East-West Guarding Victoria Pty Ltd T/A East-West Guarding Victoria

[2018] FWC 4649

[2018] FWC 4649

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

East-West Guarding Victoria Pty Ltd T/A East-West Guarding Victoria
(AG2017/1505)

COMMISSIONER GREGORY MELBOURNE, 8 AUGUST 2018

Application for approval of the East-West Guarding Victoria Enterprise Agreement 2017.

Introduction

[1] An application has been made for approval of an enterprise agreement known as the East-West Guarding Victoria Enterprise Agreement 2017 (“the Agreement”). The application is made under s.185 of the Fair Work Act 2009 (Cth) (“the Act”) by East-West Guarding Victoria Pty Ltd. (“East-West Guarding”). It is a single enterprise agreement.

[2] The proposed Agreement contains a number of significant differences from the terms and conditions contained in the underlying Security Services Industry Award 2010 1 (“the Award”). In particular, it contains what are often described as “rolled up rates of pay.” These are set out in the so-called “work patterns definitions,”2 which each provide for a specific hourly rate to be paid for work performed at all times, depending on which of the five different work patterns an employee is rostered to work. These arrangements are obviously intended to apply in place of the traditional Award wage rate structure based around an ordinary time hourly rate of pay, with additional penalty rates applying for work performed outside of the ordinary time spread of hours.

[3] The Agreement also contains a number of other provisions which are different from those in the Award. These include the part-time work, hours of work more generally, and rostering provisions. The Agreement also indicates that any applicable allowances set out in clause 15 of the underlying Security Services Industry Award 2010 will also apply despite sub clause 1.3.3 of the Agreement indicating, “The provisions of this Agreement completely exclude the award.” 3

[4] It is noted that there have been a number of exchanges over an extended period of time between the Commission and East-West Guarding, and its representative, about a range of matters to do with the proposed Agreement. In addition, on 20 February 2018 the Commission wrote to East West Guarding’s representative to advise that a Full Bench of the Commission had now been convened in what has become known as the “Loaded Rates Agreements” matter. The Commission advised that given the relevance of those proceedings to the present application it considered that it was inappropriate to be dealing further with the matter until such time as the Full Bench has provided guidance and direction about the approach to be adopted in regards to agreements containing loaded or rolled up rates of pay. However, the Commission also made reference in that correspondence to a number of additional concerns it had regarding the proposed Agreement. These included the provisions to do with rosters, part-time work, annual leave loading, casual employees, call back and unpaid meal break.

[5] However, East-West Guarding subsequently sought to have the matter progressed and it was set down for hearing on 7 June 2018. However, on 28 June 2018 the Full Bench handed down its decision in the Loaded Rates Agreements matter, 4 and the Commission has accordingly now had the benefit of being able to consider that decision in the context of the present application.

[6] Mr H. Lewis from ER Strategies was given permission to appear on behalf of East-West Guarding under s.596(2)(a) as the matter involved a degree of complexity and his involvement might enable it to be dealt with more efficiently. The proceedings were conducted by telephone and Mr Lewis appeared with Mr A. Wood from East-West Guarding.

The Submissions and Evidence

[7] East-West Guarding did not seek to provide any further evidence or submissions in support of the application, but indicated that it was prepared to respond to any matters the Commission wished to raise. The Commission, firstly, sought information about the work now being carried out by the business and it was indicated in response that it currently provides security services to shopping centres, and the overwhelming majority of this work is performed on Monday – Friday, but some weekend work is also involved as well.

[8] At present the business has six permanent staff but at other times it is required to engage significant numbers of additional casual employees. Most of this work involves providing security services at events, and it cited events such as the Commonwealth Games, the Melbourne Cup, and the Grand Prix as examples in this context. This primarily involves casual employees rostered to work at the weekends and on public holidays. It also indicated that many employees are happy to take on this weekend work as a means of supplementing income from other jobs.

[9] It also indicated that the business is hopeful of obtaining more security work at shopping centres, and this would involve work at the weekends, as well as on Monday – Friday.

[10] The Commission also noted that East-West Guarding had made reference to the fact that some employees would only be required to work at the weekend, and yet the work patterns definitions do not provide for circumstances involving employees only working at the weekend. They instead provide for a combination of weekend work together with work at other times of the week, and that was why the wage rates associated with the work patterns definitions are less than those provided for in the Award for weekend work. Those Award rates involve time and a half on Saturday and double time on Sunday.

[11] East-West Guarding indicated in response that an undertaking had been proposed whereby the non-rotating day work rate would apply in conjunction with the relevant penalty rates for casual employees under clause 22.3 of the Security Services Industry Award 2010. This undertaking was proposed despite the fact that sub clause 1.3.3 of the Agreement indicated that the Award was completely excluded.

[12] Further submissions were also provided about the averaging arrangements. The Commission also made reference to some other issues of concern, including the overtime provisions and the part-time work entitlements, which are more flexible than those contained in the Security Services Industry Award 2010.

Consideration

[13] Section 186(1) of the Act requires the Commission, on application for approval of an enterprise agreement, to approve the Agreement “if the requirements set out in this section and section 187 are met.” 5 Section 186(2), firstly, requires that the Commission must be satisfied that “the Agreement has been genuinely agreed to by the employees covered by the Agreement,”6 and, secondly, that “the Agreement passes the better off overall test.”7

[14] Section 188 of the Act then deals with when employees can be said to have genuinely agreed to an enterprise agreement. It states:

“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) sub sections 180(2),(3) and (5) (which deal with pre approval steps);

(ii) sub section 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.” 8

[15] As indicated, s.186(2)(d) requires that the Commission must be satisfied that the Agreement passes the “better off overall test.” The requirements of the test are dealt with in s.193(1) in the following terms:

“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.” 9

[16] Section 193(6) also provides that the “test time” is the time the application for approval is made under s.185.

[17] It is well established that the application of the “better off overall” test requires the identification of terms and conditions in the proposed Agreement that are more beneficial for the employees, and those which are less beneficial, with an overall assessment then being made about whether the employees would be “better off overall” under the Agreement. It is also understoodthat the assessment must be carried out in a way that ensures each employee, and each prospective employee, would be “better off overall” under the Agreement. It is not sufficient for the Commission to simply be satisfied that a majority of the employees would be better off.

[18] Agreements like the East-West Guarding Victoria Enterprise Agreement 2017, which contain these loaded rate arrangements typically raise a range of particular issues in the context of the better off overall test assessment, and these considerations presumably had much to do with the President of the Commission referring various agreements containing loaded rates to a Full Bench of the Commission to consider how the better off overall test should be applied in those circumstances.

[19] As indicated, these types of agreements typically provide a range of issues to work through. Firstly, a comparison needs to be made between the “rolled up” arrangements and those that would apply under a traditional Award structure, where a base rate of pay is provided for, and additional penalty rates then apply for work performed outside of the ordinary time spread of hours, and at weekends and on public holidays. An important factor in terms of these considerations is to have an understanding about when the work is actually to be performed because this will often be critical in terms of making a comparison between the terms in the Agreement and those in the underlying Security Services Industry Award 2010.

[20] In addition, these arrangements obviously involve a degree of complexity, and the Commission’s assessment in terms of the better off overall test is based on the work pattern definitions being strictly applied in the manner stated. However, given the inherent complexities of these arrangements it is often difficult to be satisfied that they will indeed be applied correctly in practice.

[21] However, there are also some additional matters that arise when the terms and conditions in the present Agreement are compared to the terms and conditions contained in the underlying Security Services Industry Award 2010. They include:

•  Rosters – the Award provides that rosters, once notified, may not be changed without the payment of overtime unless seven days’ notice has been given, unless the parties have otherwise agreed. 10 However, the Agreement provides for a different approach. It states in sub clause 4.3.3 that “Rosters will be drawn up and where practicable posted 3 days in advance of the commencement of the roster cycle.”11 Once posted they may then only be changed by mutual agreement. Therefore, East-West Guarding is required to post rosters three days in advance of the commencement of the roster cycle, where practicable. However, if it considers it is not practicable to comply with this obligation then it can vary rosters without notice.

•  Part-time work – this ability to change rosters with little or no notice also needs to be considered in conjunction with the part-time work provisions in the Agreement. Under the Award part-time hours of work have to be agreed on by the employer and the employee in advance, and can then only be varied by agreement. When hours are worked in excess of those agreed then overtime entitlements apply, unless there has been a further agreement to vary those hours. However, under the terms of the Agreement it appears the hours of a part-time employee can be varied without agreement. The only requirement is for any change to be made in advance of the release of the roster. Given that rosters can be varied with little or no notice this creates a far more flexible regime of part-time work than provided for by the Award. It is submitted that these provisions are designed to provide more flexibility in order to be better able to service client needs. The ability to be able to service client needs is not questioned. However, the Commission is also required to have regard to the relevant statutory requirements. In this context it appears that the flexible framework of part-time work provided for by the Agreement has more in common with casual work arrangements, and could operate to deny entitlements to overtime that would otherwise apply under the terms of the Award.

•  Annual leave – the Agreement provides for the 17.5% annual leave loading to be paid on the basis of the non-rotating day worker rate. By contrast the Award provides in sub clause 24.6 for the payment to comprise the greater of either the amount the employee would have earned during the period of leave for working their normal hours, exclusive of overtime, had they not been on leave, or their ordinary time rate, together with any applicable allowances, plus a loading of 17.5%.

•  Allowances – The Agreement provides for the applicable allowances in clause 15 of the Security Services Industry Award 2010 to be paid, although it does not specify which of them would be applicable. However, this clause also needs to be considered in the context of sub clause 1.3.3 of the Agreement which states, “The provisions of this Agreement completely exclude the award.” 12

•  Hours of work – without going to specific detail the Agreement generally contains more flexible conditions in regard to hours of work than the Award. For example, it allows for 12 hour shifts to be worked without the corresponding conditions that the Award requires to be in place before such shifts can be rostered.

[22] As indicated, East-West Guarding submits that the deficiencies in the Agreement concerning the rates of pay for casual employment can be remedied by an undertaking being provided to the effect that if casuals are employed then they will be engaged under the terms and conditions contained in the Security Services Industry Award 2010. This is clearly a significant consideration. In the first place, it is evident that if casuals are employed to only work a limited number of shifts at the weekends then they are clearly going to be worse off under the terms of the Agreement when compared to those in the Award. This is essentially because the work patterns definitions do not anticipate arrangements whereby shifts are only worked at the weekends. They have instead been established for full-time employees, and propose specific hourly rates which are based on an averaging arrangement of hours being worked over various times of the week. However, if the only hours that are actually rostered are at the weekends then those averaging arrangements are going to mean the employees will inevitably be worse off under the terms contained in the Agreement, when compared to the Award, because under the Award they would have received penalty rates of time and a half and double time for work at the weekends.

[23] The nature of the proposed undertaking also raises other issues. In the first place the Agreement states that it applies to the complete exclusion of the Award, and therefore an undertaking of the kind proposed by East-West Guarding would be a significant change to what was originally proposed when the Agreement was put to the employees for approval and voted upon.

[24] These circumstances were highlighted by the Full Bench in the “Loaded Rates Agreements” decision when it indicated at [128]:

“This conclusion is an example of the general difficulty which we earlier identified in establishing a loaded rate structure for casual employees which is capable of passing the BOOT.” 13

[25] The Applicant in the relevant matter before the Full Bench had also proposed an undertaking which would have provided for the relevant penalty rates in the Security Services Industry Award 2010 to apply when casual work was performed in the evenings, or at the weekend, or on public holidays. The Full Bench responded by stating at [130]:

“This undertaking, if accepted, would resolve the BOOT difficulty which we have identified. However such an undertaking may only be accepted if it meets the conditions specified in s 190(3) of the FW Act, namely that it is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement. We do not consider that either condition is satisfied. It constitutes a fundamental change to the remuneration structure in the Allied Agreement and the JWT Agreement which was voted upon by their respective employees, in that it moves from a loaded rate structure to a more traditional base hourly rate and penalty rate structure. It may also leave some casual employees worse off. For example, for an employee who worked a rotating weekday/weeknight roster, but only worked a small proportion of hours outside day worker hours (6.00am to 6.00pm), the addition of the 21.7% night span penalty rate for that small proportion of hours would not compensate for the move from the rotating weekday/weeknight worker rate ($23.07 for Level 1) to the non-rotating day worker rate ($20.89 for Level 1). We therefore do not accept the undertakings proposed by Allied and JWT in this respect. As noted above, no undertaking was proposed by PSA in response to the Commission’s concern about this issue.” 14

[26] The Full Bench finally concluded that the agreement “…fails the BOOT with respect to casual employees not assigned to a specified work roster pattern.” 15

[27] Similar circumstances clearly exist in the present matter. The Employer’s F17 Statutory Declaration indicates there were eight employees employed at the time the application was made, with six of these employed on a casual basis. It also appears that the composition of the workforce has changed since that time as well, and the business now has six permanent staff providing security services. However, the submissions provided by East-West Guarding also indicate that at different times a significant number of additional casual employees could also be engaged by the business, primarily to do event work, which is generally associated with work performed at the weekends and on public holidays. The undertaking that it now proposes in regard to casual employees is therefore, as the Full Bench identified, a fundamental change to the remuneration structure, based around the loaded rate arrangements, that was voted on when the Agreement was put to the employees for approval. Therefore, as a consequence of the decision by the Full Bench, I am not satisfied that the undertaking proposed by East-West Guarding can be accepted, and it follows that the Agreement cannot be approved.

[28] In coming to this decision it is also emphasised that there are a number of other conditions in the Agreement which would leave employees worse off when compared to those in the underlying Award. In this context I refer, in particular, to the part-time work provisions, the roster arrangements, and the annual leave entitlements. I am also unable to identify other conditions in the Agreement that are more beneficial and might act to offset these less beneficial provisions.

Conclusion

[29] The commercial pressures that require employers in the security industry to have enterprise agreements in place are acknowledged. It is also understood that it can often be a difficult industry to operate in, with tight margins and significant pressure being applied to sub – contractors to tender and engage at the lowest possible rates. This has been evidenced in a number of previous applications the Commission has dealt with involving the security industry. However, in dealing with the present application the Commission is simply required to have regard to the relevant statutory requirements in the Act.

[30] I am not satisfied, in conclusion, that it can be said that each employee to be covered by the proposed Agreement would be “better off overall” when the terms and conditions contained in the Agreement are compared to those in the Security Services Industry Award 2010. I am also not satisfied, based on the decision of the Full Bench in the Loaded Rates decision, that appropriate undertakings can be provided in all cases to remedy these shortcomings. It follows that the Agreement cannot be approved. The application is accordingly dismissed.

COMMISSIONER

Appearances:

H Lewis and A Wood for the Applicant

Hearing details:

2018.

Melbourne (by telephone):

June 7.

Printed by authority of the Commonwealth Government Printer

<PR609773>

 1   MA000016.

 2   Proposed East-West Guarding Victoria Enterprise Agreement 2017, cl 3.2.1(a).

 3   Ibid, cl 1.3.3.

 4   Loaded Rates in Agreements [2018] FWCFB 3610.

 5   Fair Work Act 2009 (Cth) s 186(1).

 6   Ibid s 186(2)(a).

 7   Ibid, s 186(2)(b).

 8   Ibid,s 188.

 9   Ibid, s 193.

 10   Security Services Industry Award 2010, cl21.12.

 11   Proposed East-West Guarding Victoria Enterprise Agreement 2017, cl 4.3.3.

 12   Ibid, cl 1.3.3.

 13   Loaded Rates in Agreements [2018] FWCFB 3610, [128].

 14   Ibid, [130].

 15   Ibid, [132].