Better Off Overall Test (BOOT) - A Report To Fair Work Commission

Write a report to the President of the Fair Work Commission advising him of any changes that you consider should be made to the Better Off Overall Test or Boot.

Background

The Honorable Justice IJK Ross AO,

President Fair Work Commission,

Fair Work Commission,

GPO Box 539, Canberra City,

ACT, 2601

Dear Justice Ross,

Requisition to amend the Better Off Overall Test parameters.

This is regarding the current system of Better Off Overall Test. We would like to put forward a request to amend the parameters of BOOT as we feel that there are certain shortcomings because of which it may impact the current unemployment and poverty trends in Australia.

A report has been attached to this letter for your perusal. We have tried to highlight the positive points of BOOT and some concerns as well. We have tried to present certain recommendations as well for your consideration.

Looking forward to a positive action on behalf of your esteemed self to consider it and help us, the youth with better amendments.

Yours Sincerely,

Better off Overall Test or BOOT is used by Fair Work Commission to approve or disapprove a proposed enterprise agreement against rewards. The registered agreement is compared to the relevant award under BOOT to ensure he is better off with the registered agreement. The agreement is then approved. This project has been prepared to shed some light on the BOOT, its origin, the effect it has on employment percentage and how organizations have been using different enterprise agreement models trying to show the employees are at advantage whereas it was not the case. Case from H&M and Coles have been discussed to shed light on the same.

Some recommendations have been prepared to Fair Work Australia for consideration to revise the BOOTs structure to extent of advantage for working mass, the unemployed as well the business organizations.

Better off Overall Test has its roots in Fair Work Act 2009 – Sect 193. It laid the foundation for the Better off Overall Test. It laid down certain foundations for Greenfields agreement. A Greenfields agreement is an agreement between a new employer who does not have any employees yet and one or many unions for establishing a new business venture (Forsyth and Stewart, 2009). Australian trade unions played an important role in the monitoring and enforcement of minimum employment standards. (Hardy & Howe, 2010)

 It is mandatory to seal the agreement before any employees are hired.

As opined by Culbert (2017), in order for FWA (Fair Works Australia) to approve such an agreement, there were conditions. Such as:

1. Should be in public interest to approve the agreement
2. With respect to the work that shall be conducted under the agreement, the union should be entitled to represent company’s interests for majority of their employees

Upon release of the ACT, it was further noticed that section 175 & 177 were missing. The Fair Work Bill Act 2008 set out that the combination of 175 & 177 could be potent as they would entitle each of the unions as bargaining representatives for the agreement with the enterprise and also under it employers would be under obligation to notify all unions who have eligibility to cover the vocations covered under the Greenfields Agreement. It was hence decided that the amendment would come with attachment of a ‘safety valve’ that if the negotiations are not fruitful between the union and enterprise i.e. if the Greenfields agreement failed, then FWA could intervene, on its own or by request from a party, conduct a limited arbitration. Also, a clause of ‘good faith bargaining’ to be included. Earlier, enterprise agreements were assessed against the no-disadvantage test (NDT), post 1/2010 onwards BOOT has replaced the NDT. It ensures that the minimal pay is as per the modern awards and compliant to National Employment Standards (Waterhouse and Colley, 2010, p. 154)

AIMS

The objective of BOOT is to provide a structure or framework for the enterprises to enter into an employment agreement. It assists in enterprise bargaining power of the employees. Enterprise bargaining is the process involving the employee, employer and the bargaining representatives with the goal of making an enterprise agreement. The Fair Works Act with BOOT establishes clear rules on how the process is to be conducted, rules on bargaining, what the agreement content should be, how the agreement needs to be made and most importantly be approved.

Enterprise agreements could be either:

1. Greenfields agreement
2. Single-enterprise agreement or
3. Multi-enterprise agreement

Boots ensure that the offer made to the employee for employment has a minimum base pay rate as per the modern standards set under the National Employment Standards. They check that the offer made to the employee is better in every respect and are better off overall rather to be employed by the agreement itself than as per the relevant modern award. The BOOT is a point in time test. That means that at the test time each prospective agreement covered employee and each award covered employee are better off overall. Test time being the time when the bargaining representative submits request for approval to FWA. Though, sometimes, there may be possibility that base pay rate falls below the modern award system but the FWA would not roll it back if it is against the public interest (McRostie and Giles, 2017, p. 34).  This system allows award conditions (non-NES conditions) to be traded off or excluded provided the total remuneration and may be the benefits received by the employee leave them better off than if the conditions remained the same.

The scope and function of the Better off Overall Test remains contested (Miller and Orchard, 2016) It definitely shows that labor has given up a lot of ground though. The FWA with the new act, provides enterprises a lot of power to decide on the award contents. However, the scope of BOOT may be discussed as (Healy, 2016, p. 311),

1. It provides a national framework for agreements between potential employee/award covered employee and the employer (also a bargaining representative) – This means that there would be uniformity in the way the enterprise agreements are created and the bargaining that is done for giving the employee the best reward for his skills and expertise nationwide
2. The framework is monetary – it decides mostly monetary offers however, rewards of any employee benefit kinds are also taken in account
3. It ensures that no employee has been taken advantage of for the sake of employment monetarily and that he is at least being paid the minimum pay set as per the modern award system – every employee or potential one has received the agreement/offer of employment without having to bargain for non-expertise. He shall be at par with any other employee in the organization with his skills set
4. The system requires employees to compare the salary offered or the salary which covers the employee to the modern award standards set – every employee has the guarantee to get a particular amount of money as remuneration
5. All enterprise agreements must pass BOOT- all enterprises registered as business organizations and giving employment must conform to the BOOT standard.
6. BOOT ensures that trade unions ‘get a seat at the table’

BOOT or Better off Overall Test is a provision in the new enterprise agreement launched n 1/2010 which requires every enterprise agreement to be approved by the FWA. It is part of the National Minimum Wage Order 2016 (Heron and Charlesworth, 2012, p. 214). It sets the minimum compensation an employee could get in an enterprise agreement or a modern award. The National Minimum Wage order lists the following:

1. National Minimum Wage
2. Casual Loading
3. Special National Minimum Wage 1 (for disabled employees whose disability does not affect their productivity)
4. Special National Minimum Wage 2 (For disabled whose disability affects their productivity)
5. Special National Minimum Wage 3 (for junior employees)
6. Special national Minimum Wage 4 (for apprentices) and
7. Special National Minimum Wage 5 (for trainees)

The enterprise agreement put forward by the employee and which is not a Greenfields agreement, need to conform to the above set guidelines when proposing an offer of employment to a prospective employee for approval by FWA.

As discussed by Hampton, (2016, p. 16), The Better off Overall Test, though controversial have certain pros. Some of them for discussion would be:

1. Protection of interest of employee in terms of wages – Let’s take example of refusal of the FWC to approve the Coles Store Team Enterprise Agreement. The committee put forward evidence of rosters of eight employees working at sites Northcote and Benalla store.  FWC argued that even though the stores did not function on a 24*7 model like others, it was representative of general operating conditions and rostering patterns. The FWC said that the eight employees owing to the pattern of the rosters were disadvantaged with respect to wages. In their view, the above-award per hour rate was negated by lower penalties under the Enterprise Agreement for both night and weekend work. If the same was compared to an employee who worked at weekends or just nights, he was further worse off. They put forward that they were suffering monetary losses in base pay itself.  In case of H&M enterprises as well, the Swedish fashion retailer decided to pay out higher weekday wages against lower weekend and holiday penalty rates. FWC found out that this put workers at a disadvantage and rejected their agreement
2. Wage Increases – The bench of FWC says that wage increases over the life of agreement was a good consideration and relevant however, cautioned that not all employees at the time of test shall remain in employment during the tenure of the agreement and that the level of future agreement is unknown.
3. Protection from portrayal of increased rest breaks – Coles had a provision of 15-minute break whereas the Award has provision of 10 minutes, The Bench contended that the 5-minute extra break did not have any monetary effect as because the breaks were for shifts 4 hours plus but under the award it covered the shifts of four hours or more both.
4. Protection from portrayal of increase benefits to employees – In the Coles case, the Enterprise agreement were providing employees with lot of benefits however, the Bench argued that not all employees would access all the benefits. It was unfair to add a monetary value to the benefits the employees may not access at all. In comparison to the 50% value that Coles were attributing to the benefits, the Bench attributed just 10% in this light (Venn et al. 2016, p.139) In H&M case as well, they tried to justify the less weekend rated with increased weekday rates but it was a bluff as per FWC as the workers would have been at a disadvantage by portrayal of increased rates by H&M

Australia’s unemployment rate as of March, 2017 is steady at 5.9%. Unemployment is on rise in this continent and as of today, Better off Overall Test stands to be a good enough barrier to employment of youth in sectors like retail, fast-food etc. similar industries. As per former FWC VP-Mr. Graeme Watson, immediate reforms needed to be made to minimum rates of pay to tackle the problem of youth unemployment (Buchanan and Oliver, 2016, p. 796). He pointed that along with high minimum wage rates, they also had high minimum skilled employees above the minimum rate which was unusual by international standards (Cook et al. 2017, p. 49). He also added that all sorts of add-ons such as penalty rates and allowances are unusual as per international standards as well. He clearly pointed out that the employment safety net needed a major overhaul.

Scope

When looking at it from perspective of employers, the BOOT stands as a deterrent to hiring more people, no matter if they are freshers. Industries such as aviation, fast food, retail require high number of ground staff and stand as major employment avenues as first jobs for youth.  To gain a little bit of experience and move on to greener pastures, however, with BOOT’s enforcement, things are becoming difficult for them to get a job and the employer to trust the system for excuses. Poverty and unemployment both are linked and may get affected if number of organization opting to provide employment shut their gates to fresh hires. It would not only affect business but hit industries and economy as a whole as well (Freyens and Gong, 2017, p. 125). Also, if we talk about H&M, their enterprise agreement was also rejected for BOOT as because the bench felt that they were putting the employees at advantage by offering them low weekend and Sunday rates. H&M argued that this was because they were offering high weekday rates. BOOT has provided the trade union a ‘seat’ on the table and this is again something that employers are not happy about. Weaknesses in the system could impede service quality and quick responses to consumers in long run. In times of economic slow-downs or stymie innovations, the system could severely impact the unemployed (Grayson, 2016, p. 14). It is safe to say that there is scope of improvement in the BOOT mechanism

It is hereby recommended that certain amendments be made in FW ACT and specifically BOOT mechanism.

1. People find workplace relations system confusing. The system could be simplified in its presentation, may be a set format would help
2. Parties that should have a bigger say in it such as underemployed, unemployed and consumers have just marginal influence in it. Recommendation from these sectors should be considered
3. Instead of keeping the approach centric to history, precedents and previous judgements, it should keep an open approach, unaffected by lobbyists and keep it evidence centric
4. The FWC could also keep in mind the uncertainties in forecasts of unemployment related to uncalculated fluctuations in economic circumstances, and the effect it would have subsequently for employment and household income of forecasting errors
5. FWC could also improvise on a plan for annual wage reviews
6. Introduce range of measures to complement the minimum wages (example – some countries use EITCs or earned income tax credits)
7. Changes to the National Employment Standards – some relaxation in the mandatory 10 conditions of employment could also assist in relaxing situation to draw up a favorable Enterprise agreement by organizations when offering employment
8. Repairing Award system – The current award system is rigid and contains undesirable inconsistencies despite them proving to be a good safety net and benchmark used by several employers. It could be made less simpler and unambiguous to avoid mistakes and misunderstandings arising from them
9. Revision in penalty rates – it is recommended that changes be made in the current penalty rates for working on Sundays and night shift
10. Make Enterprise bargaining suitable for smaller enterprises – because of BOOT in place, smaller enterprises find it challenging in the bargaining process as uncertainty creeps in during this stage as well as the approval stage. This could be replaced with the no-disadvantage test as earlier and also for individual agreements
11. The duration of four years may not be a benefit but maybe allowing a negotiation for five years could help with a better negotiation and lowered costs

Conclusion

Better off Overall test is a bane and boon for the Australian work community. While the workforce of an organization may be inclined to accepting Enterprise Agreements in some ways as was evident through the Coles  & H&M case, some aspects of it may be unfair and needed to be altered for the overall betterment and welfare of employees at ground levels. Better off Overall System may have severe impacts on economic development of nation if it is not balanced appropriately with the rising unemployment rates and underemployment rates? It is safe to say that the recommendations cited may prove to be beneficial for FWC to consider and make suitable amendments to help the situation rather than threat the employing of youth with high minimum wages. As it is the skill level of employable youth is not at an appreciable standard and with imposing tough standards it may pose a hindrance to offer of employment. Youth mostly takes up their first jobs at retail, aviation, fast food chains as their first stops to gain some exposure and further move on to better roles with experience and skill upliftment. It is hereby concluded that by repairing the Model Awards scheme, they help the upliftment of work community in Australia. Also, that they make the regulations simple and address the troublesome points on thematic basis instead of replacing them.

Reference List

Books

Culbert, S.A., 2017. Good People, Bad Managers: How Work Culture Corrupts Good Intentions. Oxford University Press.

Forsyth, A. and Stewart, A. eds., 2009. Fair work: The new workplace laws and the work choices legacy. Federation Press.

Hardy, T. and Howe, J., 2010. Partners in enforcement? The new balance between government and trade union enforcement of employment standards in Australia.

Journals

Buchanan, J. and Oliver, D., 2016. ‘Fair Work’and the Modernization of Australian Labour Standards: A Case of Institutional Plasticity Entrenching Deepening Wage Inequality. British Journal of Industrial Relations, 54(4), pp.790-814.

Cook, K., Corr, L. and Breitkreuz, R., 2017. The framing of Australian childcare policy problems and their solutions. Critical Social Policy, 37(1), pp.42-63.

Freyens, B.P. and Gong, X., 2017. Judicial decision making under changing legal standards: The case of dismissal arbitration. Journal of Economic Behavior & Organization, 133, pp.108-126.

Grayson, A., 2016. A how to guide to the Fair Work Commission. Precedent (Sydney, NSW), (135), p.14.

Hampton, P., 2016. The role of arbitration in disputes before the fair work commission. Bulletin (Law Society of South Australia), 38(7), p.16.

Healy, J., 2016. The Australian labour market in 2015. Journal of Industrial Relations, 58(3), pp.308-323.

Heron, A. and Charlesworth, S., 2012. Working time and managing care under Labor: whose flexibility?. Australian Bulletin of Labour, 38(3), p.214.

McRostie, S. and Giles, M., 2017. Footy coach's' unfair dismissal'gets the boot. Proctor, The, 37(1), p.34.

Venn, D., Carey, G., Strazdins, L. and Burgess, J., 2016. What explains trends in Australian working-time arrangements in th  2000s?. Labour & Industry: a journal of the social and economic relations of work, 26(2), pp.138-155.

Waterhouse, J. and Colley, L., 2010. The Work-Life Provisions of the Fair Work Act: A Compromise of Stakeholder Preference. Australian Bulletin of Labour, 36(2), p.154.