DECISION

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

Beechworth Bakery Employee Co Pty Ltd T/A Beechworth Bakery
(AG2016/3647)

BEECHWORTH BAKERY EMPLOYEE CO PTY LTD ENTERPRISE AGREEMENT 2016

Application for approval of the Beechworth Bakery Employee Co. Pty Ltd Enterprise Agreement 2016 – relevant reference instrument in dispute – Better Off Overall Test (BOOT) – applicant covered by Restaurant Industry Award – some employees ‘worse off’ – comparison with rosters – undertakings provided – Hart v Coles distinguished - Full Federal Court judgement in SDA v Aldi – revised undertakings – Agreement satisfies all statutory requirements – Agreement approved.

BACKGROUND

[1] This decision will determine an application filed by Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery (or the ‘applicant’) on 27 June 2016, pursuant to s 185 of the Fair Work Act 2009 (the ‘Act’). The application seeks the approval of the Fair Work Commission (the ‘Commission’) of a single enterprise agreement to be known as the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 (the ‘Agreement’). The Agreement is to cover 232 employees employed at six sites, primarily in Victoria (Beechworth, Echuca, Albury (NSW), Healesville, Bendigo and Ballarat) who are engaged in front of house service (hospitality), production of bakery products (baking), transport (logistics) and clerks (clerical). The Agreement does not cover managerial employees. For the purposes of 186(3), I am satisfied that the group of employees to be covered by the Agreement was fairly chosen. I note the Agreement will replace an expired collective agreement – The Beechworth Bakery Employee Co. Pty Ltd Employee Collective Agreement 2008.

[2] The Agreement was negotiated with the Shop, Distributive and Allied Employees Association (‘SDA’ or the ‘Union’) and 13 employee nominated bargaining representatives, who are representative of a cross-section of the business. The employees were issued with the last notice of representational rights on 3 May 2016 and voting for the approval of the Agreement commenced on 18 June 2016 and concluded on 21 June 2016. The time limits under s 181(2) of the Act are thereby satisfied. In the vote for approval of the Agreement, 167 employees cast a valid vote in a secret ballot and 143 voted in favour of approving the Agreement (86%). The application for approval of the Agreement was lodged on 27 June 2016, thereby satisfying thereby satisfying s 185(3) of the Act.

[3] In the form F17 accompanying the application, Mr M Matassoni¸ Managing Director of Beechworth Bakery identified the following Awards as the relevant reference instruments for the purposes of the Commission’s assessment of the ‘Better Off Overall Test’ (‘BOOT’), pursuant to s 186 of the Act:

• Restaurant Industry Award 2010 [MA000119]

• Food, Beverage and Tobacco Manufacturing Award 2010 [MA000073]

• Road Transport and Distribution Award 2010 [MA000088]

• Clerks (Private Sector) Award 2010 [MA000002]

[4] Mr Matassoni attested that the higher base rates of pay under the Agreement (front of house (2.33%-18.33%), production (0.17%-15.75%), transport (11.88%-11.96%) and clerks (8.07%-9.74%)) resulted in the employees being ‘better off overall’, given that the Agreement provides for the following less beneficial terms than the relevant reference instruments:

• absorption of the annual leave loading into base rates;

• change of Award penalty rates so as to simplify variable rates (i.e. Rate 1 and Rate 2);

• standardisation of overtime loadings payable; and

• a public holiday penalty rate of 200%, rather than 250%.

[5] The application for approval of the Agreement was received in my Chambers on 5 August 2016 from the Commission’s Enterprise Agreement Triage Team in Melbourne. I listed the application for hearing by phone on 11 August, 2016 (subsequently, relisted for 15 August 2016). Mr A Duc of Counsel was granted permission to appear, pursuant to s 596 of the Act, with Mr Matassoni and Mr H McPherson of Broad Reach Employee Relations. Mr M Neale appeared for the SDA with Mr T Burke, also of the SDA. The SDA had filed a form F18, in which the Union objected to the Commission’s approval of the Agreement on the following grounds:

• The Agreement does not pass the BOOT. A comparison of the Agreement to the relevant Awards shows that under the Agreement, employees are not ‘better off overall’. The relevant Awards are:

(a) General Retail Industry Award 2010 [MA000004];

(b) Hospitality Industry (General) Award 2010 [MA000009];

(c) Restaurant Industry Award 2010 [MA000119]; and

(d) Food, Beverage and Tobacco Manufacturing Award 2010 [MA000073];

• Some workers working early morning shifts, on Sundays and public holidays are paid less than the Award minimums;

• No Award allowances apply to the Agreement;

• Casuals have no daily minimum number of hours;

• 17.5% annual leave loading is not paid; and

• Overtime rates under the Agreement are less than under the Awards.

The SDA submitted that in light of the Full Bench decision in Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited [2016] FWCB 2887 (‘Hart v Coles’), the Agreement does not pass the BOOT when compared to the relevant Awards. Therefore, the Agreement cannot be approved by the Commission.

[6] Given the Union’s position, the matter was adjourned by consent to 15 September 2016 to allow the parties to discuss the issues in contention. No consensus was reached. As the SDA’s objections were pressed, the application was listed for hearing on 24 October 2016, with directions for the filing of evidence and submissions issued by the Commission on 7 September 2016.

THE EVIDENCE

Case for the applicant

[7] Mr Matassoni provided a statement and oral evidence. Mr Matassoni has been involved in the business for 24 years. He described the applicant as having three main business operating models:

•  two locations operated as internal wholesale bakehouses (for supply to other internal operations) and which have baking café fronts, serving predominantly dine-in customers, with some take away;

•  three locations operating as bakery cafes, with limited production, such as finishing and decorating, serving predominantly dine-in customers, with some take away;

•  one location operating as a baking café, with restricted onsite production, predominantly serving dine-in customers and some take away;

•  restaurant seating capacities range from 60-400 with indoor and outdoor seating and toilet facilities for customers. The restaurants are open seven days a week with opening and closing times ranging from 6am-7pm (peaking between 11am-2pm).

[8] Mr Matassoni said that the yearly turnover of the business is in excess of $13.5m, with product sale statistics as follows;

•  pies – 23%

•  cakes – 20%

•  hot drinks – 18%

•  salad bar/breakfast items – 16%

•  cold drinks – 7%

•  bread/non-GST products – 7%

•  other – 9%

[9] It was Mr Matassoni’s estimate that 66% of the business is ‘eat in’ and 34% takeaway. In his evidence, he provided details of the business’ menu, photographs of the production areas and café dining areas and workers’ compensation policies, describing the business as ‘café/restaurant’. Mr Matassoni also set out the employees’ functions, duties and tasks and training for each of the front of house, production, transport and clerical areas.

[10] In respect to the BOOT, Mr Matassoni said that the Agreement provides for terms and conditions to be averaged across weekdays and weekends. He had undertaken an exercise of comparing the relevant Awards’ hours and other conditions against the employees’ rosters and was satisfied that the employees were ‘better off overall’, if the Agreement applied.

[11] Mr Matassoni was closely questioned about the calculations he had undertaken and the methodology adopted. He had used the Restaurant Award as the comparison and not the Retail Award for the front of house employees. Mr Matassoni conceded there had been an error in the original calculations, based on a rate by rate comparison which included the loss of annual leave loading and consideration of the number of public holidays which might fall in the roster cycle.

[12] As to items for sale, Mr Matassoni accepted that the majority of the products (bread, pies, pasties, focaccias, wraps, sandwiches, cakes and pastries) can be taken away and are baked and prepared onsite. However, the majority of purchased products are eaten in.

[13] Mr Matassoni said that the shift start times range from 3am-8am. He had provided rosters for 24 employees across bakery production and front of house and said that the modelling is similar across all locations. There are 132 part-time employees and 98 casuals. Mr Matassoni accepted that there may be 4 or 5 employees who potentially only work on Sundays and there is certainly one who does so currently, by choice. 17% of turnover is on Sundays. In this case, employees who only work Sundays would be ‘worse off’, as would hypothetically, employees who only work on public holidays (which does not happen). However, he was unsure if work on a public holiday was voluntary.

[14] As to late and early morning shifts, Mr Matassoni said that employees are protected by the business procedures to ensure they are not ‘worse off’. Mr Matassoni was asked about a number of shift scenarios which he claimed do not apply because staff rotate evenly throughout the year to share Sunday to Thursday and Tuesday to Saturday shifts. If there are examples of employees being ‘worse off’ they are paid more than the Agreement provides for or arrange shift swaps. Mr Matassoni said overtime is paid separately according to the Agreement. While he conceded that accident make up pay, natural disaster leave and tea breaks are not provided for in the Agreement, staff are allowed to take time off when they need to, in accordance with the business policy.

[15] Mr Matassoni said that his original BOOT calculations submitted with the F17, for both part-time and casual employees, included front of house. However, the calculations did not include approximately 18 Team Supervisors (3 in each location). Mr Matassoni was asked why Supervisors appear at Level 3 and not Level 5. He did not know the answer.

[16] During Mr Matassoni’s cross-examination, the Commission raised with the parties the possibility of undertakings, including a reconciliation provision similar to that which Bull DP had approved in Glassons Australia Limited [2016] FWCA 5873 (‘Glassons’). Mr Duc also sought to clarify the calculator relied upon by Beechworth. These were the first calculations filed, and they used the Commission’s own modelling. The more recent calculations were prepared by Mr Matassoni in relation to individuals in anticipation of a Hart v Coles argument being advanced by the Union.

[17] In re-examination, Mr Matassoni reiterated that the predominant business activity is a bakery/café restaurant in which the business produces its own product. It is in the restaurant industry.

[18] Under further questioning from me, Mr Duc confirmed that the modelling provided to the Commission took into account public holidays and annual leave loading. He maintained that in all cases, employees are ‘better off’ under the Agreement, except if they work only on Sunday (one person).

[19] In further cross-examination, Mr Matassoni agreed that if an employee worked only on public holidays, they would be ‘worse off’; but that scenario simply never arises. He agreed however, that production staff who only work shifts commencing before 6am, would be ‘worse off’, but not all shifts start before 6am. As to meal allowances, Mr Matassoni said that the business supplies meals to employees when they take their breaks.

SUBMISSIONS

For the applicant

[20] Counsel submitted that the Agreement meets all the statutory requirements of the Act. In particular, that:

(i) the Agreement has been genuinely agreed to by the employees to be covered by it;
(ii) the group of employees was fairly chosen, and includes all the employees of the employer, except management;
(iii) the Agreement does not contravene the National Employment Standards;
(iv) the Agreement does not contain any unlawful terms;
(v) the Agreement provides for a nominal expiry date which is four years after the Agreement is approved; and
(vi) the Agreement contains a term for settling of disputes by the Commission and the mandatory flexibility and consultation terms.

Relevant Reference Instrument

[21] Mr Duc submitted that the applicable Modern Award that ought to be used as the reference instrument for the purposes of the BOOT, for front of house employees is the Restaurant Industry Award 2010 (MA00119) (the ‘Restaurant Award’) and not the General Retail Industry Award 2010 (MA000005) (the ‘Retail Award’), which has no application to the applicant’s operations. He submitted that the Retail Award applies to bakery shops, where the predominant activity is baking products for sale on the premises which are then taken away immediately. This is not the business of the applicant. At to the applicant’s premises, customers choose items from the menu and then remain to eat and drink those products on the premises. Staff wait tables, serve and provide meals to customers at tables and clear tables. This fits the definition of a café under the Restaurant Award. Mr Duc also submitted that the relevant Award for the production employees, as well as employees who perform transport functions is the Food, Beverage & Tobacco Manufacturing Industry Award 2010 (MA000073) (the ‘FBT Award’). The relevant Award for clerical employees is the Clerks - Private Sector Award 2010 (MA000002) (the ‘Clerks Award’).

The Better off Overall Test (‘the BOOT’)

[22] Mr Duc accepted that the Agreement contains a single provision which is more beneficial than the reference instruments; that is the rate of pay during the week is significantly higher than the rate in the relevant reference instruments. No other beneficial term or condition was identified. While Mr Duc conceded that the Agreement contains provisions which are less beneficial than the reference instruments, including the weekend penalty rates, he maintained that employees working on a Saturday receive a higher penalty rate and employees working on a Sunday receive a lower penalty rate when compared with the reference instruments. However, when viewed against actual rosters, the Agreement provides that employees are ‘better off overall’, when they also work during the week.

[23] Mr Duc submitted that the Union’s arguments against the Agreement passing the BOOT should be dismissed because the Union’s calculations show that it has not interpreted the Agreement correctly, or against the correct reference instrument. He submitted that the structure of the Agreement is to provide a higher rate of pay Monday to Friday and an average rate of pay for work performed on Saturdays and Sundays.

[24] Mr Duc addressed particular aspects of the Union’s submissions as follows:

(a) Shifts, Sundays and Public Holidays

• while shift rates are not set out in the Agreement, payments for shift work have been incorporated into the higher rate of pay. For example, the shift penalty of 12.5% applicable under the FBT Award has been incorporated into the rates of pay in the Agreement;
• the employees in production work on a rotating roster, which means employees will be, on average, ‘better off overall’.

(b) Allowances

• the business operates in such a way that no Award allowances are applicable, or in the case of meal allowances, employees are provided with meals on their breaks.

(c) Spread of hours

• the spread of hours is to cover the operations of the business. Shift loadings are paid to the employees who work from 2am in production.

(d) Hours of work

• the Agreement provides for part-time minimum hours of three hours, and for a transport employee, it is four hours.

(e) Penalty rates

• the amount employees receive in penalty rates under the reference instruments is factored into the rate of pay the employees receive on an hourly basis.

(f) Overtime rates

• the rate of overtime is 150% in the Agreement. The pattern of overtime is one where overtime is worked in production. Overtime is paid at the higher rate, as provided for in the Agreement.

(g) Annual leave

• annual leave loading is incorporated in the higher rate of pay.

(h) Casuals

• casuals receive 25% of the loaded rate of pay.

(i) Public holidays

• while public holidays are paid at a lower rate than in the reference instruments, employees are ‘better off overall’ under the Agreement.

(j) Rosters

• The applicant provided rosters and calculations which Mr Duc submitted demonstrate that the employees are better off under the Agreement than they are under the relevant reference instruments.

[25] In oral submissions, Mr Duc informed the Commission the applicant would be prepared to give an undertaking to provide for a reconciliation every three months, to satisfy BOOT compliance; See: Glassons.

[26] Mr Duc reiterated that the predominant business activity of the applicant is the cafe/restaurant industry. He relied on the definition of a café the Restaurant Award compared to the definition of a bakery shop in the Retail Award which is - ‘bakery shops, where the predominant activity is baking products for sale on premises’. He provided examples such as Bakers Delight, Brumby’s Bakery, or a local Vietnamese bakery in a shopping mall or strip, where food is purchased and taken away to be eaten elsewhere. Mr Duc said that a commonsense approach would indicate the business is in the café/restaurant industry and the Union had proffered no evidence to contradict this proposition. Mr Duc noted the business also provides wholesale products to other regional bakeries and institutions in Victoria. He also relied on the workers’ compensation definition of the business’ activities.

[27] As to the BOOT, Mr Duc highlighted that the exercise is not a ‘line by line’ comparison, but whether the employees are ‘better off overall’. Mr Burke’s ‘what if’ questioning and ‘cherry picking’ of individuals, was not the reality of the applicant’s rostering or employment arrangements. Mr Duc stressed that the applicant has undertaken the BOOT analysis based on the Commission’s own calculator.

[28] Mr Duc undertook to provide an undertaking in respect to payment of drivers at the Level 2 rate under the Road Transport Award. As to supervisors classified at Level 3 and not Level 5, Mr Duc relied on the uncontested evidence of Mr Matassoni that the term ‘supervisor’ did not comprehend the level of duties of a Level 5 Supervisor. Mr Duc added the term ‘Team Supervisor’ was simply an incorrect label carried over from the 2008 Agreement.

For the Union

[29] Mr Burke submitted that the Agreement does not pass the BOOT in accordance with the Act. He relied on Hart v Coles and Integrated Protective Services Pty Ltd T/A Integrated Protective Services [2016] FWCA 6180 (‘Integrated Protective Services’). He submitted that in accordance with s 193 of the Act, the Agreement can only be approved if the Commission is satisfied, as at the test time, that each Award covered employee, and each prospective Award covered employee, would be ‘better off overall’ if the Agreement applied, rather than if the relevant Modern Award applied. Mr Burke said that the Full Bench of the Commission in Hart v Coles found that if individual employees were financially disadvantaged under a proposed Agreement, then the Agreement would not pass the BOOT. Without appropriate undertakings, the Coles Agreement could not be approved. He claimed that the same test applies in this case. Mr Burke added that the Union had identified a large number of employees, current and prospective, that will not be ‘better off overall’ if the Agreement applies, rather than the relevant reference instruments. On this basis, Mr Burke submitted the Agreement cannot be approved by the Commission.

[30] Mr Burke further submitted that if the Commission is of a mind to consider undertakings to approve the Agreement, then those undertakings must be capable of providing that each current and prospective employee, is ‘better off overall’ under the Agreement. Mr Burke submitted that if there are a significant number of undertakings sought for approval, then the Agreement will be substantially different to the one voted upon by employees and a new vote for approval by employees must be held.

Relevant Reference Instrument

[31] Mr Burke argued that the relevant Award to be used as a reference instrument for the purposes of the BOOT for front of house employees is the Retail Award. He opined that the establishments covered by the Agreement are bakery shops. These are defined under the Award as ‘where the predominant activity is baking products for sale on the premises.’ The Beechworth businesses prepare and sell bakery products. Mr Burke rejected the evidence of Mr Matassoni, and submitted that the predominant activity is the baking of products for sale to customers. While there is sometimes a clash between the Retail Award and the Restaurant Award in relation to similar bakery establishments, if the predominant activity is the baking of products for sale on the premises, then the Retail Award applies. In any event, Mr Burke put that even if the applicant’s retail establishments are not covered by the Retail Award, the Agreement still does not pass the BOOT in relation to the Awards that are claimed to be relevant by the applicant.

The BOOT

[32] Mr Burke claimed that the only provisions of the Agreement that are more beneficial than the relevant reference instruments, are the weekday rate of pay and the Saturday rate of pay for some employees. He submitted that these benefits do not compensate employees for reduced weekend penalty rates, late night penalties and other reductions in rates of pay and conditions when compared with the reference instruments, which include the following:

• reduced Sunday penalty rates;
• reduced Saturday penalties for some employees;
• loss of late night penalties;
• reduced public holiday rates;
• no annual leave loading;
• no allowances;
• no roster change clause;
• no daily minimum starts;
• reduced overtime rates.

[33] Mr Burke believed that the rosters of individual employees, provided by the applicant, demonstrate the financial disadvantage they would receive under the Agreement when compared to the Award(s). This is clearly demonstrated with each part-time or casual employee who only works on a Sunday, or early morning Monday to Friday shift workers in production. Further, the Sunday rate and the rate for early morning shift workers in production are lower than for each relevant Award. The public holiday rate is also lower than the relevant Award.

[34] Mr Burke referred to the applicant’s Form F17, which stated that all employees covered by the Agreement are either part-time or casual. This means that part-time and casual employees may only have one start per week, which could be a Sunday or a commencement time before 6am Monday to Friday in production each week. The same would apply for each prospective employee. These employees will be ‘worse off’. He also said that any employee who only works a public holiday shift in a week that a public holiday falls, is financially ‘worse off’ when compared to the relevant Award.

[35] Mr Burke made a number of observations in regard to the applicant’s BOOT calculations which were based on sample rosters it had provided. In relation to the first group of bakery production employees, the calculations show that 10 employees over a 16 week period would each be $177.80 better off. However, the benefit only applies to employees if they have a rotating roster, which includes a Saturday every fortnight. Mr Burke submitted that the calculations do not consider the loss of annual leave loading or the reduced public holiday rate. When these are factored in, each employee is financially ‘worse off’ under the Agreement. He also said that a roster with a Sunday every week will also mean the employee will be financially ‘worse off’ when compared to the Award.

[36] Mr Burke believed that a second group of production employees were shown to be $845.12 better off over a 16 week period. However, whilst this benefit would cover the loss of annual leave loading, it would not cover the reduction of public holiday rates. He submitted that if one of these employees works one public holiday of 7.5 hours in the 16 week period, then they will be financially ‘worse off’ under the Agreement. This will be compounded where there are more public holidays in that period.

[37] In respect to the third group of production workers, the calculations show them to be $296.92 ‘worse off’ over a 4 month roster. This is before the loss of annual leave loading and the reduced public holiday rate.

[38] Mr Burke submitted the following wage rate comparison for employees in production on public holidays:

FBT Award $51.53
General Retail Award $51.53
Agreement $44.00
Reduction ($7.53)

7.5 hrs x $7.53 = ($56.48)

[39] Mr Bourke submitted that the weekly increase of $52.82 for the second group of employees identified by Mr Matassoni, will not offset the public holiday reduction in pay if an employee performs work on one or more public holidays for at least 7.5 hours. Therefore, he submitted that a Monday to Friday crew, starting after 6am are financially ‘worse off’ after working one public holiday in 16 weeks. He also said that each of the groups are financially disadvantaged if they work more than 2 hours of overtime. He submitted that individually and as a group, production employees are financially ‘worse off’ under the Agreement in comparison to the relevant Award.

[40] Mr Burke submitted that the group of workers in the front of house is also financially ‘worse off’. Any employee, whether part-time or casual, who works only a Sunday is financially ‘worse off’. At least one employee, Claudia, is shown to have worked only on a Sunday, according the applicant’s rosters and calculations. He submitted that the employee is financially ‘worse off’ under the Agreement by the amount of either $20.96 or $105.04 per week. The disadvantage is greater if Claudia works on Easter Sunday at a rate of between $8.08 and $9.40 per hour less than the relevant Award public holiday rate.

[41] Mr Burke gave a further example of disadvantage for Level 1 under the Agreement which is the comparison of casual rates for working on the weekend. The Level 2 casual rate under the Restaurant Award on Saturday and Sunday is $28.37 on both days and the Agreement rate on both days is $27.00. A casual working on a Saturday or Sunday is therefore financially ‘worse off’ on each day in comparison to the Restaurant Award. Mr Burke submitted that, as the applicant employs 232 part-time and casual employees, each of them could potentially have only one shift per week on a Sunday. There are a number of employees on the applicant’s rosters who are shown to only work a Sunday shift during that rostered week. They are ‘worse off’ financially as a result. Mr Burke claimed that the disadvantage is greater on any Sunday for a Level 3 casual under the reference instrument, who receive 75% instead of the 50% that applies for Level 2. Mr Burke believed that other front of house employees are also financially ‘worse off’, including those who work one Sunday per roster as well as weekdays. He provided the following example:

Lorraine, works 25 hours part-time, including a Sunday.

Retail Award
20 hours x $19.44 $388.80
5 hours x $38.88 $194.40
$583.20

Restaurant Award (Level 2)
20 hours x $18.91 $378.20
5 hours x $28.37 $141.85

$520.05

Agreement (Level 1)
20 hours x $19.60 $392.00
5 hours x $25.75 $128.75
$520.75

[42] Lorraine’s loss is $62.45 against the Retail Award. This is before considering if work is done after 6pm on a weeknight under the Award, which attracts a 25% penalty. This is before the loss of annual leave loading or reduced public holiday rates. Mr Burke accepted that under the Restaurant Award, the benefit is only 70 cents per week. However, he submitted that annual leave loading and reduced public holiday rates, including Easter Sunday being a public holiday in both Victoria and NSW, had not been factored into the calculations.

[43] Mr Burke calculated the loss of annual leave loading for Lorraine to be $330.93 (over a year) or $6.36 per week under the Restaurant Award. He submitted it is a higher amount under the Retail Award, as it takes into account weekend penalties for annual leave loading. Therefore, the 70 cents benefit each week is negated by the loss of annual leave loading.

Public holiday rates Permanent Casual

Retail Award $48.60 $53.49

Restaurant Award (Level 2) $47.28 $47.28

Agreement (Level 1) $39.20 $50.50

[44] Mr Burke submitted that there is a loss of between $8.08-$9.40 per hour for a permanent working on a public holiday in comparison to the relevant Award. For Lorraine’s 5 hour shift on Easter Sunday, this is a minimum loss of $40.40 dollars for that day, based on the Restaurant Award. This equates to 57.7 weeks’ worth of the 70 cent weekly benefit that Lorraine gets every other week. If Lorraine works one public holiday, she will be financially ‘worse off’. As Lorraine works other week days, the public holiday loss is increased by the number of public holidays that she works. In the roster provided by the applicant, Lorraine works Monday and Tuesday, which means that she would be rostered on at least 4 more public holidays throughout the year.

[45] Mr Burke noted that the applicant classifies Team Supervisors as Level 3 in the Restaurant Award. This is the wrong comparison. It should be a Level 5 under the Restaurant Award or Level 6 under the Retail Award. Mr Burke acknowledged he had not seen any rosters for Team Supervisors. Nevertheless, he believed they would be financially ‘worse off’ under the Agreement. This was due to that group of employees receiving no compensation for the Saturday and Sunday rates, public holiday rate or loss of annual leave loading. If they work after 6pm on a weeknight, there is no compensation for the 25% penalty that would be incurred under the Retail Award. A one cent an hour increase in the Monday to Friday hourly rate if compared to the Level 4 rate of $20.61 is not sufficient compensation for these losses and reductions in entitlements. In addition, notwithstanding the incorrect classification, Team Supervisors are still paid less under the Agreement than the relevant Award, if they are properly classified as Level 3.

[46] Mr Burke submitted that clerks and drivers also need to have a Monday to Friday roster to ensure that they are not financially disadvantaged under the Agreement. He claimed that drivers are incorrectly classified in the applicant’s form F17. A Level 1 driver should be classified as a Grade 2 in the Road Transport and Distribution Award 2010 (the ‘RTD Award’). A Level 2 driver under the Agreement should be classified as a Grade 3 under the RTD Award. Level 1 in the Agreement is paid $20.50 Monday to Friday and $26.00 on weekends. In the RTD Award, Level 2 is paid $19.22 Monday to Friday, $28.83 on Saturday and $38.44 on Sunday. Level 2 is paid $21.00 Monday to Friday and $27.00 on weekends. In the RTD Award, Level 3 is paid $19.46 Monday to Friday, $29.19 on Saturday and $38.92 on Sunday. Mr Burke further contested that the increased weekly rates in the Agreement do not compensate for the reduced weekend rates in the Award. As well as the loss of annual leave loading, reduced public holiday rates and reduced overtime rates, drivers are financially ‘worse off’ under the Agreement compared to the relevant Award.

[47] Mr Burke concluded that the financial disadvantages compared with the reference instruments would be replicated in each of the applicant’s establishments and prospective employees face the same financial disadvantage under the Agreement in comparison to the relevant Awards.

[48] In oral submissions, Mr Burke relied on Hart v Coles and Integrated Protected Services and calculations undertaken by the Union, to demonstrate that the Agreement fails the BOOT. Mr Burke acknowledged that unlike in Hart v Coles, the employer in this case will seek to offer undertakings in respect to concerns with the BOOT. He stressed that he had not seen the form of undertaking proposed by Mr Duc.

[49] As to the relevant reference instrument, Mr Burke submitted the evidence of Mr Matassoni and the business menu established that Beechworth makes bakery products which are sold to customers onsite. The Retail Award covers bakery shops whose predominant activity is baking products for sale on the premises. Mr Matassoni’s evidence confirmed this, particularly in that at least 50% of the products are bakery products (23% pies, 20% cakes and 7% bread). Mr Burke contended that the fact Beechworth provided seating for customers is incidental to the predominant purpose test. Nevertheless, Mr Burke accepted that, there are sometimes coverage ‘clashes’ between the Retail Award and the Restaurant Award in respect to bakery establishments. In any event, neither Award comparison satisfies the BOOT.

[50] Mr Burke said that the higher rates of pay do not compensate employees for the loss of other Award terms and conditions. Even the applicant’s rosters demonstrate employees suffer financial disadvantage in particular circumstances; work on weekends and public holidays particularly, and the loss of annual leave loading. He referred to his various calculations set out in the SDA’s written submissions.

[51] Mr Burke reaffirmed the Union’s view that the common sense definition of ‘supervisor’ means that Supervisors under the Agreement should be classified as Level 5 and not Level 3. The employees are a group of 18 senior employees. Other employees in the front of house would look up to them as their direct supervisors, not just assisting them. Mr Burke noted that the applicant would offer an undertaking in respect to the three drivers who are disadvantaged under the Agreement.

[52] Mr Burke referred to the exercise undertaken by the Full Bench in Hart v Coles and noted that it was similar to what Beechworth had undertaken - but on a much smaller scale. It produced the result of employees being ‘worse off’ if the higher rate of pay said to offset the other penalties, was paid for all time worked. Mr Burke noted that unlike the Coles Agreement, this Agreement provides for no meal breaks at all. He also referred to other benefits under the Coles Agreement which are not provided for in this Agreement, which the Full Bench found did not amount to any significant value. Mr Burke emphasised that in this case, there are no other identified benefits, other than the higher loaded rate. Mr Burke opined that, on one view, this Agreement is worse than the Coles Agreement, which had been rejected by the Full Bench.

[53] Mr Burke contended that the decision of Gregory C in Integrated Protective Services was also similar to this Agreement. In that case, the Commission looked at rosters and the effects on part-time employees, particularly in respect to the limited notice to employees of their roster. The Commission had refused to approve the Agreement.

[54] In respect to a Glassons type reconciliation undertaking, Mr Burke put that it would need to be specific in respect to the loss of public holiday penalties and annual leave loading, paid extra to employees who were identified as being financially disadvantaged.

In reply

[55] Mr Duc identified five proposed undertakings in respect to;

•  a Glasson’s type reconciliation proposition;

•  the payments to employees who only work Sunday;

•  the payment to employees who only work on public holidays;

•  employees working late night shifts; and

•  the rates for drivers.

Mr Duc stressed this exercise was not a negotiation. The applicant is prepared to provide the undertakings it had foreshadowed and allow the Commission to make the final decision.

CONSIDERATION

Relevant Reference Instrument

[56] The SDA submitted that the business activities of Beechworth bring it within the scope of the Retail Award and therefore that is the relevant reference instrument for the purposes of the BOOT. It was also claimed that in any event, the BOOT is not satisfied if the Restaurant Award was the correct relevant reference instrument. To resolve this dispute, it is necessary to consider the coverage and definitions in both Awards.

[57] In the Retail Award, the following definition is relevantly set out as being included within its coverage:

‘bakery shops, where the predominant activity is baking products for sale on the premises.’

‘Fast Food operations’ are defined as:

‘taking orders for and/or preparation and/or sale and/or delivery of:

•  meals, snacks and/or beverages, which are sold to the public primarily to be consumed away from the point of sale; and/or

•  take away foods and beverages packaged sold or served in such a manner as to allow their being taken from the point of sale to be consumed elsewhere should the customer so decide; and/or

•  food and/or beverages in food courts and/or in shopping centres and/or in retail complexes, excluding coffee shops, cafes, bars and restaurants providing primarily a sit down service inside the catering establishment.’ (my emphasis)

[58] The ‘restaurant industry’ is defined in the Restaurant Award as:

‘restaurants, reception centres, night clubs, cafes and roadhouses, and includes any tea room, café, and catering by a restaurant business.’

[59] In my view, the evidence submitted by the applicant conclusively establishes that the predominant activity of Beechworth Bakery is as a café/restaurant business and therefore the Restaurant Award is the relevant reference instrument for the purposes of the BOOT. This evidence, which was not seriously impugned, includes the following:

•  Mr Matassoni’s statement and oral evidence, particularly his assessment that 66% of the business revenue is derived from eat-in table service;

•  photographs of the production, servicing and seating areas;

•  other documentation, including the workers’ compensation classification of Beechworth as a café.

[60] It seems obvious that the activities of the Beechworth business can be plainly contrasted to bakeries, as defined in the Retail Award, such as well known names as Bakers Delight, Brumby’s, Pie Face, Bread Top, Coffee Club and Michelle’s Patisserie. To submit that the Beechworth business is covered by the Retail Award, is to draw a very long bow indeed. I reject it.

[61] Accordingly, I find that the Restaurant Award is the relevant Award for the comparison with the terms and conditions of relevant employees under this Agreement for the purposes of the BOOT.

The BOOT

[62] A major consideration as to whether the Commission can approve an agreement is a determination that the agreement passes the ‘better off overall test’(BOOT). That requirement is set out at s 186(2)(d) of the Act. The definition of the BOOT is set out at s 193(1) as follows:

“193 Passing the better off overall test

When a non greenfields agreement passes the better off overall test

(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC 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.

FWC must disregard individual flexibility arrangement

(2) If, under the flexibility term in the relevant modern award, an individual flexibility arrangement has been agreed to by an award covered employee and his or her employer, the FWC must disregard the individual flexibility arrangement for the purposes of determining whether the agreement passes the better off overall test.

When a greenfields agreement passes the better off overall test

(3) A greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that 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.

Award covered employee

(4) An award covered employee for an enterprise agreement is an employee who:

(a) is covered by the agreement; and

(b) at the test time, is covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and

(iii) covers his or her employer.

Prospective award covered employee

(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:

(a) would be covered by the agreement; and

(b) would be covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) would cover the person in relation to the work that he or she would perform under the agreement; and

(iii) covers the employer.

Test time

(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.

FWC may assume employee better off overall in certain circumstances

(7) For the purposes 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, the FWC 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.”

[63] Sections 190 and 191 of the Act deal with undertakings that may be given when the Commission has concerns that the Agreement does not meet the requirements of ss 186 and 187. These sections are as follows:

“190 FWC may approve an enterprise agreement with undertakings

Application of this section

(1) This section applies if:

(a) an application for the approval of an enterprise agreement has been made under section 185; and

(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings

(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.

Undertakings

(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:

(a) cause financial detriment to any employee covered by the agreement; or

(b) result in substantial changes to the agreement.

FWC must seek views of bargaining representatives

(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.

Signature requirements

(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.”

“191 Effect of undertakings
(1) If:

(a) the FWC approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b)  the agreement covers a single employer;

the undertaking is taken to be a term of the agreement, as the agreement applies to the employer.

(2) If:

(a) the FWC approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b) the agreement covers 2 or more employers;

the undertaking is taken to be a term of the agreement, as the agreement applies to each employer that gave the undertaking.

[64] It is trite to observe that an agreement does not necessarily fail the BOOT because employees do not receive weekend penalty rates, public holiday loadings or any other Award term or condition. Such a simplistic test would be to adopt an incorrect approach to the exercise of ensuring employees (and prospective employees) are ‘better off overall’ under the Agreement, rather than the relevant reference instrument. It is not an exercise in which the Commission ‘negotiates’ with the parties over remotely unlikely ‘what if’ scenarios about implausible or fanciful work patterns or rosters which the employer has never utilised and never intends to. This would be a barren and wasted exercise, perhaps of some obscure academic novelty, but of no practical utility.

[65] The BOOT is a balancing exercise - not a ‘line by line’ comparison. In NTEU v UNSW [2010] FWAA 9588, Lawler VP said as follows:

‘It is trite to observe that awards typically contain both monetary and non-monetary terms and conditions. Obviously enough, the BOOT calls for an overall assessment. Comparing monetary terms and conditions is, at the end of the day, a matter of arithmetic. There is an obvious problem of comparing apples with oranges when it comes to including changes to non-monetary terms and conditions into the “overall” assessment that is required by the BOOT. In such circumstances the Tribunal must simply do its best and make what amounts to an impressionistic assessment, albeit by taking into account any evidence about the significance to particular classes of employees covered by the Agreement of changes to particular non-monetary terms that render them less beneficial than the equivalent non-monetary term in an award. In my view, it may also be relevant to consider the terms of any existing agreement and whether there is a relevant change of position when compared to that existing agreement.’ (my emphasis)

[66] In the present case, the assessment of the BOOT is relatively straightforward. This is so because the Agreement does not provide any other terms or conditions which are more beneficial than the reference instrument, other than the higher loaded rates of pay which apply for ordinary time worked during the week and on the weekend and public holidays.

[67] In my judgement, the decision of the Full Bench of the Commission in Hart v Coles has no application to this matter, for one significant reason. In Hart v Coles, the employer was invited, but refused, to provide undertakings, under s 190 of the Act, to address the identified concerns with the BOOT. By refusing to do so, the decision of the Commission not to approve the Agreement, was hardly surprising. That is not the position here. Beechworth has conceded a number of individual circumstances (mostly unlikely, given the rostering and employment arrangements of the business) which might result in a small cohort of employees not being ‘better off overall’ under the Agreement, rather than the relevant Award. The only identifiable real circumstance was one employee who, for purely personal reasons can only work on Sundays, which meant she was ‘worse off’ than if the Award applied. This was readily acknowledged and corrected, by an undertaking, that any employee who works solely on a Sunday or public holidays (highly unlikely) would be paid at a rate to ensure they would not be ‘worse off’ under the Agreement, compared to the relevant Modern Award. However, for reasons I will explain later, this may not be sufficient.

[68] It cannot be ignored (for the purposes of the BOOT) that a higher base rate of pay applies for all purposes. In other words, other terms and conditions such as annual leave, personal and long service leave, superannuation, overtime, casual loadings etc. will all be calculated by reference to the higher base rate, thereby making those terms more beneficial than if they are calculated at the Award rate. In my opinion, this is an appropriate matter to be taken into account when balancing all the relevant matters to ensure employees are ‘better off overall’.

[69] I would add that, in some ways, the comparison between the Agreement and the relevant Awards, at the ‘test time’ is an artificial and unreliable guide as to whether the Agreement throughout its nominal term, will be able to guarantee all employees, (let alone prospective employees), will be ‘better off overall’. Given the ‘test time’ is a snapshot in time; that is, when the application to approve the Agreement is filed with the Commission (s193(6)), it is difficult to imagine in a dynamic business environment, that rosters which exist at the ‘test time’ will remain static and unchanged for the nominal term of the Agreement, of up to four years. Moreover, it seems to me there would be nothing to prevent an employer from changing rosters, subject to lawful notice, within weeks of the Agreement being lodged and which might result in employees not being ‘better off overall’ for the balance of the Agreement’s nominal term. Of course, an appropriate reconciliation undertaking may ensure that this scenario is not possible under this Agreement.

The Undertakings

[70] On 7 November 2016, Mr Matassoni provided undertakings on the following matters:

•  employees who only work on Sundays or public holidays will be paid the appropriate Award penalty rate;

•  adjustments to provisions dealing with tradesperson’s starting times;

•  increasing rates of pay for drivers;

•  increasing rates for Team Supervisors.

[71] Pursuant to s 190(4) of the Act, each of the bargaining representatives were provided with the applicant’s proposed undertakings. The SDA responded on 7 November 2016 and the applicant replied the next day. I note that eight of the employee bargaining representatives indicated they all supported the proposed undertakings.

[72] During the Commission’s deliberation of this matter, I became aware of a decision of the Full Federal Court (by majority) in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161 (‘SDA v Aldi’) published on 29 November 2016, which in my judgement squarely raises concerns with the undertakings given by Beechworth in respect to Sunday and public holiday rates of pay and a proposed reconciliation clause. Accordingly, on 1 December 2016, my Associate advised the parties as follows:

Dear Parties

AG2016/3647 s 185 application by Beechworth Bakery

His Honour wishes to bring to the parties’ attention this week’s majority judgment of the Full Federal Court in SDA v Aldi [2016] FCAFC 141. The Judgement raises concerns that the undertakings proposed by Beechworth may not ensure that all employees are ‘better off overall’, particularly in that:

• employees who only work on Sundays (one existing employee) or public holidays will be paid the relevant Award rate, but that does not satisfy the employee being ‘better off’; see: Aldi at paragraph 153.
• His Honour is less concerned at the proposed public holiday undertaking because of the unlikelihood of an employee only working public holidays. However, this could be addressed by an undertaking that no employee will be required to work only a public holiday, during a rostered cycle;
• the above concerns also arise in respect to the proposed reconciliation clause (White J calls it the ‘make good’ clause) resulting in employees being brought into line with the Award to make up a shortfall, not being better off; see: Aldi at 166.

The parties might consider an undertaking similar to that accepted by Gostencnik DP, in Main People [2015] FWCA 8917 [paragraphs 5 to 8] or an undertaking ensuring that all employees will be required to work a certain number of shifts in ordinary hours Monday to Friday.

His Honour notes that because the loaded base rate applies to all forms of leave, superannuation, overtime etc. this may be sufficient to ensure that employees are ‘better off overall’. This could also be sufficient for casual employees whose casual loading is calculated on this higher loaded rate.

His Honour emphasises that these comments do not indicate the Commission’s final conclusions as to the approval of the Agreement. However, while His Honour regrets these circumstances, he believes it incumbent on him to bring the Aldi decision to the parties’ attention and invite further undertakings and/or submissions.

[73] Beechworth provided new undertakings, which in essence increased relevant Award rates for work only performed on a Sunday or public holiday by 1.5%, and ensured any reconciliation exercise, which resulted in an employee not being ‘better off overall’, be paid any shortfall of the Award rates otherwise payable, plus 1.5%. Pursuant to 190(4) of the Act, each of the bargaining representatives were provided with the applicant’s revised undertakings. The SDA responded on 6 December 2016. It maintained its opposition to the Commission approving the Agreement on the basis the revised undertakings do not satisfy the BOOT and the revised undertakings are inconsistent with the decision in SDA v Aldi.

[74] Having considered these undertakings, the Union’s response, the fact the higher base rates of pay are applied for ‘all purposes’; see paragraph 68, and that the vast majority of employees work regular Monday to Friday shifts at the higher rate of pay, I am satisfied the Agreement meets the BOOT. I do not intend to engage with the parties any further over illogical or fanciful ‘what if’ scenarios concerning hypothetical work arrangements that Beechworth has never used and has no intention of using.

[75] In respect to the Union’s main concern about work solely performed on Sundays and public holidays, only one employee is likely to be practically and positively affected. In the very unlikely event of other employees working only on Sundays or public holidays, they would not be ‘worse off’ under the Agreement and will at least be ‘better off’ by 1.5%.

[76] Pursuant to s 190(2) of the Act, I am satisfied that the proposed undertakings meet the concerns of the Commission as to the Agreement passing the BOOT. I am further satisfied, pursuant to subsection 190(3), that the undertakings do not cause financial detriment to any employee covered by the Agreement; indeed the contrary is the case. Given the proposed undertakings provide for beneficial improvements for some of the existing employees, it might safely be assumed that they would not object to the undertakings (noting that none of the employee bargaining representatives, with the exception of the Union, opposed the undertakings when they were provided the opportunity to make their views known). In any event, I do not consider that the undertakings result in substantial changes to the Agreement which would otherwise prevent the Agreement from being approved. I note the SDA did not assert in its more recent submissions, that the revised undertakings result in substantial changes to the Agreement. Pursuant to s 191 of the Act, the undertakings shall be taken to be terms of the Agreement. A copy of these undertakings are attached to the Agreement and marked as ‘Annexure A’.

[77] Having been satisfied that all of the statutory requirements for the approval of an agreement have been met, the Commission must do so. Pursuant to s 53 of the Act, the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 shall operate from 16 December 2016 and have a nominal expiry date of 9 December 2020.

DEPUTY PRESIDENT

Appearances:

Mr A Duc, of Counsel for the applicant

Mr T Burke, for the Shop, Distributive and Allied Employees Association

Hearing details:

Sydney

2016

24 October

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