The Full Bench of the Fair Work Commission (FWC) recently revisited the principles for determining whether an enterprise agreement passes the ‘better off overall test’ (BOOT) in relation to an enterprise agreements with ‘loaded rates’. In doing so they further emphasised the complex nature of the enterprise bargaining provisions in the Fair Work Act 2009 (Cth) (Act), supporting calls for reform of the current statutory regime.

Background

On 1 May 2018, the Aerocare Collective Agreement 2018 (Agreement) (covering Swissport, the world’s largest airport ground services provider and its ground handling employees) was made when it was approved by 91% of employees covered by the Agreement.

On 30 January 2020, after a lengthy pre-approval process, the Agreement was approved with undertakings by Commissioner Wilson. This approval decision was appealed by the Transport Workers’ Union (TWU) and Australian Services Union (ASU).

The unions’ appeal contended that the approval decision erred in several ways, including, most crucially, because it failed to apply the proper BOOT assessment as required under section 193 of Act. The unions argued that the methodology adopted by the Commissioner to assess the BOOT, which considered a random sample of employees, meant that the Commission could not be satisfied that each and every Swissport employee was better off overall under the Agreement.

Swissport, in response, argued that the Commissioner followed ‘the most obvious and effective’ mechanism for testing BOOT compliance in the situation, and that the original approval of the Agreement should be affirmed on appeal.

The BOOT approach

The FWC’s initial BOOT assessment was not an easy or straightforward task. The BOOT spreadsheets, filed in support of the approval application, included dense datasets and no viewable formulae.

The Commissioner remarked that “the impenetrable nature of the material that has been provided has not assisted the Commission’s task, but rather hindered it. The degree of its opacity is such that the material cannot be viewed as a tool that would assist in assessing the BOOT”. Deciphering the material, it was said by the Commissioner, “would have been a task worthy of Jean-François Champollion – the person credited with having first complied a modern grammar of the Ancient Egyptian hieroglyphs”.

To rectify this issue, the Commissioner directed Swissport to provide the FWC with a modelling report, which included hypothetical roster and payments for 200 “randomly selected employees, being approximately 10% of the total 2036…covered by the Agreement at the time of the ballot”.

Considering this data and using the wage rates in the Agreement and the relevant award, the Commission, in completing its BOOT assessment:

  1. identified “those classifications and working circumstances at risk of not passing the BOOT” – the justification for this methodology was that if this ‘at risk’ group passed the BOOT, it logically followed that all employees above them should also;
  2. conducted modelling of the “at risk” workers based on the rostering patterns indicated by Swissport to see whether it would result in those workers failing the BOOT; and
  3. considered whether any non-financial matters would change the conclusions, which would otherwise be based only on financial matters.

The BOOT finding

The Full Bench (comprising Vice President, Joe Catanzariti, Deputy President, Peter Sams and Commissioner, Leigh Johns), being bound by the clear principles asserted in the Re Loaded Rates decision, could not reconcile the Commissioner’s approach to assessment of the BOOT with the requirements in section 193 of the Act.

Section 193(7) of the Act allows the Commission to assume that employees are better off in certain circumstances (i.e. when employees of the same “class” satisfy the BOOT). Re Loaded Rates provides guidance on how a “class” of employees may be selected for this purpose. Considering this, the Full Bench was critical that the approach of examining 35 employees was inconsistent with the need to:

  • select a class of employees in common classifications (of which there were many in the proposed Agreement); and
  • further divide that class into subclasses based on common patterns of working hours, taking into account evening, weekend and/or overtime hours worked (noting that the various classifications were likely to work a variety of roster patterns).

The Full Bench, in upholding the appeal and remitting the matter to Commissioner Johns for redetermination, found that whilst the randomised methodology adopted by Commissioner Wilson was logical, it was ultimately inconsistent with Re Loaded Rates. As the Commissioner applied the wrong approach to the operation of section 193(7), he could not have been satisfied that the Agreement passed the BOOT.

What does this mean for employers?

As the Federal industrial relations system is currently under a microscope, this case provides yet another example of the difficulties associated with the assessment of the BOOT, as well as the complexity of the current enterprise bargaining regime and possible need for reform to improve efficiencies for businesses and employees alike.

However, for the time being, employers are reminded to:

  • exercise caution when determining the class of employees under section 193(7) for the purposes of their BOOT assessment, especially when dealing with loaded rates agreements; and
  • provide clear and user-friendly data to the FWC to support approval of any enterprise agreement.

Employers seeking new workplace agreements might benefit from engaging experts and legal advice early, and ensure the BOOT process is managed in an effective, systematic way.

For more information or advice on this topic, please contact:

Nicholas Ogilvie
Nicholas Ogilvie
Partner, Melbourne
+61 3 9288 1380
Alexis Agostino
Alexis Agostino
Senior Associate, Melbourne
+61 3 9288 1488
Henry Kerstens
Henry Kerstens
Solicitor, Melbourne
+61 3 9288 1103