Enterprise Agreements – Better Off Overall Test

Better off overall test

There are two steps to obtaining approval for a new enterprise agreement. The first step is for employees to vote on whether they approve of the proposed enterprise agreement. If the majority of employees vote in favour of the new enterprise agreement the agreement progresses to the second step.

The second step in approving a new enterprise agreement is obtaining approval from the Fair Work Commission (the FWC). One of the key factors that the FWC needs to be satisfied of before approving a proposed enterprise agreement is whether the enterprise agreement passes the Better Off Overall Test (the BOOT).

So what is the BOOT? What does better off overall mean? Who must be better off?

Legislative Authority

The BOOT is outlined in section 193 of the Fair Work Act 2009 (Cth) (the FW Act). To pass the BOOT employees and prospective employees covered by the proposed enterprise agreement need to be better off overall when compared to the relevant award/s. It is a consideration of the terms of the enterprise agreement that are more and less beneficial to employees compared to similar terms in the relevant award/s to determine if employees are better off overall. When undertaking the BOOT the FWC ignores any individual flexibility arrangements that the employer may have with any employees covered by the proposed enterprise agreement. The time for determining if employees are better off is the time the application is made with the FWC, known as the test time.

What is Better Off Overall?

Recently the FWC has provided additional clarification on the BOOT in BOC Limited (Gas & Gear – Victoria) Certified Agreement 2019 [2019] FWCA 5544. Deputy President Colman reviewed the application by BOC Limited to approve the proposed enterprise agreement. The National Union of Workers (the NUW) argued that the enterprise agreement did not pass the BOOT for prospective employees. Under the proposed enterprise agreement future employees were unable to accrue rostered days off for overtime worked. The FWC provided calculations that the higher rate of pay offered to employees meant that prospective employees were better off financially under the proposed enterprise agreement. The NUW further argued that future employees were unable to have the ‘intangible’ or ‘lifestyle’ benefits that came with taking RDOs or accruing time off in lieu for overtime worked and that this loss of ‘intangible’ or ‘lifestyle’ benefits should be taken into consideration when conducting the BOOT. Deputy President Colman stated that it was not inherently more beneficial to take RDOs and time off in lieu compared to receiving overtime payments. This was a subjective consideration. Individual employees would have different views on whether RDOs and time off in lieu compared to a higher rate of pay was more beneficial.

Deputy President Colman further stated that the BOOT focuses on objective and verifiable considerations. The assessment of whether an employee is better off under the proposed agreement is not a line by line comparison. Nor is it against the FW Act for an enterprise agreement to trade off conditions. The test is whether employees are better off overall under the enterprise agreement as a whole. The BOOT does not take into account the personal preferences of each individual employee. Deputy President Colman held that under the proposed enterprise agreement current and prospective employees were better off. The higher rate of pay outweighed the loss of ability to accrue RDOs and take days off in lieu of overtime.

Who has to be Better off Overall?

Section 193 of the FW Act sets out that to pass the BOOT the enterprise agreement is to be better off overall for ‘each award covered employee, and each prospective award covered employee’. FW Act sections 193(4) and (5) define who is an award covered employee and who is a prospective award covered employee. An award covered employee is an employee that is both covered by the proposed enterprise agreement and who at the test time is covered by a current modern award, the award covers the employee’s duties and the award covers their employer. A prospective award covered employee is a person if at the test time could have been employed by the employer and meets the requirements of an award covered employee. Use of the word ‘each’ means that all award covered employees and prospective award covered employees must be better off under the new enterprise agreement.

An example of how this is applied is seen in Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited; the Australian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited [2016] FWCFB 2887. This case concerned an appeal against the approval of the Coles Store Enterprise Agreement 2014-17. The appeal was made by Mr Hart, an employee of Coles, and the Australasian Meat Industry Employees Union (the AMIEU). The approved enterprise agreement had a higher hourly rate of pay compared to the award, but it had lower penalty payments for evenings, weekends and public holidays. The Full Bench of the FWC reviewed direct wage comparisons of certain employees who were most adversely affected by the enterprise agreement. The Full Bench also took into consideration other benefits under the approved enterprise agreement, including:

  • non-contingent benefits, such as additional penalties for ordinary hours, rest and meal breaks and payment while on annual leave;
  • wage increases;
  • benefits contingent on choice, such as pre-approved leave arrangements, blood donor leave and defence service leave;
  • benefits contingent on circumstances, such as accident makeup pay, carer’s leave, compassionate leave, emergency services leave, natural disaster leave and redundancy pay; and
  • unquantifiable benefits, such as enhanced wellbeing, supporting non-work activities, domestic violence support and care responsibility support.

The Full Bench outlined certain cautions when considering the other benefits, mainly the difficulty in determining the value of the benefits as not all employees would access these benefits. Reasons for not accessing the benefits included:

  • certain employees would not remain employed by Coles for the whole period of the agreement and so would not receive all the wage increases;
  • choosing not to take the benefit; or
  • their particular circumstances meant they were unable to take the benefit.

The Full Bench held that the agreement did not pass the BOOT. Not all employees were better off under the agreement. Employees who primarily worked during the lower penalty rate times, part-time and casual employees, would experience a significant monetary loss. Additionally, not all employees would receive the other benefits.

This case is consistent with BOC Limited (Gas & Gear – Victoria) Certified Agreement 2019 [2019] FWCA 5544 outlined above. In forming their decision, the Full Bench did not consider the personal preferences of each employee for each benefit. The Full Bench conducted an objective assessment of better off overall for all employees.

Take Away

The BOOT is a test used by the FWC to ensure employees are not disadvantaged compared to other employees covered by the relevant award/s. The FWC compares the proposed enterprise agreement against the relevant award to ensure employees and prospective employees are better off. It is not a line by line comparison of each condition to determine whether employees and potential employees are better off. It is an objective test to determine whether employees are better off overall under the proposed enterprise agreement compared to the applicable award. Conditions under a proposed enterprise agreement can be traded off, if overall the employees are better off.

Each employee and prospective employee who is covered by a current award, whose duties are covered by an award and whose employer is covered by an award must be better off under the proposed enterprise agreement. It is not the majority of those employees that have to be better off overall, all employees are to be better off. However, when making their decision the FWC does not consider the subjective personal preferences of each employee.

For a step-by-step guide on the bargaining process please see the article by my colleague Helen Carter.

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