Australia: BOOT appraisal - does every provision in an enterprise agreement have to be more beneficial?

The Full Bench of the Fair Work Commission has recently handed down a decision in Re AKN Pty Ltd T/A Aitkin Crane Services [2015] FWCFB 1833. The Full Bench upheld the appeal from AKN Pty Ltd t/a Aitkin Crane Services (AKN) and quashed the decision of a Commissioner who ruled that an enterprise agreement did not pass the better off overall test (BOOT).

WHAT IS THE BOOT?

Where an employer and its employees decide on terms and conditions to be included in an enterprise agreement the employer must apply to the Fair Work Commission (the FWC) for approval of the agreement. There are several factors that the FWC must be satisfied with before approving the agreement. One of these is that the agreement must pass the BOOT.

In relation to non-greenfields agreements, the BOOT requires each employee that is 'award covered' and each prospective award covered employee to be better off overall than under the relevant modern award. As confirmed in this decision of the Full Bench, the BOOT is to be applied on a global basis, not a line by line basis. This therefore requires all advantages and disadvantages to be examined to determine whether the proposed working arrangements are better than the working arrangements under the relevant modern award. The BOOT allows award conditions to be traded off as long as the total benefits received by the employee are more favourable than if their conditions of employment remained the same as the award conditions. The National Employment Standards (NES) cannot be traded off or excluded from an enterprise agreement.

BACKGROUND

AKN is a crane hire company. AKN agreed on terms and conditions of an enterprise agreement with its employees in late 2014 (the Agreement). The Agreement was in relation to employees engaged as mechanics, crane operators, crane supervisors, rigger/dogger operators and truck drivers.

An application was made to the FWC to have the Agreement approved. On 7 January 2015 Commissioner Ryan did not approve the Agreement as he had concerns in relation to specific provisions in the Agreement including hours at work, deductions from pay, part-time and casual employment, restraint of trade and the NES. These concerns were not addressed in submissions or undertakings by AKN. Although the Commissioner found other sections of the Agreement to be more beneficial than the relevant award, these specific concerns resulted in the Commissioner making a decision that the Agreement did not pass the BOOT and therefore did not approve the Agreement.

APPEAL SUBMISSIONS

AKN appealed the decision for several reasons, one of which was the submissions that the Commissioner misapplied the BOOT by dealing with issues on a line by line basis, rather than taking all issues into consideration and conducting a cumulative balancing exercise between the Agreement and the relevant modern award/s. The Commissioner did not provide an explanation on how the less beneficial provisions of the Agreement outweighed those provisions that the Commissioner found to be more beneficial.

DECISION

The appeal was upheld on two bases, one being that the Commissioner failed to properly apply the BOOT. In coming to this decision, the Full Bench noted that the Commissioner identified provisions of the Agreement that were more beneficial and provisions that were less beneficial than the relevant award. The Commissioner did not however, explain how the less beneficial provisions outweighed those that were more beneficial in the Agreement. The Full Bench stated that Commissioner was in error by taking a line by line approach to applying the BOOT rather than a global approach.

The Commissioner was also found to be in error by deciding that the provisions permitting deductions from wages was an "insuperable barrier to approval". Although unlawful terms must not be included in enterprise agreements, the provision regarding deduction from wages was not found to be an unlawful term.

The Full Bench found that as a result of these two errors, the Agreement was not properly assessed by the Commissioner and therefore the appeal was upheld, the decision quashed and AKN's application for approval of the Agreement to be re-heard.

WHAT DOES THIS MEAN FOR YOU?

For employers negotiating an enterprise agreement with employees, they must consider all conditions, advantages and disadvantages and balance these against the modern award. When preparing enterprise agreements, employers do not need to be concerned with ensuring each and every condition will leave the employee/s better off than if they were covered by the modern award. An agreement may pass the BOOT even in circumstances where some benefits in the award have been reduced or excluded. As confirmed by the Full Bench, the relevant test is whether the employees will be better off overall under the enterprise agreement than under the relevant award.

For a full link to the original decision by Commissioner Ryan click here.

For a full link to the decision on appeal click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.