Understanding H And M Enterprise Agreement And The Better Off Overall Test

The BOOT – What and why

Discuss about the H and M Enterprise Agreement.

The current labour landscape in Australia is characterised by high wages that are n many cases not sustainable by the businesses which are supposed to support them. The labour market has for long been moderated by bargained agreements, which were put to the test by the BOOT, which ensured that they were better for the workers they were to apply to. In recent years, the focus on the BOOT has not always led to the positive results that it was meant to have. Besides increased attention to the compliance of awards as agreed, the sector is also rapidly changing. Additionally, enterprise bargaining has ground to a halt as uncertainty mounts over the issue of penalties.

The effects of this situation are not localised on the hospitality and retail markets, or on a particular sector of the economy. Rather, the effects have been felt far beyond, as unemployment rates soar. In particular, the rates have affected youth who are just graduating from college, with up to 18% of them going for more than a year without fulltime employment. Many others are underutilised.

One of the solutions to the problem, according to Watson (2017), is the cutting of salaries to a level that will enable the long term unemployed to secure gainful employment, without having to jeopardise the survival of the employers. At the same time, there is a need to ensure that the BOOT does not act as an impediment to the labour market, but rather, acts as a catalyst for improved labour relations and better employment prospects, especially for the youth.

This report aims to provide a framework that the Fair Work Commission can use to institute changes to the BOOT. The president as the commission’s former vice  president implies, may be in need of a way that would make the labour market more adaptive to changes in the economy, and in particular to the rate of unemployment. The report will cover the BOOT’s advantages and disadvantages, current issues, as well as other issues. At the same time, the report will look at the challenges which currently face it, with the objective of ensuring that the test is better suited to work in the current situation.

The Better off overall test is an aspect of the Fair Work Act that was passed in 2009 to better safeguard the compensation rights of employees. Under the Act, the agreement must convince the FWA that the agreement will lead modern and prospective award covered employees better off if it applied, as compared to the relevant modern award applicable. In case this is not the case, the agreement must leave the class to which the employee belongs in a better condition than it would have been under the said relevant award. The FWA makes the test without any consideration to individual agreements agreed to between the employer and the employees. The precursor to the BOOT was the no – disadvantage, which also provided that employees should not be left disadvantaged under the agreement. However, it did not give as strong safeguards to this as the BOOT does (McPhail, Jerrard & Southcombe, 2015).

Application of BOOT

The FWA may still approve deals that do not meet the BOOT criteria. However, this will only succeed if the deal does not run contrary to any other provision under the FWA. At the same time, the deal may be approved if it does not cause any financial injury to the employee covered (McPhail, Jerrard & Southcombe, 2015)

The BOOT was a mechanism adopted to better protect workers. The Australian legal system has historically been aimed at ensuring that the more vulnerable in society were taken care of. This involved initiative such as the no disadvantage and among the most recent, the BOOT. The BOOT guarantees the protection of workers in the enterprise bargaining setup, especially by ensuring that there are comprehensive equal pay provisions, and ensuring that all employees are able to enjoy at least the minimum pay standards. Employees who are most likely to be protected by the BOOT are low income earners who have minimal or no bargaining power with their employers. This means that the retail and hospitality industries’ workers are among the highest beneficiaries (Naughton &Pitard, 2013)

According to the Fair Work Act, the FW authority has the mandate to determine what constitutes modern award, which will then be considered for the test benchmarking. The modern award may indeed become confusing if there is more than one. In such instances, the authority will allow for flexibility, such that employers and employees can choose what best covers them. The agreement in question must be well understood by the affected employees, who must also be willing to adopt it. This is usually done by way of a vote, where the agreement is backed by the majority (McPhail, Jerrard & Southcombe, 2015).

 H&M, one of the largest clothing designers in the country had come up with a national enterprise agreement which would allow lower weekend and public holiday rates for employees, in return for higher weekday rates. In addition, the agreement committed to a number of undertakings which would enable workers who were adversely affected by the deal to gain respite, and not be disadvantaged by the agreement. The agreement was however rejected. The FWC felt that the agreement left casual workers in many instances in worse – off situation than they would be under the existing agreement that was signed in 2010 (Desir, 2017).

The FWC came up with several reasons for rejecting the deal on the basis of the test. The company had not provided enough undertakings to show that casual employees – especially those who consistently worked on Sundays for an extended amount of time – would not be worse off under the new agreement. While H&M had agreed to pay casual employees $0.65 per hour, it limited their hours of work to 65%. This meant that their earnings would be more limited than would have been the case under the existing agreement, which did not have such provisions. Additionally, the store had tried to reduce employees’ salaries by up to $5,000, in order to accommodate budget costs and expansion drives (Marin-Guzman, 2017).

Strengths and weaknesses of the BOOT Test

The retail giant, Coles, had reached an agreement with workers unions, which had aimed at increasing the hourly rate for employees during weekdays, but cut them during the weekends. The deal also provided for some added benefits, such as blood donor and emergency services leave. It also provided for an extra five minutes meal break for employees who worked for more than 4 hours shifts (Hanan, Coles Workers may Lose Pay Rise after Fair Work Veto, 2016).

The agreement has been found by the Fair Work Commission to be deficient in terms of the criteria set by the BOOT test. The agreement had come up with higher rates for weekdays. However, it cut rates for weekended and nights. This meant that employees who were working at night and weekends consistently were likely to be disadvantaged, than would have been the case before (Clarke, Taylor &Oakes, 2016). While the company and union suggested this only affected a small number of people, the BOOT requires all employees to be left better off with the deal, which was clearly not the case. Additionally, the decision to give the other benefits as some sort of compensation was found to be insufficient, since the said benefits were overvalued. The company’s decision is said to likely impact other retail chains in the country adversely, as retail chains try to expand while making their wage bill more sustainable for this (Hanan, Fair Work Ruling Could hurt Coles Staff, 2016).

The Better off Overall test has been instrumental in safeguarding the interests of employees. It has gone further than the no disadvantage agreement, in ensuring that an enterprise bargain has to ensure that all employees are better off that they are under the relevant award. The BOOT also makes it possible for companies and workers to agree on non – monetary awards which ultimately leave the employees in a position better off than the current arrangement would be able to (FWC, 2017).

On the other hand, the test has complicated the enterprise bargain system, making it increasingly difficult for organizations to reach agreements with their employees on sustainable agreements. For instance, the agreement between H&M and the workers union had been backed even by the employees and for a while, by the FWC. However, the need to ensure everyone was better off as a result of the agreement meant that it could not apply. As Watson (2017) notes in his article, it is increasingly necessary to consider wage cuts, with the understanding that it is not unethical, and that it could ultimately mean more jobs. The BOOT system however prevents this.

The BOOT can be improved by redefining the process. The best approach would be to consider that the best deal may not always involve improving the monetary improvement of the offer, as well as corresponding benefits that may constitute “better overall”. Rather, the approach may consider the wider industry needs, which include economic sustainability, job creation and equity. As the number of young unemployed graduates rises, the retail and hospitality industries, which traditionally have helped absorb them before they chart more definite career paths. They are currently unable to do this, since they cannot afford the associated wages and benefits as prescribed under BOOT, which even anticipates the potential employees in its tests. This should be reviewed and if necessary, scrapped (Watson, 2017).

Conclusion

As the decisions regarding Coles and H&M, as well as the industry analysis by Watson show, the labour market is in a crisis. This crisis is however not a result of under or oversupply of labour or skills. Instead, it is the result of unsustainable wage regulations which continue to drive up the wage bills for companies. While the BOOT background is positive, since it ensures that the lowest paid are catered for, it has simultaneously made it harder for other workers to access the job market. Analysis of the industry suggests that since the test was implemented in 2010, the rate of unemployment has drastically gone up among the youth, a factor that threatens to harm the community, rather than help it. The implementation of the BOOT regulation has been improved the fortunes of existing workers, but has dimmed the hopes of prospective ones, who have to look further and longer to secure jobs.

The president should consider some improvements to make the system more receptive to the current atmosphere. The measures should consider the special status of the retail and hospitality industries as first job industries. In light of the soaring unemployment and the attendant social issues, the president should consider changes to the test that will leave not just employees, but also the whole community better off. This will include incentives that enable businesses to hire new employees, by scrapping the provision which also covers potential employees. The will of employees affected in deals should be considered too. The BOOT in the case of Coles did not consider the will of the employees, expressed though the union.

References

Watson, G, 2017, ‘The entire Fair Work Act awards system is failing the 'better off overall' test’, available at URL: https://www.afr.com/opinion/the-entire-fair-work-act-awards-system-is-failing-the-better-off-overall-test-20170327-gv7580 [Accessed 9 May 2017].

Angwin, M 2017, ‘EBAs are now just a blockage to productivity’, Australian Financial Review, 14 February, p. 39.

Desir, B 2017, ‘H&M enterprise agreement fails BOOT’, National Retail Association, 29 January. Available at URL:  https://www.nra.net.au/hm-enterprise-agreement-fails-boot/ [Accessed 2 March 2017].

Hannan, E 2016, ‘Fair Work ruling could hurt Coles staff’, Australian Financial Review, 1 June, p. 3.

Hannan, E 2016, ‘Coles workers may lose pay rise after Fair Work veto’, Australian Financial Review, 10 June, p. 7.

Naughton, R., Pittard, M. 2013. The Voices of the Low Paid and Workers Reliant On Minimum Employment Standards. Adelaide Law Review, 34(1), 120 – 139.

Marin-Guzman, D 2017, ‘Fair Work takes swipe at H & M over failing to disclose pay cuts’, Australian Financial Review, 18 January, p. 3.

McPhail, R, Jerrard, M&Southcombe, A 2015, Employment relations: an integrated approach, Cengage Learning Australia, South Melbourne.

Clark, S, Taylor, J & Oakes, D 2016, ‘Coles could be forced to renegotiate pay deal with thousands of workers after Fair Work ruling’, ABC News, 31 May. Available at URL:  https://www.abc.net.au/news/2016-05-31/part-time-coles-worker-wins-fair-case-against-supermarket-giant/7463132  [Accessed 28 February 2017].