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Employer Facing Significant Operational Costs after Old Agreement Terminated

March 12, 2018

Written by Victoria Hansen, Senior Workplace Advisor, and Lindsay Carroll, Legal Practice Director

In a decision made last week, the Fair Work Commission terminated the collective agreement of a yoghurt shop chain that had been in operation for nearly 14 years. This decision highlights how much of an impact termination of an old instrument can have on employers operationally.

Application by Johnston-Wyly [2018] FWCA 908

What’s it all about?

The Yoghurt Shop Pty Ltd Collective Agreement Number One (2006) (the Agreement), was approved under the former Workplace Relations Act 1996 sometime in November 2006. It had an expiry date of three years from the date of lodgement, in late November 2009.

A young employee working at one of the shops made an application to terminate the Agreement on the basis that:

  • the terms and conditions had fallen below the minimum standards of the Fast Food Industry Award 2010 or General Retail Industry Award 2010; and
  • the base rate of pay no longer compensated those working evenings, Saturdays, Sundays and Public Holidays, leaving them worse off than those covered by modern awards; and
  • employees suffered a disadvantage when compared with the rates of pay and terms and conditions of employment under the modern awards; and
  • today, the Agreement would not pass the Better Off Overall Test (BOOT); and
  • the rate of pay for employees undertaking a school-based traineeship was below the relevant rate prescribed in the Miscellaneous Award 2010.

The Impact

The Agreement covered a number of employers who operated one or more outlets trading as part of the Yoghurt Shop’s franchise. The employers had mixed views about the application, although they supported it in principle. They sought a two-month delay in the date of effect of any termination stating that:

  • the increase in pay rates on weekends requires staffing restructure resulting in reduced shifts for some employees and extra shifts for owners
  • profit margins will be reduced.

It was also implied in submissions that new pay rates had not been budgeted for or understood by employers when taking on the franchise businesses.

The Decision

In his decision, Commission Hampton found that termination of the agreement was in the public interest and that termination would be appropriate having regard to the likely effect on parties and the views and circumstances of the parties.

However, because there were competing views as to which modern award would apply upon termination of the agreement, and the increase in pay rates would have a significant effect on employers in terms of staffing arrangements and profit margins, it was considered by Commissioner Hampton that a delay in termination until Friday 23 March 2018 was appropriate and reasonable.

What that means for you

The Fair Work Commission’s Annual Report shows that fewer people are bargaining and more agreements are being terminated.

If you have an agreement which has passed its nominal expiry date, you or any of your employees or a union covered by the agreement may make an application to have it terminated. This could have a significant impact on your business – whether it be operationally in terms of cost and staffing arrangements or in the press.

If you have a nominally expired enterprise agreement covering your workforce and would like advice on the options available to your business, contact the NRA.

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