[2017] FWC 1624

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

Sodexo Australia Pty Ltd T/A Sodexo Australia
(AG2016/6249)

SXO CUSTODIAL ENTERPRISE AGREEMENT 2016

Corrections and detentions
DEPUTY PRESIDENT KOVACIC	CANBERRA, 24 MARCH 2017

Application for approval of the SXO Custodial Enterprise Agreement 2016

[1] An application was made on 3 October 2016 for approval of an enterprise agreement known as the SXO Custodial Enterprise Agreement 2016 (the Agreement). The application was made by Sodexo Australia Pty Ltd T/A Sodexo Australia (Sodexo) pursuant to s.185 of the Fair Work Act 2009 (the Act). The Agreement is a single-enterprise agreement.

Background

[2] The Agreement was initially approved by the Fair Work Commission (the Commission) on 31 October 2016 1. That decision was subsequently appealed by United Voice (UV) and the Community and Public Sector Union – State Public Services Federation Group (Western Australian Prison Officers’ Union Branch and Western Australian Branch) (WAPOU) with both organisations seeking a stay of the decision under s.606 of the Act. At the stay hearing on 24 November 2016 the parties consented to permission to appeal being granted, the appeals being upheld, the decision being quashed and the application for approval of the Agreement being referred to a member of the Commission for hearing and determination. In a decision handed down on 29 November 20162, a Full Bench of the Commission, among other things, quashed the decision approving the Agreement and referred the application for approval of the Agreement to the Commission as currently constituted for determination.

[3] The application was the subject of a conference on 18 January 2017 at which a number of issues regarding the Agreement were discussed. Both WAPOU and UV participated in that conference despite neither organisation being a bargaining representative for the Agreement. That conference concluded on the basis that the Commission would write to Sodexo regarding a number of issues and that Sodexo would give consideration to those issues and the various other issues discussed in the conference. The Commission sent an email to Sodexo on 20 January 2017, with that email copied to both WAPOU and UV.

[4] In subsequent developments, Sodexo wrote to the Commission on 6 February 2017 regarding the various issues discussed at the 18 January 2017 conference and offering undertakings in respect of a number of those issues. Among other things, Sodexo proffered an undertaking in respect of Clause 23 – Special Site Allowance (SSA) of the Agreement. The effect of the SSA undertaking proffered by Sodexo was to guarantee that a minimum SSA of $6,500 per annum would be paid to all employees.

[5] On 8 February 2016 my chambers wrote to both WAPOU and UV seeking an indication as to whether they wished to be heard on the matters canvassed in Sodexo’s correspondence of 6 February 2017 and/or still pressed their objections to the Agreement being approved. Both WAPOU and UV responded on 10 February 2017 confirming their continued objection to the Agreement’s approval, with the Commission advising the parties on 14 February 2017 that it intended to list the application for hearing.

[6] The application was heard on 7 March 2017. At the hearing, Mr Nicholas Harrington of Counsel appeared with permission for Sodexo and Ms Rachael Consentino appeared with permission for WAPOU. Mr Stephen Bull, an Industrial Coordinator/Legal Practitioner with UV, appeared for UV.

[7] As both WAPOU and UV provided material on which they intended to rely shortly before the hearing on 7 March 2017, Sodexo was given the opportunity to provide written submissions in response to that material by close of business on 10 March 2017. Sodexo’s further submissions also responded to some questions put to it by the Commission at the hearing regarding the rosters it provided to WAPOU, UV and the Commission on 6 March 2017.

The statutory framework

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

186 When the FWC must approve an enterprise agreement—general requirements

Basic rule
(1) If an application for the approval of an enterprise agreement is made under subsection 182(4) or section 185, the FWC must approve the agreement under this section if the requirements set out in this section and section 187 are met.
Note: The FWC may approve an enterprise agreement under this section with undertakings (see section 190).

Requirements relating to the safety net etc.

(2) The FWC must be satisfied that:

(a) if the agreement is not a greenfields agreement—the agreement has been genuinely agreed to by the employees covered by the agreement; and
(b) if the agreement is a multi-enterprise agreement:

(i) the agreement has been genuinely agreed to by each employer covered by the agreement; and
(ii) no person coerced, or threatened to coerce, any of the employers to make the agreement; and

(c) the terms of the agreement do not contravene section 55 (which deals with the interaction between the National Employment Standards and enterprise agreements etc.); and
(d) the agreement passes the better off overall test.

Note 1: For when an enterprise agreement has been genuinely agreed to by employees, see section 188.
Note 2: The FWC may approve an enterprise agreement that does not pass the better off overall test if approval would not be contrary to the public interest (see section 189).
Note 3: The terms of an enterprise agreement may supplement the National Employment Standards (see paragraph 55(4)(b)).

Requirement that the group of employees covered by the agreement is fairly chosen
(3) The FWC must be satisfied that the group of employees covered by the agreement was fairly chosen.

(3A) If the agreement does not cover all of the employees of the employer or

employers covered by the agreement, the FWC must, in deciding whether the group of employees covered was fairly chosen, take into account whether the group is geographically, operationally or organisationally distinct.

Requirement that there be no unlawful terms
(4) The FWC must be satisfied that the agreement does not include any unlawful terms (see Subdivision D of this Division).

Requirement that there be no designated outworker terms
(4A) The FWC must be satisfied that the agreement does not include any designated outworker terms.

Requirement for a nominal expiry date etc.
(5) The FWC must be satisfied that:

(a) the agreement specifies a date as its nominal expiry date; and
(b) the date will not be more than 4 years after the day on which the FWC approves the agreement.

Requirement for a term about settling disputes
(6) The FWC must be satisfied that the agreement includes a term:

(a) that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:

(i) about any matters arising under the agreement; and
(ii) in relation to the National Employment Standards; and

(b) that allows for the representation of employees covered by the agreement for the purposes of that procedure.

Note 1: The FWC or a person must not settle a dispute about whether an employer had reasonable business grounds under subsection 65(5) or 76(4) (see subsections 739(2) and 740(2)).
Note 2: However, this does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4).

187 When the FWC must approve an enterprise agreement—additional requirements

Additional requirements
(1) This section sets out additional requirements that must be met before the FWC approves an enterprise agreement under section 186.

Requirement that approval not be inconsistent with good faith bargaining etc.
(2) The FWC must be satisfied that approving the agreement would not be inconsistent with or undermine good faith bargaining by one or more bargaining representatives for a proposed enterprise agreement, or an enterprise agreement, in relation to which a scope order is in operation.

Requirement relating to notice of variation of agreement
(3) If a bargaining representative is required to vary the agreement as referred to in subsection 184(2), the FWC must be satisfied that the bargaining representative has complied with that subsection and subsection 184(3) (which deals with giving notice of the variation).

Requirements relating to particular kinds of employees
(4) The FWC must be satisfied as referred to in any provisions of Subdivision E of this Division that apply in relation to the agreement.
Note: Subdivision E of this Division deals with approval requirements relating to particular kinds of employees.

Requirements relating to greenfields agreements
(5) …

190 FWC may approve an enterprise agreement with undertakings

Application of this section
(1) This section applies if:

(a) an application for the approval of an enterprise agreement has been made under subsection 182(4) or section 185; and
(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings
(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.

Undertakings
(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:

(a) cause financial detriment to any employee covered by the agreement; or
(b) result in substantial changes to the agreement.

FWC must seek views of bargaining representatives
(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.

Signature requirements
(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.

193 Passing the better off overall test

When a non-greenfields agreement passes the better off overall test
(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.

FWC must disregard individual flexibility arrangement
(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.

When a greenfields agreement passes the better off overall test
… (1)

Award covered employee
(4) An award covered employee for an enterprise agreement is an employee who:

(a) is covered by the agreement; and
(b) at the test time, is covered by a modern award (the relevant modern award) that:

(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(iii) covers his or her employer.

Prospective award covered employee
(5) A prospective award covered employeefor an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:

(a) would be covered by the agreement; and
(b) would be covered by a modern award (the relevant modern award) that:

(i) is in operation; and
(ii) would cover the person in relation to the work that he or she would perform under the agreement; and
(iii) covers the employer.

Test time
(6) Thetest timeis the time the application for approval of the agreement by the FWC was made under subsection 182(4) or section 185.

FWC may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.” (Underlining added)

The Applicant’s case

[9] At the hearing Sodexo reiterated the undertakings proffered in its correspondence of 6 February 2017, confirmed that the undertaking given regarding penalty rates when the application was first determined by the Commission still stood and rebutted aspects of both WAPOU’s and UV’s submissions. Key aspects of Sodexo’s submissions were that:

the SSA undertaking provided a quantifiable benefit which should be taken into account by the Commission as part of its better off overall test (BOOT) assessment, adding that if the Commission were not to do so that it [i.e. Sodexo] was unlikely to satisfy the Commission that the Agreement passed the BOOT;

the argument that the SSA remained a contingent benefit despite the undertaking proffered was wrong because the undertaking assured that every employee would receive a payment of no less than $6,500 per annum;

employees were aware of the SSA when they voted on the Agreement, adding that at that time the provision was a discretionary component of the Agreement and that the SSA undertaking provided employees with a substantial benefit;

it rejected the contention that the SSA undertaking resulted in substantial change to the Agreement;

the absence of the Correctional Supervisor (CS) Level 2 classification which was included in the relevant underpinning award, the Corrections and Detention (Private Sector) Award 2010 3 (the Award), but not in the Agreement did not create a detriment to employees as the rate of pay for the Prison Custodial Officer (Supervisor) (PCOS) classification under the Agreement, once the SSA undertaking was taken into account, was higher than the Award rate of pay for the CS Level 2;

the SSA undertaking offset any financial detriment caused by the Agreement’s less beneficial Higher Duties Allowance arrangements;

the redundancy undertaking it had proffered involved a change in the form of clarification as opposed to a substantial change to the provision;

the absence of automatic access to arbitration under the Agreement’s Dispute Resolution clause did not disadvantage employees given that it was consistent with the Award provision; and

there were no employee bargaining representatives for the Agreement.

[10] In support of its submissions, Sodexo relied on a number of authorities including the decisions in Perth Access Scaffolding Pty Ltd 4 (Perth Access Scaffolding), Angove’s Pty Ltd T/A Angove’s Family Winemakers5 (Angove’s) and Woolworths Ltd Trading as Produce and Recycling Distribution Centre6.

[11] Key aspects of Sodexo’s written submissions of 10 March 2017, included a reiteration of aspects of its earlier submissions and that:

there was no basis for the Commission to undertake its BOOT assessment on the basis of “illogical or fanciful ‘what if’ scenarios concerning hypothetical work arrangements that [the employer] has never used and has no intention of using” 7;

the BOOT test time in respect of the Agreement was the date on which the application for approval of the Agreement was lodged with the Commission, i.e. 3 October 2016;

at that time, all persons who would be covered by the Agreement, were performing training duty on a 38 hour per week, Monday to Friday roster without substantive overtime with a view to undertaking duty according to the operational rosters provided to WAPOU, UV and the Commission on 6 March 2017;

it and WAPOU had agreed on a future roster which was to operate from 14 March 2017;

as a result of the SSA undertaking, the SSA is a quantifiable benefit for the purposes of the BOOT as it is advantageous to all employees;

the Commission should also have regard to the continuing contingent element of the SSA, i.e. the scope for payment of the SSA at a rate above the $6,500 minimum specified in the undertaking;

clarified that the SSA would be paid to employees on a pro-rata basis in each pay cycle and in respect of casual employees would be calculated on an hourly basis and paid according to the number of hours worked in a particular pay cycle;

there was no mathematical or rational basis disclosed in UV’s submissions to assert that an overall assessment would conclude that the Agreement did not pass the BOOT;

the SSA undertaking ought be accepted by the Commission as it did not introduce a new term or condition but rather confirmed a minimum payment that simply coloured the bargain reached, nor did it result in substantial change to the Agreement;

other than for the purposes of preparatory training, Sodexo only employed shiftworkers and had no intention of engaging persons as ‘day workers’ as defined in the Award;

of the rosters currently in place only one exceeded an average of 38 hours per week when averaged over an 8 week period, i.e. the Comms and Gates roster;

under that roster an employee worked a maximum additional 18.37 hours during the year which would attract overtime payments (calculated at double time) ranging from $728.18 to $902.70 per year;

to the extent that the hours of work provisions of the Agreement disadvantaged employees, the SSA undertaking ought to be taken into account and offset that disadvantage;

drawing on the decision in Re Solar Systems Pty Ltd 8, there was no positive or negative impact in the Agreement’s dispute resolution clause;

the undertakings it had proffered clarified the operation of the Agreement, adding that while some of those undertakings effected a change in substance to aspects of the Agreement they did not result in substantial changes to the Agreement; and

the Agreement ought to be approved.

UV’s case

[12] UV did not support approval of the Agreement on the basis that it did not pass the BOOT. More specifically, UV submitted among other things that:

the undertakings proffered by Sodexo should not be accepted and even if they were it was not certain they would satisfy the BOOT;

the SSA could not be used in any assessment of whether the Agreement passed the BOOT as it was a contingent benefit which provided no entitlement;

if the SSA was given no consideration for the purposes of the BOOT, an analysis of the terms and conditions provided for in the Agreement and the Award indicated that an employee covered by the Agreement would be worse off than if the Award applied;

in assessing whether or not the Agreement passed the BOOT, the Commission should be mindful of the discretion which the Agreement provided to Sodexo to reduce its labour costs through manipulation of rosters and other discretionary decisions;

with regard to the SSA undertaking proffered by Sodexo, unresolved issues as to how the SSA would operate were reasons for the Commission not to accept the undertaking;

WAPOU had demonstrated that the SSA’s benefit was easily dissipated when the Agreement’s less beneficial shift length provisions were used to construct rosters which would avoid overtime when the same pattern of hours worked in accordance with the Award would result in overtime payments in excess of $6,500 per annum;

the absence of the Award’s CS Level 2 classification from the Agreement and clause 29 – Ordinary Hours of Work were also detrimental features of the Agreement;

the undertakings proffered by Sodexo in respect of clauses 16.4 – Flexible Part-time Employment, 22.1 – Wage Rates and 24.11 – Adjustment of Allowances addressed UV’s concerns regarding those provisions;

the undertakings proffered by Sodexo in respect of clauses 11 – Dispute Resolution, 16.13 – Daily Hire Employee and 19.4 – Redundancy did not address UV’s concerns regarding those provisions;

it was not the role of the Commission to improve bad bargains, adding that the Commission would be doing so were it to accept the undertakings proffered by Sodexo;

while the Commission could accept undertakings that clarified the operation of an agreement or added provisions to ensure compliance with the Act, it should not accept undertakings that fundamentally altered the balance of what had been agreed to; and

the undertakings proffered in this case should not be accepted and the Agreement should not be approved.

[13] In support of its submissions, UV relied on several authorities, including Perth Access Scaffolding and AKN Pty Ltd t/a Aitkin Crane Services 9(AKN).

WAPOU’s case

[14] WAPOU submitted that the Agreement did not pass the BOOT. In doing so, WAPOU relied on its written submissions of 17 January 2017 which predated several of the undertakings proffered by Sodexo. Specifically, WAPOU submitted, inter alia, that:

the more beneficial terms of the Agreement cited by Sodexo in its Form F17 – Employer’s statutory declaration in support of an application for approval of an enterprise agreement (other than a greenfields agreement) could not be regarded as more beneficial and where they were more beneficial, the benefit did not on balance outweigh the less beneficial provisions of the Agreement

- the Form F17 declared that a number of provisions of the Agreement were more beneficial than the Award, including the SSA, the additional categories of employment on the basis that they provided greater flexibility for employees, the dinner allowance which is $1.00 higher than the Award, the minimum break between shifts being 10 hours as opposed to 8 hours under the Award, and personal leave being paid at the annualised rate as opposed to the employee’s ordinary base rate of pay 10;

the Agreement included several provisions not identified by Sodexo in its Form F17 which were less beneficial to employees when compared to the Award, including the absence of the CS Level 2 classification, the absence of the automatic classification progression provisions of the Award, ordinary hours of work up to a maximum of 12 hours in any one day with hours of work averaged over a six month period as opposed to a maximum of 10 ordinary hours per day and an averaging period of 8 weeks under the Award, an increase from 3 to 10 days in the qualifying period for Higher Duties Allowance for persons acting as a PCOS, and the absence of provision for long breaks between roster cycles; and

on a monetary quantum analysis alone the Agreement did not pass the BOOT.

[15] At the hearing, in response to a question from the Commission, WAPOU indicated that it did not know whether the SSA undertaking proffered by Sodexo addressed the detriment to employee’s vis-à-vis the Award. Drawing on the decisions in Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery 11 (Beechworth Bakery) and United Voice v SECOM Australia Pty Ltd T/A SECOM Security12, WAPOU submitted with regard to the issue of rosters that the issue was not whether a particular roster passed the BOOT but rather whether the Agreement passed the BOOT. WAPOU further submitted at the time the application was made employees were working a training roster as opposed to a shift roster and that the BOOT required the Commission to take into account the potential volatility of rosters. Beyond this, WAPOU:

submitted that the undertaking proffered by Sodexo regarding weekend penalty rates did not address the issue of public holiday penalty rates;

reiterated what it considered to be the detrimental aspects of the Agreement; and

contended that the undertakings proffered by Sodexo resulted in substantial changes to the Agreement and therefore should not be accepted by the Commission.

Consideration of the issues

Does the Agreement pass the BOOT?

[16] As alluded to above, Sodexo proffered a number of undertakings to address issues raised by the Commission and WAPOU and UV regarding the Agreement.

[17] As stated by Deputy President Sams in Beechworth Bakery:

“[65] The BOOT is a balancing exercise - not a ‘line by line’ comparison. In NTEU v UNSW [2010] FWAA 9588, Lawler VP said as follows:

‘It is trite to observe that awards typically contain both monetary and non-monetary terms and conditions. Obviously enough, the BOOT calls for an overall assessment. Comparing monetary terms and conditions is, at the end of the day, a matter of arithmetic. There is an obvious problem of comparing apples with oranges when it comes to including changes to non-monetary terms and conditions into the “overall” assessment that is required by the BOOT. In such circumstances the Tribunal must simply do its best and make what amounts to an impressionistic assessment, albeit by taking into account any evidence about the significance to particular classes of employees covered by the Agreement of changes to particular non-monetary terms that render them less beneficial than the equivalent non-monetary term in an award. In my view, it may also be relevant to consider the terms of any existing agreement and whether there is a relevant change of position when compared to that existing agreement.’ (my emphasis)” 13

[18] I agree and adopt that approach.

[19] The Commission’s analysis of the Agreement indicates that the rates of pay provided for in the Agreement reflect those in the Award. The following sets out the Commission’s analysis of the Agreement in terms of provisions which are more beneficial for employees than the Award and those which are less beneficial for employees than the Award.

More beneficial provisions

Clause 24.3 – Meals which provide an allowance for dinner which is $1.00 above the rate specified in the Award.

Clause 29.14 – Minimum break between shifts which provides for a minimum 10 hour break between shifts, whereas the Award provides for a break of at least 8 hours between shifts.

Less beneficial provisions

Clause 14.2 – Onboarding which provides that an employee who has not successfully completed the onboarding requirement of the Company or client may be stood down without pay in certain circumstances. There is no equivalent provision in the Award.

Clause 15.3 – Probation which provides that an employee who is promoted into a new position will have their performance in that new position reviewed during the first 6 months and if deemed to be unsatisfactory the employee will be returned to their previous position or a similar alternative position. There is no equivalent provision in the Award.

Clause 16.4 – Flexible Part-time Employment which bears all the hallmarks of casual employment but does not attract payment of a casual loading. There is no equivalent category of employment in the Award.

Clause 16.13 – Daily Hire Employee. The Award does not provide for daily hire employment.

Clause 19.4 – Redundancy which defines the term “ordinary and customary turnover of labour’ as including circumstances such as “the Company losing a contract or part of a contract with the client for any reason, including a decision by either party terminating the contract.” In its email to Sodexo on 20 January 2017 the Commission expressed its concern that the provision was inconsistent with s.119(1)(a) of the Act on that basis that it was potentially inconsistent with the Full Bench in Compass Group (Aust) Pty Ltd v National Union of Workers 14 in which the Full Bench stated:

“[27] In order to determine whether the Exception applies in a given case it is necessary to consider the normal features of the business and then determine whether the relevant terminations are properly described as falling within the ordinary and customary turnover of labour in that business. This is a question of fact, to be determined on the basis of each termination and each business. It necessarily focusses on the business circumstances of the employer.” (Underlining added)

Clause 21 – Classifications which does not include the CS Level 2 classification contained in the Award and does not provide for progression from Correctional Officer Level 1 to Correctional Officer Level 2 after 12 months and possession of a Certificate III in Correctional Practice.

Clause 24.8 – Travelling, Transport and Fares which unlike the Award does not provide for the payment of a vehicle allowance in circumstances where an employee is required to use their own vehicle for excess travel.

Clause 24.11 – Adjustment of Allowances which provides that the “index adjustment of allowances is at the discretion of the Company” whereas the Award provides at clause 15.7(a) that “At the time of any adjustment to the standard rate, each expense allowance will be increased by the relevant adjustment factor” (underlining added).

Clause 26 – Higher Duties which increases from 3 to 10 days the qualifying period for Higher Duties Allowance for persons acting as a PCOS, with employees who perform between 3 and 10 days higher duties eligible to receive 50 per cent of the higher duties payment. Under the Award an employee is eligible to receive higher duties allowance in circumstances where they perform all of the duties of a higher position for at least 3 consecutive days.

Clause 29 – Ordinary Hours of Work which provides that employees (excluding shiftworkers) may work up to 12 ordinary hours of work per day with weekly ordinary hours to be averaged over a period of not more than 6 months. The Award provides for a maximum of 10 ordinary hours of work per day with weekly ordinary hours to be averaged over a period not exceeding 8 weeks. Further, unlike the Award, the Agreement does not provide for long breaks (i.e. continuous time off work in each roster cycle).

Clause 32 – Penalty Rates which provides penalty rates for shiftworkers of 15-30 per cent for Saturday work, 15-75 per cent for Sunday work and 15-150 per cent for public holidays. The Award provides for penalty rates of 50 per cent for all Saturday work, 100 per cent for all Sunday work and 150 per cent for all work performed on a public holiday.

[20] As previously mentioned, in its Form F17 Sodexo cited a number of other provisions in the Agreement as beneficial to employees. These were the additional categories of employment provided for in the Agreement relative to the Award, the SSA, the provision and replacement of uniforms at its expense, the approach to the adjustment of allowances, higher duties being paid at a rate which includes any SSA paid to the employee, personal leave being paid at the annualised hourly rate of pay (which includes ordinary hours, additional rostered overtime and other penalties) and several benefits related to public holidays. I note also that the Form F17 did not identify many of the abovementioned less beneficial provisions in the Agreement, though Sodexo acknowledged the lower penalty rates for shiftworkers, describing it as an administrative error in the final draft of the Agreement and foreshadowing an undertaking to address the issue, and the increase in maximum daily ordinary hours provided for in the Agreement.

[21] Also in its Form F17 Sodexo attached some weight to the SSA. By way of background, under the Agreement the SSA is a discretionary and variable allowance which may be granted to an employee for a specified period of time. The Agreement does not specify a quantum for the SSA and there is no equivalent provision in the Award. Sodexo further declared in its Form F17 that the SSA was at the time paid to trainee prison officers at the Melaleuca Remand and Reintegration Facility such that their base rate of pay was $55,000 per annum as opposed to the $36,296 per annum provided for in the Agreement. In the absence of the Agreement specifying a quantum for the allowance and given its discretionary nature, it cannot in my view be considered in determining whether or not the Agreement passes the BOOT. This is because the Agreement does not establish an enforceable right to payment of the SSA. For this reason, I have not in the above list identified the SSA as a beneficial provision in the Agreement.

[22] The above analysis indicates that of the beneficial and less beneficial provisions of the Agreement, there are a number of detrimental provisions in the Agreement relative to the Award balanced by two relatively modest enhancements. In circumstances where the rates of pay and other conditions provided for in the Agreement are generally no greater than the those provided for in the Award, I am not satisfied that the Agreement passes the BOOT absent undertakings to address the detrimental aspects of the Agreement.

[23] As previously mentioned, Sodexo proffered a number of undertakings. Key undertakings were that:

all employees will be paid an SSA of no less than $6,500 per annum for the life of the Agreement;

penalty rates for shiftworkers equivalent to those provided for in the Award will apply to Saturday and Sunday work;

employees may be represented at all stages of the dispute resolution process (see below);

Sodexo will not engage flexible part-time employees and will only engage employees on a daily hire or fixed term basis where the requirements of the business necessitate labour flexibilities to support operational irregularities, among other things, or to ensure that business continuity is not compromised;

allowances will be increased in line with the percentage increase in the applicable Australian Bureau of Statistics index;

progression to the next classification level will be on the same basis as per the Award; and

the definition of ordinary and customary turnover of labour at clause 19.4 of the Agreement will be amended so that it can include (underlining added) as opposed to including the circumstances set out in the provision.

[24] The question that arises in light of those undertakings is, whether those undertakings if accepted by the Commission, would result in the Agreement passing the BOOT. If the undertakings were to be accepted, the key remaining less beneficial provisions of the Agreement would be:

the changed Higher Duties Allowance arrangements;

the lower penalty rates applying to some shiftworkers for work performed on public holidays;

the absence of the Award’s CS Level 2 classification;

the increased maximum number of ordinary hours which can be worked in any one day and the longer period over which ordinary hours of work can be averaged; and

the absence of any specified long breaks, e.g. the Award specifies that the minimum number of breaks in a 3 week roster cycle is “3 breaks of 2 days (48 continuous hours)” 15.

[25] I turn now to consider the level of detriment attached to the abovementioned key remaining less beneficial provisions of the Agreement.

[26] Sodexo in its correspondence of 6 February 2017 calculated the worst case scenario detriment in respect of higher duties payments as $282.60 per annum. Neither UV nor WAPOU sought to quantify the financial detriment to employees as a result of the Agreement’s provisions relating to Higher Duties Allowance. While my own calculations suggest a lower level of detriment than that calculated by Sodexo (based on an hourly pay differential of $2.97 per hour between a PCOS and a Prison Correctional Officer Level 2 under the Agreement), I nevertheless accept Sodexo’s calculation in this regard.

[27] As to the penalty rates issue, under the Agreement, night span employees working on a public holiday will be paid either 115 per cent or 130 per cent of their base rate of pay 16, whereas under the Award they would be paid 150 per cent in addition to the ordinary time rate17. In terms of the hourly pay differential between the Agreement and the Award resulting from these differences, it ranges from $24.80 per hour for a Trainee employee up to $33.17 per hour for a PCOS. The maximum detriment for a PCOS working a 12 hour shift on a public holiday is therefore $398.04 ($33.17 x 12). For 2017, eleven public holidays have been declared for Western Australia and ten for 201818 – were an employee to work each of those public holidays in 2017, the maximum detriment would be $4,378.44 per annum ($398.04 x 11). However, based on the rosters provided to the Commission by Sodexo on 6 March 2017, I consider it highly unlikely that any employee would be required to work each public holiday and that a more realistic scenario would see a PCOS being required to work on six (i.e. just over half of the declared public holidays for 2017). In that case the maximum detriment would be $2,388.24 per annum ($398.04 x 6). By way of background, the rosters provided by Sodexo indicate among other things that employees in the Operation Group PCOs are not rostered to work on five Mondays over a 22 week roster cycle and Unit 11 and 12 PCOs employees are not rostered to work on five Mondays over a 16 week roster cycle.

[28] As to the absence of the Award’s CS Level 2 classification, Sodexo submitted at the hearing that based on the rosters it provided to the Commission on 6 March 2017 the annual remuneration for a PCOS under the Agreement was $64,500 per annum whereas the equivalent rate for a CS Level 2 employee under the Award was $67,104 per annum, a differential of $2,604 per annum. Sodexo further submitted, that once the SSA undertaking was taken into account, a PCOS employee would earn more than a CS Level 2 employee under the Award and that as such employees were not disadvantaged by the non-inclusion of the latter classification in the Agreement. WAPOU on the other hand, in its correspondence of 10 February 2017, calculated the loss as $1,939.60 per annum based on the Award rate of pay for a CS Level 2 employee and $10,141.67 in lost overtime (on the assumption that an employee worked eighty two 12 hour shifts over a 6 month roster cycle). UV did not seek to quantify the financial detriment attached to the absence of the Award’s CS Level 2 classification from the Agreement but submitted that it was a significant detrimental feature of the Agreement. Putting aside the overtime aspect of WAPOU’s calculations, both Sodexo’s and WAPOU’s estimates of financial detriment are in the same ball park. I will therefore draw on Sodexo’s estimate, given that it is the higher of the two. For the reasons set out below I consider WAPOU’s estimate of the financial detriment in the form of lost overtime to be “fanciful” and therefore have not drawn on WAPOU’s estimates in this regard.

[29] In respect of the loss of overtime under the extended roster arrangements provided for in the Agreement, Sodexo in its submissions identified the level of financial detriment under the Agreement relative to the Award as between $728.18 and $902.70 per annum. WAPOU in its correspondence of 10 February 2017 calculated the financial detriment to employees as ranging from $9,037.26 per annum for Trainees up to $12,087.66 for a PCOS. WAPOU’s calculations were based on a roster which entailed eighty two 12 hour shifts over a six month roster cycle. Such a roster bears no resemblance to the rosters currently being worked by Sodexo employees who would be covered by the Agreement. More specifically, an analysis of the rosters provided by Sodexo on 6 March 2017 indicates that employees in the Operation Group PCOs work eleven 12 hour shifts out of a total of 110 shifts over a 22 week roster cycle and employees in the Reception PCO work seven 12 hour shifts out of a total of 35 shifts over a 7 week roster cycle. Drawing on the language of Deputy President Sams in Beechworth Bakery, WAPOU’s calculations appear to be based on “illogical or fanciful ‘what if’ scenarios concerning hypothetical work arrangements that [the employer] has never used and has no intention of using” 19. I therefore do not accept WAPOU’s estimate of the level of detriment. Further, I note that the Award provides that shiftworkers may work shifts of up to a maximum of 12 ordinary hours, whereas for day workers the maximum is 10 ordinary hours per day. Sodexo’s statement that it only employs shiftworkers and has no intention of engaging day workers as defined in the Award raises further doubts in my mind as to the veracity of WAPOU’s calculations. In those circumstances, and in the absence of any probative material undermining Sodexo’s estimate, I consider Sodexo’s estimate of the financial detriment stemming from the Agreement’s hours of work provisions to be more realistic.

[30] With regard to the issue of long breaks, and noting that a roster agreed between Sodexo and WAPOU was to be implemented on 14 March 2017, an analysis of the rosters provided to the Commission by Sodexo on 6 March 2017 indicates that the number of continuous days off ranges from 1 to 6 days, with:

seven instances of single day breaks, five instances of three day breaks, one instance of a four day break and two instances of a six day break in the 16 week Unit 11 and 12 PCO rosters;

22 instances of single day breaks, eight instances of two day breaks and two instances of three day breaks in the 22 week Operations Group PCO roster; and

four instances of single day breaks and five instances of two day breaks in the seven week Reception PCO roster.

[31] Whilst the above analysis indicates that there are some swings and roundabouts in the break pattern for employees, given the prevalence of single day breaks in the rosters, I consider there to be some marginal disadvantage for employees relative to the Award.

[32] Turning now to whether or not the Agreement passes the BOOT if the Commission were to accept the undertakings proffered by Sodexo. Section 193(6) provides that the test time for the purposes of the BOOT is “the time the application for approval of the agreement by the FWC was made…” As previously noted, Sodexo submitted that at the time the application was made all persons who would be covered by the Agreement, were performing training duty on a 38 hour per week Monday to Friday roster without substantive overtime and with a view to undertaking duty according to the operational rosters provided to the Commission on 6 March 2017. For this reason, I have considered whether the Agreement would pass the BOOT based on the “training roster” which was being worked at the time the application seeking approval of the Agreement was made. I have also undertaken the BOOT assessment based on those operational rosters provided by Sodexo.

[33] The above analysis of the level of detriment attached to the Agreement’s key remaining less beneficial provisions based on the operational rosters provided by Sodexo, indicates that the worst case scenario as to the level of financial detriment for a PCOS employee when the Agreement is compared to the Award is in the order of $5,900 per annum ($2,388.24 per annum for a shiftworker working night spans on public holidays under the Agreement + $2,604 per annum as a result of the non-inclusion in the Agreement of the Award’s CS Level 2 classification + $902.70 per annum in lost overtime). The level of detriment for other classifications under the Agreement is unlikely to exceed this worst case scenario, even after including the potential detriment in respect of the Agreement’s Higher Duties Allowance arrangements, given the lower rates of pay ($2.97-$6.20 per hour) for those classifications. The $6,500 SSA clearly exceeds the worst case scenario of financial detriment. Even when regard is had to the various other detrimental aspects of the Agreement, the above analysis supports a finding that the Agreement would pass the BOOT if the undertakings proffered by Sodexo were to be accepted by the Commission. With regard to the “training roster” which applied at the time the application for approval of the Agreement was made, the hours of work and the absence of substantive overtime reduces the potential financial disadvantage for employees under the Agreement to less than that established above. This also supports a finding that the Agreement would pass the BOOT if the Commission were to accept the undertakings proffered by Sodexo.

[34] Beyond that, while not BOOT related issues, I note that:

Clause 9 – Individual Flexibility Arrangement of the Agreement does not require that any individual flexibility arrangement be genuinely agreed to by the employer and employee as required by s.203(3) of the Act. In those circumstances the model flexibility term prescribed in the Fair Work Regulations 2009 (the Regulations) would be taken to be a term of the Agreement should it be approved by the Commission.

Clause 10 – Consultation Regarding Major Workplace Change does not require Sodexo to invite employees to give their views about the impact of the change to the employee’s regular roster or ordinary hours of work (including any impact in relation to their family or caring responsibilities) as per s.205(1A)(b) of the Act. In those circumstances, the model consultation term prescribed in the Regulations would be taken to be a term of the Agreement should it be approved by the Commission.

Clause 11 – Dispute Resolution in limiting scope for an employee to be represented to Steps 4 and 5 of the Dispute Resolution procedure does not satisfy s.186(6)(b) of the Act. This issue can only be addressed by way of an undertaking. The undertaking proffered by Sodexo addresses the Commission’s concern regarding this issue.

Do the proposed undertakings result in substantial changes to the Agreement?

[35] Section 190(3) of the Act provides that the Commission may only accept a written undertaking if is satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to any employee covered by the agreement or result in substantial changes to the agreement. In this case it was not contended by any party that the undertakings proffered by Sodexo would cause financial detriment to employees. Hence that requirement is satisfied.

[36] The issue of whether or not the undertakings result in substantial changes to an agreement was considered by Commissioner Roe in Perth Access Scaffolding where he observed that:

“[12] Having regard to the objects of the Act concerning facilitating the making of agreements I am inclined to see the requirement that “the effect of accepting the undertaking is not likely to … result in substantial changes to the agreement” as a relatively high bar.

[13] … I have approved agreements with undertakings which cover a significant number of entitlements but which I have concluded do not result in a substantial change to the agreement.
…

[15] In this particular case, notwithstanding my view that the “substantial change” test in respect to undertakings should be a high bar, I am satisfied that the Agreement, with the undertakings required, would bear no real resemblance to the Agreement which was voted upon by employees. The essential character of the Agreement which employees voted on was that the Agreement would replace and exclude the operation of the Award and they would receive base rates which are the current Award rates plus a small margin in return for forgoing a significant number of Award rights. I am satisfied that it would not be consistent with the requirements of Section 190 for me to accept the undertakings because they would be likely to result in substantial changes to the Agreement. As a consequence the requirements of Section 186 and the BOOT are not met and I cannot approve the Agreement.” (Underlining added)

[37] In AKN a Full Bench of the Commission observed that:

“[34] The statutory scheme therefore requires the application by the Commission of the provisions of ss.186-190 to an enterprise agreement that has been already bargained for, approved by employees and “made” under Div.3 and Subdiv.A of Div.4 of Part 2-4. That is to say, in relation to non-greenfields enterprise agreements, the Commission is discharging its functions by reference to an agreement which has already been developed and finalised by a process of collective bargaining at the enterprise level. The Commission’s approval functions are not intended to be a process by which an employer, in a process of dialogue with the Commission, can seek to develop the agreement further so that it may eventually satisfy the approval requirements in ss.186 and 187. The undertaking facility in s.190 provides an opportunity to an employer to proffer an undertaking to address any concern which the Commission may have concerning the satisfaction of the approval requirements in ss.186 and 187. Because any such undertaking may not result in substantial changes to the agreement, the opportunity provided is necessarily limited in nature and cannot involve a wholesale reshaping of the agreement which has already been made.” (Underlining added)

[38] Further, in Angove’s Deputy President Bartel stated:

“[49] Undertakings are taken to be terms of the Agreement. In my view, whether one or more undertakings represent a substantial change to an agreement is a question of fact and degree. It is to be considered in the context of the Agreement as a whole, taking into account the legislative context.

[50] The objects of Part 2-4 of the Act set out in s.171 are as follows:

“171 Objects of this Part

The objects of this Part are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that d
(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) makingbargaining orders; and
(ii) dealing with disputes where the bargaining representatives request assistance; and
(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.”

[51] Accordingly, a liberal approach to the interpretation of “substantial changes” is warranted, i.e. an approach where the benefit of the doubt should be weighed in favour of approving the agreement so that the making of enterprise agreements that meet the other statutory requirements, is facilitated.” (References omitted, underlining added)

[39] From these decisions can be distilled the following key principles to guide consideration of the issue of whether or not undertakings result in substantial changes to an agreement:

1. the requirement that “the effect of accepting the undertaking is not likely to … result in substantial changes to the agreement” is a relatively high bar;
2. the opportunity to provide undertakings is limited in nature and cannot involve a wholesale reshaping of the agreement which has already been made;
3. whether or not one or more undertakings represent a substantial change to an agreement is a question of fact and degree which is to be considered in the context of the agreement as a whole; and
4. a liberal approach to the interpretation of “substantial changes” is warranted, i.e. an approach where the benefit of the doubt should be weighed in favour of approving an agreement.

[40] I will apply those principles in this case.

[41] In this case the undertaking proffered by Sodexo in respect of:

the SSA and the adjustment of allowances, amend these provisions to either reduce or remove the discretion available to Sodexo under the Agreement and in doing so provide greater clarity as to the operation of the provisions;

penalty rates was foreshadowed in Sodexo’s Form F17;

classification progression amends the operation of the Agreement in a way that mirrors the Award and is more beneficial to employees;

employment categories, constrains the circumstances in which Sodexo will use daily hire and fixed term employment and precludes the use of flexible part-time employment;

the Agreement’s dispute resolution procedure is directed at ensuring that s.186(6)(b) is satisfied; and

redundancy is to ensure that the requirements of s.186(2)(c) are satisfied.

[42] What is apparent from the above outline of the undertakings proffered by Sodexo is that they overwhelmingly address issues dealt with in the Agreement in a way that provide greater clarity regarding the operation of the provisions and is advantageous to employees. In my view, the undertakings do not, having regard to the language in AKN, involve a wholesale reshaping of the Agreement. While the quantum of the SSA is not an insignificant amount, based on the Form F17 employees were already in receipt of an SSA of $18,704 per annum. In those circumstances, the SSA undertaking does not in my view result in a substantial change to the Agreement.

Conclusion

[43] For all the above reasons, I am satisfied that taking into account the undertakings proffered by Sodexo the Agreement passes the BOOT and that those undertakings do not result in substantial changes to the Agreement. I am therefore willing to accept the undertakings proffered by Sodexo. A decision approving the Agreement will be issued once the undertakings proffered by Sodexo are formally provided to the Commission.

DEPUTY PRESIDENT

Appearances:

N. Harrington of Counsel for the Applicant.

R. Consentino for the Community and Public Sector Union – State Public Services Federation Group (Western Australian Prison Officers’ Union Branch and Western Australian Branch).

S. Bull for United Voice.

Hearing details:

2017

Canberra

March 7

Printed by authority of the Commonwealth Government Printer

1 [2016] FWCA 7876

2 [2016] FWCFB 8531

3 MA000110

4 [2016] FWC 8042

5 [2015] FWC 7106

6 (2010) 192 IR 124

7 Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery at paragraph [74]

8 (2012) 223 IR 466 at paragraph [17]

9 [2015] FWCFB 1833

10 Form F17 at Item 3.4

11 [2016] FWCA 8862

12 [2015] FWCFB 1776

13 [2016] FWCA 8862

14 (2015) 253 IR 32

15 MA000110 at Clause 20.6

16 Clause 32.1

17 MA000110 at Clause 23.3

18 Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery at paragraph [74]

Sodexo Australia Pty Ltd T/A Sodexo Australia