates with the Social and Community Services Employees (State) Award (NSW) (the Pre-reform Award)[5] required by reason of Schedule A of the Award, indicated that a number of classifications appeared to be paid less than the rates required under the Pre-reform Award. The only classifications identified in the Agreement that appeared to be above the Pre-reform Award rates were Levels 2, 3, 10, 11A and 12A.
(4) Classification matching of the Agreement classifications with the Award had also identified that Level 1 employees under the Agreement appeared to be paid below Award rates of pay.
(5) The Agreement failed to include a minimum weekly payment for supported wages employees as provided for in the Award.
(6) Schedule 2 Attachment A of the Agreement provides for apprentice rates of pay which are not provided for under the Award.
(7) Schedule 2 Attachment A of the Agreement provides for trainee rates of pay which may not satisfy the BOOT.
(8) Various BOOT concerns including:
a. Clause 13 First Aid Training, while providing for first aid training, did not provide for payment of a first aid allowance;
b. Clause 12.1 Payment for Training provides that payment for training undertaken outside of ordinary hours of work is to be paid at ordinary time rates of pay.
c. Clause 17.2 Ordinary Hours of Work provides for an increased span of hours for shift work that is greater than under the Award which may have implications for overtime penalty payments to employees; and
d. Clause 21.2 Annual Leave Loading provides for a less beneficial entitlement than the Award with respect to shiftworkers.
The Applicant was invited to provide submissions or to consider the provision of undertakings to address concerns raised by the Commission by 8 March 2018. After further exchanges of correspondence and clarification being provided by the Commission to the Applicant in relation to the relevance of the Pre-reform Award to the conduct of the BOOT assessment, the Applicant provided revised classification and pay rate matching relative to the Pre-reform Award on 15 March 2018.
Following receipt from the Applicant of the revised classification and pay rate matching with the Pre-reform Award, a further review was undertaken by the Commission. That review identified further concerns with the classification matching undertaken by the Applicant. Specifically rates used by the Applicant in the classification matching did not correlate with the relevant rates contained within the Agreement.
Further correspondence was sent to the Applicant on 3 April 2018 identifying the Commission’s concerns regarding the Applicant’s revised classification and pay rate matching. The Applicant was invited to respond to those concerns as well as provide a response on the other outstanding issues raised by the Commission in its correspondence to the Applicant on 2 March 2018.
In further correspondence to the Commission, dated 19 April 2018, the Applicant advised that it was not in a position to amend the Agreement. The Commission then wrote to the Applicant on 24 April 2018 indicating that it had formed a preliminary view that the Agreement could not be approved. The Applicant was invited to request to be heard in relation to the matter prior to the determination of its Application. The Applicant in correspondence to the Commission, dated 27 April 2018, declined the invitation to be heard in relation to its Application.
Statutory framework
In order for an Agreement to be approved by the Commission, it must be satisfied that a number of statutory requirements are met. They are found in s 186, which relevantly provides for the purpose of the present matter as follows:
“186 When the FWC must approve an enterprise agreement—general requirements
Basic rule
(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).
Requirements relating to the safety net etc.
(2) The FWC must be satisfied that:
(a) if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement;
……..
(d) the agreement passes the better off overall test.”
Section 188 of the Act deals with the requirements necessary to establish that employees have genuinely agreed to an enterprise agreement and provides as follows;
“188 When employees have genuinely agreed to an enterprise agreement
An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:
(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:
(i) subsections 180(2), (3) and (5) (which deal with pre-approval steps);
(ii) subsection 181(2) (which requires that employees not be requested to approve an enterprise agreement until 21 days after the last notice of employee representational rights is given); and
(b) the agreement was made in accordance with whichever of subsection 182(1) or (2) applies (those subsections deal with the making of different kinds of enterprise agreements by employee vote); and
(c) there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees.”
Section 180(3) of the Act deals with the notification requirements for the time, date, location and method of voting for an agreement:
“180 Employee must be given a copy of the proposed enterprise agreement etc
………
(3) The employer must take all reasonable steps to notify the relevant employees of the following by the start of the access period for the agreement:
(a) the time and place at which the vote will occur;
(b) the voting method that will be used
(4) The access period for a proposed enterprise agreement is the seven–day period ending immediately before the start of the voting process referred to in section 181(1).”
Section 193 prescribes what is necessary to pass the better off overall test. It relevantly provides:
“193 Passing the better off overall test
When a non-greenfields agreement passes the better off overall test
(1)An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section .if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.
…….
Award covered employee
(4) An award covered employee for an enterprise agreement is an employee who:
(a) is covered by the agreement; and
(b) at the test time, is covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(iii) covers his or her employer.
Prospective award covered employee
(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:
(a) would be covered by the agreement; and
(b) would be covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) would cover the person in relation to the work that he or she would perform under the agreement; and
(iii) covers the employer.
Test time
(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.
FWC may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.”
It is not necessarily the case that, where an agreement does not satisfy all of the approval requirements in ss 186 and 187, the application for approval of the agreement must be dismissed. Section 190 allows for an agreement to be approved with undertakings. It provides:
“190 FWC may approve an enterprise agreement with undertakings
Application of this section
(1) This section applies if:
(a)an application for the approval of an enterprise agreement has been made under section 185; and
(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.
Approval of agreement with undertakings
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under sub-section (3) of this section meets the concern.
Undertakings
(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:
(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.
FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under sub section (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.
Signature requirements
(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.”
Has the employer taken all reasonable steps to notify employees?
Having regard to the statutory provisions, it is necessary for the Commission to satisfy itself, amongst other statutory considerations when considering approval of the Agreement, that the Agreement has been “genuinely agreed” to by employees pursuant to s 186(2)(a). Employees will be found to have “genuinely agreed” to the Agreement if the requirements of s 188 are met. This relevantly includes consideration of, for the purposes of the present matter, s 180(3) requirements. Specifically, whether the Applicant has taken all reasonable steps to notify employees of the time, date, location and method of voting on the Agreement on or before the start of the “access period”.
In responding to Question 2.5 in its Form F17 Statutory Declaration, the Applicant stated as follows:
“Staff and supported employees were informed of the of the voting process and voting timeframe (11 October to 19 October) on 28 September 2017.
Staff were informed by email.
Supported employees were informed by paper notice.”
I note that of 616 employees who would be covered by the Agreement, 271 employees voted. Of the employees who voted, 251 employees voted to approve the Agreement.
The Commission sought additional information from the Applicant in relation to whether the time, location and method of voting was communicated to employees by the start of the access period as required under s 180(3). The Applicant failed to provide the additional information sought despite an invitation to do so in correspondence dated 2 March 2018 and 3 April 2018.
The provisions in the Act in relation to requirements for notice of the time, location and method of voting on an agreement are clear. Reasonable steps must be taken to notify the relevant employees by the start of the access period. In the absence of relevant material, I am unable to be satisfied that the Applicant has complied with the requirements of s 180(3) of the Act. I therefore cannot be satisfied that employees have “genuinely agreed” to the Agreement as required by s 186(2)(a) of the Act.
Does the Agreement satisfy the BOOT?
Rates of Pay
By reason of an equal remuneration order (ERO)[6] issued by a Full Bench of Fair Work Australia on 22 June 2012 employers engaging employees under Schedule B and Schedule C of the Award are required to pay such employees no less than either the minimum wage for the relevant classification in the Award, or the minimum wage in the relevant transitional minimum wage instrument and/or award-based transitional instrument for the classification concerned whichever is higher. In the present matter the Applicant engages employees covered by Schedule B of the Award and as such is required to comply with the ERO. The relevant transitional minimum wage instrument and/or award-based transitional instrument is the Pre-reform Award.
Classification matching and pay rate analysis undertaken by the Commission identified that there were several Agreement classifications that provided for pay rates that were less than the required Pre-reform Award pay rates. These classifications and their pay rates are provided below matched against the relevant Pere-reform Award pay rates:
| LEVEL | AGREEMENT | PRE-REFORM AWARD |
| Level 1 | $18.28 | $19.88 |
| Level 4 | $24.76 | $24.89 |
| Level 5 | $25.29 | $25.72 |
| Level 6 | $26.13 | $26.56 |
| Level 7 | $26.97 | $27.37 |
| Level 8 | $27.65 | $28.05 |
| Level 9 | $28.52 | $28.92 |
| Level 11 | $32.14 | $32.54 |
| Level 11B | $35.04 | $35.09 |
| Level 12 | $36.55 | $37.78 |
| Level 13 | $39.97 | $40.25 |
| Level 14 | $42.09 | $42.98 |
| Level 15 | $43.99 | $44.32 |
Classification matching and pay rate analysis undertaken by the Commission also identified that one Agreement classification provided for a pay rate that was less than the required Award pay rate. The classification and pay rate is provided below matched against the relevant Award pay rate:
| LEVEL | AGREEMENT | AWARD |
| Level 1 | $18.28 | $19.88 |
The Applicant’s response to the Commission’s pay rate analysis was received on 15 March 2018 but contained incorrect Agreement pay rates. Several of the pay rates used by the Applicant for the purpose of comparing the Agreement rates with the Pre-reform Award rates were not actually contained in the Agreement. The rates used by the Applicant were higher than the actual Agreement rates in respect of several classifications. The Commission concluded that the Applicant’s analysis was flawed and invited the Applicant to provide further submissions or undertakings in relation to the pay rates. The Applicant declined to do so.
I am satisfied that the Agreement provides for pay rates that are 8.07% below the Award with respect to Level 1.[7] All other Agreement rates are in excess of Award rates. I am also satisfied that the Agreement provides for wage rates that range between 8.07% below to 4.18% above Pre-reform Award rates. Several classifications identified above provide for pay rates that fall below Pre-reform Award rates[8]. It is clear that several classifications provide for wage rates that are less beneficial than the Award or Pre-reform Award and will consequently be regarded as less beneficial for the purposes of the BOOT assessment.
Supported Wage Structure
Schedule 7 Clause F.4.2 of the Award provides for a minimum weekly payment of $84 to employees covered by supported wage arrangements. The Agreement while providing for supported wage arrangements at Appendix A6 Schedule 3 Supported Employees Wage Structure does not provide for a minimum weekly payment.
In these circumstances, I am satisfied that the Agreement provides for supported wage arrangements that are less beneficial than the Award and consequently will be regarded as less beneficial for the purposes of the BOOT assessment.
Apprentice Rates of Pay
The Agreement provides for Apprentice rates of pay at Appendix A5 Schedule 2 Trainee/Apprentice/Junior Employee Wage Structure. The Award makes no provision for the engagement of apprentices.
Despite Commission requests for additional information in relation to Apprentice arrangements, no information was provided by the Applicant. It is unclear as to what trades apprentices may be engaged in under the Agreement. As a consequence, I am unable to be satisfied that wage rates provided for apprentices are more beneficial or at least comparable to what may be required under the relevant award for the purposes of the required BOOT assessment. That will result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
Trainee Rates of Pay
The Agreement provides for Trainee rates of pay at Appendix A5 Schedule 2 Trainee/Apprentice/Junior Employee Wage Structure. The Agreement relevantly provides the following:
“A trainee shall receive a minimum of 75% of the appropriate rate for the type and level of work within each Work Stream.”
The Commission identified that there was potential for some employees to not be better off overall with respect to wage rates if 75% of the Agreement rate fell below trainee rates provided for in Schedule E Group A of the Miscellaneous Award.[9]
The Miscellaneous Award 2010 relevantly provides for minimum wage rates ranging between $312.20 per week for a Year 10 School leaver up to $635.10 per week for an employee three years out of school after completing Year 12. An application of the 75% against Agreement classification rates reveals that with respect to Levels 1-3 Agreement classifications it would be possible for Agreement Trainee rates to fall below the Miscellaneous Award minimum trainee rates of pay.
Despite an invitation to make submissions on this issue, the Applicant declined to do so. In the absence of further information from the Applicant, I am satisfied that the Agreement provides for conditions that are less beneficial than the minimum trainee rates provided for in the Miscellaneous Award. That will result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
First Aid Training
Clause 13 First Aid Training in the Agreement provides that where an employee is required to hold a first aid qualification, the Applicant will pay for the training course and the wages of the employee while undertaking first aid training. The clause explicitly states that no allowance will be paid to employees who obtain the qualification notwithstanding an employee’s position description may require the possession of such qualification.
Clause 20.4 First Aid Allowance in the Award provides that where an employee is required to hold a first aid allowance, they are entitled to receive an allowance equal to “1.67% of the standard rate per week”. The Award is silent on payment for the cost of the first aid training course or for the time spent attending.
The Agreement in providing for payment of wages to employees while undertaking first aid training is unclear as to whether such payment extends to payment where the training is undertaken outside ordinary hours of work. An invitation to provide additional information to the Commission that would address its concern over the clause was declined by the Applicant. Consequently, it is not possible to establish whether the contended benefit of payment for the training time is more beneficial than the Award.
Having regard to the above, I am satisfied that the absence of a first aid allowance in circumstances where an employee is required to obtain and maintain such a qualification is less beneficial than the Award. That will result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
Payment for training
Clause 12.1 Payment for Training in the Agreement states that an employee required to undertake training outside of their ordinary hours of work will receive single time payment for excess travel and the training time. The Award requires payment for training where directed by the employer to be made at the appropriate penalty rate, i.e. overtime rates of pay. I am consequently satisfied that the Agreement provides for a less beneficial entitlement and as such will result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
Ordinary hours of work - shiftwork
Clause 17.2 Ordinary Hours of Work in the Agreement allows for an employee to request to work a shift in excess of 10 hours and up to 12 hours. Clause 18.2(ii) of the Agreement provides for the payment of overtime rates for hours worked beyond a 10 hour shift or a 12 hours shift where it is worked in accordance with clause 17.2.
Clause 25.1 of the Award limits the ordinary hours of work to a maximum of 10 hours per shift. Overtime penalty payments apply for hours worked in excess of 10 hours.
The relevant Agreement provisions would operate in circumstances of an agreed 12 hour shift being worked such that an employee would not receive overtime penalty rates for those hours worked beyond 10 hours and up to 12 hours. This is a less beneficial entitlement than the Award and will consequently result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
Annual leave loading
Clause 21.2 Annual Leave Loading in the Agreement provides for payment of a 17.5% leave loading when an employee takes annual leave. Unlike the entitlement found at clause 31.3 Annual Leave Loading in the Award the Agreement makes no provision for payment of weekend and shift penalties in lieu of the 1.5% leave loading for shift workers in circumstances where the weekend and shift penalties are greater than the 17.5% leave loading. I am satisfied that the Agreement provides for a less beneficial entitlement which will result in the provision being regarded as less beneficial for the purposes of the BOOT assessment.
More beneficial entitlements
The Applicant has identified the following more beneficial provisions within the Agreement in its Form F17 Statutory Declaration:
(1) Clause 8.7 and Clause 8.8 Redundancy – existing staff will retain a higher payment scale whereas new staff will receive National Employment Standard (NES) entitlements;
(2) Clause 19.1 Sleepovers – existing staff will retain more beneficial provisions whereas new staff will receive Award entitlements;
(3) Clause 19.5 Remote Response – additional benefit to on-call staff;
(4) Clause 22 Negotiated Extra Leave – provides ability for staff to purchase additional leave;
(5) Clause 26.1 Employee Birthday Off – in addition to the NES public holiday entitlement staff receive an additional day off for their birthday;
(6) Clause 21.3 Annual Leave Shut Down – provides for up to one week’s leave in advance where no leave accrual is available, such benefit not being provided under the Award;
(7) Clause 27 Payment While on Maternity Leave – six weeks paid maternity leave in addition to NES entitlements.
Having considered those clauses contended by the Applicant to be more beneficial than the Award, I am satisfied that with the exception of Clause 21.3 Annual Leave Shut Down, each of the above-referred clauses provide for entitlements that are more beneficial than the Award. That will result in those provisions being regarded as more beneficial for the purposes of the BOOT assessment.
I note however that Clauses 8.7 and 8.8 Redundancy and Clause 19.1 Sleepovers, while more beneficial for current employees, will not be more beneficial for prospective employees. I further note that while Clause 22 Negotiated Extra Leave provides employees with increased flexibility by allowing the “purchase” of additional leave of up to four weeks it does so by allowing the employees to pay for that additional leave from their existing remuneration.
With respect to Clause 21.3 Annual Leave Shut Down, the Applicant contends that the entitlement delivered by the Agreement is more beneficial than the Award in that an employee required to take annual leave in circumstances of a Christmas - New Year period shut down will receive up to one week’s annual leave in advance where they have insufficient leave accruals to cover the shutdown.
Clause 31.4 Annual Leave in Advance in the Award enables the employer and employee to agree to uncapped annual leave in advance being granted in circumstances where the employee has insufficient leave accruals to cover the period of leave sought. In the circumstances of the Award providing for uncapped leave in advance to be agreed, I am not persuaded that the Agreement provision is more beneficial. It is therefore a neutral consideration for the purpose of the BOOT assessment.
Summary
It will be seen from the statutory provisions provided above that an enterprise agreement will be found to have passed the BOOT if the Commission is satisfied, that at the test time, each Award covered employee and each prospective Award covered employee employed under the Agreement would be better off overall if the Agreement applied to the employee rather than if the Award applied to the employee.
The application of the BOOT is not applied as a line by line test. Rather, it is a global consideration of the provisions in the Agreement compared to the Award taking into account those provisions that are less beneficial and weighing them against those provisions that are more beneficial.
In conducting its assessment of the Agreement, it is open to the Commission to accept undertakings given pursuant to s 190 of the Act if the Commission is satisfied that the undertaking or undertakings provided are not likely to cause financial detriment to any employee covered by the Agreement or result in substantial changes to the Agreement. In the present matter, the Applicant declined to provide undertakings to address the deficiencies in the Agreement identified by the Commission.
I am satisfied that the Agreement provides for some entitlements that are more beneficial than the Award. I note, however, that some of those more beneficial provisions would only apply to current employees and would not be available to prospective employees who would only receive Award or NES entitlements. This is a relevant factor in the conduct of the BOOT assessment given the requirement for the Commission to consider at test time the effect of the Agreement, not only on each Award covered employee, but also on prospective Award covered employees.
Balanced against the more beneficial provisions are my findings that for a significant number of classifications, the rates of pay provided for under the Agreement are less beneficial than the Award. Additionally, a number of other less beneficial terms have been identified.
I am not satisfied on balance that the more beneficial terms are sufficient to outweigh the less beneficial terms that have been identified. This is particularly the case having regard to the cumulative and ongoing effect of remuneration that falls below what is required under the Award. Consequently, I am not satisfied that the Agreement meets the required BOOT. The satisfaction of the BOOT is a necessary pre-requisite to approval of the Agreement.[10]
Finally, as I have also found, I am not satisfied that the Applicant has complied with the requirements of s 180(3) of the Act. Consequently I cannot be satisfied that employees have “genuinely agreed” to the Agreement as required under s 186(2)(a) of the Act.
Conclusion
In order to approve the Agreement, the Commission must, as part of its consideration, be satisfied in respect of the s 186(2) requirements under the Act. For the reasons detailed above, I am not satisfied in respect of those requirements. Consequently, the application for approval of the Agreement is dismissed. An order reflecting this decision will be separately issued.
DEPUTY PRESIDENT
<PR607100>
[1] Section 173 Fair Work Act 2009.
[2] Section 174 Fair Work Act 2009.
[3] Section 180 Fair Work Act 2009.
[4] MA000100.
[5] AN120505.
[6] PR525485.
[7] Paragraph [24].
[8] Paragraph [23].
[9] MA000104.
[10] Section 186(2)(d) Fair Work Act 2009.
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