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Report On Changes To Be Made To The Better Off Overall Test

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Discuss about the Report on Changes to Be Made to the Better off Overall Test.
 
 

Answer:

Report Changes to Be Made to the Better off Overall Test

The better off overall test is an essential requirement for an enterprise agreement.  If the agreement applies to award covered employees, the FWA requires that the Fair Work Commission must be contented that each of them is better off overall. This test commenced operation on 1st January 2010, and this is the same time that modern awards commenced operation. The requirement of the “better off overall” must be met at the time of testing. While FWA provides that Fair Work Commission can approve an agreement that does not comply with this law, it can happen in isolated cases. The tribunal can approve an agreement if it deems that it is not contrary to the interest of the public. According to the law, one instance when an approval can be acceptable is if it is part a sound plan to sort put a short-term crisis as well as to help in the revival of the business of an employer who is covered by this agreement.

The Better off overall test is perfect on paper. Since the enactment of the Fair Work Act, there have been many cases that point to the fact that this law is failing the “better off overall” test.  Many industries find it difficult to implement the policy and remain profitable, and both the court and the FWC has made rulings that leave employers uncertain whether their practices are legitimate. It is for the reason that I write this report to the President of the Fair Work Commission advising him on several changes that I consider should be made to BOOT.

Unprecedented Changes in the Application of BOOT

Problems in the Retail and Hospitality Industries

Many industries have experience difficulty implementing this new policy. In particular, the current occurrences in the retail and hospitality industries are an indicator that all is not well and storm might be brewing in these industries and many other industries. In early 2016, enterprise bargaining in the retail and hospitality industries ground to a halt (Fair Work Commission, 2017). The combined effect of increased attention to BOOT and uncertainty over penalty rates were, in part, responsible for this problem. Other factors that have made these industries to face their most challenging moment are the critical changes in the retailing and the increased attention to award compliance.  Unfortunately, the implications have extended to the entire community as well (Coorey & Marin-Gunzman, 2017; Watson 2017).

The nature of this “protection” device is connected with enterprise bargaining in these industries.  Enterprise bargaining offers larger businesses opportunities to modify their award obligations and maximize their profits at opening times. For the past 25 years, many enterprises have used this approach to thrive in the market (Mathur & Kenyon 2008). This trend makes the future of business to look good with the increased implementation of BOOT. However, it became apparent in 2016 that an enterprise agreement is no longer possible to have an enterprise agreement approved simply because a union has given its name to it (Stewart, 2011).

 

Undertakings No longer Helps

A Full Court of the Federal Court ruled last year that the Full Bench of the FWC failed to exclusively consider whether an agreement met the requirements of the BOOT. The case in question was the approval of the MSS Security OLD Enterprise Agreement 2014-2018.  United Voices argued in court that the agreement could not satisfy the Fair Work Commission as it puts employees in a position that is better off overall.  For this to happen, the agreement ought to have put employees at a greater advantage than the modern enterprise award that applies to those employees (Better Off Overall Test, n.d.; Creighton & Stewart, 2010).

United Voices observed that the implementation of the Agreement would make some employees receive below award entitlements, which would, for that matter be worse off. The union also noted that the undertakings that the commission to use to address this did not adequately solve the shortcomings. After an extensive court battle, the court ruled that circumstances, where undertakings can be used to address deficiencies in Agreements, are restricted.  The courted continued to say that an employer cannot easily resolve a failure to meet the better off overall test by making undertakings (Undertakings Insufficient, 2017; United Voice v MSS Security Pty Ltd [2016] FCAFC 124, 2016).

Only Easy to Understand Evidence Counts

The Fair Work Commission rejected another landmark enterprise agreement in May 2016, and this has left employers confused whether their employees are better off overall.  One member of the Fair Work Commission initially approved Coles Store Team Enterprise Agreement 2014-2017. However, a Full Bench of the Commission later rejected it on the basis that the assertions could not convince them that the higher ordinary rate of pay as well as the additional entitlements that the agreement offered meant each ward-covered employee would be better of overall. Since the agreement would increase the casual loading to 25 percent and the pay rate for 17 and 18 years olds to 60 percent and 70 percent respectively, Coles argued it was a better deal.  The Agreement would also create a provision for casual and non-trades to allow them to take home payment for any four-week roster cycle (Winckworth, 2016).

Commissioner Bull was concerned that the consultation clause contained in the Agreement did not meet the required standards as regards consultation on changes to the ordinary hours of work of employees. However, according to Coles, another clause in the document met that particular criteria and they provided an undertaking that employees would be represented during all consultation processes regarding changes to these matters. These reasons consequently persuaded Commissioner Bull. For many enterprises, this means they could use undertakings to meet BOOT (Kollmorgen & Naughton, 2009; Brooke, 2016).

 


However, this approval did not save the situation as a Full Bench overruled this commissioner’s approval in May 2016.  The Australasian Meat Industry Employees Union and an individual employee, Duncan Hart, appealed the decision, and Full Bench had to sit to determine its legitimacy. In the end, the Full Bench overturned Commissioner Bull’s approval and came up with six main points to justify its decision to do so (Commercial Law Australia, 2016; Tredwell & Silcock, 2016). 

The Full Bench held that though the stores that employed eight employees, which was presented as evidenced,  did not operate on a 24 hours basis as Coles stores did, they were a representation of the operating circumstances at most Coles stores. The Full Bench considered these employees to be among the most disadvantaged individuals on wages. This unfairness in pay was attributed to the hours they were forced to work, and the commission ruled that these employees lost between $782 and $3,506 annually on wages alone (Commercial Law Australia, 2016). 

Another area of the commission’s concern was wage increases. The Full Bench noted that the wage increases offered were relevant considerations. However, it warned that the wage increases are of only limited significance as not all employees who were enrolled at test time would remain in employment throughout the entire period of the Agreement. The Full Bench also noted that the future award increases were unknown (Pallot, 2016; Ellison, 2012).

Additionally, the Full Bench considered the impact of longer rest breaks on the welfare of the eight employees. Under the Award, employees have a rest break of 10 minutes. However, this Agreement provided 15 minutes. The Commission considered that the longer rest break that was provided was unlikely to represent a financial advantage. This reasoning was founded on the belief that the 10 minutes provided under the Award was allowed for shifts of at least four hours, but the 15 minutes was provided for shifts of more than four hours (Stewart, 2011).

There were also some more generous entitlements.  Coles Agreement provided employees with several benefits that were intended to make the contract more beneficial to employees. Some of these benefits include pre-approved leave arrangements, carer’s leave, redundancy pay, ability to take blood donor leave, accident makeup pay, natural disasters leave, defense service leave, and emergency services leave (Stewart, 2011).

Concerning pre-approved arrangements leave, defense service leave as well as blood donor leave, Coles was of the opinion that it was 50 percent of the benefit of accessing each form of leave on a yearly basis was a reasonable ground to value these benefits. However, this argument could not hold since Coles failed to provide any evidence in its support. The Commission held that it was not reasonable to assume that all employees would have equal access to those benefits (Tredwell & Silcock, 2016).

 


The Full Bench found it appropriate to accord these additional benefits high regard. However, it had reservations regarding attributing a financial value to them given that employees were unlikely to use the benefits uniformly.  It went on to point out that if a value were attributed to them, it would assign that value 10 percent of the total (Winter & Smeaton, 2012).

The Executive Manager of Fire & Emergency Management put forward evidence that employees who volunteered to work for the Country Fire Authority would find the emergency services leave to be of great value. Coles, on his part, failed to provide any evidence as to the probability of employees accessing that leave. The Full Bench considered the provisions that provided domestic violence support supported individual wellbeing, supported workers to remain employed but still be able to manage their caring responsibilities reasonable. It also considered it reasonable to consider supported employees in undertaking some viable non-work activities like study. However, the Full Bench said that it was close to unfeasible to quantify these benefits, and, therefore, it concluded that these provisions were beneficial for employees, but some aspects of Award offered greater flexibility and security than the Agreement did (Le Mare & Forsyth, 2016).

The Full Bench also raised some concerns regarding the employee’s views.  The Shop Distributive and Allied Employees’ Association brought to the attention of the Full Bench that closes to 90 percent of the employees who took part in the voting exercise voted up the Agreement. The Full Bench accepted the association’s submission that the views of the employees were relevant. However, it also provided that the level of income is a vital aspect that can help determine the level of access to study and other life choices. The Full Bench found that Coles had failed to satisfy the better off overall test (Le Mare & Forsyth, 2016). 

The Commission found it appropriate to accept undertakings from Coles that either reduced the number of working hours that attracted penalty that an employee could work or made sure employees rostered to work more hours that could attract penalty rates would be paid more under the Agreement than under the Award. When Coles refused to provide these undertakings, the Full Bench overturned the earlier decision to approve the Agreement (Dessler, 2012; Le Mare & Forsyth, 2016).

 

Conclusion

The Coles case and that of the United Voices left employers looking for evidence to take to the Fair Work Commission to demonstrate that each of their employees that is covered by an Agreement is “better off overall.”  They have learned that only employers who present adequate evidence in an easy to understand and progressive way have high chances of the commission approving their Agreements.  However, employers who need to pay award rates or rates that are very close to the award must take adequate care when working towards offsetting deficiencies in financial entitlements with enhanced contingent entitlements.

Numerous practices have emerged over the past few years in this particular respect.  In the labor hire industry, for example, many provisions that tend to “buy out” sundry award allowances with an all up “Better Off Overall Test”- style allowance is relatively common. Practices like that one at Coles where employers want to change elements that many people consider to be outdated penalty rate systems, especially for after hours work or weekends, are quite popular. Agreement that seeks to accomplish these things can succeed, but like many other things, how an employer handles them can mean either success or failure. The main factor is that for an enterprise agreement to hold, it must provide every employee that it covers to be “better off overall” when compared to the relevant awards.

In a market where most employers are putting into great consideration their employment costs,  the Coles ruling helps to show that this can be a quite challenging exercise in enterprise bargaining. This ruling also helps to establish that a small group of well-organized employees can stand in the way of these agreements covering large national employers against the desires of the majority of people in the workforce. As a result, employers need to take considerable care to ensure new enterprise agreements have the right benefits for all categories of employers to ensure the better off overall test is met and the agreement approved.

The failure of awards that knocked down penalty rates for some employers has contributed to the removal of the traditional advantage of the better off overall test. Today, it is common practice to find the commission applying the better off overall test more strictly against enterprise awards that do not comply with retail opening hours, which also makes the implementation of the Agreements a great challenge.

Recommendations

Many industries are facing their most challenging moments because of the rapid changes in retailing, increased attention to award compliance, and uncertainty over penalty rates.  While employers have a responsibility to try to minimize the effect of these changes on their businesses, their efforts are limited, and the Fair Work Commission need to come it to save the situation.

The chairman of the commission needs to lead this process and ensure several changes is made to the law. The Commission should encourage real consideration of options such as a reduced pay floor long-term unemployed.  In the current penalty rate debate, no one is representing their interests, yet they need viable sources of income. The commission should also draft policies that will ensure enterprise bargaining returns to the retail sector. The past rulings have indicated that enterprise bargaining may be a thing of the past given that it appears more costly and time-consuming than putting pressure on employers to comply with the over-demanding labor law. The commission should act to avoid the occurrence of altering employment practices and the increased discouragement of employment of individuals who are in dire need.

The chairman of Fair Work Commission should use his powers to ensure the safety net is comprehensively reviewed so that it can provide a fair go for all people.  For the review to be useful, it needs to be based on an objective evaluation of the 21st-century social, economic circumstances. The chairman should ensure the law is amended to temporarily do away with the exorbitant penalties that puts too much pressure on employers and force them to focus on award compliance and BOOT compliance at the expense to economic productivity.  The penalties can take effect when employees have understood what they need to do. Finally, FWA should give priority to employees’ views. In the case of Coles, 90 percent of employees voted up the Agreement, so it should not have been rejected on the grounds of technicality rather than a substantial value that it offered.

 

References

Better Off Overall Test (BOOT). (n.d.). Retrieved April 18, 2017, from https://workplaceinfo.com.au/resources/employment-topics-a-z/better-off-overall-test-(boot)

Brooke, P. A. (2016, June 25). Are your employees better off overall? Retrieved April 18, 2017, from https://www.lexology.com/library/detail.aspx?g=cae58e49-b709-46a7-b8a6-ab0b66dae9de

Commercial law Australia. (2016, July 25). Retrieved April 18, 2017, from https://www.piperalderman.com.au/publications/employment-relations/article/8516

Coorey , P., & Marin-GUnzman, D. (2017, February 23). Penalty rates reality riles labour club. Retrieved April 18, 2017, from https://www.afr.com/news/politics/penalty-rates-reality-riles-labor-club-20170223-gujrv6

Creighton, B., & Stewart, A. (2010). Labour law. Annandale, NSW: Federation Press.

Dessler, G. (2012). Management and people: HRMG100. Fenches Forest, N.S.W.: Pearson Education Australia.

Ellison, M. (2012, October 29). Procedural requirements for enterprise bargaining - tips, tricks and pitfalls. Retrieved April 18, 2017, from https://www.minterellison.com/publications/procedural-requirements-for-enterprise-bargaining-201210hef/

Fair Work Commission cuts Sunday penalty rates. (2017, February 22). Retrieved April 18, 2017, from https://www.afr.com/business/retail/fair-work-commission-slashes-sunday-penalty-rates-public-holiday-rates-20170222-gujbi0

Kollmorgen, S., & Naughton, R. (2009, May 13). The BOOT Practical Operation Of The Better Off Overall Test - Employment and HR - Australia. Retrieved April 18, 2017, from https://www.mondaq.com/australia/x/79602/employee rights labour relations/The BOOT Practical Operation Of The Better Off Overall Test

Le Mare, N., & Forsyth, A. (2016, July 7). The Coles Agreement Decision and What it Means for Enterprise Bargaining. Retrieved April 18, 2017, from https://www.corrs.com.au/publications/corrs-in-brief/the-coles-agreement-decision-and-what-it-means-for-enterprise-bargaining/

Mathur, S. S., & Kenyon, A. (2008). Success in diversification: The filters and the better-off test. Creating Valuable Business Strategies, 175-184. doi:10.1016/b978-0-7506-8548-1.50022-5

Pallot, L. (2016, June 2). Russell Kennedy Lawyers. Retrieved April 18, 2017, from https://www.rk.com.au/insights/every-day-low-wages-when-not-all-employees-are-better-off-overall/

Stewart, A. (2011). Fair Work Australia: The Commission Reborn? Journal of Industrial Relations, 53(5), 563-577. doi:10.1177/0022185611419600

Stewart, A. (2011). Fair Work Australia and the Legacy of the Commission. Journal of Industrial Relations, 53(5), 551-555. doi:10.1177/0022185611419606

Tredwell, K., & Silcock, J. (2016, June 15). Major Australian retailer struggles to give employees 'better off overall' under new agreement. Retrieved April 18, 2017, from https://www.hallandwilcox.com.au/major-australian-retailer-struggles-to-give-employees-better-off-overall-under-new-agreement/

Undertakings Insufficient as Agreement fails Better Off Overall Test. (2017, February 06). Retrieved April 18, 2017, from https://hallpayne.com.au/agreement-fails-better-off-overall-test/

United Voice v MSS Security Pty Ltd [2016] FCAFC 124  . (2016, August 23). Retrieved April 18, 2017, from https://www.fwc.gov.au/documents/decisionssigned/html/2017fwcfb651.htm

Watson, G. (2017, March 28). The entire Fair Work Acts award system is failing the "better off overall"test. Retrieved April 18, 2017, from https://www.afr.com/opinion/the-entire-fair-work-act-awards-system-is-failing-the-better-off-overall-test-20170327-gv7580

Winckworth, J. (2016, August 4). Coles – the BOOT needs to fit all feet (not just the majority). Retrieved April 18, 2017, from https://www.claytonutz.com/knowledge/2016/august/coles-the-boot-needs-to-fit-all-feet-not-just-the-majority

Winter, B., & Smeaton, A. (2012, June 4). Paying above award? You still may be exposed. Retrieved April 18, 2017, from https://www.cgw.com.au/publication/paying-above-award-you-still-may-be-exposed/

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