Enterprise Agreement Gets the BOOT After Fair Work Decision

The “better off overall test” (or the BOOT) is a principle in Australian enterprise agreements that requires employees are ‘better off’ under the agreement than if the relevant award applied. Sections 186(2)(d) and 193 of the Fair Work Act 2009 (Cth) (FWA) detail the better off overall test. Below, we examine a recent Coles Supermarkets case to understand better how the test affects employers.

How Did Coles Supermarkets Get the Boot?

The FWC recently considered the application of the BOOT in Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Ltd [2016] FWCFB 2887 (31 May 2016), in particular:

• Whether the BOOT should apply to every single worker individually, or
• Whether the BOOT should simply apply to the majority of workers under a more general analysis.

The Full Bench of the FWC rejected a proposed enterprise agreement for Coles Supermarkets because it did not pass the better off overall test. This was despite both the employees approving and the principal union for Coles workers (the SDA) supporting the agreement.

Where legislation requires that each worker must be better off under an enterprise agreement than the award, the FWC will not be satisfied if a majority of workers will be better off.

Coles sought to reduce penalty rates and compensate for these reductions through entitlements. The retailer argued that by slightly increasing the standard base rate and offering other benefits, they adequately compensated workers for loss of wages for some workers. The Full Bench of the FWC found that contingent leave entitlements (such as blood donor leave or defence services leave) relied on a particular employee taking that leave. In many individual cases, these ‘contingent’ (i.e. uncertain) entitlements would not adequately compensate for the clear and unambiguous reduction in wages during penalty rate periods.

The FWC asked Coles to reapply for approval of a revised enterprise agreement once they had addressed these deficiencies.

How Does the Decision Affect Employers?

The decision indicates that presenting evidence showing that each employee will be “better off overall” is clear to obtaining approval from the FWC. It’s not relevant how employers choose to present this evidence (e.g. in a detailed spreadsheet comparing the award against the proposed payments). What is clear is that the material should address each category of employee that the employer hopes to cover in the agreement. For instance, if the ‘standard’ payment is close to the award with no significant offsetting benefit for those affected by reductions in penalty rates, more work must be done to explain why these workers are still ‘better off’.

***

If you are an employer and you have any questions about enterprise agreements or satisfying the better off overall test, get in touch with our specialist employment lawyers on 1300 544 755.