Mel & Mel Enterprises Pty Ltd T/A Subway
[2024] FWC 3264
•28 NOVEMBER 2024
| [2024] FWC 3264 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Mel & Mel Enterprises Pty Ltd T/A Subway
(AG2024/1884)
| COMMISSIONER TRAN | MELBOURNE, 28 NOVEMBER 2024 |
Application for approval of the Mel & Mel Enterprises Pty Ltd Enterprise Agreement 2024 - Agreement not approved
Mel and Mel Enterprises Pty Ltd applied for approval of an enterprise agreement known as the Mel & Mel Enterprises Pty Ltd Enterprise Agreement 2024 under s 185 of the Fair Work Act 2009 (Cth). The Agreement is a single enterprise agreement. Mel and Mel is a franchisee of the Subway sandwich chain and operates two Subway stores in South Australia. One of the stores is located as part of a petrol station. Some employees work solely at one store and some employees work across both stores.
The Shop, Distributive and Allied Employees Association (SDA) is a default bargaining representative for the Agreement and filed a Form F18 on 19 June 2024. The SDA does not support approval of the agreement as it says the Agreement was not genuinely agreed and the Agreement would not pass the better off overall test.
I do not approve the proposed agreement because I am not satisfied that it was genuinely agreed to as the Employer did not take all reasonable steps to explain the terms and effect of the Agreement, as required by s 180(5) of the Act. My reasons follow.
Procedural Background
I reviewed the application, proposed Agreement, supporting documents and the Commission’s Agreements Team checklist and raised various concerns with Mel and Mel by email on 11 June 2024. Mel and Mel replied to my email on 14 June 2024 and also offered undertakings with its reply.
The SDA filed its form F18 on 19 June 2024, which did not support approval of the Agreement. The SDA also sought copies of the approval application and supporting documents and asked that the matter be programmed for hearing.
My chambers provided redacted materials to the SDA and issued directions. In compliance with those directions, parties filed materials, including submissions, witness statements and case authorities.
The matter was listed for hearing via Microsoft Teams on 25 July 2024. Mel and Mel did not rely on any witness evidence other than the declaration filed with its application. Mr Ali Amin, Industrial Officer, gave evidence on behalf of the SDA.
After the hearing, Mel and Mel provided further undertakings on 29 July 2024. The SDA provided its view about those undertakings. This was that as a result of the undertakings, it would not press its concerns regarding the Better Off Overall Test. However, it continued to press that the Agreement should not be approved as the Agreement was not genuinely agreed.
The SDA also brought to my attention the decision of Deputy President Beaumont in Application by LFP Australia Pty Ltd t/a Subway.[1] Mel and Mel did not make any further submissions in relation to the above decision.
Legislative Requirements
Section 186 of the Act sets out the general requirements for the approval of an enterprise agreement. In summary, in relation to a non-Greenfields single enterprise agreement, s 186 requires that the Commission must be satisfied that:
· the agreement has been genuinely agreed to by the employees covered by the agreement: s 186(2)(a);
· the terms of the agreement do not contravene s 55 (which deals with interaction between the National Employment standards and enterprise agreements): s 186(2)(c);
· the agreement passes the better off overall test: s 186(2)(d);
· the group of employees covered by the agreement is fairly chosen, taking into account geographic, operational or organisational distinctiveness: s186(3) and (3A);
· the agreement does not contain unlawful terms: s 186(4) or designated outworker terms: s186(4A)
· the agreement has a nominal expiry date that complies with s 186(5); and
· there is a term about settling disputes: s 186(6)
There are additional matters of which the Commission must be satisfied as provided for in s 187, which are not relevant considerations for this Agreement.
In brief, the additional requirements are:
· approving the agreement would not be inconsistent with good faith bargaining where there is a scope order;
· that notice was provided for a variation where required by s184;
· requirements relating to particular kinds of employees, being shift workers (s 196), pieceworkers(ss 197 and 198), school based apprentices and trainees (s 199), and outworkers (s 200); and
· requirements relating to greenfields agreements.
Key Issues
The were two key issues in relation to the Agreement. First whether the Agreement was genuinely agreed to and second whether the Agreement passes the better off overall test.
Which tests apply?
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (the Amending Act) made changes to enterprise agreement approval processes in Part 2-4 of the Act. The changes commenced operation on 6 June 2023.
The notification time for the Agreement was 13 November 2023, which is after the commencement of operation of the Amending Act. Therefore, the genuine agreement test to be applied is set out in part 14 of Schedule 1 to the Amending Act, which is s 188 of the Act. The full text of the genuine agreement test is set out in Appendix A to this decision.
The time that the agreement was made was 22 May 2024, which is after the commencement of operation of the Amending Act. Therefore, the better off overall test to be applied is as set out in part 16 of Schedule 1 to the Amending Act, which is s 193A of the Act. The full text of the better off overall test is set out in Appendix B to this decision.
Underpinning Awards
The Employer informed the Commission that there were 2 relevant underpinning awards: (1) the Fast Food Industry Award 2020 and (2) the Vehicle Repair, Services and Retail Award 2020. The Employer explained that this was because it operates 2 stores in South Australia. One of the stores is located as part of a petrol station and some employees work across both stores. Employees who work across both stores undertake duties relating to fast food service and petrol station service. As it is possible that either award could cover employees undertaking petrol station service duties, the Agreement therefore had to be compared against both awards.[2]
Genuine Agreement
SDA submissions
The SDA asserts that the Commission cannot be satisfied that there was genuine agreement because (1) the explanation provided by the Employer was inadequate for several reasons, (2) that the Employer made an inaccurate and misleading representation about pay rates and (3) that the evidence and information before the Commission was insufficient.
The SDA says that the explanation was inadequate because the Employer did not explain to employees that they would be effectively agreeing to a ‘pay freeze for the life of the agreement’. Also, that the Employer did not explain that allowances under the awards were included in the Agreement rate of pay. The SDA says that the Employer made an inaccurate and misleading representation when it promised in its explainer document that the Agreement includes higher minimum wage rates, stated that it must do so in order to pass the better off overall test, and that the Commission must assess the Agreement against the better off overall test.
Further, the SDA submits that the Employer said nothing about how the Agreement did not include an important protection in clause 27.7 of Vehicles Services Award that says that junior employees may not work unsupervised after 7.00pm and may not work at all after 9:00pm.
Last, the SDA says that the evidence before the Commission (being an explainer document and statements about what was discussed in meetings in the F17B Declaration that accompanies applications for approval) is insufficient to allow the Commission to reach a state of satisfaction about the Employer’s explanation.
Employer submissions
The Employer says that the requirement to explain the Agreement does not equate to explaining the terms of the award to employees and that there is no obligation to explain terms that simply would not apply to employees. It further says that the explainer document was not the entirety of what was explained to employees; the document formed the basis of discussions at face-to-face meetings. The Employer also says that penalty rates were explained to employees by referring to the structure of payment in accordance with the schedule in the Agreement.
Consideration re genuine agreement
In accordance with s 186(2)(a) of the Act, I must be satisfied that the Agreement has been genuinely agreed to by the employees covered by the Agreement. The genuine agreement test is in s 188 of the Act and relevantly requires that the Statement of Principles is taken into account, the Notice of Employee Representational Rights was given, that employees are sufficiently representative and have a sufficient interest in the Agreement and that terms of the agreement are explained. For the explanation, I must be satisfied that the employer complied with s 180(5), which requires that the employer must take all reasonable steps to explain the terms of the Agreement and that the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of employees. Section 188(5) of the Act also allows for minor procedural and technical errors in relation to specific requirements to be disregarded if the Commission is satisfied that employees were not likely to have been disadvantaged by the errors.
I am of the view that the Employer did not take all reasonable steps to explain the terms of the Agreement. Based on the information before me, the steps that the Employer took to comply with s 180(5) are revealed in three explainer documents – an Employee Q & A Document, an Updated Employee Q & A Document and a Comparison Document. The Employer informed me in its F17B declaration that it held 2 face-to-face meetings with employees at which the Employer went through terms of the proposed Agreement clause by clause and compared them against the 2 awards. The Employer says that it provided employees with the opportunity to raise questions. Some questions were raised in a meeting on 22 November 2023 but no questions were raised in a meeting held on 13 May 2024. The Employer also scheduled 2 meetings that were cancelled as no employees wished to attend. The Employer says that it nevertheless encouraged employees to ask questions and provide feedback on the Agreement
I consider that the steps taken to comply with s 180(5) were reasonable steps, but am of the view, having regard particularly to the content of the explanation, that they were not all the reasonable steps that should have been taken in the circumstances.[3] This is because I have formed the view that the explanation is deficient with respect to a number of clauses that relate to pay.
In respect of allowances and penalty rates, the Comparison Document does no more than refer employees to the relevant clause in the Agreement. It does not state, for example, which allowances are absorbed into the rate of pay, not payable or separately payable.
In respect of penalty rates, the Comparison Document does not set out what the award penalty rates are, simply referring employees to the relevant award clause. The Employer also did not set out how the Agreement dealt with penalty rates and how this was different to the awards. That is, under the Agreement, there are set rates of pay for particular times, which incorporate the base rate plus the relevant amount of the penalty rate from the award for those times. The awards, however, set penalty rates as percentages of the base rate. This means that under an award, penalty rates may change from year to year if the base rate changes. Under the Agreement, they would not.
The final way in which the Employer’s explanation regarding pay was deficient relates to its failure to explain how the minimum rates under the Agreement would not change over the lifetime of the Agreement combined with its explanation of the application of the better off overall test.
The explanation in both the initial and updated Employee Q & A Documents said, “The [Agreement] features higher minimum wage rates compared to the [awards] (it must in order to pass the better off overall test). The Q & A Documents also described the Better Off Overall Test as:
Once the EA has been voted on and lodged for approval with the FWC, it must pass the 'Better Off Overall Test'.
This test ensures that terms and conditions under the EA are fair and lawful when compared against the FFIA and the VRSRA.
If you feel that you are worse off under the proposed enterprise agreement, please speak to your manager.
In the Comparison document, the Employer details the minimum hourly wage rates for permanent and casual employees in each of the awards and the Agreement. The rates are described in numerical terms, i.e Level 1: $24.73 (under the Fast Food Award); Team Member: $25.50 (under the Agreement). In this part of the Comparison Document, the Employer does not explain that the minimum rates incorporate annual leave loading and particular allowances (special clothing/laundry allowance).
The Employer does not explain the meaning of clauses 10.2 and 10.3 of the Agreement, which has the effect of ensuring that Agreement rates increase only in accordance with s 206. That is, Agreement rates would only increase when base rates of pay in the awards are higher than in the Agreement. However, the Agreement minimum rates incorporate special clothing (laundry) allowance and annual leave loading but not rates of pay where penalty rates may apply.
In respect of annual leave loading, the Employer does explain that the loading is “incorporated into the higher base rates of pay” but only where it deals with annual leave loading and not where it deals with minimum rates. In respect of allowances, it refers to the relevant clause (clause 13) in the Agreement. That is, it does not clearly explain the effect of incorporating the loading and certain allowances into the Agreement minimum rates, being that under the Agreement the loading and certain allowances would not increase whereas they may increase under an award where the award base rate increases.
Principle 9 of the Statement of Principles supports the Employer’s submission that it did not need to explain effects of the award that would not have applied (for example, in relation to its operating hours and junior employees under the Vehicles Services Award). But I am of the view that it was insufficient to simply refer to clauses in either the awards or the Agreement without identifying the detriment or the different way that the Agreement dealt with a relevant entitlement. The Full Bench in at NECA v EIGTC[4] said “in respect of a provision of an agreement that is straightforward, readily comprehensible and deprives employees of no existing benefit, giving employees a copy of the Agreement may itself be a step relevant to s 180(5).” I am of the view that in an agreement where the rates of pay incorporate entitlements that under an award may be separately identified, it is not sufficient to refer to the agreement provision – a more detailed, clearer identification of that different treatment of the rates is required. That was not done here.
The Act also requires that the explanation is given in an appropriate manner, taking into account the particular circumstances and needs of employees. Principle 14 of the Statement of Principles elaborates on this requirement. Mr Amin for the SDA gave unchallenged evidence about the demography of employees within the fast food industry. He says the “overwhelming majority are young workers”, who have never held paid employment of any kind. He also says that “fulltime employment in the fast food industry is rare.” Despite its submission otherwise, the Employer’s F17B Declaration provided demographic information which demonstrates that the make-up of its workforce of 12 employees reflects the make-up of the industry. Of 12 employees, all are part-time, 11 are female, and 4 are under 21 years of age (although it submitted that only one was under the age of 18). I also consider that relevant circumstances include the workforce’s knowledge and experience of employment entitlements; this is the purpose of taking into account an employee’s age when explaining an agreement.
The circumstances of this workforce is that the instrument governing their employment was a ‘Zombie agreement’, known as the Mel & Mel Enterprises Pty Ltd Employee Collective Agreement. The Collective Agreement does not have a clear, specific expiry date. The expiry date is expressed in clause 27 as ‘5 years from the date of commencement.’ So, presumably the Collective Agreement pre-dates the Fair Work Act 2009, which requires that in order for agreements to be approved, the nominal expiry date must be specified and must be no more than 4 years after the day that the Commission approves the agreement.[5] It is likely that the workforce therefore did not have any experience of award terms and conditions. So, I am of the view that more extensive explanation of the effect of the Agreement, particularly in relation to the matters detailed above (allowances, penalty rates, and minimum rates of pay), would have been reasonable steps that the Employer should have taken.
Submissions were not made about whether I could have exercised my discretion to disregard minor errors that did not disadvantage employees under s 188(5). While errors with respect to an explanation can be disregarded, I am of the view that failure to take all reasonable steps described above are not minor procedural or technical errors. I am also of the view that employees who have the characteristics of the Agreement employees were likely to have been disadvantaged by the error. So, I cannot disregard the errors.
As I am not satisfied that the employer took all reasonable steps to explain the terms and effect of the Agreement in comparison with the underpinning awards, I cannot be satisfied that the Agreement was genuinely agreed to.
For the sake of completeness, I could have been satisfied of other matters in the genuine agreement test. First, I was satisfied that employees who voted were sufficiently representative and had a sufficient interest in the Agreement. In relation to the Notice of Employee Representational Rights, the Employer distributed an earlier version of the Notice and therefore did not comply with s 174(1A), as required by s 188(4). Aside from use of the earlier version of the Notice, there were no substantive differences between the earlier and the current version of the Notice. I have previously detailed differences between the pre-6 June 2023 and post-6 June 2023 Notice in Application by AJS Electrical Contracting Pty Ltd[6]. I consider the use of the earlier Notice is a minor technical error. I was satisfied with the Employer’s responses to my concerns that employees were not likely to have been disadvantaged by this error. As such, I could disregard this error in accordance with s 188(5).
Better Off Overall Test
Concerns raised
I raised concerns that the following matters did not assist the Agreement to past the better off overall test when compared with the Fast Food Award:
· Minimum Engagement for part-time and casual employees;
· When overtime applies;
· Notice of termination;
· Annual leave loading; and
· Special clothing allowance.
The concerns I raised related only to the Fast Food Award, as I also raised in my initial correspondence a query about why the Employer said the Vehicles Services Award was a second underpinning award as this was not apparent in the application material.
The SDA raises that the Agreement has (1) monetary detriments and (2) non-monetary detriments.
In relation to monetary detriments, the SDA asserts that the Agreement does not contain higher minimum wage rates, particularly as against the Vehicles Services Award. This was because the Agreement rates provided for different rates of pay at different times. The Agreement rates are higher at all times when compared with the Fast Food Award. But the Agreement rates are not higher for all times when compared with the Vehicles Services Award, which contains shiftwork and penalty rates that applied at different times to the Fast Food Award. Further, the SDA say that employees could not be said to be better off overall simply because there were higher rates of pay at particular times that could balance out lower rates of pay at other times. This is because the Agreement does not contain guarantees that casual or part-time employees would work only or predominantly those hours that provided for higher rates. A further monetary detriment was that the Agreement rates do not separately provide for annual leave loading or allowances.
In relation to non-monetary detriments, the SDA says that the Agreement contains ‘radical flexibility provisions’ that makes part-time employment similar to casual employment. This is because the Agreement allows for part-time employees to work additional hours at ordinary rates of pay. Also, although the Agreement requires guaranteed hours per week (which can be minimal), part-time employee could forfeit those agreed minimum hours if they attempt to change hours for a particular week.
The SDA further raises that the Agreement does not provide for protections restricting the hours of work of junior employees in the clause 27.2 of the Vehicles Services Award, which provides:
Prohibited employees for certain junior employees
A junior employee under the age of 18 years will not work unsupervised between the hours of 7.00 pm and 9.00 pm and must not be employed between the hours of 9.00 pm and 6.30 am.
Employer undertakings
The Employer made submissions and offered undertakings in order to satisfy concerns raised by me and by the SDA. Its consolidated undertakings offered on 29 July 2024 address the above concerns, and provide an updated minimum wage rate schedule that increases rates of pay for employees working at Tailem Bend, where the underpinning award would have been the Vehicles Services Award.
I could have accepted the undertakings and could have been satisfied that they would not have caused financial detriment nor been substantial changes to the Agreement in accordance with s 190.
Other s 186 matters
I was satisfied that the Agreement would not contravene the National Employment Standards and that it did not contain unlawful terms or designated outworker terms. I was also satisfied that employees covered by the Agreement were fairly chosen, as it covers all employees of the Employer. The agreement has a nominal expiry date that complies with s 186(5).
The Agreement included a term about settling disputes, although it required that the name of any representative was provided to the employer. I formed the view that this requirement appeared more restrictive than that in Schedule 6.1 of the Fair Work Regulations. The Employer offered an undertaking, which I could have been satisfied would have resolved my concern.
Conclusion
I find that the Employer did not take all reasonable steps to explain the terms and effect of the Agreement, as required by s 180(5) of the Act. As a I result, I am not satisfied of the requirements under s 186 and do not approve the Agreement.
COMMISSIONER
Appearances:
J Sung of MST Lawyers, with permission for the Applicant
P Dean, Counsel with permission for the SDA
Hearing details:
25 July 2024
Via Microsoft Teams
Final written submissions:
2 August 2024
APPENDIX A – Part 14 of Schedule 1 to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022
188 Determining whether an enterprise agreement has been genuinely agreed to by employees
Statement of principles
(1) The FWC must take into account the statement of principles made under section 188B in determining whether it is satisfied that an enterprise agreement has been genuinely agreed to by the employees covered by the agreement.
Sufficient interest and sufficiently representative
(2) The FWC cannot be satisfied that an enterprise agreement has been genuinely agreed to by the employees covered by the agreement unless the FWC is satisfied that the employees requested to approve the agreement by voting for it:
(a)have a sufficient interest in the terms of the agreement; and
(b)are sufficiently representative, having regard to the employees the agreement is expressed to cover.
Note: In One Key Workforce Pty Ltd v Construction, Forestry, Mining and Energy Union [2018] FCAFC 77 (2018) 262 FCR 527, a Full Court of the Federal Court observed that whether an agreement has been genuinely agreed involves consideration of the authenticity of the agreement of the employees, including whether the employees who voted for the agreement had an informed and genuine understanding of what was being approved.
Agreement of bargaining representatives that are employee organisations
(2A) The FWC cannot be satisfied that an enterprise agreement to which section 180A applies has been genuinely agreed to by the employees covered by the agreement unless the FWC is satisfied that the employer complied with section 180A in relation to the agreement.
Where notice of employee representational rights was required
(3) Subsection (4) applies in relation to an enterprise agreement if an employer was required by subsection 173(1) (which deals with giving notice of employee representational rights) to take all reasonable steps to give notice in relation to the agreement.
(4) The FWC cannot be satisfied that the agreement has been genuinely agreed to by the employees covered by the agreement unless the FWC is satisfied that the employer complied with the following provisions in relation to the agreement:
(a) sections 173 and 174 (which deal with giving notice of employee representational rights);
(b) subsection 181(2) (which requires that employees not be requested to approve certain enterprise agreements until 21 days after the last notice of employee representational rights is given).
Explanation of terms of the agreement
(4A) The FWC cannot be satisfied that the agreement has been genuinely agreed to by the employees covered by the agreement unless the FWC is satisfied that the employer complied with subsection 180(5) in relation to the agreement.
Minor errors may be disregarded
(5) In determining whether it is satisfied that an enterprise agreement has been genuinely agreed to by the employees covered by the agreement (including determining whether it is satisfied that an employer complied with the provisions mentioned in subsection (2A) or (4) or (4A)), the FWC may disregard minor procedural or technical errors made in relation to the following requirements if it is satisfied that the employees were not likely to have been disadvantaged by the errors:
(a) section 173 or 174 (which deal with notices of employee representational rights for certain agreements);
(aa) subsection 180(5) (which requires employers to explain the terms of agreements);
(ab) section 180A (which deals with agreement of certain bargaining representatives);
(b) subsection 181(2) (which requires that employees not be requested to approve certain enterprise agreements until 21 days after the last notice of employee representational rights is given);
(c) subsection 182(1) or (2) (which deal with the making of different kinds of enterprise agreements by employee vote).
Regulations
(6) The FWC cannot be satisfied that an enterprise agreement has been genuinely agreed to by the employees covered by the agreement unless the FWC is satisfied that the requirements (if any) prescribed by the regulations for the purposes of this subsection are met.”
APPENDIX B – Part 16 of Schedule 1 to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022
193A Applying the better off overall test
(1) This section applies for the purposes of determining whether an enterprise agreement passes the better off overall test under section 193.
(2) To avoid doubt, the FWC must undertake a global assessment of whether each employee concerned would be better off having regard to:
(a)the terms of the agreement which would be more beneficial to the employee if the agreement applied to the employee than if the relevant modern award applied to the employee; and
(b)the terms of the agreement which would be less beneficial to the employee if the agreement applied to the employee than if the relevant modern award applied to the employee.
(3) The FWC must give consideration to any views relating to whether the agreement passes the better off overall test that have been expressed by any of the following:
(a)the employer or employers that are covered by the agreement;
(b)if the agreement is not a greenfields agreement—the award covered employees for the agreement;
(c)in any case—a bargaining representative for the agreement.
(4) The FWC must give primary consideration to a common view (if any) relating to whether the agreement passes the better off overall test expressed by all of the following:
(a)the bargaining representative or bargaining representatives of the employer or employers that are covered by the agreement;
(b)the bargaining representative or bargaining representatives of award covered employees for the agreement (other than a bargaining representative that is not an employee organisation).
(5) Subsection (4) does not apply if the agreement is a greenfields agreement.
(6) The FWC may only have regard to patterns or kinds of work, or types of employment, if they are reasonably foreseeable at the test time. In considering what is reasonably foreseeable, the FWC must have regard to the nature of the enterprise or enterprises to which the agreement relates.
(6A) The FWC must determine whether a particular pattern or kind of work, or type of employment, is reasonably foreseeable for the purposes of subsection (6) if a view is expressed by any of the following that it is, or is not, reasonably foreseeable:
(a)the employer or employers that are covered by the agreement;
(b)if the agreement is not a greenfields agreement—the award covered employees for the agreement;
(c)in any case—a bargaining representative for the agreement.
(7) 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.”
[1] [2024] FWC 2013
[2] Noting that only one award would apply to an employee with respect to their employment with an employer.
[3] CFMEU v One Key Workforce Pty Ltd [2017] FCA 1266 at [94]- [109], affirmed on appeal: [2018] FCAFC 77; CFMMEU v Ditchfield Mining Services Pty Limited[2019] FWCFB 4022 at [66]- [67]; National Electrical and Communications Association v Electrotechnology Industry Group Training Company Ltd (NECA v EIGTC) [2021] FWCFB 6073 at [28]
[4] NECA v EIGTC[2021] FWCFB 6073 at [52].
[5] Section 186(5)
[6] Application by AJS Electrical Contracting Pty Ltd T/A AJS Electrical Contracting [2023] FWC 3343 at [34]
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