Undertaking Half Baked: Beechworth Bakeries enterprise agreement approval undone

May 5, 2017
FCB Workplace Law

Industry Focus


2016 proved to be a tumultuous year for the approval (or not, as was the case for many employers) of enterprise agreements by the Fair Work Commission. One beacon of hope for employers in an otherwise bleak approval landscape in 2016, was Deputy President Sams’ decision to approve the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 (Agreement).

When the matter was listed for approval last year, the SDA argued that the Agreement did not pass the better off overall test (BOOT). Deputy President Sams also raised concerns in this regard. In response, Beechworth proposed undertakings to address these concerns, finally proposing that an employee would be able to request a comparison of their wages over a four month period where they considered they were not better off overall under the Agreement, to rectify any shortfall in employee earnings when compared to the relevant modern award.

In deciding to approve the Agreement, the Deputy President considered the proposed undertaking, the SDA’s response, the higher base rates of pay, and the fact that the vast majority of employees work regular Monday to Friday shifts. Deputy President Sams observed that applying the BOOT was 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 used and never intends to. This would be a barren and wasted exercise, perhaps of some obscure academic novelty, but of no practical utility. The BOOT is a balancing exercise — not a ‘line- by-line’ comparison.”

The SDA appealed the decision primarily on the basis that Deputy President Sams applied the BOOT incorrectly in approving the Agreement. The Full Bench (Vice President Hatcher, Deputy President Gostencnik and Commissioner Bissett) rejected the majority of the SDA’s arguments, but determined that the SDA’s criticisms of the undertaking, on which the approval of the Agreement was wholly contingent, had merit.

The Full Bench identified that the obligation arising from the undertaking to “make good” any shortfall in wages only arises where requested by an employee, rather than imposing an obligation on Beechworth to conduct a review. They found that “an undertaking that in its expression is uncertain, ambiguous, aspirational or perhaps conditional, with the result that it will not create an enforceable entitlement as a term of the agreement, will not likely meet the concern that an agreement does not pass the better off overall test”.  This defect would have been easily cured with an undertaking placing an obligation on the employer to conduct the analysis as a matter of course and make good any shortfall.  Crucially, however, the Full Bench considered the four month review period could cause delay and uncertainty regarding an employee’s wages and entitlements.

These two factors rendered the undertaking incapable of addressing the Deputy President’s concerns regarding the BOOT. The Full Bench upheld the SDA’s appeal, and remitted the decision back to Deputy President Sams for re-determination.

With this beacon of hope now seemingly extinguished, it seems likely that under the current legislative regime the traditional retail enterprise agreement structure, where weekend and evening penalty rates are bought out through a higher base rate, may no longer be achievable.  The recent decision in the kikki.K Enterprise Agreement 2016[1] only serves to confirm this.  kikki.K also sought to navigate around BOOT concerns through the use of a reconciliation clause, although in this case the reconciliation would occur monthly.  Even this was insufficient to satisfy Deputy President Bull, who noted the difference between the monthly reconciliation and the requirement under the Award to pay fortnightly and considered this to be a detriment.  The kikki.K agreement was approved, but it is important to note that it was not a traditional retail enterprise agreement, in that it included higher base rates than the Award, but also contained penalty rates that mirrored the Award.

While this does not mean that enterprise bargaining in retail is dead, retailers do need to carefully consider what they want to achieve through bargaining, and then analyse whether this can be achieved in the current environment.  We have been working through this strategic analysis with a wide range of retailers.  We would welcome the opportunity to share this experience with you, so please contact us on 02 9922 5188 to discuss.