Nepero Pty Ltd T/A Morgan's Super IGA
[2009] FWA 1712
•15 DECEMBER 2009
[2009] FWA 1712 |
|
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
(AG2009/12944)
COMMISSIONER WHELAN | MELBOURNE, 15 DECEMBER 2009 |
Application for approval of the Morgan’s Supa IGA Enterprise Agreement 2009—application refused; s.181(2); no disadvantage test.
[1] This is an application under section 185 of the Fair Work Act 2009 for the approval of an enterprise agreement.
[2] The statutory declaration of Mr Morgan made in support of the application states that the agreement was made on 26 August 2009. Both the statutory declaration and the material provided to Fair Work Australia in a hearing on 13 November 2009 indicate that a meeting of employees was held on 5 August 2009 at which time they were given a copy of the agreement, ‘a memorandum outlining the terms and effect of the enterprise agreement’, and a notice of representational rights. They were also advised of the proposed date for the vote.
[3] A second meeting was conducted on 25 August 2009 where the employees voted by a show of hands to approve the agreement.
[4] The application to approve the agreement was lodged on 8 September 2009 and was the subject of a hearing before Fair Work Australia on 13 November 2009. Following that hearing the applicant was invited to provide further submissions on a range of issues raised during the hearing and did so.
The procedural requirements
[5] The procedural requirements for making an enterprise agreement capable of being approved under the Fair Work Act 2009 are set out in Part 2–4 of the Act.
[6] The first step requires the employer to give notice to the employees of their right to be represented in the bargaining process. The notice is to be given no later than 14 days after the notification time which is defined in section 173(2) of the Act. In the absence of a majority support determination, a scope order or a low–paid authorisation, this is ‘when the employer agrees to bargain, or initiates bargaining for the agreement’.
[7] In this case the notice was given to the employees at the same time as the agreement, the explanatory memorandum and the notice of when voting would occur. To the extent that there was any ‘bargaining for the agreement’ this appears to have occurred prior to when the employees were notified of their right to appoint a bargaining representative to represent them in bargaining for the agreement. 1
[8] Section 180 of the Act requires that before an employer requests employees to approve an agreement by voting for it they must take all reasonable steps to ensure that during the access period (which is defined as ‘the 7 day period ending immediately before the start of the voting process’) employees are given a copy of the agreement or reasonable access to it.
[9] In this case the employees were given the Agreement on 5 August 2009. By the start of the access period the employees must also be given notice of the time and place at which the vote will occur and the voting method to be used. It appears that this was also given on 5 August 2009.
[10] The employer must also take reasonable steps to ensure the terms of the Agreement and the effect of those terms are also explained to the relevant employees. The employees were provided with a memorandum which details some ‘frequently asked questions and answers’. The memorandum does not contain detail of the content of the agreement although Mr Morgan stated that at the meeting they ‘went through the entire agreement’. It is not clear that any comparison with the entitlements under the relevant reference instruments were part of this process.
[11] Section 181 provides that an employer may request the employees to approve the agreement by voting for it. Section 181(2) provides that the request ‘must not be made until at least 21 days after the day on which the last notice under section 173(1)’ was given.
[12] In Alphington Aged Care and Sisters of St Joseph Health Care Services (Vic) t/as Mary Mackillop Aged Care 2, the notice was given on 6 July 2009 and the vote was taken on 27 July 2009. In determining that the application failed to meet the requirements of section 181(2), I referred to a decision of a Full Bench of the Australian Industrial Relations Commission in Re: White’s Discounts Pty Ltd t/as Everybody’s IGA Everyday and Broken Hill Foodland.3
[13] While that case dealt with the application of section 170LK(2) which required that employees were to have ‘at least 14 days notice’, in writing, of an employer’s intention to make an agreement, the principles to be applied are the same. The Full Bench held that the provisions of section 36(1) of the Acts Interpretation Act applied, and as the vote in that case was taken on the 14th day, the requirements of the relevant legislation were not met. Section 36(1) states:
‘Where in an Act any period of time, dating from a given day, act, or event is prescribed or allowed for any purpose, the time shall, unless the contrary appears to be reckoned exclusive of such day or such act or event’.
[14] A vote taken on the 21st day after the day on which the notice under section 173(1) was given, does not meet the requirements of section 181(2).
The terms of the Agreement
[15] Fair Work Australia raised with the applicant several matters going to the application of the no disadvantage test.
[16] The agreement provides for three ‘minimum wage rates schedules’. Schedule ‘A’ provides for a Monday to Friday rate for all hours worked between 7.00 a.m. and 10.00 p.m. with modified penalty rates for weekends and public holidays and hours worked between 6.00 a.m. and 7.00 a.m. and 10.00 p.m. and 1.00 a.m.
[17] Schedule ‘B’ provides a Monday to Saturday rate for the same hours with modified penalties for weekends, public holidays and hours worked between 6.00 a.m. and 7.00 a.m. and 10.00 p.m. and 1.00 a.m.
[18] ‘Option C’ provides a flat rate for all hours worked and includes a loading for annual leave and personal leave. Clause 24—Minimum wage rate schedules, states that the employer shall designate the Minimum Wage Schedule applicable to an employee in the employee’s letter of engagement.
[19] Employees may be required to work a maximum of 10 rostered hours of work on any shift for a maximum of 10 consecutive working days. The minimum engagement on any shift is one hour. Hours may be averaged over a 12–month period. For all employees, annual leave loading is incorporated into the wage rate. Any entitlement to meal allowance and a range of other allowances is also incorporated into the wage rate.
[20] The rates incorporate an assumption that an employee will work three public holidays per year. All rates are calculated on the basis that an employee will on three occasions per year work hours which would attract an entitlement to a meal allowance. There are however no provisions in the agreement which would limit the number of public holidays an employee could be asked to work or the number of occasions on which they can be asked to work hours which would entitle them to a meal allowance.
[21] A number of allowances available under the reference instruments are not included in the Agreement, e.g. transport reimbursement, cold work disability allowance. The Agreement also makes no provision for accident makeup pay.
[22] The Agreement also provides for compulsory attendance at team meetings for which no additional payment is made and provides in the dispute settlement clause for an employee to pay half the cost of an ‘agreed private independent mediator’.
The loaded rate
[23] ‘Option C’ of the agreement provides for a flat rate of pay in compensation for all entitlements, with the exception of overtime, and includes a component for annual leave and personal/carers leave. The Agreement provide that if there is an increase in the minimum rate of pay between the time at which the employee was paid for the leave and the time of taking unpaid leave they will receive a top up of the difference.
[24] The applicant argues that this provision is not akin to the ‘cashing out’ of the leave as the employee is still entitled to take to leave (without being paid at the time it is taken). Further, it is argued that the provision is a term which is ancillary or incidental to the leave entitlement of the National Employment Standard (NES) within the meaning of section 55(3) (sic) of the Act.
[25] The applicant further referred Fair Work Australia to advice received by its solicitors in August 2006 from the Office of the Employment Advocate which supported the view that a loaded wage did not disadvantage an employee.
[26] The applicant in addition referred to other agreements covering companies operating Morgan’s Supa IGA supermarkets with similar provisions and asserted that many employees prefer the loaded wage rate.
[27] The reference instruments in this case made provision for full-time, part-time and casual employees. It is a characteristic of casual employment that an employee is not entitled to paid annual or personal/carers leave but is compensated for this by the casual loading which the status attracts. A casual employee is also not entitled to notice of termination of severance payments on redundancy and may be offered work or not by the employer.
[28] The provisions of this agreement make no reference to casual employees although the reference to ‘relief employees’ is presumed to be a reference to casual employment because of the loading payable and the exclusion of certain clauses from applying to these employees.
[29] Neither the full–time nor part–time employee under the Agreement is guaranteed any particular hours or days on which they will work. A full–time employee is merely one who is required to work an average of 38 hours per week averaged over a 12–month period. A part–time employee is one required to work ‘up to 38 hours per week’ averaged over a 12–month period. There is no requirement that their hours be reasonably predictable, that they have a regular pattern of work or that any variation to the hours be agreed and recorded in writing.
[30] In essence the only difference between a casual employee under this Agreement and a part–time or full–time employee is that for full–time employees the total annual hours of work are guaranteed and they both have the right to be given notice of termination and severance pay on redundancy.
[31] Paid annual leave and personal/carers leave are conditions of employment with a long history in industrial jurisprudence. The provision of paid annual leave is a standard designed to ensure that employees have an appropriate rest from work without the need to worry about paying for the needs of daily life. It also encourages employees to take a holiday which provides both a social benefit to them and their families and a financial benefit to the domestic tourism industry. Paid annual leave also enables parents of school–age children to care for them during some of the school holiday period without cost to their income.
[32] Incorporation of payment for annual leave into the wage rate may compensate the employees financially for the loss of paid leave but it may discourage them from actually taking leave, if they will receive no income at the relevant time.
[33] With respect to personal/carers leave the applicant argues that the employee may be better off because they receive the payment even if they do not take the leave. Conversely a long–term employee, who may under the terms of a relevant award accrue a considerable amount of paid leave may be left in the situation where they have theoretically extensive leave accruals but no money coming in for an extended period of time should they be seriously ill or suffer a non–work related injury. Paid personal/carers leave is not a wage supplement but an entitlement designed to meet the objective of providing ongoing payments when an employee or a member of their family is ill.
[34] Clause 4 of Schedule 7 provides that an enterprise agreement passes the no–disadvantage test if Fair Work Australia is satisfied that the agreement does not, or would not result, on balance, in a reduction in the overall terms and conditions of employment of the employees who are covered by the agreement under any reference instrument relating to one or more of the employees. During the transition period, a Fair Pay and Conditions Standard (AFPCS) will for the purpose of this test period prevail over an award provision to the extent that the AFPCS provides a more favourable outcome for the employee.
[35] A term and condition of employment is not simply one which can be quantified in monetary terms. An entitlement to unpaid parental leave for example, is a condition of employment, the denial of which would disadvantage an employee but which could not be quantified and ‘bought out’ in monetary terms. The no disadvantage test is not simply an accounting exercise.
[36] I refer also to my decision in Re Cafe Yaringa 4 where these issues are also discussed.
[37] As I have noted this agreement makes no provision for accident makeup pay although three of the reference instruments do so. Accident make up pay is a contingent benefit. An employee may never need to access it. To such an employee it is of no financial benefit. If an employee suffers a work related injury and as a consequence is unable to work for an extended period, accident make up pay may be of huge financial significance. When a regular income, at a particular level, is for example needed to service a mortgage it may mean the difference between keeping a house or not.
[38] The applicant offered to give undertakings in relation to a number of the matters raised by Fair Work Australia and referred to its rostering arrangements to submit that the normal practice of the employer was not that which the Agreement on the face of it allowed. The no disadvantage test however must be applied to the Agreement and what it allows, not what the normal practice is. If it allows the employer to roster an employee for 10 hours a day for 10 days straight and then for one hour on one day in the next 10, provided that over a period of 12 months the hours average 38 per week, then that is the provision which must pass the test and not the provisions of a roster which is not part of the Agreement.
[39] If the Agreement is based on what an average employee working an average roster would earn without any limitation on, for example, how many public holidays they might work, then what must pass the test is what the Agreement allows and not how it might apply to the average employee. The Agreement will not pass the test if any employee is disadvantaged by its terms.
[40] The applicant referred to the approval of previous agreements under different statutory instruments. An application under section 185 must however be considered in the context of the Fair Work Act and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009. There are, in my view, significant differences between those Acts and their predecessors. Most significantly, prior legislation did not contain the provisions of section 202 which provide for individual flexibility arrangements and section 65 which allow employees to request a change in working arrangements to assist the employee to care for a child.
[41] Section 202 is particularly important because it requires compliance with section 203 which in turn provides certain safeguards which must be met. An employer may enter into an agreement with an employee which varies the provisions which would otherwise apply to all employees provided that the agreement meets the requirement that the employee be ‘better off overall’ and provided the parties can terminate the agreement on the giving of notice.
[42] This agreement allows the employer to determine under what arrangements an employee will be engaged including the minimum wage options set out in Option ‘A’, ‘B’ and ‘C’.
[43] Taken in its entirety, I am not satisfied that the Agreement would pass the no disadvantage test even if the procedural prerequisites had been met. While some of these might be able to be addressed by undertakings, I am not satisfied that the conditions which attach to Option ‘C’ of the wage options in the agreement could pass the no disadvantage test.
COMMISSIONER
Appearances:
K. Sweatman for Nepero Pty Ltd.
Hearing details:
2009.
Melbourne:
November 13.
Final submissions:
November 19.
1 Fair Work Act 2009, s. 174(2).
2 [2009] FWA 301.
3 Re: White’s Discounts Pty Ltd t/as Everybody’s IGA Everyday and Broken Hill Foodland [PR937496].
4 Café Yaringa Pty Ltd t/as Café Yaringa [2009] FWA 1388
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