J.E Bellero & C.M Bellero T/A Lighthouse Port Douglas

[2017] FWC 4947

[2017] FWC 4947

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

J.E Bellero & C.M Bellero T/A Lighthouse Port Douglas
(AG2017/2074)

DEPUTY PRESIDENT KOVACIC CANBERRA, 22 SEPTEMBER 2017

Application for approval of the Lighthouse Port Douglas Enterprise Bargaining Agreement 2017 - Agreement does not pass the better off overall test - application dismissed.

[1] An application was made on 7 June 2017 for approval of an enterprise agreement known as the Lighthouse Port Douglas Enterprise Bargaining Agreement 2017 (the Agreement). The application was made by J.E Bellero & C.M Bellero T/A Lighthouse Port Douglas (the Applicant) pursuant to s.185 of the Fair Work Act 2009 (the Act). The Agreement is a single-enterprise agreement.

[2] On 4 July 2017, the Fair Work Commission (the Commission) wrote to the Applicant raising a number of concerns regarding whether the Agreement passed the better off overall test (BOOT). Undertakings and a response to those matters was provided by email on 6 July 2017. The response did not address the Commission’s concerns and on 1 August 2017 the Commission again wrote to the Applicant reiterating some of its previously raised concerns. On 4 August 2017, the Applicant provided further undertakings and submissions seeking to address those concerns. Again, the further response did not address the Commission’s concerns.

[3] The application was the subject of a telephone hearing on 14 August 2017. At the hearing Ms Teneal Fabiani of HRdynamics appeared with permission for the Applicant. Further correspondence between the Applicant and Commission was exchanged on 16 and 25 August and 15 September 2017 (see below).

[4] For the reasons set out below I am not satisfied that the Agreement passes the BOOT. The Agreement therefore cannot be approved.

The statutory framework

[5] The relevant provisions of the Act are set out below.

“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; 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)).

…

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.

…

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 subsection 182(4) or 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 subsection (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 subsection (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.

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.

…

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 employeefor 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) Thetest timeis the time the application for approval of the agreement by the FWC was made under subsection 182(4) or 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.”

Consideration of the issues

[6] The Commission’s primary concerns regarding the Agreement relate to the issues of overtime payments for part-time employees and the Agreement’s loaded rates of pay. By way of background, all seven employees who would be covered by the proposed Agreement are employed on a part-time basis on hours ranging from 27 or 32 1 to 35 per week.

[7] The relevant Award for the purposes of the BOOT is the Restaurant Industry Award 2010 2 (the Award) which at clause 12 – Part-time employment provides as follows:

12.3 At the time of engagement the employer and the part-time employee will agree in writing on a regular pattern of work, specifying at least the hours worked each day, which days of the week the employee will work and the actual starting and finishing times each day.

…

12.7 All time worked in excess of the hours as agreed under clause 12.3 or varied under clause 12.4 will be overtime and paid for at the rates prescribed in clause 33 – Overtime.”

[8] On the other hand, the Agreement at clause 4.1.2 – Hours of work – Part-time Employees provides as follows in respect of overtime:

“(e) Standard Overtime rates will apply, in accordance with this Agreement, for

1) all hours worked in excess of 152 hours per four (4) week cycle; and / or

2) all hours worked in excess of ten (10) hours per days;”

[9] As to the loaded rates of pay issue, the Agreement provides at clause 3.2.1 that:

“Loaded Full-time, Part-time and Casual

The loaded hourly rate to be paid to all employees for all hours worked (Monday to Sunday) over the life of the Agreement shall include the following terms and conditions of the:

1) Restaurant Industry Award 2010

(a) Minimum wages

(b) Allowances

(c) Penalty Rates

(d) Hours of Work

(e) Annual Leave Loading (for Permanent Employees)”

[10] The issues of overtime payments for part-time employees and loaded rates were first raised with the Applicant by the Commission in its correspondence of 4 July 2017 with the Commission seeking undertakings in respect of both issues or further submissions regarding the loaded rates issue to address its concerns. On 4 August 2017 the Applicant proffered the following undertakings:

“Loaded Rates

The Lighthouse Port Douglas undertakes that Employees who receive the Loaded Rates under the Agreement will not be required to work more than 60% of Saturdays and Sunday within a one (1) year period from the commencement of the Agreement.

The Lighthouse Port Douglas undertakes to add the following clauses to the Agreement:

3.1.2 Annual Reconciliation

All Employees paid Loaded Rates covered by this Agreement are entitled to a reconciliation on an annual basis, to establish whether work performed under the Agreement is the preceding year, the Employee’s total remuneration is greater than the Employee would have received under the Award. Where a reconciliation establishes that the Loaded rates the Employee has received is less under the Agreement than the Employee would have been paid for performing the same work under the Award, the Employee will be reimbursed for the difference between the amount paid under the Award and the loaded rate paid under this Agreement.

Part-time Employees

The Lighthouse Port Douglas undertakes to add the following to clause 4.1.2 as subclause (h):

(h) In the event that a Part-time Employee is required to work hours in excess of their rostered hours, they will receive overtime penalties unless the extension of hours is mutually agreed, between the Employee and the Employer, to be performed at the Employee’s ordinary hourly rate.”

[11] On 8 August 2917 the Commission wrote to the Applicant as follows:

“Thank you for the below provided undertakings and submissions in this matter. They have now been considered by the Deputy President.

Upon review of these documents the Deputy President has indicated that the provided undertakings and submissions address his concerns in relation to the provision of the Notice of Employee Representational Rights, hours of work for full time employees, shift penalties and TOIL. However he is not yet satisfied the Agreement is able to be approved. In particular, the Deputy President remains concerned in relation to the loaded rates of pay and reconciliation clause, and overtime for part time employees. In relation to the loaded rates and the reconciliation clause provided in your initial undertaking, the Deputy President further wishes to note the that the provided reconciliation clause appears inconsistent with the decision in Main People [2015] FWCFB 4467, and has indicated that it may not be able to be accepted for this reason.

In light of the above, the Deputy President has indicated he will be listing the matter for a hearing. At this hearing you will have the opportunity to provide further submissions on all remaining points of concern.”

[12] As previously mentioned, the application was the subject of a telephone hearing on 14 August 2017. At the telephone hearing, the Applicant undertook to provide further information comparing what employees would have earned under the Agreement as opposed to the Award. The material was provided on 16 August 2017 and involved a comparison of earnings based on the hours worked by employees over a five week period. The material indicated that employees were between $18.19 and $107.86 better off under the Agreement over the five week period.

[13] The Commission responded on 25 August 2017 in the following terms:

“…thank you for your emails of 16 August 2107 regarding the above application and which provided information about the agreed hours for each employee and a pay comparison for employees over a 5 week period. I apologise for the delay in getting back to you.

Having considered the material I remain concerned that part-time employees will be worse off under the Agreement when compared to the Restaurant Industry Award 2010 (the Award). For instance, based on the pay comparison you provided Employee 1 is $18.19 better off overall under the Agreement over the 5 week period. However, my calculations indicate that Employee 1 would only need to work 2.35 additional hours over the 5 week period before he/she would be worse off under the Agreement (this based on a differential of $7.73 per hour between the hourly Award overtime rate and the hourly loaded rate under the Agreement – i.e. $30.92 less $23.19). Similarly, Employee 2 would only need to work 3.75 additional hours over the 5 week period before he/she would be worse off under the Agreement (based on a differential of $7.10 per hour between the hourly Award overtime rate and the hourly loaded rate under the Agreement – i.e. $28.37 less $21.27). Further, I remain concerned about prospective part-time employees who may be employed on less than the hours current part-time employees work (the fewer the hours a part-time employee works the greater the potential loss attached to the absence of overtime for hours in excess of their agreed ordinary hours up to 38 hours per week) and who work additional hours at the loaded rate provided for in the Agreement.

Against that background, I would indicate that in the absence of an undertaking that addresses my concerns in this regard I am unable to approve the Agreement on the basis that it does not pass the BOOT. I am willing to provide you/the Applicant until close of business on Friday, 1 September 2017 to either provide an undertaking that addresses my concerns or alternatively any further submissions you/the Applicant may wish to make regarding my concerns. In the absence of a response, I intend to finalise my decision shortly thereafter.”

[14] The Applicant responded on 15 September 2017 (the Applicant’s representative had sought an extension of the timeframe for response as she was about to go on leave – the request was granted) as follows:

“… We believe based on the modelling of the business and staff rosters that we have demonstrated the employees will be better off overall under the Agreement. Whilst it has been brought to our attention that the BOOT applies to the date that the agreement is made, it is our view that as Agreement progresses through its term, the conditions provided in the Agreement will further ensure that the employees are better off overall as employees will be remunerated at a higher rate compared to the decreasing penalties on Sundays and Public Holidays.

In addition to this, the undertaking that pay audits will be conducted ensures that as a minimum, employees will receive the minimum entitlements under the Restaurant Industry Award 2010.

…

We are confident that the employees are better off overall under this Agreement than they are under the Restaurant Industry Award 2010.

We look forward to receiving your final decision.”

[15] For the reasons outlined above, I am not satisfied that as at the test time, 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. Accordingly, s.186(2)(d) of the Act is not satisfied and I am unable to approve the Agreement. The Application seeking approval of the Agreement is therefore dismissed.

[16] Beyond that, I should also indicate that I am unable to accept the undertaking proffered in respect of the Loaded Rates issue as to do so would be inconsistent with the Full Bench decision Main People 3.

Conclusion

[17] As I am not satisfied that the Agreement passes the BOOT, the Agreement cannot be approved. An order dismissing the application will be issued in conjunction with this decision.

Appearances:

Ms T. Fabiani for the Applicant

Telephone Hearing details:

2017.

Canberra and Cairns.

14 August.

 1   One employee works 27 hours per week some weeks and 35 hours per week in other weeks

 2   MA000119

 3   [2015] FWCFB 4467 at [34]-[40]

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