[2010] FWA 6987

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The attached document replaces the document previously issued with the above code on 21 September 2010.

Emma Anderson

Associate to Commissioner McKenna

Dated 23 September 2010

[2010] FWA 6987



Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

Turn Key Distribution Pty Ltd



Turn Key Distribution Pty Ltd Enterprise Agreement 2010.

[1] Turn Key Distribution Pty Ltd (“the applicant”) has filed an application for the approval of a single-enterprise agreement titled the Turn Key Distribution Pty Ltd Enterprise Agreement 2010 (“the Agreement”). The applicant trades as a tavern, restaurant and motel.

[2] There was initially an issue about whether different statutory declarations had been completed in support of the application. That is, the applicant’s representative, Enterprise Initiatives Pty Ltd/EI Legal, had a statutory declaration which provided information slightly different from the statutory declaration which was before Fair Work Australia. That matter has now been resolved.

Loaded rates

[3] The Agreement contains wage rates which are loaded to compensate for certain award-referenced and transitioned provisions under the Hospitality Industry (General) Award 2010 (“the award”). It may be noted the loaded rates in this Agreement are different from the loaded rates inclusive of annual leave and personal/carer’s leave which were considered in Or-Tak Pty Ltd [2010] FWA 5235 to be in contravention of the National Employment Standards, being a decision of Thatcher C with which I respectfully agree. See also Margin Brothers Pty Ltd T/A Campbell IGA Friendly Grocer [2010] FWA 2105 at [29]-[30] per Cambridge C (“Margin Brothers”); Murray’s Craft Brewing Co Pty Ltd Enterprise Agreement [2010] FWAA 5987 at [9]-[20] per Harrison DP.

[4] EI Legal submitted the loaded rates in the Agreement are such as to satisfy the better off overall test when considered, for example, in terms of the calculations from which the rates were derived and their quantum at the test time. The employer’s declaration noted two payments from the award have been loaded into the wage rates, namely, a laundry allowance for motel employees and the annual leave loading other than for casuals. Certain penalty rates and allowances from the Hospitality Industry - Accommodation, Hotels, Resorts and Gaming Award 1998 (referred to as the “Federal Award” in the table below) are also loaded into the rates, as identified in the employer’s declaration as follows:

Award Term and Condition

Award Reference

Agreement Reference

Additional payment for hours worked between 7pm and 7am Monday-Friday

Clauses 15.2.2 and 19.3 of the Federal Award.

This has been loaded into the rates of pay within the Agreement.

Penalties for Saturdays

Clause 15.2.2(b) and 19.1.1 of the Federal Award.

This has been loaded into the rates of pay within the Agreement.

Penalties on Sundays

Clause 15.2.2(c) and 19.1.2 of the Federal Award.

This has been loaded into the rates of pay within the Agreement.

Penalties for Public Holidays

Clause 15.2.2(d) and 19.2 of the Federal Award.

This has been loaded into the rates of pay within the Agreement.

Split Shift Allowance

Clause 24 of the Federal Award.

This has been loaded into the rates of pay within the Agreement.

[5] The employer’s declaration attached several spreadsheets of calculations in support of the application, to demonstrate the loaded wage rates in the Agreement compensate employees for the entitlements not otherwise disaggregated. The calculations assume no more than five public holidays will be worked in a 52 week period. There is also a value or assumption in the calculations for working one broken shift each week. The modelling for the hours’ calculations is contained under headings titled the “Award weekly work profile” and the “EA weekly work profile” to compare what employees would earn. The spreadsheets contain assumptions all employees will work, on average, certain days and hours at ordinary and penalty rate times in a 38 hour week.

[6] Schedule A of the Agreement specifies loaded wage rates for permanent employees and casual employees categorised into hourly rates for Mondays to Fridays, weekends and public holidays; and trainee hourly rates of pay, together with trainees’ penalty payments for weekends and public holidays. Schedule A specifies higher rates for weekend work, albeit without differentiation for work performed on Saturdays and Sundays, and higher rates for work on public holidays other than for Level 7 permanent employees. Schedule B specifies annualised salaries for permanent employees. This decision focuses on the rates in Schedule A.

[7] Section 193(7) of the Act provides that for the purpose of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, Fair Work Australia is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee. There was insufficient information from the averaging in the calculations and the materials initially filed in support of the application to establish the employees would fit within the standardised class as outlined in the applicant’s calculations; the supporting papers did not outline the basis on which weekly hours or operating spans were calculated. At my request, employee rosters were subsequently filed. The applicant provided rosters for one group of employees for a period in early-2009 and for all other employees for a period in early-2010. While it seems odd that rosters from 2009 for one group of employees and rosters from 2010 for another group of employees would be provided, a statutory declaration nonetheless states these rosters are indicative of the employees’ average weekly working patterns. Moreover, there are more names of individual employees in the rosters than the number of employees the employer’s declaration stated would be covered by the Agreement - although that may, for example, be a product of the provision of old rosters rather than rosters showing more contemporary, indicative working patterns of the employees who would be covered by the Agreement.

[8] Indicative rosters for the purposes of examining loaded rates have been considered in a number of recent applications for the approval of enterprise agreements, including Shaydi Pty Ltd and others [2010] FWA 4262 (“Shaydi”) where Hamilton DP said:

[9] Similarly, in Earthfield Pty Ltd t/as Bakers Delight Diamond Creek, Bakers Delight St Helena & Bakers Delight Laurimar Enterprise Agreement 2009 [2010] FWA 5752 (“Earthfield”) Drake SDP said this:

[10] Considerations of the type described in Shaydi and Earthfield arise in relation to this application. That is, the calculated assumptions in support of the application and the rosters themselves do not necessarily marry. A number of employees work more hours outside the standardised assumptions and, thus, may be financially disadvantaged by the loaded rates. Although the calculations in the spreadsheets were said to demonstrate the better off overall test had been met for all classes of employees to be covered by the Agreement, modelling and analyses of the indicative rosters do not support that conclusion. While some employees identified as working the indicative rosters would be advantaged by the Agreement at the test time, other employees would receive wages lower than they otherwise would be entitled to be paid were it not for the Agreement. Employees who do not work, on average, around 72 per cent of their hours between 7.00am to 7.00pm, Monday to Friday, would constitute a class of employees for whom the better off overall test is not necessarily met in relation to the loaded rates, e.g., a casual employee who works predominantly weekends, including Sundays. In short, roster analysis does not consistently show the better off overall test would be satisfied in terms of wages for all employees/classes of employees; and s.193(1) of the Act provides that an enterprise agreement passes the better off overall test if Fair Work Australia 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.

[11] Putting aside the discrepancies in the rostering information as against the assumptions in the calculations provided in support of the application, the question of potential advantage and disadvantage necessarily depends on employees’ actual work patterns, rather than assumed, standardised models of work used for the calculations of the loaded rates (in circumstances where, as in this Agreement, there is no clear, compensating benefits to satisfy the better off overall test, even considering the proposed undertakings). As to roster changes, EI Legal drew attention to s.193(1) of the Act as it concerns the test time, submitting change to employees’ working patterns is not a relevant consideration as the Agreement needs to be considered in the context of the better off overall test at the test time. Nonetheless, in Margin Brothers, Cambridge C succinctly outlined concern about the operation of loaded rates and rostering:

[12] To similar effect, Whelan C said this in Nepero Pty Ltd T/A Morgan’s Super IGA [2009] FWA 1712 (“Nepero”):

[13] In Top End Consulting Pty Ltd re Top End Consulting Enterprise Agreement [2010] FWA 6442, (“Top End Consulting”) Bartel DP commented as follows:

[14] When such a comparison is made of the terms and conditions of employment, rather than the practices and working arrangements that may flow from those terms as referred to in Top End Consulting (such as rostering practices) the loaded rates in the Agreement do not satisfy the better off overall test. That is, employees who do not work hours according with the assumptions propositioned by the applicant in the spreadsheets may be disadvantaged as at the test time. Further, analysis of the rosters in this case confirms the existence of such a class of employees.

Adjustment of loaded wage rates over life of Agreement

[15] Clause 9.3 of the Agreement addresses wage adjustments in the following way: “The minimum hourly rates and salaries set down in Schedules A and B are subject to minimum wage adjustments by Fair Work Australia as made from time to time”. Further, Schedules A and B to the Agreement contain boxed, bolded text which reads:

[16] A reading of these provisions suggests that Fair Work Australia will periodically adjust the minimum rates in the Agreement. However, EI Legal’s submissions confirmed the loaded wage rates in the Agreement in fact would not be increased, unless and until s.206 of the Act was engaged. Section 206 provides as follows:

[17] Thus, there would not be any wage increase for employees over the four year nominal term of the Agreement other than by operation of s.206 of the Act. As to this, EI Legal submitted the comparison between the award and the Agreement must be made at the test time and the rates must at least meet the minima in s.206 of the Act; EI Legal also referred to comparison tables showing the rates and transitioned rates in support of the approval of the Agreement. EI Legal further submitted the starting rates in the Agreement were above the award rates, so as to satisfy the better off overall test, and there would be a substantial buffer. EI Legal nonetheless acknowledged the financial outcome at the test time relied on by the applicant in satisfaction of the better off overall test would not be so great over the life of the Agreement.

[18] The Agreement is constructed such that the test time money value and/or percentage value of the loaded component compensating for the award-referenced entitlements identified in the employer’s declaration will, in reality, inexorably erode over the life of the Agreement given, for example, the reasonable predictability of award wage increases. The lack of an appropriate wage adjustment mechanism in the Agreement for rates incorporating this style of loading effectively ensures employees progressively will be financially disadvantaged, because the Agreement does not actually provide any wage increases and/or maintenance of the test time value of the loaded component - with adjustment to the minimum rates in the Schedules to the Agreement arising only through the engagement of s.206 of the Act. If it came to the point where s.206 of the Act was in fact engaged, the value of the loaded component relied on to satisfy the better off overall test as at the test time would by then have eroded completely. The employer’s declaration indicated the applicant held meetings with employees collectively and individually, taking all reasonable steps to ensure employees understood the operation of each clause of the Agreement, and the effect of each clause. In circumstances where the employer’s declaration states that the operation and effect of each clause was explained to employees, it remains unclear why properly-informed employees would vote in favour of an Agreement that will, over time, operate to their financial disadvantage, i.e. the loaded rates are effectively fixed, with the only potential for a wage increase for four years arising if and when the loaded rates in the Schedules fall behind the base rate of pay as specified in s.206 of the Act.

[19] I expressed concern about wage adjustments for employees, flagging consideration of undertakings providing a reconciliation approach or a mechanism to maintain the integrity of the loaded component in the rates. The applicant has proposed an undertaking concerning wage increases for certain rates, to which I will return later.

Work parameters

[20] As to hours of work, cl.7 of the Agreement provides as follows:

[21] Except as provided in cl.7, the Agreement does not otherwise define ordinary hours or hours that would attract penalty rates for additional hours worked under cl.7.3. The Agreement does not contain minimum hours per shift. The Agreement does not contain a cap on the hours that would be worked in any day, week or month over the 26 weeks before payments in the nature of overtime would be attracted. EI Legal confirmed the Agreement does not have these types of “work parameters”, submitting the Agreement contains “quite a bit of flexibility”. In Nepero, Whelan C commented as follows in relation to an application for the approval of an enterprise agreement:

[22] In Margin Brothers, Cambridge C said of the additional hours provisions which appear to be similar to those in the present Agreement:

[23] The lack of work parameters in the Agreement may be compared to and contrasted with provisions in the award. For example, part-time employees are entitled under the award to reasonably predictable hours of work, as provided and defined by cl.12 - including agreement in writing concerning the regular pattern of work, the hours worked each day, which days of the week, and the actual start and finish times. Without provisions of the type contained in cl.12 of the award for reasonably predictable hours of work and associated provisions, part-time employees under the Agreement could work, in effect, as casual employees but without a casual loading. I note that in Liquor Hospitality and Miscellaneous Union v Ausco Martin Pty Ltd trading as The Westin Sydney [2010] FWAFB 6214 (“Ausco”) a Full Bench recently considered an appeal involving similar considerations, concluding there was sufficient material to satisfy the no disadvantage test concerning that enterprise agreement. However, I doubt the compensating benefits in this Agreement, even with the proposed undertakings, would be sufficient to satisfy the better off overall test. On a consideration of the terms and conditions provided in the award and the Agreement, it appears at the test time that part-time employees who may be employed under the Agreement are a class of employees who would be worse off under the Agreement given the lack of work parameters and the absence of compensating benefits to satisfy the better off overall test, such as the benefits considered in Ausco.

[24] Casual employees under the award are entitled by cl.13.2, on each occasion a casual is required to work, to a minimum payment for two hours’ work. The Agreement does not limit the ability of the employer to engage a casual for a lesser period, nor did the applicant advance anything as to how this detriment was offset. Moreover, as to the annualised salaries in Schedule B, cl.27 of the award provides certain provisions which are not reproduced in the Agreement, such as those contained at cll.27.3-27.6, being provisions which provide for certain payments depending on the time worked.

Written undertakings

[25] The applicant has filed a number of proposed undertakings addressing a range of matters. In abbreviated form, these undertakings concern:

[26] In Rockleigh (Vic) Pty Ltd T/A Workforce Extensions Castlemaine [2010] FWA 6570 (“Rockleigh”), Lewin C recently considered certain undertakings that had been proposed in relation to an application for the approval of an enterprise agreement. Of those undertakings, Lewin C said at [10]: “I conclude that the Tribunal does not have the discretionary power to accept the undertakings because it is likely that the undertakings will lead to substantial changes in the terms of the Agreement.” Similarly, in Earthfield at [8], Drake SDP said this in declining to approve an enterprise agreement with undertakings: “The Agreement as it now stands, having regard to the extent of the proposed changes and the undertakings provided, would be so renovated as to be an entirely different agreement to that to which the employees originally agreed”.

[27] The applicant’s undertakings have endeavoured to address aspects of the Agreement which represent a shortfall as against the award, but it is still difficult, considering the advantages and disadvantages (not all of which are identified in this decision), to accept the proposition that employees would be requisitely better off overall under the Agreement. A number of the undertakings do no more and no less than bring the Agreement into better conformity with entitlements otherwise applicable under the award. While some of the proposed undertakings would not result in substantial changes (e.g. addressing discriminatory terms), other changes are substantial (e.g. the combined effect of the new daily engagement provisions for part-time employees and casual employees coupled with the markedly altered period for averaging of hours etc). Further, the undertaking concerning wage adjustments provides an approach which is entirely new and different from that originally envisaged, i.e., the minimum hourly rates in Schedule A (although not Schedule B) of the Agreement would be increased by 2.5 per cent from the first full pay period on or after 1 July each year, commencing from 2011 - which is objectively and of itself a substantial change to the Agreement that was the subject of a vote. Given the characteristics of the undertakings as they concern the Agreement, and following from the approach articulated in Rockleigh and Earthfield, I do not consider I may accept the undertakings, given the effect of accepting the undertakings pursuant to s.190 of the Act would result in substantial changes to the Agreement.


[28] A combination of factors leads to the conclusion that, overall, each employee would not be better off under the Agreement than under the award, for example, in circumstances where there are employees/a class of employees who do not work hours according with the standardised assumptions propositioned by the applicant. While the proposed undertakings endeavour to satisfactorily address a number of aspects of the Agreement that would be, for example, inferior to the award for employees, their combined effect nonetheless would result in substantial changes.

[29] In the circumstances, the Agreement cannot be approved.


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