FWAFB 6397
FAIR WORK AUSTRALIA
Fair Work Act 2009
s.604 - Appeal of decisions
VICE PRESIDENT WATSON
Appeal against decision  FWA 4381 of Commissioner Ryan at Melbourne on 7 June 2012 in matter number AG2011/14557 - appeal against decision refusing to approve an enterprise agreement - application of the better off overall test - whether test correctly applied - whether approach to application erroneous - Fair Work Act 2009 - ss.185, 193, 604.
 This decision concerns an application for permission to appeal by Solar Systems Pty Ltd (Solar Systems) against the decision of Commissioner Ryan on 7 June 2012 in relation to the refusal to approve a single-enterprise agreement known as the Solar Systems Pty Ltd Enterprise Agreement 2011 (the Agreement) under s.185 of the Fair Work Act 2009 (the Act). 1 The appeal relates to the procedure adopted by the Commissioner and to the application of the better off overall test (BOOT).
 At the hearing of the appeal in Sydney on 25 July 2012, Ms P Salewicz with Mr M Mead appeared on behalf of Solar Systems.
 At the conclusion of the hearing we indicated that we were satisfied that Commissioner Ryan had erred in the overall approach to the application and in the conclusions reached. Permission to appeal was granted and the decision of Commissioner Ryan quashed. This decision provides further details of our reasons for these conclusions. The application for approval of the Agreement was remitted to Deputy President Sams for consideration. Deputy President Sams approved the Agreement on 3 August 2012. 2
 The Agreement was made on 12 December 2011 and the application for approval was lodged with Fair Work Australia on 14 December 2011. In its material in support of approval of the Agreement, Solar Systems identified the positive benefits of wage rates significantly higher than the rates contained in the Manufacturing and Associated Industries and Occupations Award 2010 3 (the Award) and a minor reduction in award entitlements in respect of excessive leave.
 Commissioner Ryan convened a hearing to address his concerns about the Agreement on 16 January 2012. Some matters were addressed to his satisfaction at the hearing. Other matters were dealt with by way of written responses and undertakings provided on behalf of Solar Systems on 3 February 2012.
 Commissioner Ryan’s decision refusing to approve the Agreement was handed down on 7 June 2012.
 In his decision the Commissioner commenced by considering the approach to the BOOT in s.193 of the Act. He analysed differences between the BOOT and the no-disadvantage test in the Workplace Relations Act 1996 and determined not to follow the approach to the BOOT adopted by Deputy President Bartel in Re Top End Consulting Pty Ltd. 4 He said:
“ The difference between the above two tests is not a subtle difference, it is real and substantial.
 The earlier NDT focussed on the overall terms and conditions of employment and the focus was on the respective instruments, ie the agreement and the award. The current BOOT does not focus on the respective instruments but rather on the employee and whether the employee is better off overall. The BOOT requires that FWA have regard to the position of the employee if an award applied to the employee against the position of the employee if an agreement applied to the employee.
 Whether an award or an agreement applies to an employee, the award or agreement is not the only source of workplace rights and entitlements of the employee. The BOOT is concerned with having regard to all of the workplace rights and entitlements because only by having regard to all of the rights and entitlements can an assessment be made as to whether the employee is Better Off Overall.
 The Full Bench in Bupa was required to focus on the instruments as that was the intent of the legislative provision which applied at that time. The BOOT however has a focus which is not limited to the respective instruments.
 I note the decision in Top End Consulting which said in relation to the BOOT that “the intentions of the parties as to working arrangements which may flow from” the terms of the enterprise agreement are to be disregarded. I agree that the intentions of the parties are to be disregarded when applying the BOOT. What cannot be disregarded for BOOT purposes is what the terms of the Agreement permit to be done. What is permitted by the terms of the enterprise agreement may not be intended to be acted upon, but if it is permitted then it may be acted upon. The same applies in relation to the Award which is to be considered for the purposes of the BOOT. An employer may not have the intention of using the breadth of the ordinary hours of work permitted by the award, but it is not what the employer intends that is relevant for the BOOT but what is permitted by the award.”
 The Commissioner then deals with three specific aspects of the Agreement: the dispute resolution clause, averaging of ordinary hours, and the spread of ordinary hours. He then deals with other matters under the heading “Provisions of the Agreement which are more beneficial than the Award”. He then expresses his conclusions as follows:
 I have considered each of the aspects of this Agreement which are improvements over the award and I have considered each of the aspects of this Agreement which are less beneficial than the award.
 The scales for the BOOT fall clearly on the side of a finding that an employee will not be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.
 Given that the Applicant was offered an opportunity to offer undertakings to Fair Work Australia but declined to do so on several key concerns of Fair Work Australia I determine that the agreement does not meet the requirements of s.186(2)(d) of the Act.
 The application in this matter is dismissed.”
Grounds of Appeal
 Solar Systems challenged several aspects of the decision. It contended that the Commissioner was in error in his approach to the BOOT, he misapplied the BOOT in relation to each of the specific matters he dealt with, and erred in his conclusions that the Agreement failed to pass the BOOT. We will consider each of the grounds of appeal separately.
Errors in Approach in Applying the BOOT
 Solar Systems submits that in declining to follow the decision of Deputy President Bartel, the Commissioner was adopting an approach which took his analysis away from the application of the relevant terms of the instruments and drew inappropriate distinctions between the BOOT and the previous no-disadvantage test.
 The Commissioner’s comments regarding the two tests are set out above. For our part we do not agree that the differences in the tests are as substantial as suggested by the Commissioner. Both tests require a comparison of the position of employees under respective instruments. There are differences in the wording. The BOOT requires a finding that each employee would be better off. The no-disadvantage test required a finding that there was no reduction in terms and conditions of “the employees.” In our view the approach of Deputy President Bartel was not incorrect and we affirm generally the approach to the BOOT adopted by the Full Bench in the Armacell Case. 5 There is a danger, in our view, in seeking to place a gloss on the legislative test beyond the words of the section. The task is best expressed as applying the words in s.193.
 Solar Systems submits that the Commissioner’s approach was not a global approach as required by s.193. It submits that the Commissioner took an approach more akin to a line by line analysis and when he found a provision to be less advantageous found that that particular provision would not pass the BOOT. Solar Systems instances the following conclusion on the dispute resolution matter as an example of such a finding:
“ In other applications for approval of an enterprise agreement I have been able to attach a positive benefit for BOOT purposes to the relevant dispute resolution procedure where the dispute resolution procedure in the agreement has provided arbitration by Fair Work Australia as of right to either party and/or has provided for any dispute about any matter pertaining to the employment relationship to be dealt with under the dispute procedure. In the case of such clauses there are real and positive benefits flowing to employees from the provision of the dispute resolution and this is directly relevant to whether an employee is better off overall if employed under the terms of an enterprise agreement as against being employed under the award.”
 It is not clear that the Commissioner was in error in this respect. As required by s.193 he identified the more beneficial entitlements under the Agreement to higher wages and blood donors leave. He then balanced those benefits against the perceived disadvantages. His conclusion, set out above, is recorded by reference to his assessment of where the scales fell. We are of the view therefore that his approach of looking at the terms and conditions as a whole in relation to each employee in this respect was ostensibly consistent with the test in s.193.
 However, in the course of considering specific matters he made comments such as:
“ I do not consider that an averaging period of 12 months will, even with higher than Award pay rates, lead to an employee being better off overall.”
 As will be clear from the consideration of the specific matters below, the Commissioner’s approach of identifying certain areas of “concern”, finding that they were not more beneficial than the Award, and then elevating them to disadvantages compared to the Award such that they were found to outweigh the advantages of the Agreement undermined his approach to the BOOT. In order to be relevant to the BOOT a matter needs to be advantageous or disadvantageous. It is then a matter of balancing the items that fall within the two categories to come to an overall view. When the Commissioner’s decision is viewed as a whole it is not clear that he actually did this.
 Solar Systems submits that in paragraph  of his decision quoted above the Commissioner erroneously characterised the dispute resolution clause as less beneficial than the Award. In fact the dispute settlement clause permits arbitration by consent and there is no access to unilateral arbitration under either instrument.
 We agree that the comparison between the instruments should have led to a finding that there was no positive or negative impact in the dispute settlement clause. However, we are unsure from the Commissioner’s decision precisely what he was saying about the dispute resolution clause and its significance to the BOOT. Dispute resolution was raised by the Commissioner as one of his areas of “concern” in the hearing on 16 January. 6 The Commissioner expressed his concern as there being a lack of arbitration. We do not consider that this was an issue which should have been raised in that context given that the effect of the Award position was identical. Nevertheless, the Commissioner’s conclusion was expressed as there being no positive benefit in the clause. Solar Systems did not contend that there was such a positive benefit and in its submission was merely responding to the concern of disadvantage expressed by the Commissioner.
 It may be that ultimately the Commissioner had no regard to this matter, but in the absence of any clear articulation of the remaining concerns or negative aspects of the Agreement for employees, Solar Systems could be forgiven for thinking that in raising his concerns, his lengthy discussion of the matter in his decision and the absence of the finding of the neutral impact of the clause meant that this matter was part of his ultimate conclusion that the scales fell on the side of employees not being better off. We conclude however that the way the Commissioner dealt with this matter was inappropriate and that having raised the matter as his concern, he should have found that the dispute resolution clause did not detract from the Award conditions. It remains unclear what matters were considered to be so negative as to outweigh the positive impact of the higher wage rates in the Agreement.
Averaging of Ordinary Hours
 This was a matter that was raised as a matter of concern by the Commissioner in the hearing of 16 January. His concern was expressed as there being no period over which the average hours of 38 per week could be averaged. Solar Systems said that it would provide a draft undertaking on the matter. An undertaking was duly provided which allowed averaging over 12 months - being the same period permitted for averaging for shiftworkers under the Award.
 In his decision the Commissioner said:
“ The undertaking does not address the concern raised by the Tribunal.”
 After considering the matter in more detail in  -  of his decision the Commissioner concluded:
“ I do not consider that an averaging period of 12 months will, even with higher than Award pay rates, lead to an employee being better off overall.”
 Solar Systems submits that it responded to the concern that was raised about the absence of a period for averaging and that the ultimate concern, that 12 months was too long a period, was not one that was ever raised by the Commissioner. It submits that if the matter was raised it would have been prepared to give an undertaking that the period of averaging would be the period of the roster applying on site and remains prepared to do so. It submits that in failing to raise the particular concern it was denied procedural fairness, and the conclusion that a 12 month average outweighs the benefits of above award wages is wrong in any event.
 We find that it was not appropriate for the Commissioner to rely on this matter in the way that he did. If there were concerns regarding the length of the period proposed they should have been raised expressly with Solar Systems.
Spread of Ordinary Hours
 In the Commissioner’s decision he said the following in relation to this matter:
“Spread of Ordinary Hours of Work
 The Tribunal identified a concern flowing from the wording of clauses 23 and 24 in that the combined operation of the clauses permitted the employer to have ordinary hours worked for 12 hours between 6am and 6pm on every day of the week. The Agreement permits the employer to require an employee to work every day of every week (except public holidays) and to work up to 12 hours on every day. A 7 day work week is clearly permitted and a work week of 84 ordinary hours is clearly permitted.
 The Applicant in its written submission contended that “there is also no provision in the Award or NES that would entitle employees to at least two days off per week.”
 This contention is not correct. Clause 36.2 of the Agreement provides as follows:
36.2 Ordinary hours of work—day workers
(a) Subject to clause 36.5, the ordinary hours of work for day workers are an average of 38 per week but not exceeding 152 hours in 28 days.
(b) The ordinary hours of work may be worked on any day or all of the days of the week, Monday to Friday. The days on which ordinary hours are worked may include Saturday and Sunday subject to agreement between the employer and the majority of employees concerned. Agreement in this respect may also be reached between the employer and an individual employee.
(c) The ordinary hours of work are to be worked continuously, except for meal breaks, at the discretion of the employer between 6.00 am and 6.00 pm. The spread of hours (6.00 am to 6.00 pm) may be altered by up to one hour at either end of the spread, by agreement between an employer and the majority of employees concerned or, in appropriate circumstances, between the employer and an individual employee.
(d) Any work performed outside the spread of hours must be paid for at overtime rates. However, any work performed by an employee prior to the spread of hours which is continuous with ordinary hours for the purpose, for example, of getting the plant in a state of readiness for production work is to be regarded as part of the 38 ordinary hours of work.
(e) Where agreement is reached in accordance with clause 36.2(b), the rate to be paid to a day worker for ordinary time worked between midnight on Friday and midnight on Saturday is time and a half and/or the rate to be paid to a day worker for ordinary time worked between midnight on Saturday and midnight on Sunday is double time.
(f) A day worker required to work on a public holiday must be paid for a minimum of three hours work at the rate of double time and a half. The double time and a half rate must be paid to the employee until the employee is relieved from duty.”
 The hours of work of day workers is clearly premised on the normal ordinary hour working week being between Monday and Friday as is clear from the first sentence of clause 36.2(b). A seven day ordinary hour working week for day workers is a possibility under the Award but only where there is an agreement with a majority of employees. Absent the agreement of a majority of employees the ordinary hour working week is limited to Monday to Friday. The Agreement however permits the Applicant to require all day workers to work an ordinary hour working week of 7 days.
 It is clear from the language of clauses 36.3 and 36.4 of the Award that continuous shift workers and non continuous shift workers employed under the Award are not guaranteed two days off in each 7 days. However clause 36.5 of the Award provides that “the arrangement of ordinary working hours must be by agreement between the employer and the majority of employees in the enterprise or part of the enterprise concerned. This does not preclude the employer reaching agreement with individual employees about how their working hours are to be arranged.”
 Thus even where there is no specific provision for non working days in relation to shift workers under the award the very fact that the arrangement of working hours must be by agreement with a majority of employees means that the employer cannot simply direct employees to work each and every day of the week.
 In contrast the Agreement permits the employer to direct shift workers to work each and every day of the week.
 I note in relation to shiftworkers the answers given by the Applicant in its Statutory Declaration in support of the application:
“2.15 Does the Agreement cover any shiftworkers? (s.196)
[ ] Yes
Shiftworkers covered by the Agreement do not meet the definition of shiftworker as set out in the National Employment Standards.
If “Yes”, please identify the clause, if any, that defines or describes an employee as a shiftworker for the purposes of the National Employment Standards:
 Section 196 of the Act provides as follows:
Application of this section
(1) This section applies if:
(a) an employee is covered by an enterprise agreement; and
(b) a modern award that is in operation and covers the employee defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.
Shiftworkers and the National Employment Standards
(2) FWA must be satisfied that the agreement defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.
Note: Section 87 provides an employee with an entitlement to 5 weeks of paid annual leave if an enterprise agreement that applies to the employee defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.”
 It is clear that s.196 does apply to the Agreement in the matter before me. The Award contains at clause 41.3 a definition of shiftworker for the purposes of the NES as follows:
“41.3 Definition of shiftworker
(a) For the purpose of the additional week of annual leave provided for in s.87(1)(b) of the Act, a shiftworker is a seven day shiftworker who is regularly rostered to work on Sundays and public holidays.
(b) Where an employee with 12 months continuous service is engaged for part of the 12 month period as a seven day shiftworker, that employee must have their annual leave increased by half a day for each month the employee is continuously engaged as a seven day shiftworker.”
 As the requirement in s.196(1) is met then I must be satisfied as to the requirements of s.196(2).
 The very operation of clauses 23 and 24 and 34.5 of the Agreement permit shift work to be required to be performed over 7 days with shiftworkers being regularly rostered to work on Sundays and public holidays.
 There is no definition or description of shiftworker in the Agreement which would satisfy the requirements of s.196(2) of the Act. This lack of an appropriate definition of shiftworker for the purposes of s.87(1)(b) of the Act is not a matter which by itself would lead me to refuse to approve the Agreement. In the context of the present application where the Applicant has declined to offer any undertakings in relation to the key concerns I have raised in relation to clause 23 and 24 of the Agreement, even if the Applicant offered an undertaking to insert an appropriate definition of shiftworker for the purposes of s.87(1)(b) of the Act it would still leave the more substantial concerns unanswered.
 An aspect of the concern in relation to the hours of work clause was the capacity to have employees work 12 hour shifts each day.
 The Applicant contended in its written submission as follows:
“19. Regarding the second issue, the applicant agrees that the Agreement will allow it to work employees on 12 hour shifts.
20. It says, however, that the shift arrangements allowed in the Agreement are lawful under the Award. The Award allows an employer to run 10 or 12 hour shifts with majority agreement of its employees (clause 36.5). By virtue of having agreed to the clause allowing 12 hour shifts in the Agreement, the employees have made a majority agreement for the purposes of clause 36.5 of the Award. There is nothing in the Award or the Act that required an employer to mirror the Award's majority agreement provisions in an agreement, seek majority agreement for the agreement and then seek further majority agreement for the shift pattern once the agreement has been approved by Fair Work Australia. This construct of the Award provisions is overly complex and onerous, and not in line with the modern award and enterprise agreement objectives contained in the Act (sections 134 and 171).”
 I agree with the Applicant’s contentions as expressed in the first, second and fourth sentence of paragraph 20 of its written submissions.
 However I disagree with the contention expressed in the third sentence that:
“By virtue of having agreed to the clause allowing 12 hour shifts in the Agreement, the employees have made a majority agreement for the purposes of clause 36.5 of the Award.”
 The Agreement is a stand alone document and is not an agreement made under a clause of the Award. Once the Agreement commences to operate it will displace the operation of the Award. What can only be done by agreement with a majority of employees under the Award will be able to be done by direction of the employer under the Agreement. There is a significant difference in what the award permits and what the Agreement permits.
 The written submissions of the Applicant made clear that the Applicant did not intend to offer undertakings to Fair Work Australia on any of the matters I raised concerning the hours of work.”
 Solar Systems submits that this analysis stems from a negative approach to the Agreement and not a facilitative approach to determining whether the Agreement is capable of approval. It submits that the decision fails to acknowledge the safeguards in the Act for working excessive hours, that the Commissioner erred in his conclusions about guarantees in the Award about consecutive days off, failed to have regard to the agreement of employees to the Agreement in comparing the Award provisions and incorrectly interpreted the operation of the Act in relation to shiftworkers. It submits that the provisions implement what is permitted by the Award and should have been considered as neutral matters for the purposes of the BOOT. Further, Solar Systems submits that it was denied an opportunity to address the concerns about the absence of a definition of shiftworker in the agreement as they were not raised in the hearing of 16 January.
 We consider that the submissions of Solar Systems have substance in relation to these matters. In our view the Commissioner’s consideration was overly critical and failed to objectively assess the impact of the provisions of the Agreement in the light of the fact that the Agreement applied, at the time, to two employees who were not shiftworkers and would clearly operate within the framework of the safeguards contained in the Act.
 It appears to us that the Commissioner adopted an unsympathetic approach to the Agreement from the start. He raised a number of concerns in the hearing of 16 January. Although these concerns were partly addressed in the hearing and in further written submissions, in his decision over four months later, the Commissioner did not adequately or fairly apply the BOOT to the terms of the Agreement. He appeared to place little weight on the higher wages and the further wage increases provided for in the Agreement. His approach was to seek to extract additional benefits or demonstrate possible disadvantage from the operation of the provisions without properly seeking undertakings to address these concerns. He made findings that in certain respects there was no net benefit, and then apparently used those findings to justify a conclusion that overall employees were not better off. In doing so the claimed benefits were not fairly and appropriately considered against the very minor disadvantages in the Agreement, some of which were unintentional and able to be remedied. We also consider that in the context of this matter the delay in handing down his decision was inconsistent with the intention of the legislation that agreement approval applications are resolved expeditiously.
 For the above reasons we found at the conclusion of the hearing of the Appeal on 25 July 2012 that the Commissioner erred in his consideration of the BOOT to this Agreement. We granted permission to appeal, quashed the decision of Commissioner Ryan and remitted the matter to Deputy President Sams for determination as we considered that the various tests for approval, including the BOOT, required full reconsideration. Deputy President Sams approved the Agreement on 3 August 2012.
VICE PRESIDENT WATSON
P. Salewicz with M. Mead for Solar Systems Pty Ltd
1  FWA 4381.
2  FWAA 6554.
4  FWA 6442.
5  FWAFB 9985.
6  FWA 4381 at , see transcript of proceedings, 16 January 2012 PN59 - PN67.
Printed by authority of the Commonwealth Government Printer
<Price code C, PR527224 >