Coles has recently been in the spotlight for their treatment of workers. The Full Bench of the Fair Work Commission (FWC) found that the Enterprise Agreement Coles had negotiated with employees did not pass the “Better Off Overall Test” (BOOT test). This test is set out in section 193 of the Fair Work Act 2009 (Cth) and requires the FWC to look at the beneficial terms and detrimental terms of the proposed agreement and make an assessment as to whether the employees will be ‘better off overall’ under the agreement. This decision will likely have an impact on other similar agreements moving forward.
It is common practice under enterprise agreements to increase base pay rates as compensation for the reduction of other entitlements. However, in this appeal, the Full Bench was not satisfied that the increase meant that employees were better off overall.
The single enterprise agreement “Coles Store Team Enterprise Agreement 2014-17” was originally approved by the FWC but then appealed by a worker Duncan Hart. In Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited  FWCFB 2887 (Hart) the Full Bench considered a number of factors in making their assessment. The Full Bench addressed the BOOT test in relation to specific employees and their rosters as well as employees overall. They specifically looked at a number of employees’ rosters and compared the rates of pay and the loss of pay that they would suffer under the proposed enterprise agreement.
BOOT Test and Benefits
The Full Bench reiterated that the BOOT test does not just look at the majority of employees but considers each employee that is covered by an Award and whether in each case they are better of or not under the Agreement, but focusing on those most adversely affected (Hart). The relevant Award, in this case, was the General Retail Industry Award 2010, as such when making their assessment the FWC will also review the Award and the expected entitlements under such Awards as well as the National Employment Standards.
The Full Bench undertook a detailed comparison of the pay rates and particular rosters of employees and noted that hours worked by employees have a significant impact on whether the agreement would pass the BOOT test. Although base pay rates were higher under the agreement, the Full Bench held that part-time and casual employees would be negatively impacted by the agreement when looking at the advantages and disadvantages.
While Coles argued that benefits and entitlements should be considered for the BOOT test, the Full Bench noted that they should not be considered as strongly when weighing up the various benefits and detriments under the Enterprise Agreement. The court held that not many employees were likely to take up the benefits, and it was up to each employee to take advantage of these benefits rather than being provided to them.
These benefits included some which rely on the employee to take advantage of them:
- Pre-approved leave arrangements;
- Blood donor leave; and
- Defence service leave.
Some benefits relied on the circumstances in which the employee found themselves:
- Accident makeup pay;
- Carer’s leave;
- Compassionate leave;
- Emergency services leave;
- Natural disaster leave; and
- Redundancy pay.
The Full Bench was not satisfied that employees would take advantage of these benefits or currently use them. Although the Full Bench indicated that these factors should be taken into consideration, they held that it should be given a much lower value when compared to changes in other entitlements. The Full Bench also noted that other benefits which could not be quantified but would still be taken into account. These included; enhancing wellbeing, supporting non-work activities, domestic violence support, and care responsibility support (Hart). The Full Bench noted that in evidence provided, these benefits are overvalued.
Decision of the Full Bench
Balancing the reduced penalty rates and benefits, the FWC found that Coles’ Enterprise Agreement did not pass the BOOT test. They set out that “undertaking that provided for an adjustment in payments to employees who work a sufficiently high proportion of penalty shifts as to suffer a financial disadvantage of the type demonstrated in the selected Northcote and Benalla employees” or ”Alternatively, an undertaking which limits that number of penalty hours worked by employees, could potentially also address our concerns.”
However, from current media reports, it seems clear that Coles will not be submitting an undertaking and will be instead reverting to the previous enterprise agreement from 2011. Employers are not required to provide undertakings, but employers will often ensure the enterprise agreement is approved.
This decision provides some important takeaways for employers. Firstly, you need to consider the practical implications of the entitlements and benefits and detriments of your enterprise agreement. You should look at how your employees work, their rosters and whether they will in practice take advantage of the benefits you are proposing. You should also be wary in overestimating these benefits in making an assessment as to whether your agreement is likely to pass the BOOT test.
If you have any concerns about drafting an enterprise agreement or the process of seeking approval you should consult an employment lawyer, and they will be able to help you through the process. Call us on 1300 544 755 or fill out the form on this page.