Fair Work Commission to scrutinise “loaded rates” of pay within Enterprise Agreements

By Sid Sidhu, NRA Legal

Following the recent win for retailers and the Federal Court’s decision to uphold the penalty rate cuts across five Modern Awards, the Full Bench of the Fair Work Commission (FWC) has invited peak union and employer groups to make submissions on the future of “loaded rates” in enterprise agreements.

This news is particularly important to those who operate and rely on collective bargaining within their business, an area of industrial relations which has been faced with uncertainty for almost two years.

Enterprise bargaining has been in limbo

The Fair Work Act 2009 (Cth) requires that for an enterprise agreement to be approved, it must pass the Better Off Overall Test (BOOT). The BOOT requires that employees under an enterprise agreement must be better off overall when compared to the relevant modern award.

It is common practice under enterprise agreements for employers to bargain for increased base rates of pay as compensation for the reduction of other entitlements such as weekend penalties, annual leave loading and so on.

However, last year the Full Bench of the FWC considered the BOOT with respect to the Coles enterprise agreement and held that this test requires consideration of those most adversely affected, rather than just the majority of employees.

Despite receiving support from both the employees and Shop Distributive & Allied Employees Association (SDA), the agreement was rejected on the basis that many non-monetary benefits were contingent and not applicable to all.

This case left the retail and fast food industries in limbo, with many giants such as Woolworths, Big W and KFC putting their collective bargaining on hold. According to the SDA, the decision meant that each employee had to be better off overall at all times and that employers could no longer rely on penalty rate trade-offs.

Following the outcome of this case Ms Penny Vickers, a Brisbane mother of two, brought an application earlier this year to terminate the existing Coles Enterprise Agreement on the basis that she was $33-a-week worse off.

For many, this challenge is a worry as it gives rise to the potential for a single employee’s complaint to sink an agreement. If successful, the decision could have the effect of bringing the whole system down – a system that has been crucial to Australia’s economic growth and fundamental to the industrial relations system. An outcome has yet to be reached.

Full Bench to consider loaded rates of pay

The National Retail Association welcomes the decision to consider how the BOOT should be applied to enterprise agreements with rolled-up rates of pay.

There has been a significant decline in agreement-making in recent months, and this move is a step in the right direction to providing more certainty for the retail and fast food industries.

A hearing before a Full Bench presided over by Vice-President Adam Hatcher is set for November 15 and will focus on four single-enterprise agreements for approval.

Earlier this year, when the decision was made to introduce cuts to penalty rates, the FWC contemplated the insertion of loaded rates schedules in Modern Awards. It was contemplated that, subject to appropriate safeguards, this approach is likely to achieve greater compliance with Modern Awards and would also provide additional flexibility to small businesses.

However, it was identified that “determining an appropriate loaded rate would not be straightforward” as an employee “who worked the vast majority of their hours on a weekend … would require a higher loaded rate than, say, an employee who worked the vast majority of their hours during the ordinary spread of hours.” In light of this, it is likely that limits will be imposed on making employees work predominantly on weekends or late-night shifts.

The NRA is your voice

The NRA prides itself on being the voice for retailers and lobbying for policy reform and legislative changes which are of benefit to our members. We encourage you to call us and find out more on how you can have your say, particularly in relation to enterprise agreements, the BOOT test and the struggles with collective bargaining. For more information, call us today on 1800 RETAIL (738 245).