Walk Industrial Services Pty Ltd

[2017] FWC 3188

[2017] FWC 3188

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

Walk Industrial Services Pty Ltd
(AG2017/1027)

COMMISSIONER WILSON MELBOURNE, 15 JUNE 2017

Application for approval of the Queensland Private Security Pty Ltd Enterprise Bargaining Agreement 2017-2021.

Introduction

[1] An application has been made for approval of an enterprise agreement known as the Queensland Private Security Pty Ltd Enterprise Bargaining Agreement 2017-2021 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Queensland Private Security Pty Ltd. The Agreement is a single enterprise agreement.

[2] The Agreement covers all employees engaged by the employer.

[3] The Security Services Industry Award 2010 (the Award) is the relevant reference instrument for the purposes of the better off overall test (BOOT) as required under s.186 of the Act.

[4] For the reasons set out below, I have decided not to approve the Agreement as I am not satisfied that the Agreement passes the better off overall test and I do not accept the undertakings offered by the Applicant because, in my view, the undertakings would result in substantial changes to the Agreement (see s.190(3)(b) of the Act).

Agreement Concerns

[5] The Agreement provides loaded rates of pay which compensate for annual leave loading, shift penalties, overtime payments and public holiday penalties. These loaded rates are higher than the corresponding minimum rates of pay under the Award, being 7.98% to 8% higher for employees.

[6] After a preliminary analysis, taking into account the rates of pay and the reduced entitlements provided by the Agreement, it appeared employees may not be considered better off under the Agreement when compared with the Award. In particular, employees appeared to be disadvantaged if they were to be rostered for hours that would otherwise entitle them to penalties or additional loadings under the Award.

[7] On 3 May 2017, the Commission wrote to the Applicant about these concerns and invited the Applicant to provide an undertaking, submission or further information about the concerns held. In its correspondence to the Applicant the Commission identified several such matters including;

• The Flexibility Term at Clause 5 of the Agreement did not appear to comply with s.203(7)(b) of the Act, as it did not require a copy of the flexibility arrangement to be provided to an employee within 14 days after such an agreement was agreed to;



• A revised, compliant signature page should be provided since the employee representative did not provide their authority to sign;



• The Agreement provided probationary employees with one days’ notice of termination during their first 3 months of employment, which appeared inconsistent with s.117(3) of the Act; and



• That I held a concern as to whether the Agreement passed the better off overall test.

[8] In relation to the first matter, the Applicant was advised that, if approved, the model flexibility term set out in the Fair Work Regulations 2009 would be taken to be a term of the Agreement. In relation to the second matter, the Applicant was requested to provide a replacement signature page.

[9] In the same correspondence, the Applicant was advised that the concerns I held in relation to whether the Agreement passed the better off overall test included;

• That the Agreement did not provide weekend, public holiday or overtime penalties;



• The rates of pay provided for under the classifications in the Agreement would result in a lower overall rate of pay when compared to the modern award because of the absence of commonly paid allowances. This included the incorporation of first aid allowance into the rates of pay;



• The Agreement did not offer annual leave loading; and



• That the increased pay rates under the Agreement may have been insufficient in compensating employees for the abovementioned reductions in Award entitlements.

[10] In response to these concerns the Applicant provided multiple written undertakings (the First Undertakings) in order to alleviate the Commission’s concerns and made short submissions addressing those concerns. The Applicant further clarified that the issue identified about probationary employees was a typographical error, and that the phrase should read “one week’s notice of termination”, as opposed to one day, which is an explanation I accept. The Applicant’s submissions on the better off overall test included the following;

“The employer re-states that he believes this agreement passes the “better off overall test”.

Clause 18 (1) of the proposed agreement refers to a payment of 8% over award rates. This 8% include weekend work, first aid allowance and holiday loading.

Other allowances have no application to employees.

It is the intention of the employer to rotate staff around on a regular basis to ensure that no one person works hours that will make his/her wage fail the BOOT test.

In addition this agreement implies that the availability of work and equalisation of night and day shifts is provided throughout the employer’s workforce.

Clause 18 (5) - At all times wages and conditions under this proposed agreement will be “at least equal to or better than” the entitlements under the Security Services Industry Award 2010.

Clause 18(6) (7) and (8) - Should an employee request a reconciliation that is internal audit (or external audit), this will be carried out on a case by case required basis at a time agreed to between the parties.

The rates set out in 18 of the agreement have been expressed in composite terms. This means that wage rates outlined are inclusive of penalties, holiday loading and allowances as required under the Security Services Industry Award 2010 unless otherwise dealt with is this agreement. The wage rates shown in this proposed agreement are consolidated rates payable from the date of approval by the Fair Work Commission.

Clause 20 refers to relativities being maintained each year (normally) when the Fair Work Commission delivers is annual wage review decision.”

[11] A copy of the First Undertakings is attached in Annexure A.

[12] The Applicant acknowledged the Agreement did not contain all requirements set out in the Act and that the model flexibility term would apply. The Applicant also provided a revised signature page adhering to Regulation 2.06A of the Fair Work Regulations 2009.

[13] The First Undertakings state that the Agreement provides a payment of 8% above Award rates which includes “weekend work, first aid allowance and holiday loading”, but that “other allowances have no application to employees”. An undertaking was also provided to the effect that the employer would rotate staff on a regular basis in order to ensure no employees work hours that would cause them to be not better off overall, and on this basis the Applicant was of the view the Agreement passed the BOOT. The undertaking also states that should an employee request a reconciliation, an internal or external audit would be carried out on a case by case basis.

[14] After considering the abovementioned undertaking, I was still not satisfied the agreement passed the better off overall test. In Shop, Distributive and Allied Employees Association v Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery    1, the Full Bench considered the effect of an undertaking allowing an employee to request reconciliation;

“[39] On 30 November 2016 a modified undertaking was provided by the respondent which contained a new paragraph 6 in the following terms:

“6. Where an Employee considers that over a four (4) month period they are not better off overall under this Agreement than under the applicable Award, they may request a comparison of the wages received for that roster cycle under this Agreement and the wages they would otherwise have been provided with under the Award. Any shortfall in wages which would otherwise be payable under the Award will be paid to the Employee in the next pay period after the review is completed. If the Employee and Employer cannot reach agreement on the total amount which should be paid by the operation of this undertaking, the Dispute Resolution Procedure in clause 12 of the Agreement will be followed and the parties will agree to the Fair Work Commission arbitrating and making a binding determination to resolve the matter.””

…

“[42] However, we do not consider that the part of the undertaking contained in paragraph 6 was capable of satisfying any concern that the Agreement did not pass the better off overall test. First, and most obviously, paragraph 6 of the undertaking does not create an enforceable right to any payment, which if made, would mean that a relevant employee would be better off overall under the Agreement than under the applicable modern award. Rather, the undertaking operates only to allow an employee who “considers that . . . they are not better off overall under this agreement than the applicable award” to request a comparison, and thereafter if the comparison identifies a shortfall, the shortfall together with an additional 1.5% payment by reference to the shortfall amount would be paid in the next pay period after the review is completed.

[43] Such obligation to “make good” any shortfall arises only if an employee makes a request for a review. If no such request is made, whether through ignorance or design, or perhaps because an affected employee simply lacks the time, information or ability to form a view, then no obligation to conduct a review, much less “make good” any shortfall, arises. Any concern that an employee or prospective employee would not be better off overall if the Agreement applied to the employee than if the relevant modern award applied to that employee cannot be met by such an undertaking.

[44] In considering whether an undertaking should be accepted as satisfying a concern that an agreement may not pass the better off overall test, it is necessary to analyse the undertaking so as to ensure that it is expressed in a way which will allow it to be enforced as a term of the agreement. An undertaking that in its expression is uncertain, ambiguous, aspirational or perhaps conditional, with the result that it will not create an enforceable entitlement as a term of the agreement, will not likely meet the concern that an agreement does not pass the better off overall test.” 2 (underlining added; references omitted)

[15] The Applicant was advised on 19 May 2017 of the Commission’s further concerns and that should it wish to continue with the application, the matter would proceed to a hearing on 26 May 2017, at which time any submissions, evidence or further materials in support of the Application could be considered.

[16] The Applicant responded on 24 May 2017 with revised undertakings (the Revised Undertakings) and a submission in anticipation of the listed hearing. The Revised Undertakings included an amended reconciliation process and stated the employer was willing to increase the agreement rates of pay to 11% above the Award, rather than the original 8% above the Award.

[17] In light of the proposed increased rates of pay, a further analysis was conducted against the Award. Upon doing so, I was still not satisfied that the Agreement passed the better off overall test as the increase provided still did not appear to compensate employees regularly working penalty hours such as weekends, public holidays and overtime. These concerns were contemporaneously communicated to the Applicant on 25 May 2017.

[18] On the day of the hearing, Friday, 26 May 2017, the Applicant provided further undertakings (the Further Revised Undertakings) which reverted the pay rates back to 8% above the Award rates and stated employees would receive weekend penalties and public holidays in accordance with the Award provisions. The Further Revised Undertakings also stated employees would receive time off in lieu should they be required to work overtime. In addition to providing the undertaking, the Applicant provided further submissions and attached a copy of an amended Enterprise Agreement which provided all changes as referred to in the Further Revised Undertakings.

[19] Amongst other things, the Further Revised Undertakings provided the following, which appears to be an endeavour to grapple with the problem identified in Beechworth about the need for an undertaking to provide an enforceable entitlement;

“Reconciliations – The employer is giving two(2) undertakings here in relation to reconciliations, that is, one, the employee can request and reconciliation every two weeks and two (2), the employer will automatically undertake a further reconciliation every three (3) months regardless of the one just referred to in this point. The words “as an enforceable right” have been added to Clause 18(6).”

[20]  In all other respects, and taking into account the undertakings offered, the Applicant maintained the Agreement passed the better off overall test and should be approved.

[21] The matter was the subject of a hearing on 26 May 2017 at which the Applicant, its representative and an employee bargaining representative attended and made short submissions, which largely reiterated the matters that were the subject of correspondence with the Commission. I was satisfied from that hearing that the employee bargaining representative had been consulted about each of the proposed undertakings and that he agreed with their terms. In relation to the question of whether the Commission should accept the undertakings provided, the Applicant’s representative initially drew the Commission’s attention to the judgment of the Full Court of the Federal Court in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd, 3 but conceded after the hearing that the case has no application in this matter.

[22] Prior to considering whether the Agreement passes the better off overall test and whether any or all of the undertakings offered by the Applicant should be accepted, I should note that based on the materials filed in support of the application, I am satisfied that all of the other requirements set out in ss.186 and 187 of the Act, which must be satisfied before the Agreement may be approved, have been met.

Statutory Framework

[23] In order for the Commission to approve an Agreement, the Agreement must pass the better off overall test. After conducting a preliminary analysis, should the Commission hold concerns that the Agreement does not pass the better off overall test, the Applicant may provide a written undertaking in order to satisfy the concerns held. After provision of adequate written undertakings, the Commission can accept such undertakings and approve the Agreement if the Commission is of the belief all concerns raised have been addressed.

[24] Section 190(2) of the Act provides that the Fair Work Commission may approve an agreement under section 186 if the Commission is satisfied that an undertaking accepted by the FWC under s. 190(3) meets the concern. Section 190(3) provides that the FWC may only accept a written undertaking from one or more employers covered by the agreement if the Commission 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) results in substantial changes to the agreement.

[25] The test time for the purposes of assessing whether the agreement passes the better off overall test is the date on which the application for approval was made, in this case 29 March 2017.

[26] The agreement will pass the better off overall test if the Commission is satisfied, as at the test time, that all employees covered by the agreement would be better off overall by being covered under the Agreement rather than the relevant Modern Award.

Better Off Overall Analysis

[27] The applicable Modern Award utilised in conducting the better off overall test is the Security Services Award 2010. Taking into account the material provided and analysis conducted, I have come to the conclusion that the Agreement lodged does not pass the test. Employees covered by the Agreement would not be better off overall if covered under the Agreement rather than the applicable Modern Award.

[28] Firstly, the only “more beneficial” condition provided in the Agreement is the slightly higher rates of pay provided in clause 18 of the Agreement. As stated above, all rates of pay provided in the Agreement are approximately 8% above the equivalent Award rates. The Applicant has suggested in the Form F17 statutory declaration lodged with the Commission that the Agreement does not contain terms that are less beneficial than the equivalent terms and conditions in the Security Services Award 2010. However, the Agreement lodged with the Commission provides rates of pay that are inclusive of all penalties associated with weekend work, public holiday loading, first aid allowance and overtime, which are all provided as entitlements under the applicable Modern Award. Additionally, the Agreement does not refer to other entitlements provided in the Award – such as shift work penalties, other applicable allowances and annual leave loading.

[29] The Agreement rates of pay, being an 8% increase above equivalent Award rates, do not adequately compensate for the lack of Agreement entitlements employees would have received under the Award. If employees are subject to working regular penalty hours where they would receive an applicable penalty rate under the Award, they may be disadvantaged. The Applicant stated in a submission dated 26 May 2017 that no further allowances other than first aid allowance will be applicable to employees. Due to the nature of the industry the employer’s business works within, it is likely employees may be entitled to more allowances as provided under the Award.

[30] The following table is an illustration of an employee regularly working weekends or night shift. What an employee would receive for working such hours under the Agreement is compared to an employee working the same hours and receiving remuneration as provided for in the Award. The Agreement classification tested below is utilised in order to provide an example – however all pay rates are subject to an 8% increase above the Award rates and therefore all Agreement pay rates will produce the similar results as provided below.

Table 1 – Agreement classification QPS2 with a percentage increase of 7.98% above equivalent Modern Award rate, regularly working Saturday and Sunday

Agreement Ordinary Rate	$22.09	Award Ordinary Rate	$20.46
Hours	Loading	weekly total	Hours	Loading	weekly total
Ordinary Hours	22.8	100%	$503.65	Ordinary Hours	22.8	100%	$466.49
Saturday	7.6	100%	$167.88	Saturday	7.6	150%	$233.24
Sunday	7.6	100%	$167.88	Sunday	7.6	200%	$310.99
Allowances	Amount	Value	Allowances	Amount	Value
Allowance	$0.00	First Aid Allowance	$0.00
Annual Leave	Yes	$64.57	Annual Leave	Yes	$59.81
Leave Loading	No	$0.00	Leave Loading	Yes	$10.47
Totals	38.00	Hrs	$903.99	Totals	38.00	Hrs	$1,081.00
Agreement Total Weekly Rate			$903.99	Model Summary
Award Total Weekly Rate			$1,081.00
Dollar / Actual Percentage Difference			-$177.01	The Dollar / Actual Percentage Difference identifies the modelled difference between the agreement and the award in dollar terms and as a percentage.
			16.37%
Agreement Percentage Increase Required			19.58%	The Agreement Percentage Increase Required is the amount the agreement rate would need to be increased by to satisfy the BOOT under this modelling.

Table 2 – Agreement classification QPS2 with a percentage increase of 7.98% above equivalent Modern Award rate, regularly working night shift

Agreement Ordinary Rate	$22.09	Award Ordinary Rate	$20.46
Hours	Loading	weekly total	Hours	Loading	weekly total
Ordinary Hours	38	100%	$839.42	Night Shift Ordinary Hours	38	130%	$1,010.72
Allowances	Amount	Value	Allowances	Amount	Value
Annual Leave	Yes	$64.57	Annual Leave	Yes	$59.81
Leave Loading	No	$0.00	Leave Loading	Yes	$10.47
Totals	38.00	Hrs	$903.99	Totals	38.00	Hrs	$1,081.00
Agreement Total Weekly Rate			$903.99
Award Total Weekly Rate			$1,081.00
Dollar / Actual Percentage Difference			-$177.01
			16.37%
Agreement Percentage Increase Required			19.58%

[31] Taking into account the above tables, which are only an indication of absorbing some penalties employees would be entitled to under the Award, it is clear that employees would receive a substantially more beneficial remuneration amount when provided with entitlements as per the Award compared to receiving an 8% increase on top of their rate. As it is not apparent that employees receive additional advantageous entitlements as conferred by the Agreement, employees will not be better off under the Agreement than if the Modern Award applied. Accordingly, I am not satisfied that the Agreement passes the better off overall test. The absorption of entitlements and allowances that would have otherwise been provided under the Award has not, in my view, been adequately offset by increasing the ordinary rate of pay provided for in the Agreement by the amount of 8% above Award pay rates.

Proposed undertakings provided by the Applicant

[32] The Applicant has provided multiple proposed undertakings pursuant to s.190 of the Act. The proposed undertakings can be located below in Annexure A.

[33] In summary, on 8 May 2017 the Applicant provided the First Undertakings stating that the Applicant maintains the 8% increase above Award rates to ensure employees’ rates of pay pass the better off overall test.

[34] The Applicant offered additional Revised Undertakings on 24 May 2017, offering a further increase to employees’ wage rates, instead providing an 11% increase above equivalent Award rates. The Revised Undertakings also provided a revised reconciliation clause.

[35] The Applicant offered Further Revised Undertakings prior to the hearing on 26 May 2017 reverting the rates of pay back to the original 8% above the Award and additionally providing weekend penalties and public holiday penalties as per the Security Services Award 2010. The Further Revised Undertakings also reiterated employees would receive time off in lieu rather than overtime rates. In response to queries raised with the Applicant, the Further Revised Undertakings also stated the first aid allowance was the only allowance applicable to employees.

[36] Pursuant to section 190(3) of the Act, a written undertaking may be accepted if the Commission is satisfied that the undertaking is not likely to result in substantial changes to the agreement or cause financial detriment to any employee covered by the agreement.

[37] The Further Revised Undertakings seek to address concerns raised with the Applicant relating to financial disadvantage for employees under the Agreement as compared to what is provided in the Award. The undertakings intend to maintain the more beneficial remuneration amount and ultimately result in a financial improvement for all employees as compared to what was originally provided in the Agreement lodged with the Commission, in light of weekend and public holiday entitlements falling in line with the Award provisions. Therefore, I am satisfied the undertakings offered will not cause any financial detriment to any employee that will be covered by the Agreement.

[38] However, in providing the Further Revised Undertakings, it is apparent the Applicant has designed the undertakings for the purpose of ensuring the Agreement, when read with the undertakings, would subsequently pass the better off overall test. Nevertheless, when taking into account the nature of the undertakings provided and the substantial amount of content which has been altered if the undertakings were to be accepted, it is clear that the undertakings result in substantial changes to the originally lodged Agreement. The undertakings provided do not simply suggest minor alterations to the Agreement or provide further clarification of a certain provision of the Agreement. They instead detail fundamental new provisions which were originally not provided in the Agreement and Agreement-making process. As a result, the proposed undertakings provided by the Applicant are not accepted.

Conclusion

[39] Because I have not accepted the undertakings provided by the Applicant, the Agreement does not pass the better off overall test. Further, I am not satisfied that the provisions of s.189(2) are enlivened in that, despite failing the better off overall test, exceptional circumstances otherwise exist to support the Agreement’s approval on public interest grounds. Accordingly, the application for the approval of the Agreement is dismissed. An order giving effect to this decision is separately issued in conjunction with this decision.

COMMISSIONER

Appearances:

Mr K Law,paid agent,on behalf of the Applicant.

Hearing details:

2016.

Melbourne (by telephone):

26 May.

Final written submissions:

9 June 2017.

Annexure A

Undertaking dated 8 May 2017

Undertaking dated 24 May 2017

Undertaking dated 26 May 2017

 1   [2017] FWCFB 1664.

 2   Ibid [39], [42]-[44].

 3 [2016] FCAFC 161; noting that the judgment is the subject of an application for special leave to the High Court of Australia.

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