Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [[2016] FWCA 8862] of Deputy President Sams at Melbourne on 9 December 2016 in matter number AG2016/3647.

Introduction and background

[1] The Shop, Distributive and Allied Employees Association (SDA) has filed a notice of appeal under s.604 of the Fair Work Act 2009 (FW Act) in which it seeks permission to appeal and appeals against a decision 1 (Decision) issued by Deputy President Sams on 9 December 2016 approving the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 (Agreement). The Agreement was approved after the Deputy President accepted certain undertakings proffered by Beechworth Bakery Employee Co Pty Ltd, the applicant for the approval of the Agreement and the respondent to this appeal.

[2] Although four grounds of appeal are identified in the SDA’s notice of appeal, it seems clear to us that the SDA challenges the Decision to approve the Agreement on two broad bases. The first relates to the application by the Deputy President of the better off overall test. The second relates to the undertaking accepted by the Deputy President and, in particular that part of the undertaking designed to “make good” any short fall in wages payable to an employee under the Agreement when compared to the relevant modern award.

[3] When the Agreement was approved by a vote of employees conducted between 18 and 21 June 2016, it was said to cover 232 employees employed at six locations, primarily in Victoria but also in New South Wales, who were engaged in front of house service (hospitality) activities, production of bakery products (baking), transport (logistics) and clerical activities. The Agreement does not cover managerial employees.

[4] An application pursuant to s.185 of the FW Act filed by the respondent on 27 June 2016 sought the Commission’s approval of the Agreement. The SDA was a bargaining representative for the Agreement. On 3 August 2016, the SDA filed a statutory declaration made by its National Secretary in which inter alia, the SDA gave notice pursuant to s.183 of the FW Act that it wants to be covered by the Agreement but indicated that it opposed the approval of the Agreement because the Agreement did not pass the better off overall test.

[5] The application for approval of the Agreement was allocated to the Deputy President, who initially listed the application for hearing by telephone on 11 August 2016 and, subsequently, relisted it on 15 August 2016. The application was adjourned by consent to 15 September 2016 to allow discussions between the SDA and the respondent about the issues in contention. It is apparent that a consensus was not reached and as the SDA pressed its objection, the application was listed for hearing on 24 October 2016, with directions for the filing of materials issued by the Deputy President on 7 September 2016.

The Decision

[6] After determining the relevant reference instrument 2 for the purposes of the better off overall test, the Deputy President considered whether the Agreement passed the better off overall test as follows:

“[62] A major consideration as to whether the Commission can approve an agreement is a determination that the agreement passes the ‘better off overall test’ (BOOT). That requirement is set out at s 186(2)(d) of the Act.

. . .
[64] It is trite to observe that an agreement does not necessarily fail the BOOT because employees do not receive weekend penalty rates, public holiday loadings or any other Award term or condition. Such a simplistic test would be to adopt an incorrect approach to the exercise of ensuring employees (and prospective employees) are ‘better off overall’ under the Agreement, rather than the relevant reference instrument. It is 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 utilised and never intends to. This would be a barren and wasted exercise, perhaps of some obscure academic novelty, but of no practical utility.

[65] The BOOT is a balancing exercise - not a ‘line by line’ comparison. In NTEU v UNSW [2010] FWAA 9588, Lawler VP said as follows:

‘It is trite to observe that awards typically contain both monetary and non-monetary terms and conditions. Obviously enough, the BOOT calls for an overall assessment. Comparing monetary terms and conditions is, at the end of the day, a matter of arithmetic. There is an obvious problem of comparing apples with oranges when it comes to including changes to non-monetary terms and conditions into the “overall” assessment that is required by the BOOT. In such circumstances the Tribunal must simply do its best and make what amounts to an impressionistic assessment, albeit by taking into account any evidence about the significance to particular classes of employees covered by the Agreement of changes to particular non-monetary terms that render them less beneficial than the equivalent non-monetary term in an award. In my view, it may also be relevant to consider the terms of any existing agreement and whether there is a relevant change of position when compared to that existing agreement.’

[66] In the present case, the assessment of the BOOT is relatively straightforward. This is so because the Agreement does not provide any other terms or conditions which are more beneficial than the reference instrument, other than the higher loaded rates of pay which apply for ordinary time worked during the week and on the weekend and public holidays.

[67] In my judgement, the decision of the Full Bench of the Commission in Hart v Coles has no application to this matter, for one significant reason. In Hart v Coles, the employer was invited, but refused, to provide undertakings, under s 190 of the Act, to address the identified concerns with the BOOT. By refusing to do so, the decision of the Commission not to approve the Agreement, was hardly surprising. That is not the position here. Beechworth has conceded a number of individual circumstances (mostly unlikely, given the rostering and employment arrangements of the business) which might result in a small cohort of employees not being ‘better off overall’ under the Agreement, rather than the relevant Award. The only identifiable real circumstance was one employee who, for purely personal reasons can only work on Sundays, which meant she was ‘worse off’ than if the Award applied. This was readily acknowledged and corrected, by an undertaking, that any employee who works solely on a Sunday or public holidays (highly unlikely) would be paid at a rate to ensure they would not be ‘worse off’ under the Agreement, compared to the relevant Modern Award. However, for reasons I will explain later, this may not be sufficient.

[68] It cannot be ignored (for the purposes of the BOOT) that a higher base rate of pay applies for all purposes. In other words, other terms and conditions such as annual leave, personal and long service leave, superannuation, overtime, casual loadings etc. will all be calculated by reference to the higher base rate, thereby making those terms more beneficial than if they are calculated at the Award rate. In my opinion, this is an appropriate matter to be taken into account when balancing all the relevant matters to ensure employees are ‘better off overall’.

[69] I would add that, in some ways, the comparison between the Agreement and the relevant Awards, at the ‘test time’ is an artificial and unreliable guide as to whether the Agreement throughout its nominal term, will be able to guarantee all employees, (let alone prospective employees), will be ‘better off overall’. Given the ‘test time’ is a snapshot in time; that is, when the application to approve the Agreement is filed with the Commission (s193(6)), it is difficult to imagine in a dynamic business environment, that rosters which exist at the ‘test time’ will remain static and unchanged for the nominal term of the Agreement, of up to four years. Moreover, it seems to me there would be nothing to prevent an employer from changing rosters, subject to lawful notice, within weeks of the Agreement being lodged and which might result in employees not being ‘better off overall’ for the balance of the Agreement’s nominal term. Of course, an appropriate reconciliation undertaking may ensure that this scenario is not possible under this Agreement.”

[7] The Deputy President next turned to consider undertakings proffered by the respondent as follows:

“[70] On 7 November 2016, Mr Matassoni provided undertakings on the following matters:

● employees who only work on Sundays or public holidays will be paid the appropriate Award penalty rate;

● adjustments to provisions dealing with tradesperson’s starting times;

● increasing rates of pay for drivers;

● increasing rates for Team Supervisors.

[71] Pursuant to s 190(4) of the Act, each of the bargaining representatives were provided with the applicant’s proposed undertakings. The SDA responded on 7 November 2016 and the applicant replied the next day. I note that eight of the employee bargaining representatives indicated they all supported the proposed undertakings.

[72] During the Commission’s deliberation of this matter, I became aware of a decision of the Full Federal Court (by majority) in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161 (‘SDA v Aldi’) published on 29 November 2016, which in my judgement squarely raises concerns with the undertakings given by Beechworth in respect to Sunday and public holiday rates of pay and a proposed reconciliation clause. Accordingly, on 1 December 2016, my Associate advised the parties as follows:

Dear Parties

AG2016/3647 s 185 application by Beechworth Bakery

His Honour wishes to bring to the parties’ attention this week’s majority judgment of the Full Federal Court in SDA v Aldi [2016] FCAFC 141. The Judgement raises concerns that the undertakings proposed by Beechworth may not ensure that all employees are ‘better off overall’, particularly in that:

• employees who only work on Sundays (one existing employee) or public holidays will be paid the relevant Award rate, but that does not satisfy the employee being ‘better off’; see: Aldi at paragraph 153.


• His Honour is less concerned at the proposed public holiday undertaking because of the unlikelihood of an employee only working public holidays. However, this could be addressed by an undertaking that no employee will be required to work only a public holiday, during a rostered cycle;


• the above concerns also arise in respect to the proposed reconciliation clause (White J calls it the ‘make good’ clause) resulting in employees being brought into line with the Award to make up a shortfall, not being better off; see: Aldi at 166.

The parties might consider an undertaking similar to that accepted by Gostencnik DP, in Main People [2015] FWCA 8917 [paragraphs 5 to 8] or an undertaking ensuring that all employees will be required to work a certain number of shifts in ordinary hours Monday to Friday.

His Honour notes that because the loaded base rate applies to all forms of leave, superannuation, overtime etc. this may be sufficient to ensure that employees are ‘better off overall’. This could also be sufficient for casual employees whose casual loading is calculated on this higher loaded rate.

His Honour emphasises that these comments do not indicate the Commission’s final conclusions as to the approval of the Agreement. However, while His Honour regrets these circumstances, he believes it incumbent on him to bring the Aldi decision to the parties’ attention and invite further undertakings and/or submissions.

[73] Beechworth provided new undertakings, which in essence increased relevant Award rates for work only performed on a Sunday or public holiday by 1.5%, and ensured any reconciliation exercise, which resulted in an employee not being ‘better off overall’, be paid any shortfall of the Award rates otherwise payable, plus 1.5%. Pursuant to 190(4) of the Act, each of the bargaining representatives were provided with the applicant’s revised undertakings. The SDA responded on 6 December 2016. It maintained its opposition to the Commission approving the Agreement on the basis the revised undertakings do not satisfy the BOOT and the revised undertakings are inconsistent with the decision in SDA v Aldi.

[74] Having considered these undertakings, the Union’s response, the fact the higher base rates of pay are applied for ‘all purposes’; see paragraph 68, and that the vast majority of employees work regular Monday to Friday shifts at the higher rate of pay, I am satisfied the Agreement meets the BOOT. I do not intend to engage with the parties any further over illogical or fanciful ‘what if’ scenarios concerning hypothetical work arrangements that Beechworth has never used and has no intention of using.

[75] In respect to the Union’s main concern about work solely performed on Sundays and public holidays, only one employee is likely to be practically and positively affected. In the very unlikely event of other employees working only on Sundays or public holidays, they would not be ‘worse off’ under the Agreement and will at least be ‘better off’ by 1.5%.

[76] Pursuant to s 190(2) of the Act, I am satisfied that the proposed undertakings meet the concerns of the Commission as to the Agreement passing the BOOT. I am further satisfied, pursuant to subsection 190(3), that the undertakings do not cause financial detriment to any employee covered by the Agreement; indeed the contrary is the case. Given the proposed undertakings provide for beneficial improvements for some of the existing employees, it might safely be assumed that they would not object to the undertakings (noting that none of the employee bargaining representatives, with the exception of the Union, opposed the undertakings when they were provided the opportunity to make their views known). In any event, I do not consider that the undertakings result in substantial changes to the Agreement which would otherwise prevent the Agreement from being approved. I note the SDA did not assert in its more recent submissions, that the revised undertakings result in substantial changes to the Agreement. Pursuant to s 191 of the Act, the undertakings shall be taken to be terms of the Agreement. A copy of these undertakings are attached to the Agreement and marked as ‘Annexure A’.” 3

[8] It is apparent from the passages above that the Deputy President approved the Agreement with undertakings and that as a consequence he was satisfied the Agreement passed the better off overall test.

Consideration

[9] Section 186(1) of the FW Act establishes a “basic rule” that where an application for approval of an enterprise agreement is made under s.185 (which prescribes the time in which such an application must be made and its content), the Commission must approve the agreement if the requirements in ss.186 and 187 are met. Sections 186 and 187 set out a range of approval requirements. Section 186(2) sets out approval requirements in relation to the safety net, and relevantly provides as follows:

186 When the FWC must approve an enterprise agreement—general requirements
…
(2) The FWC must be satisfied that:

…
(d) the agreement passes the better off overall test.

[10] Section 193 prescribes that which is necessary for an enterprise agreement to pass the better off overall test. It relevantly provides:

193 Passing the better off overall test

When a non-greenfields agreement passes the better off overall test

(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.
…
Award covered employee

(4) An award covered employee for an enterprise agreement is an employee who:

(a) is covered by the agreement; and

(b) at the test time, is covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and

(iii) covers his or her employer.

Prospective award covered employee

(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:

(a) would be covered by the agreement; and

(b) would be covered by a modern award (the relevant modern award) that:

(i) is in operation; and

(ii) would cover the person in relation to the work that he or she would perform under the agreement; and

(iii) covers the employer.

Test time

(6) The test time is the time the application for approval of the agreement by the FWC was made under section 185.

FWC may assume employee better off overall in certain circumstances

(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.

[11] It may be seen from the above that an enterprise agreement will pass the better off overall test if the Commission is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.

[12] The application of the better off overall test is not to be applied as a line by line analysis. Rather it is a global test requiring consideration of advantages and disadvantages to award covered employees and prospective award covered employees of an agreement’s application compared to the application of a relevant modern award. The application of the better off overall test therefore requires the identification of terms of an agreement which are more beneficial to the relevant employees when compared to the relevant modern award, the terms of an agreement which are less beneficial or detrimental when compared to the relevant modern award and then an overall assessment of whether each relevant employee would be better off under the agreement. 4

[13] Turning then to the first basis of appeal, the gravamen of the SDA’s contention was that the Deputy President did not correctly apply the better off overall test. This was because:

● the Deputy President failed to consider or deal with the issues raised by the SDA relating to a comparison between the terms and conditions under the Agreement compared with the relevant reference instrument and accordingly issues of fact which required determination by the Deputy President bearing upon the satisfaction of whether the Agreement passed the better off overall test were not addressed;

● the Deputy President concluded that the decision in Hart v Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Limited 5 was irrelevant to his consideration because undertakings were not offered in that case;

● the Deputy President purported to discharge his task by finding that the scenarios advanced were "implausible, fanciful or rosters which the employer has never utilised and never intends to"; and

● the Deputy President did not consider whether the Agreement might affect employees - either existing employees or prospective employees detrimentally in the future.

[14] The SDA submitted that whilst implausible or fanciful rosters perhaps need not be considered, the mere fact that an employer has never utilised a roster and, at the time of approval, does not intend to, cannot mean that the possibility of such a roster being introduced over the life of an agreement can be dismissed out of hand.

[15] The SDA submitted that the task of assessing whether the Agreement passed the better off overall test is not only to consider how the Agreement would operate under existing conditions, but also how it might operate in the future if employees are required to work in different ways. The SDA contended that the Deputy President did not do this because he accepted the employer's current intention not to change. Such intentions might themselves change, so too might the management of a business, or the conditions under which it has to operate. An agreement is a form of legislative instrument which will continue to apply regardless of those changes. It must also pass the better off overall test in those possible circumstances.

[16] The respondent accepted that the proper application of the better off overall test requires the identification of terms which are more beneficial for an employee, terms which are less beneficial for an employee, and an overall assessment of whether an employee would be better off under the agreement. However, it submitted that the Deputy President gave detailed consideration of the matters raised by the SDA as can be seen from the lengthy recitation of the matters raised by the SDA in its written submissions and at the hearing in paragraphs [29] to [54] of the Decision.

[17] The respondent submitted that the Deputy President did not distinguish Hart on the basis that the undertakings were not given. It submitted that the methodology in Hart was followed and this is evident in [66] to [68] of the Decision.

[18] Further, the respondent submitted that the Deputy President did not purport to discharge his task by finding the scenarios advanced were implausible and fanciful. Rather the Deputy President at [66] to [69] of the Decision identified the benefit in the Agreement, namely the increased hourly rate; and identified a detriment, namely that given the rostering and employment arrangements of the business, there was only one identifiable real circumstance of one employee that could only work Sundays for personal reasons. The Deputy President then made an overall assessment at [68] of the Decision at which the Deputy President observed that he cannot ignore the fact that the higher rates under the Agreement apply for all purposes.

[19] Finally, the respondent submitted that the SDA’s attack on the failure by the Deputy President to consider the future operation of the Agreement has no substance. The Deputy President considered the scenarios advanced by the SDA and concluded that these were implausible and fanciful.

[20] Ultimately, we have found it unnecessary to decide this issue primarily because absent the undertaking proffered by the respondent, there is no finding in the Decision that the Agreement passed the better off overall test. The finding that the Agreement passed the better off overall test was wholly contingent on the undertaking.

[21] It is convenient therefore that we turn our attention to the undertaking. It is not necessarily the case that, where an agreement does not satisfy all of the approval requirements in ss.186 and 187, the application for approval of the agreement must be dismissed. Section 190 allows for an agreement to be approved with undertakings. It provides:

190 FWC may approve an enterprise agreement with undertakings

Application of this section

(1) This section applies if:

(a) an application for the approval of an enterprise agreement has been made under section 185; and

(b) the FWC has a concern that the agreement does not meet the requirements set out in sections 186 and 187.

Approval of agreement with undertakings

(2) The FWC may approve the agreement under section 186 if the FWC is satisfied that an undertaking accepted by the FWC under subsection (3) of this section meets the concern.

Undertakings

(3) The FWC may only accept a written undertaking from one or more employers covered by the agreement if the FWC is satisfied that the effect of accepting the undertaking is not likely to:

(a) cause financial detriment to any employee covered by the agreement; or

(b) result in substantial changes to the agreement.

FWC must seek views of bargaining representatives

(4) The FWC must not accept an undertaking under subsection (3) unless the FWC has sought the views of each person who the FWC knows is a bargaining representative for the agreement.

Signature requirements

(5) The undertaking must meet any requirements relating to the signing of undertakings that are prescribed by the regulations.

[22] Section 191(1) identifies the legal effect of an undertaking given in relation to a single-employer enterprise agreement as follows:

(1) If:

(a) the FWC approves an enterprise agreement after accepting an undertaking under subsection 190(3) in relation to the agreement; and

(b) the agreement covers a single employer;

the undertaking is taken to be a term of the agreement, as the agreement applies to the employer.

[23] As is apparent from the above, the power to approve an agreement with undertakings is enlivened only if the Commission has a concern that the agreement does not meet the requirements set out in ss.186 and 187. Before an agreement is approved the Commission must, inter alia, be satisfied that it passes the better off overall test. 6 A concern held by a Member of the Commission dealing with an application to approve an agreement about whether the agreement passes the better off overall test may thus properly empower the Member to consider an undertaking proffered. If the undertaking meets the concern and, after consulting with any known bargaining representatives, the Member may approve the agreement with the undertaking upon being satisfied that the undertaking does not cause financial detriment to any employee covered by the agreement nor result in substantial changes to the agreement.

[24] The undertaking given by the respondent and accepted by the Deputy President is in the following terms:

“PURSUANT to s. l90 of the Fair Work Act 2009, Beechworth Bakery Employee Co

Pty Ltd hereby undertakes to the Fair Work Commission that in relation to the Beechworth Bakery Employee Co Enterprise Agreement 2016 (AG2016/3647) that:

1. Where an employee works a Sunday only the employee will receive the applicable award rate of pay for such time worked plus 1.5%.

2. Where an employee works a public holiday only the employee will receive the applicable award rate of pay for such time worked plus 1.5%.

3. Where a Tradesperson is rostered to work shifts starting prior to 6.00am, and there is no variance in commencement times across a three (3) month period, the employee shall be entitled to a minimum rate of $23.19 per hour for all hours worked between Monday and Friday (i.e. excluding weekends).

4. The following minimum rates be payable to Transport Employees under the Agreement:

Permanent			Casual
Level 1	Rate 1	Rate 2	Rate 1	Rate 2
	$20.50	$29.60	$25.50	$32.00
Level 2	$21.00	$29.75	$26.00	$32.50

5. The following minimum rates be payable to Team Supervisors under the Agreement:

Permanent			Casual
Team Supervisor	Rate 1	Rate 2	Rate 1	Rate 2
	$22.00	$31.90	$28.60	$32.60

6. Where an Employee considers that over a four (4) month period they are not better off overall under this Agreement than under the applicable Award, they may request a comparison of the wages received for that roster cycle under this Agreement and the wages they would otherwise have been provided with under the Award. Any shortfall in wages which would otherwise be payable under the Award plus an additional amount equal to 1.5% of the total shortfall will be paid to the Employee in the next pay period after the review is completed. If the Employee and Employer cannot reach agreement on the total amount which should be paid by the operation of this undertaking, the Dispute Resolution Procedure in clause 12 of the Agreement will be followed and the parties will agree to the Fair Work Commission arbitrating and making a binding determination to resolve the matter.

For the purposes of this Undertaking:

1. ‘Applicable Award’ means:

(i) Restaurant Industry Award 2010 for Front of House Employees

(ii) Food, Beverage and Tobacco Manufacturing Award 2010 for Production Employees

(iii) Road Transport and Distribution Award 2010 for Transport Employees

(iv) Clerks - Private Sector Award 20 I 0 for Clerical Employees

2. Wage increases as provided in Part E Clause 19 (e) will be applied to the hourly rates specified here in.”

[25] The SDA criticised the Deputy President’s approval of the Agreement with the undertaking proffered by the respondent in two respects. First, the SDA submitted that the Deputy President did not make any findings as to the ways in which the Agreement did not pass the better off overall test. Consequently, he did not make a finding required by s.190(1)(b) which would have allowed the issue of what undertakings were necessary to be tested. Instead, the Deputy President considered undertakings which had been volunteered by the employer.

[26] Secondly, the SDA submitted that although the first five paragraphs of the undertakings appear to be directed at existing issues, the sixth undertaking contained inherently the type of problem identified in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd. 7

[27] We consider that the SDA’s criticism in this second regard has substance.

[28] The respondent submitted that the Deputy President identified in the Decision his concern as to whether the Agreement passed the better off overall test by observing that:

(a) the Agreement did not contain penalty rates as public holiday loading is another award condition; and

(b) the assessment of the better off overall test in the instant case was relatively straightforward because the Agreement did not provide for any other terms and conditions which were more beneficial than the reference instrument other than the higher loaded rates of pay which would apply.

[29] We do not accept this submission. A fair reading of the Decision discloses that the only concern expressed in the Decision as to whether the Agreement passed the better off overall test was that identified at [67] where the Deputy President observed:

“. . . Beechworth has conceded a number of individual circumstances (mostly unlikely, given the rostering and employment arrangements of the business) which might result in a small cohort of employees not being ‘better off overall’ under the Agreement, rather than the relevant Award. The only identifiable real circumstance was one employee who, for purely personal reasons can only work on Sundays, which meant she was ‘worse off’ than if the Award applied. This was readily acknowledged and corrected, by an undertaking, that any employee who works solely on a Sunday or public holidays (highly unlikely) would be paid at a rate to ensure they would not be ‘worse off’ under the Agreement, compared to the relevant Modern Award. However, for reasons I will explain later, this may not be sufficient.” 8

[30] But that is not the end of the matter. Raising or identifying a concern that an agreement does not meet the requirements set out in ss.186 and 187 of the FW Act need not only be raised in the decision dealing with an application to approve an agreement. Such a concern may be expressed by a Member dealing with an application during the conduct of a hearing or through an exchange of correspondence while an application for approval of an enterprise agreement is being considered. Indeed, this will usually be the case. To raise a concern only in the final decision determining an application would deprive an applicant of the opportunity to proffer an undertaking, thereby leading to the real possibility of error.

[31] The issue of an undertaking was first raised by the Deputy President during the course of the hearing of the application on 24 October 2016 as disclosed in the following exchange recorded in the transcript of the proceeding:

“THE DEPUTY PRESIDENT:  Well, while you're doing that could I ask both the parties to consider what - this is putting aside the question of the award coverage or the appropriate reference instrument coverage - Deputy President Bull recently gave a decision in Glassons enterprise agreement.  The SDA was involved.  There were identification there of persons who may have been said to have been worse off because of their working patterns and it is apparent from Mr Matassoni's frank and helpful evidence that there may be occasions where people, particularly who work on Sundays only - I forget the lady's name but mainly her - who would fit into that category and there may be even persons who work the early shifts who might fit into that category.

His Honour provided a draft undertaking which is essentially a reconciliation provision.  It appears that his Honour provided that to the parties and it was accepted.  I can provide you a copy of the decision.  I'm just wondering - and again, this of course is dependent upon which award applies but that will necessarily be a decision of the Commission.  But if it gets to it in either case, wouldn't that be a way forward?

MR DUC:  I certainly do have authority to provide an undertaking to the Commission with regard to various matters and I was going to address some of that with Mr Matassoni in re-examination but certainly, the applicant would be looking to provide undertakings.

THE DEPUTY PRESIDENT:  Are you familiar with that decision?

MR BURKE:  I'm aware there is a decision; I haven't read it, though.

THE DEPUTY PRESIDENT:  Concerning the SDA - I don't even think were bargaining agents but appeared by reason of interest.

MR BURKE:  Yes, I read briefly about it last week.  I didn't look to any further details at that time.  Sorry, Deputy President; I concentrated on some other decisions in the meantime.

THE DEPUTY PRESIDENT:  Yes, yes.

MR BURKE:  But I would say, depending on what undertakings are given, we would be prepared to look at those.  We think there are some deficiencies that could be rectified with undertakings but they may not be ones that will be agreed to by the other side but we'll discuss it. ” 9

[32] Later in the proceeding, the respondent made the following submission concerning an undertaking:

“MR DUC:  Thank you, your Honour.  Your Honour, firstly if I could commence by saying that looking at the undertaking that was provided in the Glassons decision from Deputy President Bull, the applicant would be looking to provide an undertaking in line with paragraph 18 of that decision.  The period of time in which we would be undertaking to do that calculation would be every quarter:  every three months we would do that calculation.  If the Commission is not minded to accept that undertaking we would be willing to look at a lesser period of time.  However, that is what we would be looking to offer at this stage.
. . .
Briefly in relation to the BOOT test, we have already proffered an undertaking.  It might be otiose also to indicate that from the applicant's position, the way that the SDA has cherry-picked employees - Claudia, Lorraine, Shanae, et cetera - that approach of a line-by-line, taking into account no other benefits is not the right approach to be taken and again, it would be otiose to point out the Commission's decision as presently constituted in the Australian Rail Track case of two weeks ago, which indicated at paragraph 94 that it would be impossible for the tribunal and applicants as well to analyse each employee's current and prospective roster and it would be an illogical and impossible nightmare.  I think that has been demonstrated by the SDA today, where the questions to Mr Matassoni have been, "What if?  What if an employee only works on the public holiday next week?"  We could have been here all day listening to the, "what if", scenario.” 10

[33] Still later the following exchange occurred between the SDA and the Deputy President:

“In terms of if any undertakings were to be looked at, we have considered in general what the Commission has put today but we would say that if an undertaking is to be looked at it would need to be sure that if there is a loss in terms of penalty rates, in terms of the public holiday rates that those are covered by the undertaking.  The Glassons one in particular only talks about wages.  I'm not sure if that is specific enough to talk about penalty rates and public holiday rates and so that would be something that we would raise to be covered.

Mr Matassoni himself has talked about in some cases where people are paid extra if there is some disadvantage to them already under the current agreement, so it is not something the company hasn't already turned its mind to in the past and is prepared to look at again.  But we would say, for example, some are working only on a Sunday, they would have to have the award rate maintained, it shouldn't be necessarily an undertaking to be looked at over three months; it could be an undertaking that it is guaranteed each time.  The company already knows some people will be working only on Sunday.  The same should go to public holidays, that everybody - just far easier with an undertaking that work on the public holiday will be paid no less than the relevant award.

If these sorts of undertakings aren't given then, as with the original Coles' decision, some of the undertakings that were looked at there were whether there would be restrictions on, say, weekend work or late night work.  Now that may be something that the applicant would look at, but something that certainly needs to be given to protect people.  We also say the same should apply to the annual leave loading, that that needs to be covered by any undertaking.  Looking at the Glassons' undertaking, I'm not sure that wages covers annual leave loading, it would need to be more specific than that.  If it is done over three months then each permanent is accruing annual leave.  If they have taken annual leave and under the award would have been paid more if leave loading applied then that should be covered by the undertaking as well.

The same would go baker reproduction employees that, as Mr Matassoni has said, if they only work Sunday to Wednesday they will be disadvantaged as against the award and so that would have to be addressed.  It can be addressed by the alternating rosters being the norm but it may be more difficult because I think there are some people already, from Mr Matassoni's evidence, who choose not to work every Sunday - sorry - every Saturday and they have that arrangement.  We think that the undertaking should look at overtime where it is paid less after two hours.'

THE DEPUTY PRESIDENT:  You are taking a line by line approach.  It is not the appropriate test to look at one provision and say "You've got to give an undertaking about that because it's in the award".  What you have to do is give an undertaking which ensures that employees are better off overall and that is not consistent with an approach that is line by line.

MR BURKE:  I suppose we are looking at what the Full Bench said.

THE DEPUTY PRESIDENT:  That is not what the Full Bench said, because it didn't deal with that sort of undertaking.

MR BURKE:  Well, it didn't have to in this case.

THE DEPUTY PRESIDENT:  No, because Coles wouldn't give them.

MR BURKE:  No, because in relation to overtime there is no difference, from memory, compared to the award.  The difference here is the overtime provisions after two hours are less than the award, that is the reason to look at it.

THE DEPUTY PRESIDENT:  But you weren't talking about that.  You were talking about the public holiday loading, the annual leave loading and that has to be an undertaking as well.  But if it has already taken into account in the rate then that is what you are looking at and, indeed, that is what the Commission's own instructions are to employers to do - when they are doing this exercise to do.

MR BURKE:  In our own calculations in this matter we have shown, Deputy President, and we show that people are worse off in some cases.

THE DEPUTY PRESIDENT:  That's right.

MR BURKE:  That's why they need to be protected with an undertaking.

THE DEPUTY PRESIDENT:  That's right, that is what I'm trying to get to, but it is not by taking a line by line approach to say you haven't got annual leave loading so you've got to put an undertaking in about that; you haven't got something else in the award, so you've got to give an undertaking about that; you haven't got something else, you've got to give an undertaking.  That is not how it works.

MR BURKE:  The alternative is that the agreement perhaps doesn't pass the BOOT and is non-approved, that is one alternative.

THE DEPUTY PRESIDENT:  That assumes that the undertaking doesn't meet the concerns of the Commission in respect to passing the better off overall test. ” 11

[34] At the conclusion of the proceeding the follow exchange took place:

“MR DUC:  Your Honour, very briefly.  The Commission has picked up several issues
that I wanted to make mention of, so perhaps I will just go straight to the undertaking issue.

Your Honour, we are prepared to look at the undertaking in Glassons, that structure, in relation to the supervisors' issue, about how much they get paid and I note that the Glassons' suggested clause refers to the grievance procedure, so if there is an issue between employees about what level they are then that will be dealt with through the grievance procedure.

In relation to Sundays, we will look at giving an undertaking to pay the employees in accordance with Sunday.  In relation to where employees only work public holidays, we will also look at giving an undertaking to bring them up to the award there.  The second last issue is the late night employees who have been identified as potentially having disadvantage.  I will also look at that particular issue and, finally, drivers.

So, in summary, there are five issues that an undertaking will deal with and we would seek to provide an undertaking to the Commission within seven days unless the Commission's minded to come back after 2 o'clock, but I think I might need some more time with Mr Matassoni to do some calculations.

Finally, I note that it is not a negotiation between the Commission and the applicants or the union; we will provide the undertaking on which the Commission can make a final decision.

THE DEPUTY PRESIDENT:  Thank you.  I had in mind a period of seven days and, of course, pursuant to section 190(4), I am obliged to seek the views of the bargaining representative, so that will be provided to you.  How soon after the provision of that would you require opportunity to respond?

MR BURKE:  I think I should mention we are not the only bargaining representative in this matter; there are employee bargaining reps, too.
. . .
THE DEPUTY PRESIDENT:  All right.  I will adjourn on that basis.  I will expect an undertaking in the various discussions that we have had and then allow the period of time for the bargaining representatives to give their views and consequent upon that I will consider the matters more fulsomely and issue a decision in due course.  I now adjourn. ” 12

[35] It seems to us clear enough from a review of the transcript that during the course of the hearing on 24 October 2016, through a combination of questions raised by the SDA and concessions made by the respondent, that the Deputy President had concerns about whether the Agreement passed the better off overall test. It was not necessary for the Deputy President to have formed a concluded view that was the case. Contrary to the submission advanced by the SDA in this appeal, we do not consider that it was necessary for the Deputy President to have made “findings” as to the manner in which the Agreement did not pass the better off overall test. It was sufficient for the purposes of enlivening the jurisdiction concerning the provision of undertakings for the Deputy President to have identified his concern with enough particularity so that the respondent could seek to address that concern by proffering an undertaking. We consider that the Deputy President’s concern was clearly enough articulated during the course of the hearing to enable the respondent to respond to that concern by providing an undertaking.

[36] There is nothing in the material in the appeal book which would suggest that the respondent was not clear about the Deputy President’s concern, nor is there anything in the material in the appeal book which suggests that the SDA was not clear about the concern.

[37] The initial undertaking provided by the respondent on 7 November 2016 following the hearing was in the following terms:

“PURSUANT to s. 190 of the Fair Work Act 2009, Beechworth Bakery Employee Co

Pty Ltd hereby undertakes to the Fair Work Commission that in relation to the Beechworth Bakery Co Enterprise Agreement 2016 (AG2016/3647) that:

1. Where an employee works a Sunday only the employee will receive the applicable award rate of pay.

2. Where an employee works a public holiday only the employee will receive the applicable award rate of pay.

3. Where a Tradesperson is rostered to work shifts starting prior to 6.00am, and there is no variance in commencement times across a three (3) month period, the employee shall be entitled to a minimum rate of $23.19 per hour for all hours worked between Monday and Friday (i.e. excluding weekends).

4. The following minimum rates be payable to Transport Employees under the Agreement:

5. The following minimum rates payable to Team Supervisors under the Agreement:

For the purposes of this Undertaking:

1. ‘Applicable Award’ means:

(i) Restaurant Industry Award 2010 for Front of House Employees
(ii) Food, Beverage and Tobacco Manufacturing Award 2010 for Production Employees
(iii) Road Transport and Distribution Award 2010 for Transport Employees
(iv) Clerks- Private Sector Award 2010 for Clerical Employees

2. Wage increases as provided in Part E Clause 19 (e) will be applied to rates specified herein.”

[38] On 24 November 2016 the Deputy President’s Chambers corresponded with the parties as follows:

“The Deputy President is currently preparing the decision for this application. In relation to the undertaking that was provided on 7 November, his Honour would like to ask the applicant why an undertaking to the effect of that which was indicated at PN 370 of the transcript, in relation to a proposed reconciliation every quarter has not been provided?”

[39] On 30 November 2016 a modified undertaking was provided by the respondent which contained a new paragraph 6 in the following terms:

“6. Where an Employee considers that over a four (4) month period they are not better off overall under this Agreement than under the applicable Award, they may request a comparison of the wages received for that roster cycle under this Agreement and the wages they would otherwise have been provided with under the Award. Any shortfall in wages which would otherwise be payable under the Award will be paid to the Employee in the next pay period after the review is completed. If the Employee and Employer cannot reach agreement on the total amount which should be paid by the operation of this undertaking, the Dispute Resolution Procedure in clause 12 of the Agreement will be followed and the parties will agree to the Fair Work Commission arbitrating and making a binding determination to resolve the matter.” 13

[40] As is evident from [72] of the Decision, the Deputy President’s Chambers then corresponded with the parties on 1 December 2016 alerting them to the decision in ALDI and its possible impact upon the undertakings given by the respondent and inviting revised undertakings and/or submissions.

[41] In response, the undertaking reproduced earlier at [24] was proffered by the respondent and, as is evident from [76] of the Decision, the Deputy President accepted the undertaking as meeting his concern that the Agreement did not pass the better off overall test.

[42] However, we do not consider that the part of the undertaking contained in paragraph 6 was capable of satisfying any concern that the Agreement did not pass the better off overall test. First, and most obviously, paragraph 6 of the undertaking does not create an enforceable right to any payment, which if made, would mean that a relevant employee would be better off overall under the Agreement than under the applicable modern award. Rather, the undertaking operates only to allow an employee who “considers that . . . they are not better off overall under this agreement than the applicable award” to request a comparison, and thereafter if the comparison identifies a shortfall, the shortfall together with an additional 1.5% payment by reference to the shortfall amount would be paid in the next pay period after the review is completed.

[43] Such obligation to “make good” any shortfall arises only if an employee makes a request for a review. If no such request is made, whether through ignorance or design, or perhaps because an affected employee simply lacks the time, information or ability to form a view, then no obligation to conduct a review, much less “make good” any shortfall, arises. Any concern that an employee or prospective employee would not be better off overall if the Agreement applied to the employee than if the relevant modern award applied to that employee cannot be met by such an undertaking.

[44] In considering whether an undertaking should be accepted as satisfying a concern that an agreement may not pass the better off overall test, it is necessary to analyse the undertaking so as to ensure that it is expressed in a way which will allow it to be enforced as a term of the agreement. 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. 14

[45] The second obvious flaw in the undertaking is that since an employee’s consideration that he or she is not better off overall under the agreement compared to the applicable award arises by reference to a four month period, this necessarily means that any review as might be conducted would only occur three times a year in respect of each employee. The inevitable consequence is a delay in payment to an employee. Moreover, the potential length of the delay is unknown as disputes may arise about the quantum of payment due under the undertaking as is apparent from the dispute resolution mechanism established by the undertaking. In these circumstances it is by no means apparent that a 1.5% increase in payment might compensate an employee for that which could be a substantial difference in entitlements over a potentially lengthy and indeterminate period.

[46] In these circumstances it seems to us that the undertaking proffered in paragraph 6 was not an undertaking capable of addressing the Deputy President’s concern that the Agreement did not pass the better off overall test. The acceptance of that undertaking and consequently reliance on it to approve the Agreement was therefore erroneous.

Conclusion

[47] For the reasons given we consider that the Decision was attended by appealable error. We are persuaded that permission to appeal should be granted because the appeal raises important issues about the approval of an enterprise agreement with undertakings as contemplated by s.190 of the FW Act. Furthermore, the error we have identified is jurisdictional in nature as it goes to the power of the Commission to approve the Agreement. We are also persuaded that the appeal should be upheld and the Decision to approve the Agreement should be quashed. As the Deputy President did not conclude that the Agreement passed the better off overall test independently of the undertaking, nor did he make any finding that under s.189 that the Agreement should be approved even though it did not pass the better off overall test, there was no proper basis to approve the Agreement. We consider the appropriate course is to remit the application for the approval of the Agreement to the Deputy President to deal with in light of our decision.

[48] We make a final observation. As we note at [4] of this decision, the SDA gave notice pursuant to s.183 of the FW Act that it wants to be covered by the Agreement. There is no note in the Decision as required by s.201(2). If the Agreement is ultimately approved, attention will need to be given to this issue.

Orders

We order that:

1. Permission to appeal is granted;

2. The appeal is upheld;

3. The decision of the Deputy President in [2016] FWCA 8862 is quashed; and

4. The application for the approval of the Beechworth Bakery Employee Co Pty Ltd Enterprise Agreement 2016 is remitted to Deputy President Sams for re-determination.

VICE PRESIDENT

Appearances:

Mr W Friend QC for the Shop, Distributive and Allied Employees Association.

Mr A Duc of Counsel for Beechworth Bakery Employee Co Pty Ltd.

Hearing details:

2017.

Melbourne:

23 February.

 1   [2016] FWCA 8862

 2   Neither party to the appeal took issue with the Deputy President’s conclusion in this regard.

 3   Ibid at [70]-[76]

 4   See Re: Armacell Australia Enterprise Agreement 2010 [2010] FWAFB 9985, 202 IR 88; National Tertiary Education Industry Union v University of New South Wales [2011] FWAFB 5163; 210 IR 244; Hart v Coles Supermarkets Australia Pty Ltd [2016] FWCFB 2887 at [6]; and Shop Distributive and Allied Employees Association v ALDI Foods Pty Ltd (2016) FCAFC 161 at [163]

 5   [2016] FWCFB 2887 at [46] – [47]

 6   See s.186 (2)(d)

 7   [2016] FCAFC 161

 8   [2016] FWCA 8862 at [67]

 9   Transcript 24 October 2016 PN297-PN305

 10   Transcript 24 October 2016 PN370 and PN381

 11   Transcript 24 October 2016 PN545-PN561

 12   Transcript 24 October 2016 PN571-PN577, PN580

 13   Ibid

 14   CEPU and AMWU v Main People Pty Ltd [2015] FWCFB 4467 at [38].

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