FWC 3035
FAIR WORK COMMISSION
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
ENM Group Pty Ltd
SENIOR DEPUTY PRESIDENT O'CALLAGHAN
ADELAIDE, 17 MAY 2013
Application for approval of the ENM Group Pty Ltd Enterprise Agreement - application refused.
 On 12 March 2013 ENM Group Pty Ltd (ENM) lodged an application seeking approval of the ENM Group Enterprise Agreement (the agreement). ENM were represented in the application approval process by the National Retail Association (NRA).
 ENM is a fast food retailing business trading as Eagle Boys Mawson Lakes. The Employers Declaration (Form F17) advised of the process followed to reach the agreement and advised that the agreement has application to seven employees, of whom five are casuals and six are under 21 years of age.
 I am satisfied that the employees were given notices of employee representational rights consistent with the requirements of s.173 and 174 of the Fair Work Act 2009 (the FW Act). I am satisfied that the requisite steps were taken to inform employees of voting arrangements. There was no employee bargaining representative.
 The agreement specifies a nominal expiry date of 30 June 2013. It provides for hourly rates of pay which are marginally higher than the transitional rates specified in the Fast Food Industry Award 2010 (the Award) which is the applicable award for the purposes of the "better off overall test". The agreement provides that hourly rates will not be less than those set out in the Award. The agreement fixes the casual loading at the current transitional rate of 23% and provides for a penalty rate structure which similarly preserves the current transitional penalties.
 Because this matter has been largely determined on the basis of written material provided to me, I have summarised the approach I have taken to the issue of approval of the agreement before setting out my concerns about the agreement itself.
 On 15 March 2013 I issued Preliminary Findings which stated:
“ Firstly, I note that the agreement specifies a nominal expiry date of 30 June 2013. I am concerned that, given the extent to which the agreement provides for remuneration arrangements which, at best are very close to the current award provisions, the agreement may be used to indefinitely prescribe provisions which are rapidly overtaken by the relevant modern award such that I invite the provision of advice which goes to addressing s.188(c) of the Fair Work Act 2009 (the FW Act).”
 In these Preliminary Findings I also expressed concern that the agreement may not meet the "better off overall test" and sought advice about rosters and working arrangements proposed under the agreement. Finally, in these Preliminary Findings I raised a number of other issues with the employer and invited the provision of undertakings to address these matters.
 ENM, through the NRA responded on 18 March 2013. ENM asserted that the agreement met the requirements of the "better off overall test". ENM provided advice and draft undertakings about various of the concerns expressed in my Preliminary Findings of 15 March 2013 and a comparison of earnings for certain categories of employee working certain shifts.
 On 21 March 2013 I advised ENM that the application would be listed for a hearing on 5 April 2013. ENM were advised:
“ This hearing will provide an opportunity for submissions and evidence in support of the application.
 Specifically, I invite the provision of submissions and/or evidence that allow me to conclude that the agreement was genuinely agreed to by the employees. In this respect I have noted the age of at least some of the employees and the extent to which the agreement operates for a very short period of time but prescribes employment conditions which I consider are, at best, very close to the existing award provisions. Additionally, the hearing will enable consideration of the "better off overall test".
 In order to expedite consideration of this latter issue, I require the provision of information which establishes the basis for the comparison of Agreement and Award earnings set out in Annexure A to the correspondence of 19 March 2013. I also repeat the concerns set out at paragraph 4 of my Preliminary Findings of 15 March 2013 relative to all and any rosters which the employer may require employees to work and request information which goes to any roster arrangements which may be worked under the agreement rather than information which is limited to the arrangements which may currently apply. Alternatively, signed undertakings may be provided to limit or specify actual working hours. Information in this respect should be provided to me by close of business Tuesday 2 April 2013.”
 On 25 March 2013 NRA replied, to the effect that ENM was willing to provide statutory declarations sworn by the employees who voted, to confirm that the proposed agreement was explained to them and they genuinely voted to approve it. Further, NRA advised that its initial advice about the wages comparison was incorrect and provided a revised comparison document. NRA referred me to a number of other agreements which it asserted had been approved by the Commission in similar circumstances and suggested that the proposed hearing was unnecessary.
 Notwithstanding this, the hearing on 5 April 2013 proceeded with NRA appearing by telephone. I requested further information about the comparative wage rates and invited the provision of additional information to address my concern about the extent to which the agreement was genuinely agreed to by the employees.
 On 8 April 2013 NRA provided further correspondence. It asserted that the necessary pre-approval steps had been taken such that the Commission should be satisfied that the agreement was genuinely agreed to. This correspondence stated:
“To that end, we are able to provide statutory declarations sworn by the employees as previously suggested as further evidence in support of section 188(c). As the majority of employees are either university or secondary students with varying timetables, we submit that contact during ordinary business hours would be logistically difficult, and would cause undue delay to the approval process.”
 Secondly, the NRA provided a comparison of the agreement rates for a nominated classification with the applicable transitional award rates.
 I remained concerned about the extent of genuine agreement and, on 17 April 2013, I advised ENM that the matter would again be the subject of a hearing, by telephone, on 29 April 2013. This advice stated:
“ I have listed this application for a further hearing, by telephone, on 29 April 2013. I reiterate my concern expressed in the Directions of 21 March 2013, with respect to whether the agreement was genuinely agreed to by the employees, given the age of at least some of those employees, the imminent notional expiry date of the agreement, and the agreement provisions.
 Those concerns include, but are not limited to, the extent to which employees understood, before endorsing the agreement that, for so long as the agreement operates they may not be entitled to transitional loadings otherwise applicable under the Fast Food Industry Award 2010.
 This hearing will provide an opportunity for the employer to provide evidence about what and when employees were told about the agreement as part of the approval process. Evidence may be given by telephone.
 If the employer elects not to call employees to give evidence, advice to this effect should be provided to my office as soon as possible. In that event, I will cancel this proposed hearing and consider any statutory declarations which may be provided to me prior to that date. However, you should be aware that I may conclude that any statutory declarations constitute insufficient evidence to address my concerns.”
 On 24 April 2013 the NRA advised that it had sought instructions from ENM and would not be calling witnesses as the majority of employees are University or secondary school students. ENM advised that it would provide statutory declarations in support of its position that the agreement was genuinely agreed to.
 The date by which this material was to be provided was extended to accommodate ENM. Four statutory declarations, prepared by ENM or the NRA were provided on 3 May 2013. These statutory declarations refer to two different meeting dates but generally state:
“1. I am an employee of ENM Group Pty Ltd, trading as Eagle Boys Mawson Lakes.
2. I attended a meeting on 15 November 2012 where I was advised that my employer was proposing to make an enterprise agreement.
3. At this meeting, my employer explained the wage rates I would be paid under the proposed agreement, including the penalty rates I would receive for working a shift that finished later than 9pm and for shifts on weekends.
4. I understand that the base rate of pay in the agreement will not fall below the base rate under the Fast Food Industry Award 2010.
5. I also understand that the penalty rates in the proposed agreement will override the penalty rates in the Award.
6. I genuinely agreed to vote in favour of the agreement on 26 February 2013.”
 Part 2-4 of the FW Act sets out the agreement approval process. This commences with the requirement for the issuing of a notice of employee representational rights. This part of the Act details arrangements for the representational rights of employees in the negotiation process.
 Commencing with s.196, the FW Act establishes a positive obligation on the Commission to approve an agreement when it is satisfied about the agreement making process in various specified elements of the agreement itself. Those elements are detailed in ss.186 and 187. Concerns about certain of those issues can be addressed through the provision of undertakings. The absence of satisfaction about certain other issues means that an agreement cannot be approved.
 In terms of the agreement approval application currently before me, I have identified certain matters, such as public holiday arrangements, where the NRA has proposed a draft undertaking to deal with matters I have raised. I have taken it that, had those matters been the only impediments to approval of the agreement, the undertakings could, and would have been confirmed. Accordingly, those issues do not represent an insurmountable impediment to approval.
 One of the prerequisite requirements for approval specified in s.186(2) is that the agreement passes the "better off overall test". The "better off overall test" requirements are detailed in s.193. I am satisfied that, as at the test time, the agreement passes the "better off overall test". It does so only marginally. For example, the Award hourly rate for a 19-year-old Level 1 casual kitchen hand is $21.91. This rate is transitioned down in South Australia to $17.66. The agreement rate for the corresponding classification is $17.72. As I have already indicated, the agreement preserves the transitional casual loadings of 23% and the loadings for Saturday and Sunday work. This means that, as at the test time, a 19-year-old casual Level 1 employee, working a 10 hour shift commencing on a Saturday afternoon will receive $0.58 more for that overall shift under the agreement than would have applied under the award at the test time.
 If the agreement is approved, employees will be disadvantaged relative to the award provisions that would otherwise apply when either the award rate increases and/or the transitional rates increase. At a minimum, changes to the award transitional provisions will occur on 1 July 2013. This disadvantage will continue until such time as the agreement is terminated or replaced.
 The simple fact that an agreement provides for remuneration benefits that are inevitably set to be overtaken by the underpinning award does not represent an essential impediment to approval. That is inherent in the nature of the application of the "better off overall test" and its application at the test time. The FW Act also enables approval of an agreement in certain circumstances even when the “better off overall test” is not met.
 The matter of concern to me in this instance has its genesis in the requirement in s.186(2)(a), that the Commission must be satisfied that the agreement has been genuinely agreed to by the employees. Section 188 states:
“188 When employees have genuinely agreed to an enterprise agreement
An enterprise agreement has been genuinely agreed to by the employees covered by the agreement if the FWC is satisfied that:
(a) the employer, or each of the employers, covered by the agreement complied with the following provisions in relation to the agreement:
(i) subsections 180(2), (3) and (5) (which deal with pre-approval steps);
(ii) subsection 181(2) (which requires that employees not be requested to approve an enterprise agreement until 21 days after the last notice of employee representational rights is given); and
(b) the agreement was made in accordance with whichever of subsection 182(1) or (2) applies (those subsections deal with the making of different kinds of enterprise agreements by employee vote); and
(c) there are no other reasonable grounds for believing that the agreement has not been genuinely agreed to by the employees.”
 I am satisfied that the requirements of s.188(a) and (b) have been met. It is subsection (c) which causes me difficulty in these particular circumstances.
 The advice provided to me is that the employees are, with one exception, casuals. They are University and high school students. There have already been some changes in the make-up of the workforce. The agreement has a very short nominal life but obviously continues to operate until such time as it is replaced or rescinded.
 The statutory declarations, written by the employer, but signed by the employees, confirm that the employees were told of the wage rates, including the penalty rates that were payable under the agreement. On the information provided in the statutory declarations I am unable to establish what employees actually understood or were told about the overall effect of the agreement in comparison to their otherwise applicable award entitlements. There is no advice confirming that employees were made aware that an inevitable effect of the agreement, unless it is rescinded on 30 June 2013, is a net reduction in the award benefits that would otherwise apply when the transitional arrangements are further adjusted. These changes will alter penalty rates and casual loadings.
 In this circumstance, I am not satisfied that there was genuine agreement on the part of these unrepresented and quite possibly recent employees in that I am not satisfied that the employees were told of the overall impact of the agreement relative to their award entitlements. I consider that concern to be a reasonable ground such that a proper opportunity was, and was required to be given to ENM to enable me to be persuaded that there was, in fact, genuine agreement.
 The extensive correspondence to ENM and to the NRA put the employer clearly on notice about my concerns in this respect. ENM, presumably acting on advice from the NRA, declined to give me the opportunity to clarify these issues directly with the employees. According to the employer’s declaration there were two meetings at which the agreement was explained, one on 15 November 2012 and one on 24 January 2013.
 The statutory declaration of one employee 1 states that he was at the meeting on 24th January 2013. The Statutory declaration made out by another employee2 stated that she was at the meeting on 15 November 2012 but does not address what may have happened at the meeting in January 2013. Further, there are two statutory declarations in which the employees have referred to both dates. The uncertainties about what information was provided and when this occurred, reinforces the need to hear evidence from the employees which the employer declined to facilitate.
 Accordingly, I remain concerned that the employees were not aware that the overall effect of the agreement is to decrease award benefits otherwise payable to them, such that I am not satisfied that the agreement was genuinely agreed to by the employees. The application is refused on this basis.
 This decision does not preclude the parties from reaching another agreement in similar terms. What it does mean is that ENM, and, for that matter the NRA should be on notice that, if an agreement is inevitably going to reduce the remuneration that would otherwise apply under an award, care should be taken to demonstrate that all relevant information was given to the employees voting on the agreement so that genuine agreement to it can be established.
SENIOR DEPUTY PRESIDENT
1 Statutory declaration of N Alhalah
2 Statutory declaration of K McCann
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