In order for an Enterprise Agreement to be approved by the Fair Work Commission under the Fair Work Act 2009 (Cth) (FW Act), the proposed agreement must pass the ‘better off over all test’ (the BOOT).
AJ Convenience Stores Pty Ltd T/A 7-Eleven Rozelle & 7-Eleven Bexley [2016] FWC 330
In order for an Enterprise Agreement to be approved by the Fair Work Commission under the Fair Work Act 2009 (Cth) (FW Act), the proposed agreement must pass the ‘better off over all test’ (the BOOT).
Section 193 of the FW Act provides that a proposed agreement will pass the BOOT if:
‘the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee ... would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee .’
Commissioner Roe’s decision in AJ Convenience Stores Pty Ltd T/A 7-Eleven Rozelle & 7-Eleven Bexley [2016] FWC 330 demonstrates how this test is applied by the FWC.
AJ Convenience Stores (the Employer) lodged an application with the Fair Work Commission (the Commission) to approve its proposed 7-Eleven Fuel and Non-Fuel Enterprise Agreement 2015 (the Proposed Agreement). Following lodgement, the Commission raised a number of issues with respect to the Proposed Agreement, particularly the rates of pay.
Commissioner Roe was concerned that the rates of pay provided in the proposed agreement did not sufficiently compensate for the reductions in entitlements in comparison to the relevant modern award. The Employer put forward typical rosters and argued that these demonstrated that the hourly rates were sufficient to meet the BOOT.
However, the Commissioner Roe was not satisfied with the evidence relied upon by the Employer. Commissioner Roe held that “it is necessary to consider what the Agreement allows to be done in respect to rosters not just what occurs under typical rosters to be sure that each employee and prospective employee is better off overall at the test time.”
This is an important aspect of the BOOT, namely the Commission’s close examination as to what the agreement “could” allow in terms of rostering and other terms and conditions and whether such arrangements would lead to an employee being worse off when compared to the modern award. This is a potential downside to building enterprise agreements with significant flexibility provisions in favour of the employer.
Commissioner Roe noted that rostering arrangements could be changed by the Employer, in particular as the stores operated on a 24 hour basis. Of specific concern was the number of hours performed by employees at night and on weekends. He sought an undertaking from the Employer that would restrict the amount of hours performed by employees at night and on weekends.
Practically speaking, the purpose of requesting the undertaking would be a mathematical one – so that the limited hours worked outside the span of hours could be compared to the rates that the agreement offered with a degree of certainty as to how many hours at penalty rates were to be included in the BOOT calculation.
The Employer offered two different undertakings but each was rejected by the Commission as they did not ensure that employees would be better off overall under the proposed agreement. Commissioner Roe noted that an employee working 40% of their hours on the weekend would be significantly worse off under the agreement when compared to what the employee would otherwise earn under the modern award once penalty rates were taken into account.
Accordingly, the application for approval of the proposed agreement was dismissed as the Employer did not provide the Commission with the appropriate undertakings to ensure that all employees – full-time, part-time or casual were better off overall.
Employers who are applying to have their proposed enterprise agreements approved are reminded that whilst parties may negotiate and agree on a rate of pay, the Commission still will independently determine and assess whether or not the rate paid to employees along with the other terms and condition in the agreement will result in the employees being better off overall.
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