The Fair Work Commission decided earlier this year that Coles should boost its penalty rates to ensure workers would be fair compensated compared to those under the Award. Duncan Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited T/A Coles and Bi Lo [2016] FWCFB 2887 was the David and Goliath battle and a big win for part-time Coles worker Duncan Hart. 

So what should employers be aware of when drafting enterprise agreements? Can employers refuse to comply with Award rates? What do the courts consider when determining whether an agreement is better off than the Award? We examine the key details of the Hart v Coles case below and look at the key points that employers should consider.

What Happened?

Earlier this year, Duncan Hart filed an application with Fair Work claiming the enterprise agreement between his union (the Shop Distributive and Allied Employees Association) and Coles was invalid since it left workers worse off than they would be under the award.

Under the Fair Work Act 2009 (Cth), all enterprise agreements must pass the “Better Off Overall Test” – or BOOT – as set out under section 193 to be valid over the relevant award. Essentially, the Commission must determine that each award covered employee (or prospective award covered employee) would be better off under the agreement as opposed to if they were paid under the award. BOOT is a well-established test which requires:

  • Identification of terms which are more beneficial for an employee;
  • Identification of terms which are less beneficial for an employee;
  • Overall assessment of whether an employee would be better off under the agreement.

In this case, the Commission examined whether Coles employees were better off under the new Coles Agreement, which Fair Work had only approved in July 2015, or under the General Retail Industry Award 2010.

Hart argued that the Coles Agreement gave employees a higher hourly rate but a lower penalty rate for work performed at night, on weekends and public holidays. As such, employees who relied on penalty rates or who were rostered mainly on penalty-rate based shifts were financially disadvantaged. That is, an employee who worked mainly on weekends and night shifts were worse off. Hart selected and showed seven employees that fell into this category.

What Did the Fair Work Commission Decide?

The Commission decided that the Coles Agreement did not satisfy the BOOT because it must be satisfied for each and every employee that the Agreement applied to (which it did not do in this case). 

Coles’ key defence to the decision was that its Agreement provided other benefits that the Commission should take into account and which ultimately balanced out the lower penalty rates. For example, the Agreement provided non-monetary benefits to employees, such as:

  • Additional penalty rates;
  • Rest;
  • Meal breaks;
  • Redundancy pay; and
  • Oher leave entitlements (e.g. defence service leave).

However, the Commission held that while the above factors were relevant, not all employees would receive these benefits uniformly. For example, rest breaks would depend largely on the shifts that the employee had been rostered on to complete – employees rostered on for exactly four hours would not receive the benefit of a rest break.

Employees that worked on a casual or part-time basis, in particular, would likely be disadvantaged under the Coles Agreement. The Commission held that the ultimate weight and scale of the benefits that should be taken into account in assessing these matters would be ‘generally small’.

Coles further identified benefits that the Commission should consider, namely:

  • Support to individual wellbeing;
  • Support to undertake activities away from work;
  • Support to manage domestic/family violence;
  • Support to manage care responsibilities.

For the above benefits, the Commission acknowledged that while they were significant and should be considered, they were ‘almost impossible’ to quantify and the level of benefit was ultimately not substantial for employees.

The Commission stated that it was a matter of ‘simple logic’. The more hours worked during times when the Coles Agreement rates were higher, the better off an employee would be. However, the more hours worked when the Award rates were higher, the worse off the employee. It was insufficient that only some employees were better off. 

What are the Key Takeaways for Employers From This Case?

Following the Commission’s  decision, Coles announced its employees would revert to its original 2011 Agreement and that employees would also receive a pay rise – notably, they defied the Commission in refusing to boost its penalty rates.

Regardless, the case has several key takeaways for employers, particularly large-scale employers with enterprise agreements. Employers should be aware of the following:

  1. There is an increased awareness and scrutiny of enterprise agreements for large organisations with their employees. So, employers should periodically review these agreements to ensure compliance with Fair Work requirements;
  2. While all parties may agree to a proposed enterprise agreement, it is the courts that ultimately determine whether the agreement will pass the “Better Off Overall Test”. The BOOT requires satisfaction that each Award covered employee would be better off overall under the agreement and not only a selective few;
  3. Other benefits will be considered, such as leave entitlements, rest breaks and a good support system for employees. However, if the benefits do not uniformly apply to all employees then its value is worth little and ultimately would not be significant enough to tip the balance and make the entire agreement more beneficial to the employee.

Got a question about your employment or enterprise agreement? Get in touch with our employment law team on 1300 544 755. 

Lianne Tan

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