IFS Head Franchise Pty Ltd

[2019] FWC 4706

[2019] FWC 4706

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

IFS Head Franchise Pty Ltd
(AG2017/2025)

COMMISSIONER GREGORY MELBOURNE, 5 JULY 2019

Application for approval of the IFS Head Franchise Pty Ltd Enterprise Agreement 2017.

Introduction

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

[2] The Agreement is intended to cover employees engaged in the security industry. The F17 Statutory Declaration provided by Mr Matthew Bhimbhai, the Managing Director of IFS, indicates that at the time the Agreement was voted on there were only three people employed, with each employed on a casual basis. One of those employees was apparently employed at the Level 1 classification, with the other two being employed at Level 2. It also indicated that the Agreement was intended to have application in New South Wales and Queensland.

[3] The Statutory Declaration also indicated at question 3.5 that the Agreement did not contain any less beneficial terms and conditions when compared to those in the relevant reference instrument, being the Security Services Industry Award 2010 (“the Award”).

[4] The terms and conditions contained in the proposed Agreement contain a number of distinct features when compared to those in the underlying Award. For example:

•  it provides that new employees can be engaged for a trial period of employment of up to 152 hours “to assess their suitability, capability and competency,” 1 and be paid at a lower wage rate during this period of time;

•  it otherwise contains a single rate of pay for each classification, and indicates that these rates “…are inclusive of all allowances, penalties and loadings, and are payable for all hours worked except where otherwise expressly provided;” 2

•  it provides for a span in which ordinary hours can be worked from 6 am to 11 pm, Monday to Friday, compared to the span of hours in the Award, which is from 6 am to 6 pm, Monday to Friday. The Agreement also indicates that any work performed outside of these hours will attract an additional amount of $1 per hour, but only when the majority of the shift falls outside the 6 am to 11 pm, Monday to Friday, span of hours;

•  it provides that shifts can be extended up to a maximum of 12 hours per shift, unless otherwise mutually agreed by the parties in writing. This presumably allows for shifts of longer than 12 hours to be worked by agreement;

•  it provides for the employer to pay for the cost of any required security industry training, but then indicates that these costs can be recouped by the employer as a consequence of the agreement by the employee to their salary being reduced by $5 per hour until the accrued debt is cleared;

•  it only contains wage rates for casual employees, but indicates that if full or part-time employees are engaged during the life of the Agreement, then it “will be varied to incorporate wages and conditions of such employment for such employees.” 3

[5] After reviewing the application, and the terms and conditions contained in the proposed Agreement, the Commission forwarded correspondence to IFS highlighting various issues concerning satisfaction with the requirements of the “better off overall test.” After further exchanges the Commission then decided to list the matter for hearing to enable IFS to provide any further submissions or evidence in support of the application.

[6] The hearing took place by video conference on 24 August 2017. Mr Chris Mossman from Jensen McConaghy Lawyers appeared on behalf of IFS. The Commission was also provided in advance of the hearing with a statement from Mr Matthew Bhimbhai, the Managing Director of IFS. It was also provided with a copy of what were indicated to be the current rosters being worked by the employees to be covered by the Agreement. A set of undertakings was also proposed, and it was indicated that these were now provided in place of draft undertakings forwarded previously. It was also indicated at the time of the hearing that Mr Bhimbhai had intended to be present as a witness, but was unwell and consequently unable to attend.

The Evidence and Submissions

[7] The statement provided by Mr Bhimbhai attached what was described as the most recent roster for employees to be covered by the proposed Agreement. It continued to set out what were described as some calculations demonstrating that the employees were better off under the terms of the proposed Agreement, when compared to the Award conditions. It continued to indicate that when working ordinary time hours the employees are paid at a rate that represents an extra 50 cents per hour when compared to the Award and, as a consequence, they also receive a higher superannuation contribution amount.

[8] The statement also made reference to the following matters which were described as providing “extra advantages” for the employees under the Agreement. It referred, firstly, to clause 15 and the disciplinary process, which provides casual employees with access to a disciplinary process, which it submits was not otherwise available to them. It also referred to clause 16, which provided payment in lieu of notice of one day’s wages, whereas casuals would not be entitled to notice under the Award. It next referred to the entitlement to compulsory arbitration under clause 17 and, finally, to the motor vehicle allowance of 80 cents per kilometre in clause 22, which was compared to the allowance in the Award of 78 cents per kilometre.

[9] As indicated, the Applicant’s representative also took the Commission in the hearing to a further set of undertakings which were now proposed. It was indicated that these were proposed to replace the draft undertakings that had been provided previously. Further submissions were also provided in regard to these new undertakings.

[10] It was indicated, firstly, that it was now intended that clause 10 in the Agreement, “Trial Period,” would no longer have any application, and as a consequence the Level 1 and Level 2 probationary period rates contained in Schedule 1 of the Agreement would also now no longer have application. This undertaking accordingly had the effect of removing the ability for a new employee to be engaged during an initial probationary period of 152 hours at a lower rate of pay.

[11] The submissions next dealt with the spread of hours provisions in clause 13.1 of the Agreement. This detailed a spread of hours on Monday to Friday from 6 am until 11 pm. However, the Applicant’s submissions indicated that it was now proposed that an undertaking be provided that would limit the spread of hours to Monday to Friday, 6 am to 10 pm. It was acknowledged in this context that this was still different from the spread of ordinary time hours in the Award, which is from 6 am until 6 pm, and provides for an entitlement of a 21.7% penalty rate for work performed after 6 pm on ordinary time shifts. However, it was also submitted that the higher wage rates, and the provision of an additional one dollar per hour payment for work performed beyond 10 pm, provided adequate compensation in response. It was also indicated that a further undertaking was now proposed, which would raise the Level 1 rate to $26.66 per hour. This represented an increase from the figure contained in the original Agreement of $26.10.

[12] It was noted by the Commission in response to these submissions that while it had been provided with examples of the rosters currently being worked by the employees it was obviously possible that other rosters could be put in place at some point in the future. The Applicant’s representative indicated in response that the normal spread of hours was to be limited to Monday to Friday. Secondly, if any changes were to be made to the existing rosters this would occur through the appropriate consultation provisions, and any issues arising in regard to any such proposed changes could be dealt with through the grievance and dispute settling procedures in clause 17 of the Agreement.

[13] It was also confirmed by the Applicant’s representative, in response to a question from the Commission, that if the employees in the future worked outside of the span of hours that was now proposed, being from 6 am to 10 pm, Monday to Friday, or at any other times on any other days, they would receive the additional $1 per hour for any of those hours.

[14] The Applicant’s submissions continued to indicate that the Commission should also have regard to previous decisions of the Tribunal, which have suggested that it should exercise caution in regard to speculation about future “academic rosters or hypothetical rosters,” and that it should instead have particular regard to the current rosters being worked, and the specific span of hours provisions contained in the proposed Agreement. It was also indicated in response to concerns raised by the Commission that it was possible for employees to be employed in the future under the terms of the Agreement, in circumstances where the only obligation was to pay them an extra dollar an hour for work at weekends, or for work in the evenings. It was also indicated that consideration could be given to a further undertaking to provide that no employees would be engaged to work solely at night or on weekends. However, it was also indicated that the provision of such a further undertaking might be difficult.

[15] Clarification was also provided about some of the other proposed undertakings. In regard to the undertaking that “the agreement will not apply to any unlicensed attendants” it was submitted that the business did not currently employ any unlicensed attendants, and if such persons were to be employed in the future their conditions of employment would be covered by the underlying Award.

[16] It was next indicated that clause 26 would no longer have any effect as a consequence of the proposed undertaking, and that full or part-time employees would not be employed under the terms of the Agreement at any time in the future.

[17] It was also noted in response to an issue raised by the Commission that there is no provision for overtime penalty payments to be provided under the terms of the Agreement, but it was not intended that employees would be required to work more than 38 hours in any week. It was again emphasised in the Applicant’s submissions that the Agreement was only ever intended to cover employees engaged on a casual basis, and if full or part-time employees were ever to be engaged in the future they would be employed under the terms and conditions contained in the Security Services Industry Award 2010.

[18] It was finally noted in conclusion that the disciplinary processes contained in the Agreement provided a significant non-monetary benefit to employees to be covered by the Agreement, when compared to the entitlements that would otherwise exist, given that casual employees would otherwise have had to have served the appropriate qualifying period to have any entitlement to such protections.

[19] It is noted, finally, that after the conclusion of the hearing the Commission was provided with a further set of updated undertakings signed by Mr Bhimbhai. They relevantly provided as follows:

“IFS Head Franchise Pty Ltd does in relation to the proposed IFS Head Franchise Pty Ltd Employees Enterprise Agreement 2017 (the Agreement) hereby provides the following undertakings:

1. It will not employ full time or part time employees under the agreement;

2. Agrees that the nominal expiry date will be four years from the date of approval of the agreement;

3. Agrees that clause 10 will not apply nor will level 1 and 2 probationary period employees pay rates in schedule 1;

4. Agree to the change in span of hours in clause 13.1 of the agreement to 10pm rather than 11pm.

5. Agree to a minimum engagement for casuals of four hours;

6. Agree that the agreement will not apply to any unlicensed attendants; and

7. Agree that Level 1 Security Officer/Crowd Controller will be paid $26.66 per hour.”

[20] The document also indicated in conclusion:

“IFS Head Franchise Pty Ltd acknowledges that this undertaking will not cause financial detriment to any employee covered by the proposed IFS Head Franchise Pty Ltd Employees Enterprise Agreement 2017.”

Consideration

[21] Section 186(1) of the Act requires that the Commission must approve an Agreement if satisfied that each of the various requirements in ss.186 and 187 are met. Section 186(2)(d) particularly requires that the Commission must be satisfied the Agreement passes the “better off overall test.” The nature of the “better off overall test” is dealt with in s.193(1). It states:

“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.”

[22] It is well established that the application of the test requires identification of the 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 terms and conditions in the Agreement, compared with those in the underlying Award. As indicated, in this case the relevant Award is the Security Services Industry Award 2010.

[23] The Full Bench decision in Duncan Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited T/A Coles and Bi Lo 4 also makes clear that 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. The Full Bench made this clear in the following terms:

“However the application of the BOOT requires satisfaction, as at the test time, that each Award covered employee and each prospective employee would be better off overall under the Agreement.” 5

[24] Therefore, the Commission is now required to determine whether the terms and conditions contained in the proposed IFS Head Franchise Pty Ltd Enterprise Agreement 2017 satisfy the requirements of the “better off overall test” when compared to those contained in the underlying Security Services Industry Award 2010.

[25] I have some understanding about the security industry from previous experience of dealing with agreements in the industry and the exercise of dispute resolution functions. It is clearly a highly competitive industry with wage costs typically representing a significant proportion of business expenditure. In addition, customers are often wanting services to be provided outside of traditional Monday to Friday, 9 to 5 timeframes. For example, many retail, dining and entertainment establishments are looking for security services to be provided at their busiest trading times, being in the evenings and at weekends. In addition, some employers in the industry have indicated their concerns about being undercut by businesses that are not necessarily having regard to payment of the appropriate wage rates and other conditions. However, this is not to suggest that the Applicant is involved in any such behaviour.

[26] The focus on servicing customer requirements is reflected in the terms of the current Agreement when it states at clause 5.1 under the heading, “AIMS OF AGREEMENT:”

“It is the objective of the parties to this Enterprise Agreement to implement workplace practices which provide for more flexible working arrangements, improve the efficiency and productivity of the enterprise, enhance skills, job motivation, and generally focus on customer needs, ensuring client satisfaction, ongoing business and continuous service.”

[27] However, while the desire to service customers is obviously a paramount consideration for the Applicant, as is the case with most businesses, it is equally clear that the Commission is required to consider the present application in the context of the relevant statutory provisions.

[28] Some of the key aspects of the present Agreement, have been set out at an earlier point in this decision and it is not necessary to go to them in detail again. However, in summary, the Agreement is only now intended to have application to casual employees. It then proposes a single hourly rate of pay at each classification level, and contains an extended spread of times on Monday to Friday when ordinary time hours can be worked without the payment of any additional penalty rates. It also makes clear that these amounts are inclusive of all allowances, penalties and loadings, which might otherwise be applicable under the underlying Security Services Industry Award 2010. It then continues to provide that for work performed at any other time an additional amount of $1 per hour will be paid over and above the specified hourly rates.

[29] This framework of entitlements can be contrasted with the relevant provisions in the Award.

•  The hours of work in the Award are based around an ordinary time span of hours from 6 am until 6 pm, Monday to Friday. For ordinary hours performed in the evenings outside of these times, an additional penalty rate of 21.7% applies. Ordinary time work on Saturday is to be paid at the rate of time and a half, and double time on Sunday. A penalty rate of double time and a half applies for ordinary time work performed on public holidays.

•  Clause 21 of the Award also provides that the normal shift length should be between 4 and 10 hours on any day, with the provision for 12 hour shifts only in circumstances where agreement has been reached about a series of specific matters. Overtime penalty rates of time and a half of the first two hours and double time thereafter are provided for in the Award. When the hours worked on any day exceed those specified in the Award or exceed more than 38 in any week.

•  The Award also provides for a range of allowances including First Aid, Meal and Broken Shift along with various other entitlements.

[30] It is, of course, possible for an Agreement to propose a single rate of pay for all hours worked in lieu of the penalty rate and other entitlements that might apply under the terms and conditions in an Award. However, that rate would obviously need to be high enough to compensate for the fact that the other Award entitlements were not provided for. However, this does not appear to be the case in the present matter. A review of the rates proposed in the Agreement indicates, firstly, that the probationary rates were less than the relevant Award rates. However, it is not intended that they have ongoing application.

[31] The Level 1 rate that is now proposed of $26.66 appears to be 3.82% higher than the comparable Modern Award rate of $25.68. It appears that one employee is currently employed at this classification Level. The remaining two employees are employed at the Level 2 classification. That rate of $26.83 compares with the Modern Award rate of $26.41, and would appear to be 1.59% greater than the Award rate. I am not satisfied that these small percentage differentials can be said to compensate for the fact that employees working under an already extended spread of hours in the proposed Agreement are not entitled to any of the other penalty rates and allowances provided in the Award, and are only entitled to an additional amount of $1 per hour when working outside the extended Monday to Friday, 6 am to 10 pm spread of hours.

[32] It is also clear that the additional amount of $1 proposed to be paid under the Agreement when hours are worked outside of the extended Monday to Friday, 6 am to 10 pm spread of hours is insufficient to compensate for the entitlements that would apply under the Award at these times. For example, the Award provides for an additional penalty rate of 21.7% for ordinary time work performed in the evenings. An ordinary time rate of time and a half applies for work performed on Saturdays. An ordinary time rate of double time applies for work performed on Sundays. Any employee employed under the terms of the Agreement at any of these times would clearly not be better off overall when the terms and conditions contained in the proposed Agreement are compared with those in the underlying Award. This can be demonstrated by the following examples.

•  A casual employee engaged to work on Sunday under the Award at the Level 1 classification would be entitled to an hourly rate of $46.21. Under the terms of the proposed Agreement they would be entitled to a rate of $27.66.

•  A casual employee engaged to work on Saturday under the Award at the Level 1 classification would be entitled to an hourly rate of $35.94. Under the terms of the proposed Agreement they would be entitled to an hourly rate of $27.66.

•  A casual employee engaged to work on weekdays between 6 pm and 10 pm under the Award at the Level 1 classification would be entitled to an hourly rate of $30.12. Under the terms of the proposed Agreement they would be entitled to a rate of $26.66.

[33] These are stark differences between the respective entitlements that would apply under the terms of the proposed Agreement compared with those existing under the current Security Services Industry Award 2010. I am also not satisfied that there is anything else in the Agreement that compensates in any significant way for this disparity in entitlements between the Agreement and the Award, notwithstanding the submissions made by the Applicant’s representative about the non-monetary benefits related to access to the grievance and dispute resolution procedure that might otherwise not be available for casual employees.

[34] The submissions provided on behalf of the Applicant indicate that it was primarily intended that work would only ever be performed over the extended Monday to Friday spread of hours. However, it was acknowledged that work could be performed at other times. It was also indicated that consideration might be given to other undertakings which would prevent work from being performed at the weekends or in the evenings, however, no such undertaking was ever provided. In any case, the terms of the Agreement already appear deficient when compared to the terms of the Award on occasions when work is performed on weekdays after 6 pm in the evenings, given that the Agreement does not provide for the additional penalty rate contained in the Award for work at these times. The Agreement also does not provide for the allowances that would apply under the terms of the Award.

[35] While it was again indicated that it was only ever intended that employees would work less than 38 hours per week under the terms of the Agreement there is nothing to prevent them from working more hours on this in any week, and the Agreement contains no overtime entitlements for this work. It is again a clearly deficient in this respect, in terms of the better off overall test requirements.

Conclusion

[36] I am not satisfied, in conclusion, that the Agreement is able to satisfy the requirements of the better off overall test in that the Commission can be satisfied, as at the test time, that each Award covered employee, and each prospective Award covered employee, would be better off overall if the Agreement applied to them, rather than the Security Services Industry Award 2010. It follows that the application is not able to be approved.

[37] In coming to this decision I have also given consideration to whether further undertakings might be able to be provided to deal with the concerns that the Commission has about satisfaction with the requirements of the better off overall test. However, the nature of any undertakings that would be required would represent a substantial change to the terms of the Agreement that was originally considered and voted on by the employees. Any such undertakings would, for example, require significant increases to the existing wage rates, or the addition of penalty rates and other entitlements, which are not now contained in the Agreement. They might also require restrictions to be imposed upon the times when work is able to be performed during the week. As indicated, such conditions are not contained in the framework of the existing Agreement, and their introduction by way of undertaking would inevitably result in a substantial change to what was originally proposed. For those reasons I am not satisfied that it is appropriate to give further consideration to the provision of additional undertakings. In any case, it is understood from the submissions provided by the Applicant’s representative during the course of the hearing that consideration was given to the possibility of further undertakings being provided, and the Commission was then provided, after the conclusion of the hearing, with the final set of undertakings being proposed. These were the third set of undertakings that had been put forward for consideration.

[38] I am not satisfied, in conclusion, for all of the reasons indicated above that the application is able to be approved. The application is accordingly dismissed.

COMMISSIONER

Appearances:

C Mossman for the Applicant.

Hearing details:

2017.

Melbourne and Sydney (by video):

August 24.

Printed by authority of the Commonwealth Government Printer

<PR710077>

 1   IFS Head Franchise Pty Ltd Enterprise Agreement 2017 at clause 10.1.

 2   Ibid at clause 12.1.

 3   Ibid at clause 26.1.

 4   [2016] FWCFB 2887.

 5 Ibid at [15].