SDA v Allen Family Pty Ltd
[2024] FWCFB 48
•6 FEBRUARY 2024
| [2024] FWCFB 48 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.604—Appeal of decision
Shop, Distributive and Allied Employees Association
v
Allen Family Pty Ltd t/a Subway Clare, Subway Findon, Subway Broken Hill, Subway Kadina, Subway Port Adelaide, Subway Port Pirie
(C2023/7904)
| JUSTICE HATCHER, PRESIDENT | SYDNEY, 6 FEBRUARY 2024 |
Appeal against decision [2023] FWCA 3996 of Deputy President Dean at Canberra on 27 November 2023 in matter number AG2023/4376.
Introduction
The Shop, Distributive and Allied Employees Association (SDA) has lodged an appeal under s 604 of the Fair Work Act 2009 (Cth) (FW Act) against a decision[1] of Deputy President Dean issued on 27 November 2023 (Decision). Permission is required for the appeal. The Decision concerned the approval of the Allen Family Pty Ltd Enterprise Agreement 2023[2] (Agreement).
Section 604(1) of the FW Act permits a ‘person aggrieved’ to make an application for permission to appeal a decision of the Commission. We are satisfied that the SDA is such a person in relation to the Decision.
The matter was listed on the basis that the issue of permission to appeal and the merits of the appeal would be dealt with together. Directions were issued on 22 December 2023 for the filing of submissions and other material and the matter was listed for hearing on 12 January 2024. Both parties filed material in advance of the hearing pursuant to the directions. The SDA’s material included a witness statement made by Ali Amin, an Industrial Officer with the SDA. Mr Amin’s statement was admitted in the appeal without objection and he was not required for cross-examination.
The grounds of appeal may be summarised as follows:
(1)The Deputy President erred in finding that the Agreement passed the better off overall test (BOOT) as required by s 186(2)(d) of the FW Act by failing to take into account and weighing multiple disadvantageous provisions in the Agreement including:
a.the roll-up of Award rates and allowances into inadequate base rates of pay under the Agreement;
b.part-time workers and overtime provisions;
c.abolition of weekday penalty rates; and
d.a range of other detriments.
(2)The Deputy President erred in finding that the Agreement was genuinely agreed to by employees for the purposes of s 186(2)(a) of the FW Act by having:
a.found that it was genuinely agreed to in circumstances where Allen Family Pty Ltd (respondent) failed to take all reasonable steps to ensure that the terms of the Agreement were explained to the workers and in addition, or in the alternative, that the explanation was not provided in an appropriate manner taking into account the particular circumstances and needs of the relevant workers, as required by s 180(5) of the FW Act.
b.failed to take into account principle 18 of the Fair Work (Statement of Principles on Genuine Agreement) Instrument 2023 (Statement of Principles) as she was required to under ss 188(1) and (4A) of the FW Act in that the Agreement was not a product of an authentic exercise in agreement making and that because of the likely young and inexperienced cohort of employees, those employees could not have had an informed and genuine understanding of what was being approved; and
c.failed to take into account principle 15 of the Statement of Principles as she was required to under s 188(1) of the FW Act in that the voting process adopted by the respondent did not ensure that employees’ votes were not disclosed to the respondent.
Factual background and the decision under appeal
The respondent is a corporation that trades in the fast food industry as a franchisee of the ‘Subway’ sandwich chain. It operates six stores in metropolitan Adelaide, regional South Australia and far western New South Wales, those stores being in Clare, Findon, Kadina, Port Adelaide, Port Pirie and Broken Hill. At the time of the ballot conducted for approval of the Agreement there were 102 employees that would be covered by the Agreement, half of whom were under the age of 21.
Prior to approval of the Agreement, the terms and conditions of employment of the respondent’s employees were provided for in The Allen Family Pty Ltd Collective Agreement Number Two (2007) (2007 Agreement). By reason of Part 13 of Schedule 1 to the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022, the 2007 Agreement was, as an agreement-based transitional instrument (commonly referred to as a ‘zombie’ agreement) made before 2010, due to sunset automatically on 7 December 2023. Notwithstanding the continued operation of the 2007 Agreement up to 7 December 2023, the respondent decided in mid-2023 to apply the terms of the Fast-Food Industry Award 2020[3] (Award) which, by that point, were superior to the terms of the 2007 Agreement.
At 1:47 pm on 3 April 2023, Mr Amin contacted the respondent by email requesting a call to discuss the 2007 Agreement[4]. Tracy Avis of the respondent promptly called Mr Amin following receipt of the email. During their telephone conversation, Mr Amin outlined to Ms Avis the SDA’s ‘Subway Sub-Pay’ campaign, advised Ms Avis that the 2007 Agreement’s continued operation was unfair, and that the SDA sought to negotiate a new agreement on their members’ behalf. A summary of the call was sent by Mr Amin to Ms Avis by email at 2.18pm on 3 April 2023.[5] In the email, Mr Amin sought a response from the respondent as to whether it intended to either negotiate a new agreement, apply for an extension of the 2007 Agreement or do nothing and simply allow the Award to cover employees from 7 December 2023.
Ms Avis, who identified herself in a reply email to Mr Amin on 13 April 2023 as an ‘Authorised Representative’ of the respondent, advised Mr Amin that the respondent did not intend to enter into an enterprise agreement from 7 December 2023. She stated that the respondent had decided to apply the Award from 1 July 2023 and in those circumstances expressed a view that it would be unnecessary for the SDA to pursue an application in the Commission to terminate the 2007 Agreement.[6] The SDA chose not to apply to terminate the 2007 Agreement and was not subsequently contacted by the respondent regarding its proposed negotiation of the Agreement, was not involved in bargaining for the Agreement and was not served with the application for approval of the Agreement.[7]
The respondent issued a notice of representational rights (NERR) to its employees on 9 October 2023 in accordance with reg 2.05 of the Fair Work Regulations 2009 (Cth) and bargaining then commenced for the Agreement.[8] At the same time, the respondent also provided employees with a full copy of the proposed Agreement and a ‘Q&A Document’.[9] The Q&A Document is eleven pages in length and includes a comparison between key provisions of the Agreement and the Award as well as providing answers to potential questions regarding the proposed Agreement. The stated purpose of the Q&A Document was as follows;
The purpose of this Q&A Document is to explain the key features of the Allen Family Pty Ltd Enterprise Agreement 2023 (‘EA’) and your role in its implementation. You should have by now been provided:
•A copy of the proposed EA; and
•A notice of employee representational rights.
You now have the opportunity to ask questions and provide feedback on the proposed EA. The contact person on behalf of Allen Family Pty Ltd is Lindsay Allen and Lee Kite.
Below is a series of questions and answers that provide basic information about the proposed EA…
Between 10 and 23 October 2023, the respondent arranged and conducted multiple meetings with employees across its six stores. At each meeting, the respondent provided hard copies of the NERR, the Agreement and the Q&A Document and read through those documents. According to the respondent, employees were encouraged to ask questions, but few questions were asked.[10] The Form F16 application for approval of the Agreement identified that there were no union or employee bargaining representatives involved in the agreement-making process.[11]
On 27 October 2023, a Voting Instruction Sheet was sent to employees at each outlet notifying employees of the ballot to be conducted for approval of the Agreement. The Voting Instruction Sheet stated that the ballot would be conducted at each outlet between 9:00 am and 5:00 pm on 7 November 2023 and that if an employee could not attend in person they could vote by ‘email to [email address of Ms Avis] by specifying their name and voting preference’.[12] The outcome of the ballot was that, of the 102 employees eligible to participate, 88 employees voted, and all of those employees voted to approve the Agreement.[13]
The respondent filed its application with the Commission for approval of the Agreement on 16 November 2023. In the accompanying Form F17B declaration made by the respondent’s Operations Manager Lee Kite, the Award (which is not incorporated into the Agreement) was identified as the relevant award for the purposes of the BOOT. Ms Kite stated in her declaration that some provisions in the Agreement were more beneficial than the Award, some Award entitlements were omitted from the Agreement and there were no terms in the Agreement that were less beneficial than the Award.[14]
The application was allocated to the Deputy President’s chambers on 23 November 2023, following which correspondence was sent to the respondent on 24 November 2023 in which the Deputy President raised a concern that the Agreement if approved would permit deductions from employees’ pay to be made contrary to s 324 of the FW Act. The respondent subsequently provided an undertaking which addressed the Deputy President’s concern, and the Agreement was approved on 27 November 2023.
In her decision, the Deputy President noted that the employer had provided a written undertaking that would not cause financial detriment to any employee nor result in substantial change to the Agreement and would be taken to be a term of the Agreement. She then went on to state that, subject to acceptance of the undertaking, she was ‘satisfied that each of the requirements of ss 186, 187, 188, and 190 as are relevant to this application for approval have been met’. The Agreement came into operation on 4 December 2023 and has a nominal expiry date of 27 November 2027.
Consideration
In order for permission to appeal to be granted and for the appeal to be upheld, it is necessary for the SDA to demonstrate appealable error. What might constitute appealable error in an appeal from a decision to approve an enterprise agreement was discussed in the Full Bench decision in Diamond Offshore General Company v Baldwin & Ors[15] as follows:
[25] To the extent that part of the decision-making process required to approve an agreement involves the exercise of discretion or satisfaction in relation to statutory criteria, the principles relevant to appealable error in relation to such decisions are well established. An appealable error in a decision involving the exercise of discretion is an error of the kind identified in House v The King. An error in relation to satisfaction is a question as to whether the decision maker has reached a ‘state of mind which must be formed reasonably and on a correct understanding of the law.’
(emphasis in original)
Ground 1 — whether the BOOT is satisfied
Under its first ground of appeal, the SDA contends there are a number of provisions within the Agreement that are less beneficial than the Award and that, when those Award provisions are weighed against other provisions in the Agreement, the Deputy President ought not to have been satisfied that the Agreement passed the BOOT. The range of detriments identified by the SDA are set out below.
Under the Agreement, employees are entitled to receive a base hourly rate of pay in addition to which they receive various allowances and penalty rates for Saturday work, Sunday work, public holiday work and overtime which are consistent with Award entitlements. The base rate of pay in the Agreement for an employee classified as a ‘Team Member’ not employed within the county of Yancowinna (i.e. Broken Hill) is $25.23 per hour, which compares to the relevant Award base rate of $24.73 per hour. For Broken Hill staff classified as Team Members the base rate of pay is $26.37 which compares to the relevant Award base rate of $24.73. There are however, according to the SDA, a range of other Award entitlements that are not conferred by the Agreement, including annual leave loading, penalty rates for hours worked between 10:00 pm and 6:00 am Monday to Friday, the Special Clothing Allowance and the Broken Hill Allowance. According to the respondent, these entitlements are incorporated into the Agreement base rates of pay.[16]
The SDA points to the small margin of the Agreement’s base rates of pay above the Award of 2.06 per cent for permanent and casual employees not employed within the Broken Hill outlet. For employees employed in the Broken Hill outlet, the margin of Agreement base rates above the Award is 6.62 per cent, but the SDA points out that such employees do not receive the separate flat Broken Hill allowance provided under the Award of $42.58 per week.[17] That allowance is rolled up on a pro rata basis into the higher base rates in the Agreement that apply to employees working in the respondent’s Broken Hill outlet.[18]
The SDA calculates that the foregone annual leave loading on its own represents between 1.35 per cent and 3.85 per cent of permanent employees’ remuneration under the Award, depending on the amount of weekend work undertaken. As earlier stated, the annual leave loading conferred by the Award is absorbed into the Agreement base rates which are 2.06 per cent above the Award for permanent and casual employees not employed at the Broken Hill outlet. Further, the Special Clothing Allowance payable under the Award, but not under the Agreement, to employees responsible for laundering required clothing is $6.25 per week for a full-time employee and $1.25 per shift for part-time or casual employees.[19] The SDA submits that the minimum Agreement premium necessary to discharge the value of the allowance is $0.42 per hour in the case of a casual or part-time employee working a 3-hour shift and $0.11 per hour in the case of an 11-hour shift. It is noted that the margin between the hourly rate of pay for the Team Member classification in the Agreement and the equivalent Level 1 Award classification is only $0.51 for staff not employed in the Broken Hill outlet.
In the case of employees working in the respondent’s Broken Hill outlet, the SDA submits that, in addition to the detriments described above, the consequence of rolling-up the Broken Hill Allowance payable under the Award into the Agreement’s base rates of pay on a pro rata basis is that part-time and casual employees do not receive the flat payment of $42.58 per week they would otherwise receive under the Award regardless of hours worked. Rather, they receive a pro rata amount that varies according to hours worked. This is said by the SDA to be to the detriment for casual and part-time employees depending on the number of hours worked each week.
The SDA contends that the Agreement’s wage rate margin above the Award of 2.06 and 6.62 per cent in the case of Broken Hill employees is not sufficient to compensate for the Award entitlements forgone. The submission is supported by detailed modelling prepared by Mr Amin which identifies 360 rostering scenarios in over half of which employees could not be said to be better off under the Agreement when compared to the Award.[20]
To highlight the above, the SDA identified that employees in the Broken Hill outlet working under any roster scenario would be worse off under the Agreement when compared to the Award unless they were working more than approximately 32 hours per week. The threshold for casual employees working at the Broken Hill outlet was lower, at 20 ordinary hours per week, below which such employees would be worse off under the Agreement. These conclusions were reached by the SDA based on its calculation that the margin of the Agreement base rates above the Award of 6.62 per cent was insufficient to compensate for the foregone Award entitlements of the annual leave loading, Special Clothing Allowance and the Broken Hill Allowance in a wide range of rostering scenarios.
The respondent neither sought to rebut the SDA’s modelling nor challenge the SDA’s submissions that the Agreement rates were insufficient to compensate for the various foregone Award entitlements including annual leave loading, special clothing allowance and the Broken Hill Allowance. Instead, it responded by offering a range of undertakings in these proceedings to address the detriments identified by the SDA.
In assessing the submissions made by the SDA, the following modelling undertaken by the Full Bench compares earnings between the Agreement and Award excluding superannuation across a range of straightforward hours of work scenarios:
Model 1 — Part-time employee engaged in Team Member classification working 16 hours per week in Broken Hill outlet on four shifts on Tuesday to Friday between 4:00 pm and 8:00 pm
Award earnings: 16 hours x $24.73 (Level 1 Award rate of pay) + $42.58 (Broken Hill Allowance) + 4 shifts x $1.25 (Special Clothing Allowance) + (16 hours x 24.73 x 4) x 0.175/52 (value of annual leave loading).
= $395.68 + $42.58 + $5.00 + $5.32
= $448.64 (weekly Award earnings)
Agreement earnings: 16 hours x $26.37 (Team Member Agreement rate for Broken Hill employees)
= $421.92 (weekly Agreement earnings)
Model 2 — Part-time employee engaged in Team Member classification working 24 hours per week in non-Broken Hill outlet on three days Wednesday to Friday from 11:00 am to 7:30 pm
Award earnings: 24 hours x 24.73 (Level 1 Award rate of pay) + 3 shifts x $1.25 (Special Clothing Allowance) + (24 x 24.73 x 4) x 0.175/52 (value of annual leave loading)
= $593.52 + $3.75 + $7.98
= $605.25
Agreement earnings: 24 hours x $25.24 (Team Member Agreement rate of pay)
= $605.76
Model 3 — Casual employee engaged in Team Member classification working 16 hours per week in Broken Hill outlet on Tuesday – Friday between 4:00 pm and 8:00 pm
Award earnings: 16 hours x $30.91 (Level 1 casual Award rate of pay) + $42.58 (Broken Hill Allowance) + 4 x $1.25 (Special Clothing Allowance)
= $494.56 + $42.48 + $5.00
= $542.14
Agreement earnings: 16 hours x $32.96 (Team Member Casual Agreement rate of pay for Broken Hill)
= $527.36
Model 4 — Casual employee engaged in Team Member classification working 24 hours per week in non-Broken Hill outlet on three days Wednesday to Friday between 11:00 am and 7:30 pm
Award earnings: 24 hours x $30.91 (Level 1 casual Award rate of pay) + 3 x $1.25 (Special Clothing Allowance)
= $741.84 + $3.75
= $745.59
Agreement earnings: 24 hours x $31.55 (Team Member Agreement rate of pay)
= $757.20
Model 5 — Full-time permanent employee engaged in Team Member classification working 38 hours per week in Broken Hill outlet on Monday to Friday from 11:00 am to 7:30 pm
Award earnings: 38 hours x $24.73 (Level 1 Award rate of pay) + $42.58 (Broken Hill Allowance) + $6.25 (Special Clothing Allowance) + ($24.73 x 38 x 4) x 0.175/52 (value of annual leave loading)
= $939.73 + $42.58 + $6.25 + $12.65
= $1001.21
Agreement earnings: 38 hours x $26.37 (Broken Hill Team Member Agreement rate of pay)
= $1002.06
Model 6 — Full-time permanent employee engaged in Team Member classification working 38 hours per week in non-Broken Hill outlet on Monday to Friday from 11:00 am to 7:30 pm.
Award earnings: 38 hours x $24.73 (Level 1 Award rate of pay) + $6.25 (Special Clothing Allowance) + ($24.73 x 38 x 4) x 0.175/52 (value of annual leave loading)
= $939.73 + $6.25 + $12.65
= $958.63
Agreement earnings: 38 hours x $25.24 (Team Member Agreement rate of pay)
= $959.12
The above modelling highlights that for permanent full-time employees, the positive margin between Agreement and Award earnings is slim, even without considering any other potential detriments within the Agreement. For casual and part-time employees (Models 1 and 3) working 16 hours per week, there is an earnings deficit under the Agreement when compared to the Award. This modelling is consistent with the submissions and modelling advanced by the SDA. We note that, according to Ms Kite’s Form F17B declaration, 89 of the 102 employees covered by the Agreement at the time that it was made were casual and the other 13 were part-time.
We have had the benefit of both the SDA’s and the Commission’s own modelling set out above, and we have also considered the provisions of the Agreement that may be more beneficial than the Award. It seems to us that the only unarguably more beneficial monetary term of the Agreement is that of the base rates of pay which are, respectively, 2.06 per cent and 6.62 per cent above the Award base rates of pay for non-Broken Hill and Broken Hill employees. Based on the modelling, we are satisfied that under a range of reasonably foreseeable rostering scenarios, employees covered by the Agreement would not be better off overall in respect of their conditions of employment when compared to the Award. That is because the base rate margins in the Agreement compared to the Award are insufficient in a range of reasonably foreseeable rostering scenarios to compensate for the foregone Award entitlements.
In reaching the requisite satisfaction that an agreement passes the BOOT pursuant to s 186(2)(d) of the FW Act, the Commission is required to make an evaluative judgement of whether each employee concerned would be better of overall under the terms of the agreement versus the relevant modern award. The evaluative judgement is to be formed through undertaking a global assessment of terms in the Agreement that are more and less beneficial than the award.[21] In our view, it was not open to the Deputy President to have reached the requisite satisfaction that the Agreement passed the BOOT for the reasons set out above. Unless addressed under ss 189 or 190, an enterprise agreement cannot be approved if it does not pass the BOOT approval requirement at s 186(2)(d) of the FW Act. Accordingly, the Deputy President’s decision was attended by appealable error. We consider therefore that permission to appeal should be granted, the appeal should be upheld, and the Decision quashed. Having reached this conclusion, it is unnecessary for us to deal with the SDA’s second ground of appeal.
Having quashed the decision, we will proceed to re-determine the application for approval of the Agreement.
Redetermination of the application for approval of the Agreement
The background to the application for approval of the Agreement is set out above at [5] to [13] above. Apart from the matters raised on appeal by the SDA, there are no other contested issues in respect of approval of the Agreement. Leaving aside those matters, which are considered below, we are satisfied based on the material contained in the application and the accompanying Form F17 declaration made by Ms Kite that the other approval requirements in ss 186 and 187 of the FW Act, as relevant to the application, are met. We turn to the matters raised by the SDA.
BOOT concerns
As earlier stated, the SDA submits that the Commission cannot be satisfied that the Agreement passes the BOOT in circumstances where the Agreement base rates are as little as 2.06 per cent above the relevant Award base rates, which is insufficient to compensate for a range of forgone Award entitlements. We have accepted the substance of that submission for the reasons set out above, which necessarily gives rises to ‘concerns’ for the purpose of s 190(1)(b) of the FW Act in our redetermination of the application for approval of the Agreement. The respondent has (in anticipation) proposed a series of undertakings to address a number of the BOOT concerns arising from the SDA’s submissions being upheld. We now turn to the detriments the subject of our concerns and those proposed undertakings.
Abolition of weekday penalty rates
The SDA submits that the Agreement does not provide for weekday evening penalty payments found at clause 21 of the Award. The relevant penalty rates referred to by the SDA include the penalty rates applicable to work performed between 10:00 pm and midnight on Monday to Friday of 110 per cent of the base rate for full-time and part-time employees and 135 per cent for casual employees. The Agreement is also silent on penalty rates payable for work performed between midnight and 6:00 am Monday to Friday which, under the Award, attracts penalty rates of 115 per cent for full-time and part-time employees and 140 per cent for casuals.
In his witness statement, Mr Amin claims that it is reasonably foreseeable that the respondent may operate at such times and that work performed between 10:00 pm and 6:00 am on Monday to Friday is not at all unusual in the fast food industry.[22] That general statement may hold true in some parts of the fast food industry but is unsupported by direct evidence of the respondent’s operational arrangements. It is contradicted by Ms Kite’s Form F17B declaration, in which she states that the Agreement omits evening penalty rates as the employer does not operate its stores between 10:00 pm and 6:00 am.
The respondent has nonetheless proposed an undertaking (undertaking 4) that would, if accepted, insert into the Agreement penalty rates for weekday evening work consistent with the Award entitlements referred to above. This undertaking would remedy the BOOT concern and render the item a neutral consideration in our BOOT assessment.
Leave loading
The Agreement omits the Award entitlement to annual leave loading found at clause 22.2 of the Award. We note that the Award provides for a payment of leave loading as follows:
(c)The loading for a period of annual leave will be the greater of the following 2 amounts:
(i) 17.5%of the employee’s minimum hourly rate for all ordinary hours the employee would have worked if they were not on leave during the period; or
(ii)the relevant weekend penalty amounts payable to the employee for all ordinary hours they would have worked on a weekend if they were not on leave during the period.
The absence of an annual leave loading entitlement under the Agreement represents a significant non-contingent financial detriment that must be weighed in the BOOT assessment. To address the concern, the respondent has proposed an undertaking (undertaking 10) that states ‘Employees are entitled to annual leave loading under clause 22.2 of the Fast Food Industry Award 2020’. The undertaking if accepted would remedy the BOOT concern and render the item a neutral consideration in our BOOT assessment.
Special Clothing Allowance
As earlier stated, the Agreement omits the Special Clothing Allowance entitlement found at clause 17.5(b) of the Award, which provides:
(b) If the employee is responsible for laundering their special clothing, then the employer must pay the employee an allowance of:
(i) $6.25per week for a full-time employee; or
(ii) $1.25per shift for a part-time or casual employee.
Because of the narrow margin of base rates of pay in the Agreement over the Award base rates of pay, this detriment combined with other financial detriments in the Agreement gives rise to a BOOT concern in a range of reasonably foreseeable rostering scenarios. To remedy the concern, the respondent has proposed an undertaking (undertaking 3) that mirrors the Award entitlement. The undertaking if accepted would remedy the BOOT concern and render the item a neutral consideration in our BOOT assessment.
Broken Hill Allowance
Clause 17.2 of the Award provides for the payment of a flat allowance of $42.58 per week to persons employed in the County of Yancowinna. This is known as the Broken Hill Allowance. The allowance is in addition to all other payments and is payable regardless of hours worked. By contrast, under the terms of the Agreement employees engaged by the respondent in its Broken Hill outlet receive an hourly rate of pay that is higher than employees engaged in other stores which is paid to recognise absorption of the Broken Hill Allowance into the base rates of pay.[23] For example, the base rate of pay for a permanent full-time or part-time employee in the Team Member classification in the Broken Hill outlet is $26.37, which represents a $1.13 per hour premium over the Team Member base rate of $25.24 that applies in the respondent’s other outlets.
The absorption of the Award’s Broken Hill Allowance into the base rates of pay on a pro rata basis under the Agreement differentially impacts employees engaged on a permanent full time, casual or permanent part-time basis in the Broken Hill store. To illustrate the point, the value of the $1.13 per hour premium included in the base rate of pay of a Broken Hill part‑time ‘Team Member’ working 16 hours per week is $18.08 per week. Under the Award, an employee in the same scenario would receive the $42.58 per week Broken Hill Allowance, albeit on top of an lower base rate of pay. By contrast, the value of the increased base rate of pay for permanent full-time Broken Hill Team Members is $42.94 (38 hours x $1.13 per hour premium). That compares favourably with the flat $42.58 per week Broken Hill Allowance payable under the Award. We also note that the calculation of overtime and other penalty rates would be based on the higher base rates of pay for Broken Hill staff, providing a further benefit to those employees. However, at the time the Agreement was made, there were no permanent full-time Broken Hill employees.
To address the BOOT concern arising in relation to the absorption of the Broken Hill Allowance into the higher Broken Hill rates of pay under the Agreement, particularly as it affects part-time and casual employees, the respondent has proposed two undertakings in the following terms:
1.Employees who work in Broken Hill are entitled to an allowance of $42.58 per week.
2.Minimum Wage Rate Schedule B will be deleted from the Agreement. All employees including employees at a workplace within the County of Yancowinna in New South Wales (Broken Hill) will be paid in accordance with Minimum Wage Rate Schedule A.
The effect of the undertaking would be to remove the higher Broken Hill rates of pay found in Schedule B of the Agreement and apply the base rates of pay in Schedule A of the Agreement consistently across all stores. The loss of the higher base rates of pay for Broken Hill employees would be offset by the payment of the flat Broken Hill Allowance to employees in the Broken Hill store. Although it is not entirely clear from the undertaking, we discern that the intent of the respondent in proposing undertaking 1 is to apply the $42.58 per week in line with the Award entitlement, that is, as a flat amount per week regardless of hours worked in addition to all other payments.
Casual and part-time Broken Hill employees working less than 38 hours per week may stand to benefit financially from payment of the flat allowance of $42.58 per week in lieu of the higher base rates currently provided by Schedule B of the Agreement depending on the number of hours worked. That is because the detriment identified above at [39] would be offset by payment of the proposed flat allowance. By contrast, any future permanent full-time Broken Hill employees would, if undertaking 1 and 2 were accepted, stand to suffer a financial detriment as they would lose the benefit of the higher base rates of pay when calculating weekend, public holiday and overtime penalty rates.
We further consider that proposed undertakings 1 and 2 would result in a substantial change[24] to the Agreement. It is not just the quantum of the proposed change, that of a $1.13 per hour reduction in the base rate of pay in the case of Team Members which is significant, but also the nature of the change, that of removing an entire loaded wage rate schedule and replacing it with a single flat allowance.
The Commission may only accept an undertaking pursuant to s 190(3) of the FW Act to address a concern it holds that the Agreement does not meet the requirements set out in ss 186 and 187. We hold a concern that the absorption of the Broken Hill Allowance on a pro rata basis into higher base rates of pay for Broken Hill employees is detrimental when compared to the Award at least for some part-time and casual employees engaged in the respondent’s Broken Hill store. While the undertakings proposed would address our concern regarding some Broken Hill part-time and casual employees, particularly where they are working significantly less than 38 hours per week, it would however cause financial detriment to permanent full-time employees for the reasons set out above. The undertakings proposed would also result in substantial changes to the Agreement. Section 190(3) only permits the Commission to accept an undertaking if it is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employees covered by the agreement or result in substantial changes to the agreement. We cannot reach the requisite state of satisfaction for the reasons stated and, accordingly, we are unable to accept the proposed undertakings.
We have further considered whether it would be possible to cure the identified BOOT concern by way of an undertaking without either causing financial detriment to any employee or resulting in substantial changes to the Agreement. The difficulty in developing such an undertaking arises from the differential effects that the structure of the higher base rates of pay has when compared to the forgone Award entitlement of the flat Broken Hill Allowance. We have reviewed the detriment suffered by casual and part-time employees engaged in the Broken Hill outlet working less than 38 hours per week and, for this purpose, we have considered the scenarios of a part-time employee working a minimum of three hours, eight hours, 16 hours, 24 hours and 32 hours per week and compared the earnings under the Agreement versus the Award. The scenarios presume that the part-time employee works their hours on weekdays and also take into account the undertakings proposed by the respondent in relation to annual leave loading and the Special Clothing Allowance. The various scenarios and the resultant earnings comparisons are set out below.
Scenario 1 — Part-time employee working a minimum three-hour shift between Monday and Friday
Award earnings: 3 hours x $24.73 (Level 1 Award rate) + $42.58 (Broken Hill Allowance) + $1.25 (Special Clothing Allowance)
= $118.02
Agreement earnings: 3 hours x $26.37 (Broken Hill Team Member Agreement rate)
+ $1.25 (Special Clothing Allowance)
= $80.36
Award earnings exceed Agreement earnings by $37.66.
Scenario 2 — Part-time employee working an eight-hour shift between Monday and Friday
Award earnings: 8 hours x $24.73 (Level 1 Award rate) + $42.58 (Broken Hill Allowance) + $1.25 (Special Clothing Allowance)
= $241.67
Agreement earnings: 8 hours x $26.37 (Broken Hill Team Member Agreement rate)
+ $1.25 (Special Clothing Allowance)
= $212.21
Award earnings exceed Agreement earnings by $29.46.
Scenario 3 — Part-time employee working 16 hours (two eight-hour shifts) between Monday and Friday
Award earnings: 16 hours x $24.73 (Level 1 Award rate) + $42.58 (Broken Hill Allowance) + 2 x $1.25 (Special Clothing Allowance)
= $440.76
Agreement earnings: 16 hours x $26.37 (Broken Hill Team Member Agreement rate)
+ 2 x $1.25 (Special Clothing Allowance)
= $424.42
Award earnings exceed Agreement earnings by $16.34.
Scenario 4 — Part-time employee working 24 hours (three eight-hour shifts) between Monday and Friday
Award earnings: 24 hours x $24.73 (Level 1 Award rate) + $42.58 (Broken Hill Allowance) + 3 x $1.25 (Special Clothing Allowance)
= $639.85
Agreement earnings: 24 hours x $26.37 (Broken Hill Team Member Agreement rate)
+ 3 x $1.25 (Special Clothing Allowance)
= $636.63
Award earnings exceed Agreement earnings by $3.22.
Scenario 5 — Part-time employee working 32 hours (four eight-hour shifts) between Monday and Friday
Award earnings: 32 hours x $24.73 (Level 1 Award rate) + $42.58 (Broken Hill Allowance) + 4 x $1.25 (Special Clothing Allowance)
= $838.94
Agreement earnings: 32 hours x $26.37 (Broken Hill Team Member Agreement rate)
+ 4 x $1.25 (Special Clothing Allowance)
= $848.84
Agreement earnings exceed Award earnings by $9.90.
We have further identified that in respect of part-time employees, the number of hours worked beyond which Agreement earnings comfortably exceed Award earnings is 28 hours, taking into account the annual leave loading and Special Clothing Allowance undertakings proposed by the respondent in our calculations. The relative margin of the Award earnings over the Agreement in the above scenarios would be slightly reduced where any of the shifts were worked on a weekend, that being due to the effect of weekend penalty rates being applied on the higher hourly rate payable under the Agreement. The difference would be further reduced if any overtime were worked.
Having regard to the above, we believe the most straightforward means to remedy the Full Bench’s concerns in respect of part-time and casual employees in the Broken Hill outlet is for the respondent to provide an undertaking that it would pay a flat allowance to part-time and casual employees in addition to all other payments according to the following hours of work ranges:
Broken Hill Allowance
(i)Casual or part-time employees in Broken Hill working less than eight hours per week would be entitled to receive a flat allowance of $38.00 per week in addition to all other payments.
(ii)Casual or part-time employees in Broken Hill working from eight to 15 hours per week would be entitled to receive a flat allowance of $30.00 per week in addition to all other payments.
(iii)Casual or part-time employees in Broken Hill working from 16 to 23 hours per week would be entitled to receive a flat allowance of $17.00 per week in addition to all other payments.
(iv)Casual or part-time employees in Broken Hill working from 24 to 28 hours per week would be entitled to receive a flat allowance of $3.50 per week in addition to all other payments.
An undertaking in the above terms would preserve the existing wage rate structure reflected in Schedules A and B of the Agreement, would not adversely impact those Broken Hill employees working more than 28 hours per week, and would ensure that the earnings of part-time and casual employees exceed what they would be entitled to receive under the Award. Should the respondent decline to provide an undertaking in the terms described above or in terms that otherwise remedies our concern, it will be necessary for us to consider whether to amend the terms of the Agreement to address the identified concern pursuant to s 191A of the FW Act, or, in the alternative, dismiss the application for approval of the Agreement.
Part-time employment
The SDA contend that the Agreement allows the employer substantial flexibility in relation to rostering part-time employees without paying any compensatory casual loading. That flexibility is to be contrasted with the relevant provisions in the Award that require agreement to be reached between an employer and an employee on commencement of employment, on the number of hours to be worked and the days and times at which they are to be worked.[25] The SDA submits that such rostering flexibility deprives employees of an entitlement to overtime pay that would otherwise apply under the Award when hours of work are rostered outside of the agreed days and times of work.
Relevant to this submission, clause 6.4 of the Agreement relevantly provides:
Part Time Employment
6.4As a part time employee, you will work fewer than 38 ordinary hours per week with reasonable predictability.
6.5When you commence employment with us, we will agree in writing with the employee on all of the following:
(a)the number of hours of work which is guaranteed to be provided and paid to the employee each week or, where your employer operates a roster, the number of hours of work which is guaranteed to be provided and paid to the employee over the roster cycle (the guaranteed hours); and
(b)the days of the week on which, and the hours on those days during which, the employee is available to work the guaranteed hours (your availability).
6.6Any change to a part time employee’s guaranteed hours may only be made with the written consent of the employee (which can include electronic means).
6.7You are able to provide your availability on the mobile application each week from which a roster will be created.
6.8Hours worked in accordance with an agreed roster based on provided availability will constitute your agreement to work those hours as your ordinary hours for that roster cycle. You may agree or elect to work additional ordinary hours in excess of your guaranteed hours up to a maximum of 38 ordinary hours per week.
…
Clause 9 of the Agreement deals with overtime and relevantly provides:
9.OVERTIME
9.1 Overtime means hours worked by an employee, at the direction of the employer:
(a)In excess of 38 hours per week (averaged over a 4 week cycle);
(b)In excess of 11 ordinary hours on any one day;
(c)For full time and part time employees;
(i) In excess of 5 days in one week (or 6 days by mutual agreement);
(ii) before the employee’s rostered start time on any day;
(iii) after the employee’s rostered finish time on any day; or
(d)For part time employees – outside your rostered hours (unless there is an agreed shift swap as per Clause 7.4);
provided the employee has been authorised to work such hours by the employer.
…
Clause 10 of the Award deals with part-time employment and provides:
10. Part-time employees
10.1 A part-time employee is an employee who:
(a)works less than 38 ordinary hours per week; and
(b)has reasonably predictable hours of work.
10.2 An employer must roster a part-time employee for a minimum of 3 consecutive hours on any shift.
10.3 At the time of engaging a part-time employee, the employer and the employee must agree in writing on a regular pattern of work. That agreement must include at least all of the following:
(a)the number of ordinary hours to be worked each day; and
(b)the days of the week on which the employee will work; and
(c)the actual times at which the employee will start and finish work each day; and
(d)when meal breaks may be taken and their duration; and
(e)that the daily engagement is a minimum of 3 consecutive hours; and
(f)that any variation will be in writing, including by any electronic means of communication (for example, by text message).
10.4 The employer must keep a copy of any agreement made under clause 10.3 and give a copy to the employee.
10.5 The employer and the employee may agree to vary the regular pattern of work agreed to under clause 10.3 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.
10.6 If no record of an agreed variation to a particular rostered shift under clause 10.5 is kept by the employer, then the employer must pay the employee at overtime rates for any hours worked in excess of the employee’s regular pattern of work.
10.7 The employer and employee may agree to vary the regular pattern of work agreed to under clause 10.3 on an ongoing basis or for a specified period of time, provided that:
(a)the agreed variation is recorded in writing, including by any electronic means of communication, before the variation occurs; and
(b)the employer keeps a copy of the agreed variation and gives a copy to the employee.
10.8 An employer must pay a part-time employee in accordance with clause 15—Minimum rates for each ordinary hour worked.
NOTE: Penalty rates applicable to part-time employees are set out in clause 21—Penalty rates
10.9 All time worked in excess of the number of ordinary hours agreed under clause 10.3 or varied under clause 10.5 or 10.7, is overtime and must be paid at the overtime rate in accordance with clause 20—Overtime.
Clause 20.3 of the Award provides for the following in relation to payment of overtime pay to part-time employees:
20.3 Payment of overtime for part-time employees
An employer must pay a part-time employee at the overtime rate in clause 20.6 for any hours worked as follows:
(a)in excess of:
(i)38 ordinary hours per week or an average of 38 ordinary hours per week averaged over a 4 week period; or
(ii)5 days in one week (or 6 days in one week if, in the following week, ordinary hours are worked on not more than 4 days); or
(iii)11 ordinary hours on any one day; or
(iv)the agreed hours in clause 10.3; or
(v)the agreed hours as varied under clauses 10.5 or 10.7; or
(vi)their regular pattern of work in circumstances where there is no written record of an agreed variation to a particular rostered shift; or
(b)before the employee’s rostered start time on any one day, or
(c)after the employee’s rostered finish time, on any one day; or
(d)outside the ordinary hours of work.
In considering the part-time employment arrangements and the SDA’s submissions, we accept that the terms of the Agreement provide some additional flexibility for the employer compared to the Award. That flexibility arises because the respondent can roster part-time employees for their guaranteed hours of work at any time within employees’ notified periods of availability. This may be contrasted with the Award where agreement is reached on commencement of employment on the number of hours to be worked each week and the days and start/finish times of such hours.
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.
The Agreement is silent on the number of hours or the ‘window’ of availability that a part-time employee must provide to the respondent within which their guaranteed hours may be rostered. However, the fact that a part-time employee may provide their availability in advance of each week, within which their guaranteed hours are rostered, distinguishes their working arrangements from those that apply to casual employees. It also provides a part-time employee with greater flexibility and some control over their working hours from week to week. The other point to be made is that by updating their availability via an app, this would be taken to be an agreement made by electronic means. It follows from the foregoing that while we accept there is some additional flexibility provided to the respondent in rostering part-time employees compared to under the Award, the arrangements do not possess the characteristics of casual employment. Moreover, there is an offsetting benefit to part-time employees in that they have flexibility to alter their days/hours of availability on a weekly basis.
Turning to the overtime provisions, the Agreement and Award have similar triggers for the payment of overtime, including where work is required to be performed in excess of 38 hours per week (averaged over a four-week cycle), in excess of 11 hours in a day, in excess of five days (or six days where agreed) in a given week, before or after rostered start and finish times, and outside of rostered shift times. It is also open under both the Agreement and Award for part-time employees to agree to vary their ordinary hours of work such that they may work additional hours at ordinary time rates of pay.
For these reasons, we are not persuaded that the part-time provisions in the Agreement are detrimental when compared to the Award. They are therefore a neutral consideration in the BOOT assessment.
Other detriments
The SDA has also identified a number of other detriments which it says should be weighed in the Commission’s BOOT assessment. The respondent has proposed a series of further undertakings to address some of those concerns. Our view on the matters raised is set out below.
The SDA says that clause 27.1(b) of the Agreement permits the respondent to deduct an amount from the pay of employees who are under the age of 18 years where they fail to serve out a notice period. This may be contrasted with clause 31.1(d) of the Award, which only permits such deductions for persons who are at least 18 years of age. The respondent has proposed an undertaking (undertaking 5) that would, if accepted, align the Agreement provisions with clause 31.1(d) of the Award and thus remedy the BOOT concern.
The SDA contends that clause 8.3 of the Agreement applies a ‘use it or lose it’ approach to rest breaks in that, if an employee fails to take their allotted break, the employee will not be allocated an additional 10-minute rest break. The SDA says this is contrary to clause 14 of the Award which includes no such approach. We note that the Agreement clause states that an employee will be ‘directed to take’ a rest break and that a failure to follow such a direction will result in loss of the break. The Award is silent on the consequences of a rest or meal break not being taken, unlike some modern awards that prescribe a penalty payment when a meal break is worked through or delayed. We accept that the loss of a 10-minute rest break where not taken despite a direction is detrimental when compared to the Award. However, the absence of any form of additional payment under the Award in these circumstances leads us to conclude that no financial detriment arises and therefore we accord limited weight to the matter in our BOOT assessment.
According to the SDA, the Agreement does not include a provision comparable to clause 3.4 of the Award, which requires employers to ensure copies of the NES are available to employees in the workplace either through placement on a noticeboard or via convenient electronic access. The respondent has proposed an undertaking (undertaking 6) which, if accepted, would mirror the obligation found at clause 3.4 of the Award and remedy the BOOT concern.
Clause 29.4 of the Agreement precludes an employee being accompanied during the first two steps of the Dispute Settlement Procedure by a representative attending in the capacity of a legal representative. No such limitation is imposed by clause 30.7 of the Award according to the SDA. The respondent has proposed an undertaking (undertaking 7) that would, if accepted, amend clause 29.4 to remove the restriction on legal representation at the first two steps of the Dispute Settlement Procedure and remedy the BOOT concern.
The SDA submits that clause 26.1 of the Agreement imposes an obligation on employees on termination of employment to return all relevant company property, which the SDA states places employees at risk of civil penalties in circumstances where no such provision is found in the Award. The Agreement is silent on the consequences of failing to return company property on termination although we must accept, as a matter of law, that breach of the obligation under the Agreement would expose the employee to the risk of civil penalties. We think however that the prospect of such action is more theoretical than likely, and we see nothing inherently unfair or unreasonable in the respondent seeking to recover company property from an employee on termination of employment. To the extent the clause raises a theoretical exposure to civil action where it is breached, we accord the term limited weight in our BOOT assessment.
The SDA further submits that clause 27.1 of the Agreement permits pay deductions in a wide range of circumstances not contemplated under the Award. Section 324 of the FW Act permits employers to make pay deductions in specified circumstances, including where such deductions are made in accordance with the terms of an enterprise agreement (s 324(b)). Clause 27.1 of the Agreement authorises such deductions. The absence of a provision permitting those particular deductions in the Award does not preclude inclusion of such a clause in the Agreement. However, the respondent’s authority to make deductions under clause 27.1 is tempered by the operation of s 326 of the FW Act, which would render the clause of no effect if the proposed deduction was unreasonable and directly or indirectly for the benefit of the employer. In these circumstances we attached limited weight to the matter in our assessment of the BOOT.
Unlike clause 19.5(b) of the Award, clause 12 of the Agreement does not expressly provide for superannuation contributions to be made up to a maximum of 52 weeks when an employee (who remains an employee) is receiving either workers’ compensation payments or payments directly from the employer in accordance with statutory requirements. The respondent has proposed an undertaking (undertaking 8) that would, if accepted, ensure that superannuation entitlements under the Agreement reflect those found in clause 19.5(b) of the Award, thus remedying any BOOT concern.
The SDA submits that clause 22.7 of the Agreement allows the employer to deem an employee to have abandoned their employment if absent from work for three consecutive days without notification where no such provision is found in the Award. We note that the clause requires the respondent to make efforts to contact an employee in these circumstances to try and establish the reason for the absence following which the respondent may give notice of termination if no explanation for the absence is provided and there is no indication that the employee intends to return to work. The requirement imposed on the respondent under clause 22.7 to give notice of termination is consistent with the obligation identified by the Full Bench in Bienias v Iplex Pipelines Australia Pty Ltd[26] and is not contrary to the provisions set out in clause 31.1 of the Award, which specifies required notice periods consistent with the National Employment Standards (NES). In these circumstances we do not accept the provision is detrimental and as such it is a neutral consideration in our BOOT assessment.
The Agreement fails to provide for accident pay in terms that are the same or similar to that provided by clause 18 of the Award. The respondent has proposed an undertaking (undertaking 9) that would, if accepted, provide employees with an entitlement to accident pay per clause 18 of the Award and thus remedy the BOOT concern.
Overall BOOT assessment
Under s 193(1) of the FW Act, an enterprise agreement will be found to have passed the BOOT if the Commission is satisfied that at the test time, each award covered employee and each reasonably foreseeable employee employed under the agreement would be better off overall if the agreement applied to the employee rather than if the relevant award applied to the employee. That assessment is undertaken through a global consideration of the provisions in the agreement compared to the award, taking into account the provisions that are less beneficial and weighing them against the provisions that are more beneficial.
Subject to acceptance of the proposed undertakings, the Agreement would provide for salaries of between 2.06 per cent and 6.63 per cent above the Award and a range of other conditions broadly aligned with Award entitlements including hours of work, overtime and penalty rates. We have also taken into account the undertakings proposed by the respondent, and that the financial and non-financial detriments identified above including annual leave loading, Special Clothing Allowance, superannuation while on workers’ compensation and accident pay are largely remedied. The remaining alleged non-financial detriments discussed above, in respect of which no undertakings are proposed, are accorded limited weight by us and are more than offset by the higher rates of pay in the Agreement. However, we have one residual concern, that of pay rates and allowances for casual and part-time employees engaged by the respondent in its Broken Hill store. For the reasons set out above at [38]–[44], we are unable to accept undertakings 1 and 2 as proposed by the respondent and invite the respondent to provide an alternate undertaking in the terms proposed at [47].
The SDA accepted that, subject to acceptance of the proposed undertakings, the Agreement would pass the BOOT, although we note that this position was put on the basis of undertakings 1 and 2 being included. The SDA did not oppose acceptance of the balance of the undertakings, nor contend that those undertakings could not be accepted under s 190(3) of the FW Act. We are satisfied that the proposed undertakings, other than undertakings 1 and 2, would not be likely to cause financial detriment to any employee covered by the Agreement nor result in substantial change.
Subject to receipt of consolidated undertakings including an undertaking in the form invited at [47], we consider that the range of entitlements conferred by the Agreement, are such as to leave each award covered employee and reasonably foreseeable employee better off overall when compared to the Award at test time.
Genuine agreement
Section 186(2)(a) of the FW Act requires that the Commission be satisfied that the agreement was genuinely agreed. Section 188 goes on to set out certain matters that the Commission must take into account or be satisfied of in determining whether an agreement has been genuinely agreed. Relevantly for present purposes, s 188(1) requires the Commission to take into account the Statement of Principles made under section 188B in determining whether it is satisfied that the agreement was genuinely agreed.
Further, s 188(4A) of the FW Act states the Commission cannot be satisfied that an agreement was genuinely agreed unless satisfied that the employer complied with s 180(5) of the FW Act. Section 180(5) requires an employer to take all reasonable steps to explain the terms of an enterprise agreement and the effect of those terms and ensure that the explanation is provided in an appropriate manner taking into the particular circumstances of the employees who will be covered by the agreement.
Pursuant to s 188B of the FW Act, the Commission issued the Statement of Principles on 12 May 2023 which, in the opening paragraph of Schedule 1, states as follows:
This Statement of Principles sets out matters that the Fair Work Commission (FWC) must take into account in determining whether it is satisfied that an enterprise agreement ‘has been genuinely agreed to by the employees covered by the agreement’.
The important point to be made is that while the Commission is required to take into account the Statement of Principles in determining whether an agreement has been genuinely agreed, it does not operate as a set of mandatory rules that must be complied with by an employer absent which the Commission cannot be satisfied that an agreement has been genuinely agreed. Where an employer follows pre-approval steps that are consistent with the Statement of Principles, that would weigh more favourably towards a conclusion that an agreement has been genuinely agreed. The converse is equally true of course. The requirement to take into account the Statement of Principles does not displace the requirement to consider each of the other matters set out in s 188 in determining whether an agreement has been genuinely agreed. In the present case, the SDA submits that there are various grounds upon which we should find that the Agreement has not been genuinely agreed. We turn to those matters now.
Section 180(5)
The SDA contends that the respondent failed to comply with s 180(5) of the FW Act and also, taking into account the relevant sections of the Statement of Principles dealing with explaining the terms of a proposed agreement to employees, that the Commission cannot be satisfied that the Agreement was genuinely agreed. It points to the following matters in support of that submission.
The Q&A Document provided to employees is said by the SDA to be manifestly inadequate as it fails to provide a clear explanation in relation to a number of matters including;
·the variance between the part-time provisions of the Award and Agreement, particularly as it impacts entitlements to overtime penalties;
·the calculation of how certain forgone allowances provided by the Award were absorbed into the Agreement base rates of pay;
·how penalty rates were absorbed into base rates of pay;
·how annual leave loading was absorbed into base rates of pay;
·when superannuation is payable under superannuation legislation;
·the risk of civil penalty faced by employees for failing to return company property on termination of employment; and
·the meal allowance under the Agreement is inaccurately described as being ‘per the Award’.
The SDA further submits that while the respondent conducted a series of meetings with employees across its six stores, no detail is provided of the content of the oral explanations of the terms of the Agreement in those meetings beyond a statement that the respondent read the documents and invited questions. The SDA further contends that the cohort of employees was likely to be very young, inexperienced in negotiation of enterprise agreements and not assisted by representation by a bargaining representative during bargaining for the Agreement. In all of these circumstances, the SDA submits that the Commission cannot be satisfied that employees had an informed and genuine understanding of what was being approved.
The pre-approval step in s 180(5), which is an element of the ‘genuinely agreed’ definition in s 188(4A), is expressed as follows:
Terms of the agreement must be explained to employees etc.
(5) The employer must take all reasonable steps to ensure that:
(a)the terms of the agreement, and the effect of those terms, are explained to the employees at the time and who will be covered by the agreement; and
(b)the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.
Reaching the requisite state of satisfaction as to compliance with s 180(5) depends on the circumstances of the case. The nature of the requirement was helpfully summarised by a Full Bench in The Australian Workers’ Union v Rigforce Pty Ltd[27] (Rigforce) as follows:
[35] In considering the ‘genuinely agreed’ ground of appeal, it is necessary for reasons which will become apparent to consider in detail only the question of compliance with the pre-approval step in s 180(5). The nature of the requirement in s 180(5) was analysed in detail by the Federal Court (Flick J) in CFMEU v One Key Workforce Pty Ltd. We adopt the summary of that analysis set out in CFMMEU v Ditchfield Mining Services Pty Limited, which reduced it to the following four propositions:
(1)whether an employer has complied with the obligation in s 180(5) depends on the circumstances of the case;
(2)the focus of the enquiry whether an employer has complied with s 180(5) is first on the steps taken to comply, and then to consider whether:
• the steps taken were reasonable in the circumstances; and
• these were all the reasonable steps that should have been taken in the circumstances;
(3)the object of the reasonable steps that are to be taken is to ensure that the terms of the agreement, and their effect, are explained to relevant employees in a manner that considers their particular circumstances and needs. This requires attention to the content of the explanation given; and
(4)an employer does not fall short of complying with the obligation in s 180(5) of the FW Act merely because an employee does not understand the explanation provided.
[36] Additionally, we also adopt the analysis of Gostencnik DP in BGC Contracting Pty Ltd concerning the nature of a statutory obligation to take “all reasonable steps” as follows (footnote omitted):
[43] A requirement or obligation to take “all reasonable steps” seems to me to require the identification of the steps a reasonable person would regard as reasonable in the circumstances that apply. Whether particular steps are reasonable will depend on the particular circumstances existing at the time the obligation arises. A requirement to take all reasonable steps does not extend to all steps that are reasonably open in some literal or theoretical sense…
Turning now to the particular circumstances of this application, the explanation of the Agreement’s terms and the effects of those terms took the following form. An 11-page Q&A Document was provided to employees at the commencement of the bargaining process on 9 October 2023. According to the Form F17B declaration, a total of approximately 20 meetings were then held with employees across the six stores between 10–24 October 2023. At the information sessions, the respondent’s representatives read through the Agreement clause by clause comparing it to the Award, read through the Q&A Document and encouraged and responded to questions from employees.
In our view, and briefly putting aside the alleged inaccuracies of the Agreement explanation, the provision of written explanatory material, the multiple information sessions conducted prior to the access period, the clause by clause ‘read-through’ and the opportunity afforded to employees to ask questions at these information sessions were all the reasonable steps required to be taken by the respondent necessary to satisfy the requirements of s 180(5). While there may have been further conceivable steps that could have been taken, that does not mean that such conceivable steps were necessarily reasonable steps in the circumstances.
Returning to the alleged inaccuracies of the explanation, in circumstances where the specific information before the Deputy President in relation to the detail of explanation of the Agreement was limited to the Q&A Document, it is necessary for us to consider the accuracy and quality of the explanation of the terms and effect of the terms of the Agreement provided to employees in that document to properly assess whether the requirements of s 180(5) were met. We turn to that now.
As to the meal allowance, the Agreement provides at clause 13 for a meal allowance of $15.23 where an employee is required to work more than an hour of overtime without 24 hours’ notice and is not provided with a meal, and a further $13.76 meal allowance if the overtime extends beyond four hours. Those amounts are consistent with the current Award entitlement.[28] Unlike the Award, however, there is no mechanism for the adjustment of the meal allowance during the four-year Agreement term. This may be contrasted with the Award where the mechanism for adjustment of allowances including the meal allowance is found at Appendix B.2.2 of the Award and provides for adjustment at the same time as adjustment to the Award ‘standard rate’ based on specified Australian Bureau of Statistics (ABS) CPI figures.
The Q&A Document describes the Agreement meal allowance entitlement as being ‘[a]s per the Award’. That is correct to the extent that the quantum of the allowance at the date the application for approval of the Agreement was made was the same as in the Award. However, the explanation fails to identify that, unlike the Award, there is no mechanism or obligation to adjust the meal allowance during the Agreement term. In our view the meal allowance is a significant Agreement entitlement, and its explanation was inaccurate.
We now turn to the various Award entitlements incorporated into the base rates of pay which the SDA submits were not properly explained. The relevant items are that of annual leave loading, the Broken Hill Allowance and Special Clothing Allowance. As earlier dealt with, those entitlements were said by the respondent to have been absorbed into the base rates of pay, which is made clear in the Q&A document provided to employees. While we accept that an arithmetic calculation of the value of these benefits in the base rates of pay was not included in the explanation, we are satisfied that on any sensible reading of the Q&A document, it would be apparent that the effect of the Agreement is that employees would not receive those separate Award entitlements but would receive a higher rolled-up base rate of pay. We are not persuaded that the absence of a forensic explanation of the value of each discrete component in the base rate renders the explanation inaccurate or inadequate.
With respect to superannuation, the SDA submits that the explanation of the entitlement was deficient because the Q&A document states that superannuation is ‘payable in accordance with the superannuation legislation’. While the explanation of the Agreement term may be correct, it fails to explain the effect of the Agreement term when compared to the Award, namely that the Agreement does not provide for the entitlement under clause 19.5 of the Award for superannuation to be paid during periods of absence on workers’ compensation. The omission means that the explanation of the effect of a significant term of the Agreement was inaccurate.
Clause 26 of the Agreement requires employees to return all company property upon the termination of employment. The SDA contends that the respondent failed to explain to employees the potential civil penalty risk they face if they do not comply with that obligation. We accept that the Q&A document does not deal with that clause nor, as the SDA submits, the risk of civil penalties. While we accept that the Award contains no such clause, that does not mean the absence of an explanation of the Agreement term is an omission that means the respondent has failed to comply with s 180(5) of the FW Act. The ‘all reasonable steps’ requirement in s 180(5) does not compel an employer to explain every term and the effects of every term, particularly in respect of minor and self-explanatory terms. Of course, the omission of, or the provision of an inaccurate, explanation of a significant or complex term would be relevant to s 180(5) compliance. In the present case we are not persuaded that clause 26 is a significant term of the Agreement. The requirement for employees to return company property on termination is reasonable and should be self-evident to any employee. As to the exposure to civil penalties in circumstances of non-compliance, that is an effect of the FW Act rather than the terms of the Agreement itself.
As to the variance between the part-time provisions of the Award and Agreement, the Q&A Document provides an extract of the key provisions from the Agreement and Award. The key differences between the two are apparent on a plain reading of the document. We have previously dealt with the contested BOOT issues arising from the Agreement’s part-time provisions and found that no detriment arises in respect of overtime entitlements. In these circumstances, we are not persuaded that the explanation provided in the Q&A document was inaccurate or inadequate.
We consider that the SDA’s submission that the Commission cannot be satisfied that employees had a genuine and informed understanding of what of what was being approved must be rejected. It is entirely speculative and unsupported by any direct evidence. While we readily accept that the employee cohort of the respondent is likely to be young and inexperienced in enterprise bargaining, the respondent took what we regard as appropriate and necessary steps to conduct multiple face-to-face meetings with employees across all of its sites. The conduct of the approximately 20 meetings across a workforce of some 100 employees included a ‘read-through’ of the terms and was supported by the Q&A Document. That document is written in plain language and also included a detailed set of Q&As about the Agreement-making process at pages 1 and 2 of the document, none of which the SDA took issue with. These were in our view all the reasonable steps required to explain the terms and effects of the terms of the Agreement having regard to the employee cohort.
As identified above, there were inaccuracies in the explanation of certain terms and effects of the terms of the Agreement relating to the meal allowance and superannuation entitlements in the Agreement. This gives rise to a concern as to whether the respondent has complied with s 180(5) of the FW Act. It is however well-understood that a s 180(5) concern can be remedied by an undertaking as s 190 states an undertaking may be accepted that addresses a concern under ss 186 and 187 of the FW Act.[29]
The omission of an explanation of the differences between Award and Agreement superannuation entitlements will be remedied by acceptance of the proposed undertaking which will align the Agreement superannuation entitlement with that of the Award. As regards the meal allowance, the respondent’s representation of the Agreement entitlement as being per the Award was inaccurate for the reasons set out above. The deficient explanation can however be remedied by the respondent providing an additional undertaking to the effect that the meal allowance in the Agreement will be increased in line with adjustment of the meal allowance in the Award. The respondent is invited to provide an undertaking in such terms.
Principle 18 — whether exercise in authentic agreement making
Principle 18 of the Statement of Principles provides:
18. An enterprise agreement will generally not have been genuinely agreed to by the employees covered by the agreement unless the agreement was the product of an authentic exercise in agreement-making between the employer(s) and employees in one or more enterprises, and the employees who voted for the agreement had an informed and genuine understanding of what was being approved.
The SDA contends that we must have regard to two distinct requirements in principle 18. First, the agreement must be a product of an authentic exercise in agreement-making between the employer(s) and employees and, second, the employees who voted for the agreement must have had an informed and genuine understanding of what was being approved. The SDA submits there is little evidence of either of those requirements being met and good reason to doubt them. The SDA points to the apparent absence of any actual bargaining which they contend indicates there was not an authentic exercise in bargaining. It also points out that the respondent was aware of the SDA’s status as a bargaining representative, did not notify or engage the SDA on commencement of ‘bargaining’ and simply ‘rolled out’ a finalised agreement at the same time as it distributed the NERR and Q&A Document to an industrially unsophisticated workforce.
We readily accept that the process that led to the making of the Agreement does not appear to have involved any formal ‘bargaining’. That is hardly surprising in circumstances where no employees nominated a bargaining representative, be that an individual bargaining representative or the SDA. The fact that bargaining may not have occurred does not mean the Agreement was the product of an agreement-making process that lacked authenticity. Contrary to the SDA’s submission, Principle 18 does not require there to be an ‘authentic exercise in bargaining’ but rather the Agreement should be a product of an ‘authentic exercise in agreement-making’. The two terms are not to be read as one and the same thing.
Matters that will inform a view on the authenticity of the agreement-making process will include the genuineness of the enterprise and the workforce with which the agreement is made, whether the agreement was truly intended to cover and apply to the employees with whom it is made, and whether the agreement is merely a device to achieve a collateral industrial or commercial objective. The circumstances described in AWU v Workforce Logistics Pty Ltd[30] constitute an archetypal example of an inauthentic exercise in agreement-making. In this case, there is no doubt that the respondent operates a genuine and well-established business enterprise and that the Agreement was made for the purpose of setting the terms and conditions of employment for current and future employees.
As to one of the SDA’s particular complaints, being that the respondent was aware of the SDA’s alleged status as a bargaining representative, it does not follow from the SDA’s assertion of that status in April 2023 that the respondent was required to notify or engage with it at a later point in circumstances where no employee nominated or identified the SDA as their bargaining representative or contacted them to seek their assistance in bargaining. Moreover, no evidence was led in these proceedings that would establish that the SDA was a default bargaining representative at any point from the time the NERR was issued to the time when application for the approval of the Agreement was made.
We are not persuaded that the Agreement was a product of an exercise in agreement-making that lacked authenticity. We will take this finding into account in our determination of whether we are satisfied that the Agreement was genuinely agreed.
Principle 15 — whether agreement ballot voting behaviour disclosed to respondent
Principle 15 of the Statement of Principles provides the following;
15. Employees should be given a reasonable opportunity to vote on a proposed enterprise agreement in a free and informed manner. This should include:
(a) a voting process that ensures the vote of each employee is not disclosed to or ascertainable by the employer, and
(b) a method and period of voting that provides all employees entitled to vote with a fair and reasonable opportunity to cast a vote.
The SDA submits that the manner in which the ballot was conducted resulted in the disclosure of the ballot results to the respondent, which was inconsistent with principle 15(a) of the Statement of Principles. As stated above at [11], employees who were unable to attend their stores to participate in the secret ballot on 7 November 2023 were advised in the Voting Instruction Sheets sent on 27 October 2023 that they could vote by email to Ms Avis’ email address. Ms Avis had previously identified herself as an Authorised Representative of the respondent in an email to Mr Amin on 13 April 2023.
We accept the respondent’s submission that Ms Avis was directed to collate the ballot results and then report the outcome to the respondent’s representatives without disclosing how individual employees voted. The fact that Ms Avis had previously acted as a representative of the respondent in communication with the SDA gives rise to a legitimate concern that she was not independent from the ballot process. In these circumstances we are satisfied that the voting behaviour of some employees was disclosed to or ascertainable by the employer via emails received by Ms Avis and which would have been held on the respondent’s computer system. The reason for avoiding disclosure of employees’ votes is obvious in the context of conducting a free and fair ballot where employees are free of perceived or real pressure to vote to approve an agreement.
However, material before us discloses that, of the 88 votes cast in support of the Agreement, 55 voted in person and 33 voted via an email to Ms Avis. Accepting those figures, even if we were to discount the votes cast via Ms Avis due to concerns over disclosure of those employees’ votes, the Agreement would still have been approved by a majority of employees who cast a vote. In these circumstances, while we have taken into account that the voting process was in part inconsistent with principle 15, it does not preclude a finding that the Agreement was genuinely agreed.
We have considered above whether the respondent complied with its obligations under s 180(5) of the FW Act to explain the terms and effects of the terms of the Agreement to employees. We consider that, subject to the respondent providing an undertaking to address the deficient meal allowance explanation discussed above, we would be satisfied that it has complied with s 180(5). As to the other matters raised by the SDA concerning principles 15 and 18 of the Statement of Principles, we have had regard to those matters, and they do not tell against the Full Bench reaching the requisite state of satisfaction that the Agreement was genuinely agreed pursuant to s 186(2)(a).
Section 201(2)
The SDA gave notice during the appeal proceedings on 12 January 2024 pursuant to s 183(1) that it wanted to be covered by the Agreement pursuant to s 201(2) of the FW Act if the Agreement is approved over its objections.[31] We understand that notice to have been given on the basis that the SDA was a default bargaining representative for the Agreement.
The above-referred notice by the SDA was not opposed in the proceedings by the respondent. However, we are not satisfied on the material currently before us that the SDA was a bargaining representative during the period from the issue of the NERR to the time that the application for approval of the Agreement was lodged. We will allow the SDA a period of seven days from the date of this decision to provide a declaration evidencing that it was a bargaining representative during this period. If the requisite evidence is provided, any final approval decision will note that the SDA is covered by the Agreement pursuant to s 201(2) of the FW Act.
Conclusion
For the reasons given, we propose to quash the decision under appeal and to re-determine ourselves the respondent’s application for approval of the Agreement. The respondent will have an opportunity to provide the further undertakings set out at [47] and [93] to address the specific concerns we have identified. If such undertakings are provided, we anticipate we will be in a position to approve the Agreement. For the present, we order as follows:
(1)Permission to appeal is granted in relation to Ground 1.
(2)The appeal is upheld in relation to Ground 1.
(3)The decision under appeal ([2023] FWCA 3996) is quashed.
(4)The Full Bench will re-determine the application for approval of the Allen Family Pty Ltd Enterprise Agreement 2023. The respondent is to send the President’s chambers a set of consolidated undertakings within seven days of the date of this decision.
(5)The respondent is to advise the President’s chambers whether it opposes the SDA being covered by the Agreement pursuant to s 201(2) of the FW Act and if so, must file submissions in support of its objection within seven days of the date of this decision.
PRESIDENT
Appearances:
P Dean of counsel for the Shop, Distributive and Allied Employees Association.
L Allen and L Kite for Allen Family Pty Ltd.
Hearing details:
2024.
Sydney:
January 12.
[1] [2023] FWCA 3996.
[2] AE522480.
[3] MA000003.
[4] Witness Statement of Ali Amin (Exhibit 1), 5 January 2024, Annexure AA2, email from Ali Amin to Respondent, 3 April 2023.
[5] Ibid, Annexure AA3, email from Ali Amin to Tracey Avis and Lindsay Allen titled ‘The Allen Family Pty Ltd Collective Agreement Number Two (2007)’, 3 April 2023.
[6] Ibid, Annexure AA4, email from Tracy Avis to Ali Amin, 13 April 2023.
[7] Ibid at [20]–[23].
[8] Form F17B, Question 19.
[9] Q&A Document for Allen Family Pty Ltd Enterprise Agreement 2023.
[10] Form F17B, Question 22.
[11] Form F16.
[12] Voting Instruction Sheet.
[13] Form F17B, Question 29.
[14] Ibid Questions 10–13.
[15] [2018] FWCFB 6907, 284 IR 1.
[16] Form F17B, Question 13.
[17] Fast Food Industry Award 2020 [MA000003] clause 17.2.
[18] Form F17B, Question 13.
[19] Fast Food Industry Award 2020 [MA000003] clause 17.5.
[20] Exhibit 1 at [48]–[49]; Annexure AA7 Agreement v Award Rates; AA8 Overview of Roster Patterns.
[21] CEPU v DDP Electrical Services Pty Ltd[2020] FWCFB 18 at [50]–[53].
[22] Exhibit 1 at [47(e)].
[23] Form F17B, Question 13.
[24] Fair Work Act 2009 (Cth) s 190(3)(b).
[25] Fast Food Industry Award 2020 [MA000003] clause 10.3(a)–(c).
[26] [2017] FWCFB 38 at [41]–[45].
[27] [2019] FWCFB 6960.
[28] Fast Food Industry Award 2020 [MA000003] clause 17.4.
[29] CFMMEU v Specialist People[2019] FWCFB 7919 at [23].
[30] [2023] FWCFB 157.
[31] Transcript, 12 January 2024 at PN166.
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