A summary of the High Court’s decision in ALDI Foods Pty Limited v Shop, Distributive & Allied Employees Association [2017] HCA 13

In 2015, ALDI Foods Pty Ltd (ALDI) was in the process of establishing a new store in Regency Park, South Australia. In April 2015, ALDI made written offers of employment to existing staff members from other stores who had expressed interest in working at Regency Park.

After 17 employees accepted the offer, ALDI began bargaining with the employees under the Fair Work Act 2009 (Cth) (the Act) for an enterprise agreement (EA) to cover the terms of their employment at the Regency Park store.

On 4 August 2015, ALDI applied to the Fair Work Commission for approval of the EA. It was approved by Deputy President Bull, and the EA was deemed operative as of 29 September 2015.

However, the bargaining did not involve the Transport Workers’ Union of Australia and the Shop, Distributive and Allied Employees Association (the Unions). The Unions filed notices of appeal against the decision of Deputy President Bull before the Full Bench of the Fair Work Commission (Full Bench), on the grounds that the EA should have been made a greenfields agreement under the Act. The Unions argued that the EA should have been made as a greenfields agreement because ALDI was establishing a new enterprise, and it had not yet employed any of the relevant persons in its new enterprise.

Additionally, the unions argued the proposed EA did not pass the ‘better off overall test’, also known as the 'BOOT'.

The appeal was dismissed by the Full Bench.

The Full Court of the Federal Court of Australia overturned the Full Bench’s decision on 29 November 2016, upholding the Unions’ contentions.

The High Court of Australia decided on whether the Full Court of the Federal Court erred in:

  1. finding that the EA should have been made as a greenfields agreement
  2. reaching satisfaction that that EA had passed the BOOT on the basis that a shortfall clause existed, allowing employees to recover any shortfall that they would be entitled to under the Award.

Coverage and application

The Full Court of the Federal Court contended that the Full Bench of the Fair Work Commission failed to consider s 186(2)(a) of the Act, arguing that the EA was not “genuinely agreed” upon by employees “covered by” it. This meant that because the ALDI employees were not yet working at the Regency Park store, they could not be covered by the EA.

A majority of the High Court disagreed, contending that the Full Bench of the Fair Work Commission correctly interpreted s 186(2)(a). The majority held that, when read in conjunction with sections 52 and 53 of the Act, the EA will cover the employees if it is expressed to cover the employees, and the agreement is in operation.

The High Court held that the intention of the Act is not to distinguish between employees “actually working in the business, and employees who are engaged to work in the business.”

This means that the Act 'covers' employees who have agreed to work at new enterprises, even though it does not yet 'apply' to that employee in the sense of imposing obligations on the employer and the employee. The Fair Work Commission is entitled to approve EAs for employees who have genuinely agreed to work at a new enterprise.

Comparison required to determine if the EA passes the BOOT

The BOOT requires that employees are to be “better off” under the proposed EA in comparison to the relevant award.

The High Court agreed with the Full Court of the Federal Court in finding that there had been no proper analysis conducted between the EA and the relevant Award, as there was nothing in their reasons to suggest that the employees were found to be better off under ALDI’s proposed EA.

The proposed EA contained a comparison clause, which sought to ensure that an employee could make a request for payments to be equalised as between the EA and an award. The High Court held that “the right to equalisation, after a process initiated by the employee, does not of itself leave the employee “better off” under the EA at the test time”. The High Court held the mere existence of the clause is not sufficient to approve the BOOT, and it has remitted this issue back to the Full Bench of the Federal Court of Australia for an appropriate evaluative assessment.

Key takeaways

  • Employers may create an EA under the Act even if the proposed EA is for a new enterprise and the relevant employees have not yet commenced work, provided the employees have been selected
  • A proper comparison between the terms and conditions under the EA and the terms and conditions under the modern award must be undertaken to ensure the EA passes the BOOT. Employers will not be able to rely on a shortfall clause.