HBC Tasmania Pty Ltd T/A Hog’s Breath Cafe Launceston
[2014] FWC 7335
•17 OCTOBER 2014
| [2014] FWC 7335 |
| FAIR WORK COMMISSION |
REASONS FOR DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
HBC Tasmania Pty Ltd T/A Hog’s Breath Cafe Launceston
(AG2014/1151)
COMMISSIONER LEE | MELBOURNE, 17 OCTOBER 2014 |
Application for approval of the HBC Tasmania Pty Ltd - Enterprise Agreement 2014-2018 - application of the better off overall test - notice of employee representational rights - application dismissed
[1] An application has been made for approval of a single enterprise agreement known as the HBC Tasmania Pty. Ltd. Enterprise Agreement 2014-2018 (the agreement). The application was made by HBC Tasmania Pty. Ltd. T/A Hog’s Breath Cafe Launceston (the Applicant), pursuant to s.185 of the Fair Work Act 2009 (the Act). The application for approval was lodged on 17 May 2014.
[2] On Monday 25 August 2014 this matter was listed for hearing. Mr. C Agnew represented the Applicant and was given permission to appear. At the conclusion of the hearing I gave an ex tempore decision that I was not satisfied that the agreement met the better off overall test and for that reason, would not approve the agreement. The application was dismissed. I advised that I would provide written reasons for my decision. These are my reasons.
[3] Part 2-4 of the Act (within which s.185 may be found) provides for the making of enterprise agreements. Section 186 sets out the general requirements for when the Fair Work Commission (the Commission) must approve an enterprise agreement. Section 187 sets out additional requirements for when the Commission must approve an enterprise agreement.
[4] Section 186 reads:
“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 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; and
(b) if the agreement is a multi-enterprise agreement:
(i) the agreement has been genuinely agreed to by each employer covered by the agreement; and
(ii) no person coerced, or threatened to coerce, any of the employers to make the agreement; and
(c) the terms of the agreement do not contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.); and
(d) the agreement passes the better off overall test.
Note 1: For when an enterprise agreement has been genuinely agreed to by employees, see section 188.
Note 2: The FWC may approve an enterprise agreement that does not pass the better off overall test if approval would not be contrary to the public interest (see section 189).
Note 3: The terms of an enterprise agreement may supplement the National Employment Standards (see paragraph 55(4)(b)).
(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.
(3A) If the agreement does not cover all of the employees of the employer or employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.
Requirement that there be no unlawful terms
(4) The FWC must be satisfied that the agreement does not include any unlawful terms (see Subdivision D of this Division).
Requirement that there be no designated outworker terms
(4A) The FWC must be satisfied that the agreement does not include any designated outworker terms.
Requirement for a nominal expiry date etc.
(5) The FWC must be satisfied that:
(a) the agreement specifies a date as its nominal expiry date; and
(b) the date will not be more than 4 years after the day on which the FWC approves the agreement.
Requirement for a term about settling disputes
(6) The FWC must be satisfied that the agreement includes a term:
(a) that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:
(i) about any matters arising under the agreement; and
(ii) in relation to the National Employment Standards; and
(b) that allows for the representation of employees covered by the agreement for the purposes of that procedure.
Note 1: The FWC or a person must not settle a dispute about whether an employer had reasonable business grounds under subsection 65(5) or 76(4) (see subsections 739(2) and 740(2)).
Note 2: However, this does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4).
[5] Section 187 of the Act reads;
“187 When the FWC must approve an enterprise agreement—additional requirements
Additional requirements
(1) This section sets out additional requirements that must be met before the FWC approves an enterprise agreement under section 186.
Requirement that approval not be inconsistent with good faith bargaining etc.
(2) The FWC must be satisfied that approving the agreement would not be inconsistent with or undermine good faith bargaining by one or more bargaining representatives for a proposed enterprise agreement, or an enterprise agreement, in relation to which a scope order is in operation.
Requirement relating to notice of variation of agreement
(3) If a bargaining representative is required to vary the agreement as referred to in subsection 184(2), the FWC must be satisfied that the bargaining representative has complied with that subsection and subsection 184(3) (which deals with giving notice of the variation).
Requirements relating to particular kinds of employees
(4) The FWC must be satisfied as referred to in any provisions of Subdivision E of this Division that apply in relation to the agreement.
Note: Subdivision E of this Division deals with approval requirements relating to particular kinds of employees.
Requirements relating to greenfields agreements
(5) If the agreement is a greenfields agreement, the FWC must be satisfied that:
(a) the relevant employee organisations that will be covered by the agreement are (taken as a group) entitled to represent the industrial interests of a majority of the employees who will be covered by the agreement, in relation to work to be performed under the agreement; and
(b) it is in the public interest to approve the agreement.”
[6] The application of the better off overall test to the agreement is the main focus of this decision.
[7] Section 193 of the Act deals with the better off overall test. Section 193 of the Act reads:
“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.
FWC must disregard individual flexibility arrangement
(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.
When a greenfields agreement passes the better off overall test
(3) A greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that 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.”
[8] If I form the view that the agreement passes the better off overall test (and I have found all other requirements have been met), I must approve the agreement. If I form the view that the agreement does not pass the better off overall test, the Commission may approve the enterprise agreement subject to undertakings (the requirements of which are set out in sections 190, 191 and 192 of the Act.). The Commission may also approve an agreement which does not pass the better off overall test if the Commission is satisfied that, because of exceptional circumstances, the approval of the agreement would not be contrary to the public interest (the public interest test as set out in s.189 of the Act).
Background
[9] The application was lodged on 17 May 2014. Having considered the terms of the agreement and having had the benefit of analysis from the Commission’s agreements team, I had concerns the agreement did not meet the better off overall test. The relevant award nominated by the Applicant for the conduct of the better off overall test test is the Restaurant Industry Award 2010.
[10] I wrote to Mr. C Agnew (the Applicant’s representative) on 10 July 2014. 1 That correspondence referred to and attached an analysis of the agreement conducted by the Commission’s agreements team. The key issue identified with the application of the better off overall test was that in certain circumstances, depending on the amount of Saturdays, Sundays and Public Holiday hours worked, the agreement could see employees not better off overall.
[11] The agreement provides employees with loaded pay rates that are inclusive of allowances, annual leave loading and penalty rates for public holidays, weekends and late nights. Various models were provided that showed that in some of the scenarios modelled, employees were marginally better off or “line ball” (Models A, D and E). However, modelling also showed that employees were not better off overall under Model B. The worst case scenario modelled, where the employee only worked on Saturday and Sunday showed that such an employee would be more than 15% worse off under the agreement (Model C). The 10 July 2014 letter stated as follows: “...having considered the analysis and the terms of the agreement overall I had a concern that the agreement did not pass the better off overall test. Accordingly, I have formed the preliminary view that the agreement could not be approved”. The correspondence noted that the Applicant might wish to provide an undertaking to satisfy my concerns or could request a hearing.
[12] The Applicant’s representative replied to my chambers on the 18 July 2014. Draft undertakings were provided that, it was submitted, would meet my concerns as to the application of the better off overall test.
[13] The undertakings had the effect of increasing the rates of pay by 1.5% from those that were provided for in the agreement. It was suggested that this increase would take into account the differences in the models provided at A, D and E in my 10 July 2014 correspondence. As to the models provided in B and C, the Applicant submitted that these models were not reflective of the way all staff at the business were rostered.
[14] Various rosters were attached to the Applicant’s correspondence for my consideration. It was also submitted that the trading hours of the business (11.30am to 2.30pm and 5pm to 9.30pm, 7 days per week) demonstrated that a late work penalty, as was included in models A and B, was not required.
[15] A further undertaking was suggested in the way of a wage reconciliation provision which allowed employees who believe they are not better off overall under the agreement to request reconciliation against the terms of the applicable award annually and be paid any difference that was owed to them.
[16] I considered the undertakings proposed by the Applicant and requested that the Commission’s agreements team undertake an analysis of the terms of the agreement incorporating the provided undertaking to increase rates by 1.5%. I also requested modelling of the various rosters supplied by the Applicant.
[17] Having considered the further modelling undertaken by the Commission’s agreements team, I wrote again to the Applicant’s representative on 5 August 2014 2 indicating that I remained of the view that the agreement, including the proposed undertakings, did not meet the better off overall test.
[18] In that correspondence, I set out that the key issues of concern, which were:
- The agreement rate does not appear to be high enough to compensate for the loss of weekend penalties;
- rosters (as supplied by the Applicant) modelled for wait staff, indicated that 10 out of 24 employees would be better off under the award;
- rosters modelled for kitchen staff indicated 7 out of 16 employees would be better off under the award;
- that rosters supplied indicate that employees are at times required to work beyond 10pm, notwithstanding the trading hours of the business and therefore the late work penalty was included in the analysis.
[19] I provided a summary of the outcomes of the 40 rosters modelled. The summary showed the amount of increases required for each of the rosters modelled to make employees better off under the agreement. The correspondence also expressed concern that part time employees may be rostered on “stand-by” though it was unclear what effect this would have as the agreement is silent on this matter.
[20] I advised the Applicant that my preliminary view that the agreement could not be approved had not altered. I provided a further opportunity to the Applicant to provide any amended undertakings to satisfy my concerns. A reply was sought by no later than close of business on the 12 August 2014.
[21] I note that the Applicant sought a copy of the details of the 40 rosters modelled and these were provided to the Applicant on 6 August 2014.
[22] The Applicant replied on 13 August 2014. The Applicant noted that the models provided did not take into account various matters, notably paid rest breaks for each 5 hours of work and payment for various forms of leave at the “higher hourly rate rather than the employees Monday to Friday rate of pay”. The Applicant notes that the models provided did not reflect the changing rostering patterns of the relevant employees over the cycle of their employment and their personal circumstances and asserted that relying on the rosters alone to consider the agreement was an incorrect approach. The 13 August 2014 correspondence also stated as follows:
“Our client is however prepared to provide you with a further undertaking in one last attempt to meet your concerns about the proposed Agreement - which in summary does the following:
1. An increase the proposed hourly rates by a further 1.5% on the rates proposed in the undertaking provided to you on 18 July 2014;
2. A commitment to permanency of employment over casualisation
3. A provision relating to consultation regarding changes to employee’s regular rosters or ordinary hours of work in accordance with schedule 2.3 of the Fair Work Regulations.”
[23] The letter of 13 August 2014 asked that if the Commission was still not minded to approve the agreement, “...then we would seek to have the application set down as soon as possible for hearing for ½ day in Launceston so that the applicant can present further evidence and submissions to enable you to make a final decision on the application”.
[24] On 18 August 2014 I wrote to the Applicant advising that the further undertakings do not satisfy my concerns about the application of the better off overall test. As the Applicant had indicated that he sought a hearing be listed I issued directions for a hearing on 25 August 2014.
[25] The Applicant’s representative corresponded with my chambers that same day indicating that an amendment to the directions was sought as there was not enough time to comply. It was suggested that 10 months of roster calculations was to be provided in addition to witness evidence and that the gathering of that information alone would take 14-21 days. Further, the Applicant’s representative and the Applicant were to be overseas at a conference at the time of the hearing.
[26] I considered these requests and declined the request for the hearing to be delayed. I requested that the Applicant provide, in line with the directions issued, material to support the contention that the better off overall test was satisfied. I also noted that this application had already been the subject of extensive correspondence and that the Applicant had sought a hearing as soon as possible.
[27] On 21 August 2014 I received further correspondence from the Applicant’s representative proposing an additional undertaking the effect of which was that the employer would undertake the proposed reconciliation of wages every 6 months (rather than every 12 months) and to pay any employee underpaid the relevant amount when compared with the relevant award. On 22 August 2014, I wrote to the Applicant’s representative advising that the additional undertaking did not satisfy my concerns about the application of the better off overall test.
[28] At the hearing, Mr. Agnew was given permission to appear as I was satisfied there was some level of complexity associated with this application and that granting permission would allow the matter to be dealt with more efficiently. Mr. Williams, one of four directors of the Applicant appeared by telephone and gave evidence.
[29] Mr. Williams evidence included:
- That the store employs 43 employees with 35 of the staff being part time and 22 under the age of 21 years;
- that the models provided by the Fair Work Commission do not reflect the changing work patterns over the period of employment of employees;
- that the modelling did not take into account that personal, long service leave, jury service leave, and redundancy pay are paid at the higher loaded rate and that there are no junior rates of pay;
- that there are paid ten minute rest breaks every 5 hours and that employees will be engaged on a full time or part time basis and as a result have guaranteed hours of work and security of employment;
- that there are “one or two” staff who only work on weekends.
[30] Mr. Williams gave evidence that the purpose of the agreement was not to reduce the wages of the staff but to simplify the administration of payroll by having one flat rate of pay.
[31] Mr. Williams also gave evidence that a key benefit of the agreement was simplified rostering stating that “[w]ell the key benefit for the agreement is simply to say that we have a flat rate of rostering so it’s very, very easy to roster” 3.
[32] Mr. Williams referred to two of the individual rosters that were modelled and referred to in my correspondence of 5 August 2014. In reference to the employee ”Model 15”, Mr Williams pointed out that the roster modelled showed that that employee was $11.81 worse off overall, but that in the subsequent week that employee was $27 better off overall. In reference to the employee “Model 22”, Mr Williams asserted that the roster modelled showed that this employee was $45.85 worse off but that in the subsequent week the employee was $37.69 better off.
[33] Mr. Williams gave evidence that he had undertaken some modelling, stating;
“I’ve basically done- I’ve done very simple modelling... that if I was paying this many hours and the award rate Monday to Friday and then 20 hours Saturday and Sunday as in [what] I'm paying on a roster, what it basically comes out at is that, you know, one week it might work out that I'm paying $50 less, the next week its $50 more so its worked out very, very even” 4
[34] Mr. Williams gave evidence that he had staff on a standby arrangement. 5 This arrangement is not contemplated in the agreement. Mr. Williams gave evidence that staff received no remuneration for being on standby.6
[35] Mr. Williams also gave evidence that went to a consideration of the public interest test as a basis for approving the agreement. However, Mr. Agnew on behalf of the Applicant made clear that he was not asking me to take into account the public interest test and therefore it is not necessary to consider that evidence. 7
Law to be applied:
[36] The Applicant referred me to the decision in Amacell Australia Pty Ltd 8 (Amacell).In Armacell, the Full Bench stated:
“[41] The BOOT, as the name implies, requires an overall assessment to be made. This requires the identification of terms which are more beneficial for an employee, terms which are less beneficial and an overall assessment of whether an employee would be better off under the agreement.” 9
[37] I agree that this is the correct approach in the application of the better off overall test.
Consideration:
[38] My correspondence to the Applicant’s representative on 5 August 2014 indicated that rosters modelled showed that 10 out of 24 wait staff employees and 7 out of 16 kitchen staff employees would be better off under the relevant award. That modelling incorporated the first undertaking offered to increase the rates in the agreement by 1.5%. Subsequently the Applicant offered to increase the undertaking proposed raise the rates a further 1.5%.
[39] It is evident from the modelling that the additional 1.5% increase (total of 3%) would mean that an additional two wait staff (models 20 and 21) would be better off under the agreement. However it remains that, even when applying the second undertaking given8 of the 24 employees would be better off under the relevant award.
[40] Similarly, modelling the additional increase shows that two more kitchen staff (models 1 and 13) would be better off on the agreement, but that 5 of the 16 would remain better off under the relevant award.
[41] In general terms and considering only the modelling, when applying the second undertaking provided, approximately a third of employees would not be better off.
[42] I have considered the evidence of Mr. Williams that the modelling does not accurately reflect the work of the staff. However, I note that the models were based on the actual rosters provided by the Applicant. It cannot be then said that the modelling that followed was not accurate. I further note the particular evidence of Mr. Williams in respect to the two employees, “Model 22” and “Model 15”. Mr Williams’ evidence showed that “Model 15” would be better off on the agreement when two pay periods were considered. However, his evidence in respect to “Model 22” was that the employee would be still be worse off under the agreement even when the second week is considered as the benefit under the agreement in the second week (+$37.69) is less than the $45.85 worse off the employee is in the first week. I do not see how the evidence provided by Mr Williams regarding “Model 22” supports the proposition advanced that the employee is better off.
[43] I note that the evidence of Mr. Williams where he referred to the simple modelling he undertook. It was clear from this evidence that he saw the agreement overall coming out “very very even” with the relevant award when the rates are considered over time. 10 I am not satisfied, based on the evidence, that this is the case. Further, I must be satisfied that employees are better off, not in the same “even” position when compared to the relevant award.
[44] Consistent with the approach in Armacell, an overall assessment is to be made, taking into account the more beneficial terms and the less beneficial terms in the agreement when compared to the relevant award. In that context I have considered the evidence of Mr. Williams that the models do not take into account various factors. I note that jury service, long service leave and personal leave will be paid at the loaded rate. However, this is a contingent benefit depending on whether employees access this leave. Similarly, the payment of notice periods and redundancy pay only arises at the point of termination. It is not a benefit during the period of employment. The paid 10 minute rest break every 5 hours is a benefit not provided in the relevant award. However, I am not satisfied that it is of such benefit to satisfy my concern nor does the commitment to not engage casuals in employment.
[45] The remaining issue is whether, despite these concerns, the undertaking to conduct a reconciliation of employee’s earnings under the agreement when compared with the relevant award every 6 months, and then make good any shortfall, provides a means by which the concerns I have about the better off overall test are overcome.
[46] Commissioner Roe in Falls Creek Alpine Resort Management 11(Falls Creek) considered a similar form of undertaking.
[47] Commissioner Roe in the circumstances of that case concluded:
“[80] ...I may have been prepared to consider such an undertaking in the event that I was convinced that it was unlikely that any employees would ever be worse off in practice under the Agreement and/or if I was convinced that only a small group of employees would ever be at risk of being worse off under the agreement. However, in the circumstances as they now are I doubt that such an undertaking would be reasonable and the breadth of the undertaking required would probably amount to a significant change to the agreement which is not permitted by the legislation.” 12
[48] I think that the approach taken by Commissioner Roe to an undertaking such as the proposedreconciliation undertaking is the correct one. An undertaking of this type could be used to provide a basis for approving an agreement but in circumstances similar to those described. I have previously adopted the approach of Commissioner Roe in Falls Creek Alpine Resort Management 13 in E.C. Birch Proprietary Limited14.
[49] Applying the approach of Commissioner Roe to the circumstances of this case, it is clear from the preceding analysis that I am not satisfied that it is unlikely that any employees would ever be worse off under the agreement and I am not satisfied that only a small group of employees would ever be at risk of being worse off under the agreement. In such circumstances I am not satisfied that proposedreconciliation undertakingresolves my concern that the agreement does not pass the better off overall test.
[50] Having considered all of the evidence as to the more beneficial and less beneficial terms in the agreement and making an overall assessment, I am not satisfied that employees are better off overall. I have provided a number of opportunities to the Applicant to provide undertakings to satisfy my concerns. Undertakings have been provided but for the reasons canvassed above these undertakings do not satisfy my concerns. As I am not satisfied that the agreement passes the better off overall test (a requirement under section 186(2)(d) of the Act, the agreement cannot be approved and on that basis I dismiss the application.
The notice of employee representational rights.
[51] Upon review of the application, it appears that the notice of employee representational rights contains content that is not prescribed in Schedule 2.1 of the Fair Work Regulations 2009 (the Regulations).
[52] Recently in Peabody Moorvale v CFMEU 15, a Full Bench of the Commission stated
“In our view s 174(1A) is clear and unambiguous. There is simply no capacity to depart from the form and content of the notice template provided in the Regulations. A failure to comply with these provisions goes to invalidity. We agree with the Minister’s submissions on this point, that is:
A mandatory template is provided in the Regulations. The provisions make it clear that there is not scope to modify either the content or the form or the Notice other than as set out in the template.
Taking into account the considerations identified in Project Blue Sky we have concluded that the legislative purpose of s 174(1A) is to invalidate any Notice which modifies either the content or form of the Notice template provided in Sch 2.1 of the Regulations.” (footnotes omitted).
[53] The notice of representational rights supplied refers under the heading “Questions” to the website Schedule 2.1 contains in the same position the website
[54] It would appear that the notice does not comply as it modifies the content of the notice template in Schedule 2.1 of the Regulations and is therefore invalid. It would seem to follow that as no valid notice of employee representational rights was given to employees, the agreement cannot be approved.
[55] I note that this matter was not raised at all during the hearing and has only come to my notice on further review of the file while preparing these written reasons. To be clear, I have not dismissed the application on the basis of the concern as to the notice of representational rights. However, I simply note that it is likely to have been a barrier to the approval of the agreement irrespective of my concerns about the application of the better off overall test.
COMMISSIONER
Annexure A:
Annexure B:
Appearances:
C Agnew of Agnew Legal for the Applicant
Hearing details:
2014.
Melbourne:
August 25
1 See Annexure A
2 See Annexure B
3 PN56
4 PN64
5 PN77
6 PN81
7 PN155-157
8 [2010] FWAFB 9985
9 Armacell Australia Pty Ltd [2010] FWAFB 9985, [41]
10 PN64
11 [2010] FWA 2847
12 Falls Creek Alpine Resort Management [2010] FWA 2847, [80]
13 [2010] FWA 2847
14 [2012] FWA 2313
15 [2014] FWCFB 2042
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