A major supermarket chain’s enterprise agreement went ‘down down’ when the FWC Full Bench found, on appeal, that it failed the Better Off Overall Test (BOOT) The agreement sought to cover approximately 77,000 employees at the employer’s supermarkets around Australia, of which an overwhelming majority voted in support of the agreement being made. The main union covering the employer’s workforce also supported the making of the agreement.

In order to pass the BOOT, the FWC must be satisfied that at the test time, each award covered employee, and each prospective award covered employee would be better off overall under the agreement when compared to the relevant award.  

Like many agreements, the proposed agreement included some terms that were more beneficial, less beneficial and in line with award conditions.

It was in this context that concerns were raised by FWC at first instance about whether the proposed agreement passed the BOOT. The agreement was then approved by Commissioner Bull on the basis that it passed the BOOT following undertakings, which addressed these concerns.

On appeal to an FWC Full Bench, an employee covered by the agreement claimed that it did not pass the BOOT. This was because he and other casual/part-time employees, who were rostered to work a high proportion of shifts, weekends and public holidays that attracted lower penalty rates, were worse off under the agreement when compared to the award. He relied on typical rosters from two of the employer’s stores to illustrate this financial disadvantage.

In response to this claim, the employer submitted that the Full Bench should take into account the higher hourly rate and contingent benefits including additional penalty rates, rest and meal breaks, and additional leave entitlements.

However, the Full Bench was not satisfied that the higher hourly rate and contingent benefits were sufficient to make up for the significant monetary loss for casual and part-time employees. This was, for the most part, because of the nature of contingent entitlements, the overstatement of non-monetary benefits by the employer when quantified, and the inability to quantify some of those benefits.

As such, the Full Bench found that the agreement did not pass the BOOT as it was not satisfied that a consideration of all benefits and detriments under the agreement resulted in each employee and each prospective employee being better off overall under the agreement compared the award.

The Bench then provided the employer with an opportunity to remedy the failure to pass the BOOT by providing an undertaking that adjusted the penalty/shift rates for those employees adversely affected.

However, the employer refused to provide such an undertaking and argued that quashing the agreement would mean that their employees would fall back to coverage by their earlier agreement. And that is what happened.

Since the birth of enterprise bargaining, employers have adopted strategies to offset high labour costs. For example, providing improved contingent/non-monetary entitlements to their employees or buying out award allowances with an all up rate of pay in their agreements amongst other things.

It has been a widely held belief among employers that these additional entitlements are of particular value and therefore of assistance when the Commission considers the BOOT. However, the approach taken by the Commission in this case demonstrates that while the BOOT is a ‘big picture’ test, it is a question of whether such entitlements, on balance, result in each employee and prospective employee being better off overall.

This decision also highlights that while parties may be in furious agreement about the making of an agreement, it is the FWC who ultimately assesses whether each employee and prospective employee will be better off overall under the agreement when compared to the award.

Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Ltd[2016]

Back to Newsletter