Madhav Enterprise Pty Ltd As Trustee For Freya Family Trust T/A Subway
[2024] FWCA 2692
•19 JULY 2024
| [2024] FWCA 2692 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
Madhav Enterprise Pty Ltd As Trustee For Freya Family Trust T/A Subway
(AG2024/1696)
MADHAV ENTERPRISE PTY LTD ATF FREYA FAMILY TRUST ENTERPRISE AGREEMENT 2024
| Fast food industry | |
| COMMISSIONER PERICA | MELBOURNE, 19 JULY 2024 |
Madhav Enterprise Pty Ltd ATF Freya Family Trust Enterprise Agreement 2024
Madhav Enterprise Pty Ltd as trustee for the Freya Family Trust (“Madhav”) has made an application for approval of an enterprise agreement known as the Madhav Enterprise Pty Ltd ATF Freya Family Trust Enterprise Agreement 2024 (the Agreement). The application is made under s 185 of the Fair Work Act 2009 (the Act). The Agreement is a single enterprise agreement.
PROCEDURAL HISTORY
On 30 May 2024, the Commission issued a statement of concerns in relation to the Agreement. Madhav, through its lawyer, responded on 4 June 2024.
In the response, Madhav stated during the negotiation of the Agreement, consultation with its employees was put on hold to take into account the decision of the Full Bench in SDA v Allen Family[1] (Allen) and the three decisions of Commissioner Tran in Subway Bridge Street Pty Ltd and Caneramble Pty Ltd Enterprise Agreement 2023,[2] B.G & D.M Tonge Pty Ltd Enterprise Agreement 2023,[3] and Shree Rudra Pty. Ltd ATF RD Trust Enterprise Agreement.[4] Madhav informed the Commission the draft agreement was amended to “ensure the undertakings made in those earlier proceedings were incorporated into the proposed agreement” and consultation resumed on an amended version of the Agreement incorporating those changes.
On 28 May 2024, the Shop, Distributive and Allied Employees Association (SDA) sought to be heard and to make submissions in respect to the Agreement under s 590(2)(b). Madhav consented to that application.
On 6 June 2024, the SDA sent a Better Off Overall Test (“BOOT”) analysis and a witness statement of Mr. Ali Mohammed Amin, an industrial officer with the SDA. The witness statement set out background information on the fast-food industry and made submissions to the effect that I should not approve the Agreement.
On 6 June 2024, I issued directions for Madhav to reply to material filed by the SDA. In response to the SDA material, Madhav filed submissions and a new proposed undertaking signed on 13 June 2024 (the 13 June Undertaking).
The matter was listed for mention on 18 June 2024. The matters between Madhav and the SDA had narrowed. I asked for further written submissions on the outstanding issues which were provided to me on 21 June 2024.
SDA CONCERNS OVER THE AGREEMENT
In its e-mail dated 21 June 2024, the SDA stated it was pressing three detriments under this Agreement which should lead the Commission to refuse to approve the Agreement:
· Clause 6.4 to 6.10, the part time provision of the Agreement;
· Clause 28, which obliges an employee to return company property on termination “or earlier on request; and
· Clause 29, which enables the employer to make deductions from wages for “sums owed to employer” in respect of six itemised matters.
Clause 6.5 – Part time employment
The SDA argues the part time employment provisions in the Agreement are materially different from the part time provisions considered by the Full Bench in Allen. It argues the provisions in the Agreement do not give employees the same flexibility to vary their hours. The SDA argues this is because of the inclusion of clauses 6.9 and 6.10 in the Agreement.
Clause 6.9 of the Agreement provides:
“If you vary your Availability and as a result we cannot accommodate your Guaranteed Hours:
(a) your Guaranteed Hours agreed under Clause 6.6(a) ceases to apply; and
(b) we will agree with you on a new set of Guaranteed Hours under Clause 6.6(a)”.
Clause 6.10 of the Agreement provides:
“If we cannot reach an agreement in accordance with Clause 6.9 then we will revert to the most recently agreed Guaranteed Hours and Availability.”
The SDA argues the Full Bench in Allen accepted the part time provisions under consideration in that case afforded greater flexibility to the employer, however, the Full Bench also accepted there was a “significant countervailing factor” because the employees had a unilateral right to amend their availability and the employer was compelled to roster the guaranteed hours within the employee’s availability. The SDA argues this is evident from this passage in the Allen decision:[5]
“Similarly to the Award, in respect of the actual number of hours to be worked each week, the Agreement provides that the guaranteed hours may be varied, but only by agreement of the employee and the respondent. The days and hours of work may also be varied according to an employee’s notified availability, which may itself vary from week to week. The latter point is significant in that the flexibility to vary an employee’s availability lies with the employee, not the respondent. In our view, this is a countervailing factor in considering whether the additional rostering flexibility conferred on the respondent by the Agreement’s terms gives rise to a BOOT concern.” (emphasis added)
The SDA argues clauses 6.9 and 6.10 are a significant variation from the provision considered in Allen because:
· Clause 6.9(a) creates a unilateral right for the employer to reduce an employee's guaranteed hours if they cannot accommodate their availability.
· The employee does not have a unilateral right to amend their availability due to the application of clause 6.9 and 6.10 where the employee can only change their availability if the employer can accommodate it.
The SDA argues the more limited flexibility in the hands of the employee means this Agreement does not provide the “significant countervailing factor” to the flexibility afforded to Madhav. Unlike the provision in Allen, Madhav is not compelled to roster the guaranteed hours within the employee’s availability.
Madhav response
Madhav argues clauses 6.9 and 6.10 are intended to provide both parties with protection in the event an employee decides to vary their availability under clause 6.8 of the Agreement. Madhav provides the following example in their submissions:[6]
“By way of example, if an employee’s Guaranteed Hours under the Agreement is 10 hours a week, and the employee varies their availability under clause 6.8 of the Agreement such that they are only available for 5 hours that week, Clause 6.9 would apply to ensure that a workable arrangement can be reached”
Madhav argues:
· If clauses 6.9 and 6.10 did not exist, there is a risk that either the employer would be required to pay the employee their Guaranteed Hours despite the employee not working those full hours or the employee would be at risk of their employment ending by way of repudiation.
· “Any variation as a result of clause 6.9 remains by agreement between the employee and the employer.”
· Clause 6.10 provides the employees protection in circumstances that they seek to vary their Availability … as clause 6.10 continues to guarantee the employee their most recently agreed Guaranteed Hours and Availability.
Clause 10.5 of the Fast-food Industry Award 2020 (the Award) provides:
“10.5 The employer and the employee may agree to vary the regular pattern of work … for a particular rostered shift provided that:
(a) the agreed variation is recorded in writing, including by electronic means of communication, at or by the end of the affected shift; and
(b) the employer keeps a copy of the agreed variation and, if requested, gives a copy to the employee.”
Madhav argues the arrangement under clauses 6.9 and 6.10 is, in effect, no different than the arrangement that would apply under clause 10.5 of the Award which enables an employee and the employer to enter into a written agreement to vary the employee’s regular pattern of work, which includes the equivalent of the employee’s Guaranteed Hours. It argues it is no different to the arrangement under the Award, in that any failure to enter into an agreement to vary a regular pattern of work under the Award would result in the employee working their original hours of work.
Madhav submits employees are not subject to a detriment under clause 6.9 of the Agreement as protective measures are provided for the employee by way of clause 6.10 in the event an agreement to vary the guaranteed hours cannot be made.
It also argues clause 6.9 should be read in conjunction with the remaining part time provisions under the Agreement, employees are better of overall when compared to the Award, due to the ability for employees to vary their availability when the need arises.
Consideration
Clause 6.9 and clause 6.10 make the part time provisions of the Agreement less beneficial to employees than the provision considered by the Full Bench in Allen. The addition of those sub clauses mean that the part time provisions are less of a “countervailing factor’ to the flexibility of the employer under this Agreement. I also accept that those sub clauses are in effect no different from the provisions of clause 10.5 of the Award.
Clause 28 – returning property
Clause 28 of the Agreement provides:
“Upon termination of employment or earlier upon request, you must return us all company owned property in your possession or custody. This includes tools, uniforms, keys, equipment, electronic devices, and confidential information.”
The SDA regards this as a detriment in that “the employee is obliged, on pain of exposure to a civil penalty provision to return property on request or termination”.[7] Madhav argues the provision is merely an expression of its common law entitlement to retrieve all property owned by the employer after an employee’s termination on request.[8]
Consideration
A requirement that an employee return the employer’s property is no more than a banal statement of the common law. On my assessment, it is unlikely Madhav would institute proceedings to extract a civil penalty where there are other remedies available to it. In those circumstances, I assess the detriment arising from this provision as negligible.
Clause 29 - Deductions from wages
Clause 29.1 enables the employer to “reasonably deduct … any sums you owe your employer” from the wages or from the final pay of an employee (excluding accrued or unused paid leave entitlements) in respect of:
Overpayments of wages or over re-imbursement of expenses;
An amount equal to the wages that would have been received if the employee had worked the required notice period if they fail to give the required notice;
Replacement value of any employer property in the employee’s possession or custody which had not been returned;
Repair cost of any damage caused to the employer’s property (with some exceptions); and
Value of any accrued leave which the employer allowed the employee to take in advance.
Clause 29.2 provides these deductions cannot be made from any employee under the age of 18. Clause 29.3 provides the deductions can only be made with a written authorisation and no deduction will be made from accrued NES entitlements.
SDA regards this clause as giving rise to a “significant detriment” because it permits “deductions on in extraordinary wide circumstances”. Madhav seeks to argue this provision should be regarded as a benefit to Madhav and the employees.[9]
“Any deductions sought in Clause 29.1 of the Agreement would otherwise be sought through common law proceedings as the Award does not provide for this entitlement. In consideration of the high costs, stress and time associated with common law claims, the Applicant submits that both the employer and its employees would be better off under the Agreement, due to the provision of a more cost-effective and timely method of resolving any outstanding sums owed to the employer under Clause 29.1 of the Agreement.”
Consideration
This provision can only sensibly be regarded as a detriment to the employees. It is clearly designed for the administrative convenience of Madhav. If this provision was not included in the Agreement the employer could not make these deductions.
OVERALL BOOT ASSESSMENT
It is not contested this Agreement was drafted taking into account the decision of the Full Bench in Allen and the three Subway agreement decisions of Commissioner Tran. Madhav has also made the six undertakings in the 13 June Undertakings which I take into account in this BOOT analysis.
The High Court has described the task of BOOT analysis in Aldi Foods Pty Ltd v SDA [2017] HCA 53 at [99]:
“Whether the Full Bench was satisfied that an employee was better off overall required an evaluative assessment after consideration of the provisions of the award and the Agreement that may have been more beneficial to employees and those that may have been less beneficial to employees. This assessment is a matter of the kind which has been described in other context as: a question, not of principal or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds [footnotes omitted] (our emphasis).”
When dealing with enterprise agreements for Subway franchises, the Commission has had the task of measuring the benefit of the marginal above-award wage increases against the less beneficial provisions in the agreements. The Commission’s analysis of the Agreement here is the rates of pay for permanent employees are between 3.33% and 5.06% above the Award rates. The rates of pay for casual employees are between 3.34% and 5.06% above the Award rates.
Madhav in its F17 argues the Agreement passes the BOOT because it provides higher wage rates and greater flexibility regarding their hours of work compared to the Award. It considers the benefits outweigh the terms and conditions that have been omitted from the Agreement. It also argues most of the Award terms omitted from the Agreement either do not apply to its employees or are set out in the NES and therefore no employees have been affected.
I accept the differences between the part time provisions in this Agreement and those considered in Allen make the provision in this Agreement less flexible for employees. However, the different terms in clauses 6.9 and 6.10 require an agreement to be reached between the employer and the employee which is in effect, a restatement of the Award provision in clause 10.5. The provisions of clause 6.4 to 6.10 do provide some flexibility to the employees and 6.10 does provides a fall-back position if an agreement on a variation of hours is not reached. I do not consider the less flexible clause to be such a severe detriment as to outweigh the benefits of this Agreement.
The provision in clause 28 requiring the employee to return employee property is not a significant consideration for the purposes of the BOOT. It is no more than a banal statement of the common law.
The capacity to deduct wages in the five circumstances specified in clause 29 is a detriment to the employees. The specified circumstances in which wages can be deducted would not, in my estimation, regularly occur in the normal day-to-day employment of the workers. There are safeguards in the provision; funds can only be deducted with written authorisation, and no deductions can be made from wages of employees under the age of 18 or from accrued NES entitlements.
In all the circumstances, on balance, weighing the considerations raised by the SDA, I do not consider any or all of the three detriments it raises outweigh the benefit to the employees of the increased flexibility under the Agreement or the above Award wage increases, taking into account the 13 June Undertakings.
OTHER MATTERS
A copy of the 13 June Undertakings is attached in Annexure A. I am satisfied the undertakings will not cause financial detriment to any employee covered by the Agreement and that the undertakings will not result in substantial changes to the Agreement. I therefore note the undertakings are taken to be terms of the Agreement under s 201(3) of the Act.
Subject to the undertakings, I am satisfied that each of the requirements of ss 186, 187, 188, 190, 193 and 193A relevant to this application for approval have been met.
The Agreement is approved today 19 July 2024. It will operate from 26 July 2024 as required by s 54 of the Act. The nominal expiry date is 19 July 2028.
COMMISSIONER
Annexure A
[1] [2024] FWCFB 48.
[2] [2024] FWCA 1235.
[3] [2024] FWCA 1231.
[4] [2024] FWCA 1234.
[5] [2024] FWCFB 48, [55]
[6] Further submission of the Madhav at paragraph 4.
[7] Witness Statement of Mr. Amin of the SDA at paragraph 53.
[8] Madhav Submissions in Response in paragraph 13.
[9] Ibid at paragraphs 14 and 15.
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