A Full Bench of the Fair Work Commission (Commission) refused to approve the Coles Store Team Enterprise Agreement 2014-17 (Agreement). The Commission was not satisfied that the higher ordinary rate of pay plus the additional entitlements provided by the Agreement meant that, at the test time, each award covered employee, and each prospective award covered employee for the Agreement, would be better off overall, as compared with the General Retail Industry Award (Award).
- to increase the casual loading to 25%;
- to raise the percentage pay rate for 17 and 18 year olds (non-trades) to 60% and 70% respectively; and
- that provision would be made for a reconciliation term for casual and junior (non-trades) employees to ensure that the take home pay for any four week roster cycle under the Agreement would be greater than what they would otherwise have been entitled to under the Award.
Commissioner Bull also expressed concern regarding the consultation clause contained in the Agreement as not complying with the requirement to consult with employees with respect to changes to an employee’s regular roster or ordinary hours of work. Coles argued that another clause in the Agreement satisfied that obligation and provided an undertaking that during a consultation process regarding changes to rosters or ordinary hours, employees could be represented. However, errors in the consultation clause cannot be remedied by undertakings, and so Commissioner Bull ordered that the model consultation term at Schedule 2.3 of the Fair Work Regulations 2009 was taken to be a term of the Agreement.
A Full Bench overruled Commissioner Bull’s approval in May 2016
An individual employee, Duncan Hart, and the Australasian Meat Industry Employees Union appealed Commissioner Bull’s decision to approve the Agreement. The Full Bench had to determine whether it was satisfied that the Agreement satisfied the better off overall test. Ultimately, the Full Bench concluded that it could not be satisfied of this for the reasons set out below.
The parties put forward evidence regarding the rosters worked by eight employees who worked at the Northcote and Benalla stores. The Full Bench considered that whilst these stores did not operate on a 24 hour basis, unlike some of the other Coles and Bi-LO stores, they could be regarded as being “generally representative of operating circumstances and rostering practices at most Coles stores.”
The eight employees were considered by the Full Bench to be among the most disadvantaged with respect to wages due to the particular hours they were rostered to work.
The Full Bench formed the view that the above-Award hourly rate was negated by the lower penalties that applied under the Agreement for night and weekend work. When compared with the Award, an employee who worked predominantly at nights or on weekends was worse off. The Full Bench concluded that the eight employees lost between $782 and $3,506 per year in base wages alone.
2. Wage increases
The wage increases provided for the life of the Agreement were a relevant consideration, but the Full Bench cautioned that it is of only limited importance because “not all employees at test time will remain in employment during the entire period of the Agreement and the level of future Award increases is unknown.”
3. Longer rest breaks
The Agreement provided employees with a 15 minute rest break compared with the 10 minutes provided under the Award. The Full Bench took the view that the longer rest break provided for in the Agreement was unlikely to represent a monetary advantage because it was only available for shifts of more than four hours, whereas the 10 minute rest break under the Award was available for shifts of four hours or more.
4. More generous entitlements
The Agreement provided employees with the following benefits that Coles argued were more beneficial to employees:
- pre-approved leave arrangements;
- ability to take blood donor leave;
- defence service leave;
- accident makeup pay;
- carer’s leave;
- emergency services leave;
- natural disaster leave; and
- redundancy pay.
With respect to pre-approved leave arrangements, blood donor leave and defence service leave, Coles argued that it was “reasonable to assume that 50% of the benefit of accessing each form of leave once per year [was] a reasonable basis to value [those] benefits”. Coles did not provide any evidence in support of this argument. The Full Bench took the view that it was not appropriate to assume that all employees would access those benefits and that 50% overvalued the likely benefit to most employees.
The Full Bench considered it appropriate for regard to be had to these additional benefits, but expressed concern about attributing a financial value to them on the basis that employees were unlikely to utilise the benefits universally or uniformly. The Full Bench went on to say that if a value was attributable to these benefits, it would assess that value as 10%.
The Full Bench accepted the evidence put forward by the Executive Manager – Fire & Emergency Management at the Country Fire Authority that employees who volunteered with the Country Fire Authority would value the emergency services leave provided for in the Agreement. However, Coles did not provide any evidence as to the likelihood of employees accessing that leave or the number of employees who were in fact volunteers with the Country Fire Authority.
The Full Bench also considered it appropriate to take into account the provisions in the Agreement that:
- supported individual wellbeing;
- supported employees in undertaking non-work activities, such as study;
- provided domestic violence support; and
- supported employees to manage their caring responsibilities while remaining employed,
but said that it was “almost impossible to quantify” the above benefits. The Full Bench concluded that the provisions immediately above were beneficial for employees, but there were aspects of the Award that provided greater flexibility and security for the employee than the Agreement provided. The exception to this was the domestic violence leave, which the Full Bench considered to be a benefit in the Agreement.
Coles argued that together these additional entitlements amounted to a benefit to the eight employees of between $1,429 and $7,238, which the Full Bench considered to be excessive and an overvaluation of the benefits under the Agreement.
5. Employees’ views
The Shop Distributive and Allied Employees’ Association reminded the Full Bench that the Agreement was voted up by approximately 90% of the employees who participated in the voting process. The Shop Distributive and Allied Employees’ Association argued that the majority of employees had voted in favour of the Agreement because they “valued the leave and working time control matters” provided in the Agreement.
The Full Bench accepted the Shop Distributive and Allied Employees’ Association’s submission that the employees’ views were relevant, but it also said “that the level of income is also critical for access to study, caring and other life choices.”
The Full Bench indicated that to remedy the failure to satisfy the better off overall test it would accept undertakings from Coles that either:
- ensured employees rostered to work a high number of hours that would attract penalty rates under the Award, would not be paid less than the Award; or
- limited the number of hours that attracted penalty rates that an employee could work.
Coles declined to provide such undertakings. Consequently the Full Bench overturned Commissioner Bull’s decision to approve the Agreement.
What does this mean for employers?
The Full Bench’s decision demonstrates the limited worth that the Commission is prepared to attribute to non-monetary benefits where those benefits are contingent upon employees falling into a particular category, such as more generous carer’s or emergency service leave. If reliable evidence can be presented to the Commission with respect to the likely take up of any such benefit that demonstrates that the majority of employees will benefit each year, then the Commission may be more prepared to attribute value to the non-monetary benefits.
The decision also serves to emphasise the need to compare how an employee will be paid under a proposed enterprise agreement to how the employee would be paid under the applicable modern award, particularly with respect to the most vulnerable of workers in an employer’s workforce.
This decision does not mean that an enterprise agreement cannot provide for a rolled-up or all-inclusive rate instead of paying an ordinary rate of pay plus penalty rates. What it does emphasise is that employers need to assess whether that rate leaves each employee better off overall than if an employee was subject to the applicable modern award. Ideally this assessment should be undertaken prior to finalising an enterprise agreement being put to a vote, so as to enable the employer to deal with any issues that may be discovered by undertaking a better off overall assessment. Failing that, the assessment should be undertaken before an employer submits an enterprise agreement to the Commission for approval.