What follows is an extract from a recent summary of cases decided by the Fair Work Commission and which in this particular case deals with the relationship between loaded rates in enterprise agreements and how they operate in the context of the BOOT test.
“Enterprise agreement matters
Loaded Rates Agreements
The Commission received five applications for the approval of five enterprise agreements:
- the Allied Security Management Enterprise Agreement 2017 (the Allied Agreement)
- the JWT Group Services Enterprise Agreement 2017 (the JWT Agreement)
- the PSA Security P/L Enterprise Agreement 2017 (the PSA Agreement)
- the ALDI Prestons Agreement 2017 (the Aldi Prestons Agreement), and
- the ALDI Stapylton Agreement 2017 (the Aldi Stapylton Agreement).
All of the agreements provide for ‘loaded rates’, these are higher rates of pay which are meant to incorporate, in part or in whole, penalty rates and other financial benefits which are covered by separate provisions in the appropriate modern awards. The five applications were referred to the Full Bench for consideration as to how the better off overall test (BOOT) can be properly applied to agreements which include loaded rates. This issue is particularly important to settle since an earlier Full Bench decision in Hart, where a decision to approve an agreement applying to a major Australian retailer and its employees was dismissed on appeal.
There are two well-established propositions which concern the application of the BOOT. The first is that the BOOT requires that the Commission finds that each award covered employee, and each prospective employee, would be better off under the agreement than under the relevant modern award. The definition of ‘each’ is ‘every, of two or more considered individually or one by one’, so as a result every award covered employee or prospective employee must be better off overall. If any employee is not better off overall, the relevant enterprise agreement does not pass the BOOT. In an agreement containing loaded rates in whole or partial substitution for award penalty rates, it is not sufficient that the majority of employees, even a very large majority, are better off overall if there are any employees at all who would not be better off overall. Section 193(7) of the Fair Work Act permits the Commission to assume that if a class of employees to which a particular employee belongs would be better off under the agreement than under the relevant modern award, that all of the employees in that class would be better off overall in the absence of evidence to the contrary. However s.193(7) will only be of utility if the enterprise agreement affects the members of the class of employees in the same way such that there is likely to be a common BOOT outcome.
The second is that the BOOT requires an overall assessment to be made. This means the Commission must identify the terms which are more beneficial for an employee, terms which are less beneficial, and an overall assessment of whether an employee would be better off under the agreement. Where the terms required to be compared bear directly upon the remuneration of employees, the assessment is essentially a mathematical one. However the position becomes more complex when an agreement contains provisions superior to, or not contained in the reference award Entitlements to non-monetary benefits, benefits which are accessible at the employee’s choice, or monetary benefits which are contingent upon specified events occurring. While it is necessary for the Commission to take such entitlements into account in the BOOT assessment, ascertaining the value they are to be assigned may be a difficult task. It is unlikely that a non-monetary, optional or contingent entitlement under the agreement will sufficiently compensate for the detriment for all affected employees.
The following principles apply to the application of the BOOT to a loaded rates agreement:
- The BOOT requires every existing and prospective award covered employee to be better off overall.
- Section 193(7) permits the Commission to assume that if a class of employees to which a particular employee belongs would be better off under the agreement than under the relevant modern award, then the employee would be better off overall in the absence of evidence to the contrary.
- The application of the BOOT to a loaded rates agreement will, in order for a meaningful comparison to be made, require an examination of the practices and arrangements concerning the working of ordinary and overtime hours by existing and prospective employees that flow from the terms of the agreement.
- The starting point for the assessment will necessarily be an examination of the terms of the agreement in order to ascertain the nature and characteristics of the employment for which the agreement provides or permits.
- In the case of existing employees, this may involve an examination of existing roster patterns worked by various classes of employees as at the test time. The use of sample rosters to compare remuneration produced by a loaded rates pay structure compared to the relevant modern award may be an effective method of doing this.
- In the case of prospective employees, the assessment will necessarily involve a degree of conjecture.
- If the information concerning patterns of working hours needed to assess whether a loaded rates agreement passes the BOOT is not contained in the employer’s Form F17 statutory declaration accompanying the approval application, it may be necessary for the Commission to request or require the production of such information.
- The BOOT involves the making of an overall assessment as to whether an employee would be better off under the agreement, which necessitates identification of the terms in the agreements which are more and less beneficial to the employee than under the relevant award.
- The overall assessment required will essentially be a mathematical one where the terms being compared relate directly to remuneration. The assessment will be more complex where the agreement contains some superior entitlements which are non-monetary in nature, accessible at the employee’s option or which are contingent upon specified events occurring.
- In respect of non-monetary, optional or contingent entitlements in an agreement, the assumption cannot readily be made that they have the same value for all employees.
- Where a loaded rates agreement results in significant financial detriment for existing or prospective employees compared to the relevant award, it is unlikely that a non-monetary, optional or contingent entitlement under the agreement will sufficiently compensate for the detriment for all affected employees such as to enable the agreement to pass the BOOT.
Having regard to the above principles the Decision gives examples of the type of loaded rate structures which are capable, on proper analysis, of passing the BOOT.
The Full Bench decided that the Allied Agreement, the JWT Agreement and the PSA Agreement each failed the BOOT with respect to casual employees who were not assigned to a specified work roster pattern. Neither Allied, JWT nor PSA proposed any undertakings to rectify this issue, which were capable of acceptance under s.190(3). As a result the applications for approval of the Allied Agreement, the JWT Agreement and the PSA Agreement must be dismissed.
In relation to the Aldi Prestons Agreement and the Aldi Stapylton Agreement, casual rates were used as a comparison for part-time employees, due to a lack of guaranteed and identifiable hours of work for part-time employees. The Full Bench considered that the ‘make good’ provisions in the agreements were not sufficient, and that leave provisions must be paid consistent with the National Employment Standards, not based on ‘notional shift hours’. The Full Bench issued further directions, and decided that the applications for approval of the Aldi Agreements would be considered by a single Member of the Commission instead of the Full Bench.”
Re Loaded Rates Agreements
(AG2017/1925 AG2017/1943 AG2017/3865 AG2017/4096 AG2017/4671) (2018) FWCFB 2732