Are ‘Make Good’ EA Undertakings Dead?
When an enterprise agreement has been crafted to trade base rate plus penalties to all-up rates, it has not been unusual for the Fair Work Commission to require ‘make good’ provisions before approving the deal. These usually require reconciliations between what an employee has earned under the EA and what they would have earned, had the award still applied.
But recently this approach has come under scrutiny and been found wanting. First, there was the Aldi case where the federal court made the point that reconciliation could take place as much as a year after the work was performed (and hence any shortfall wages due). This, it said, was hardly a better off situation for the employee.
Now a full bench of the FWC has put into serious doubt whether such an undertaking can actually allow an EA to be approved. The full bench has quashed an approval application, primarily because of the reconciliation undertaking and remitted it to the original FWC member for further hearing.
At the heart of the matter is that undertakings can be required to permit the FWC to approve the agreement. Inherent in that proposition is that the undertaking will provide as much certainty and clarity of purpose as the other existing EA clauses which are unaffected. That is, the full bench has said an undertaking such as a reconciliation clause is not really creating enforceable entitlements, rather it requires an employee to ‘find out’ if they have an entitlement, by running a check over their potential award earnings.
These reconciliation clauses or undertakings create an entitlement to an audit. The full bench in this case is saying that is not something that goes to passing the better off overall test at the test time, that is, as the matter is being considered. It relates to something that might happen in the future, if indeed at all. In other words, if the EA, at approval time, needs to have a reconciliation clause in it, then clearly there is doubt that it is actually better off for the employees at that point in time.
Reconciliation undertakings are an administrative burden in any event, in some cases undercutting productivity gains the EA was aiming for in the first place. If this decision means the FWC won’t ask for these sort of undertakings in future, that would be no bad thing.