Fair Work Commission Confirms that Coles Supermarkets Underpaid Workers After Negotiating Agreement with Union that Led to Penalty Rates and Casual Loadings Below the Minimum Award Entitlements

The Full Bench of the Commission has considered an appeal against a decision approving an enterprise agreement that was negotiated between Coles and the Shop, Distributive and Allied Employees Association ("SDA"). The Full Bench was not satisfied that the Coles Store Team Enterprise Agreement 2014-17 ("Agreement") passed the "better off overall test" ("BOOT").

Factual Background. The Commission approved the Agreement on 10 July 2015, having been satisfied that it passed the BOOT. Two appeals of that decision were brought by Duncan Hart (a student and part-time employee) and the Australasian Meat Industry Employees Union and were heard together.

The Agreement provided a higher hourly rate than the relevant rate under the General Retail Industry Award 2010 ("Award") but applied lower penalty rates for evenings, weekends and public holidays. The Agreement also provided various benefits for employees, including additional penalties for ordinary hours, rest and meal breaks, payment when on annual leave, wage increases, pre-approved leave arrangements, blood donor leave, defence service leave, accident makeup pay, carer's leave, compassionate leave, emergency services leave, natural disaster leave, redundancy pay, enhanced well-being, support for non-work activities, support for domestic violence and support for care responsibilities.

Legal Background. Under section 193(1) of the Act, an enterprise agreement passes the BOOT if the Commission is satisfied, as at the test time "that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee".

The Full Bench noted that it was well established that this test requires: (i) the identification of terms which are more beneficial for an employee; (ii) the identification of terms which are less beneficial for an employee; and (iii) an overall assessment of whether an employee would be better off under the agreement.

Decision. The Full Bench considered the impact on Mr Hart and seven other employees who worked at Coles stores in Northcote and Benalla in Victoria and found that on base wages alone, the lower penalty rates for evenings, weekends and public holidays meant they lost between $142 and $3,506 annually under the Agreement. The Full Bench considered that the monetary loss was potentially significant for those who work primarily at times which attract lower penalty rates under the Agreement, for example, part-time and casual employees.

The Full Bench also considered whether the benefits provided in the Agreement could make up for the loss. This was, however, not the case, as some of the benefits could not be quantified or had been overstated. Therefore, the Full Bench found that each employee and prospective employee was not "better off overall" under the Agreement.

As a result, Coles was given the opportunity to remedy the failure by giving an undertaking to make an adjustment in payments to employees who would not otherwise be better off (for example, employees working a sufficiently high proportion of penalty shifts). Alternatively, they could provide an undertaking limiting the number of penalty hours that could be worked by employees. The Full Bench held that should Coles not provide an appropriate undertaking, it would make an order allowing the appeal and quashing the decision to approve the Agreement.

In a recent response to the decision, Coles has indicated that it will not be providing any undertakings, citing the impracticality of the Commission's proposals. Instead, the 77,000 workers covered by the impugned Agreement will revert to a previous enterprise agreement that dates back to 2011. However, Coles indicated it would preserve wage and penalty rates (as contained in the Agreement) and honour a previously agreed-upon pay rise of 1.5 per cent.

Lessons for Employers. This decision is a cautionary tale for employers with similar enterprise agreements, as it confirms that in determining whether an enterprise agreement passes the BOOT under section 193(1) of the Act, the interests of those employees most adversely affected by an agreement will be taken into account. The fact that the majority of workers will be better off overall is not sufficient to satisfy the test. All employees must be better off overall when an agreement is compared to the relevant award.

Federal Circuit Court Orders University Academic to Pay More Than $130,000 for Vexatious Dismissal Claim

The Federal Circuit Court of Australia ("FCCA") has ordered an academic to pay her former employer, the University of Sydney, more than $130,000 for bringing claims for unfair dismissal in the Commission and the FCCA. Part of the monetary sum consisted of a $103,000 costs order for instituting the FCCA proceedings vexatiously and without reasonable cause.

Factual Background. In March 2014, Ms Simin Maleknia filed an unfair dismissal claim under the Act in the Commission against her former employer, the University of Sydney. However, the Commission dismissed the proceedings because her application was filed out of time. Her employment as an academic had been terminated in December 2013, at the end of a fixed-term contract with the University. Ms Maleknia appealed to the Full Bench of the Commission but failed on appeal and was ordered to pay the university $1,240 in indemnity costs. The Commission also made a further costs order of $17,823 due to Ms Maleknia's attitude and conduct throughout the proceedings.

On 15 May 2015, Ms Maleknia filed a claim in the FCCA for unfair dismissal under the Act. The University brought a motion for summary dismissal of those proceedings. Separately, the University filed a claim in the FCCA on 17 December 2015 for Ms Maleknia's failure to pay the respective Commission costs orders.

Legal Background. Under section 611(2) of the Act, the Commission may order costs where an application has been made vexatiously or without reasonable cause or where it should have been reasonably apparent that the application had no reasonable prospect of success. As section 611 is a civil remedy provision, any failure to comply with such an order is subject to civil remedies under the Act.

In relation to civil remedies, section 545(1) provides that the FCCA may make an order if the court is satisfied that a person has contravened a civil remedy provision. Further, section 545(2)(b) provides that such an order may involve an award of compensation for loss that has been suffered by a person because of the contravention.

In addition, section 570(2) provides for the making of costs orders by courts, including the FCCA, where: (i) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or (ii) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs.

Decision. In relation to the Commission costs orders, the FCCA was satisfied that it was appropriate to order that Ms Maleknia pay $19,063 in compensation in respect of the loss suffered by the University due to her failure to comply with those orders (i.e. the sum of the Commission costs orders), and $492.07 in interest. Further, the FCCA made an order under section 570(2)(b) that Ms Maleknia pay the University's costs in the amount of $11,000, due to her unreasonable act or omission in failing to comply with the Commission costs orders.

In a separate decision, the FCCA dismissed Ms Maleknia's claim for unfair dismissal and noted that "the proceedings were on their face, vexatious and included allegations of a kind entirely extraneous to theFair Work Act 2009." In particular, Ms Maleknia failed to appear in court on a number of occasions and filed voluminous material, including a 180-page application and a 600-page affidavit. The FCCA found that due to the unreasonable conduct of Ms Maleknia, she had caused the University to incur loss in respect of costs incurred in defending those proceedings. This was enough to satisfy the FCCA that Ms Maleknia had instituted the proceedings vexatiously and without reasonable cause within the meaning of section 570(2)(a), and it ordered she pay costs in the amount of $103,000, which were the party/party costs incurred by the University.

Lessons for Employers. These decisions highlight some of the circumstances where costs may be awarded against an employee in proceedings brought under the Act in the FCCA, in contrast to the ordinary rule that each party bear its own costs. Where an unfair dismissal claim is brought by an employee, an employer may be able to seek an order for costs under section 570(2), should the employee's application be found to have been brought vexatiously or without reasonable cause.