Multiple Deficiencies Block Agreement Approval

In battle, an honourable withdrawal is far superior to an ignominious defeat, and it’s much the same when seeking approval of an enterprise agreement. If the Fair Work Commission starts asking for major and extensive changes to an enterprise agreement in order for it to be approved, the smart money is on a quick retreat, not soldiering on, as a major new retailer in Australia chose to do.

The employer complied with the process steps and secured employee support for the agreement, but things turned sour as soon as the application was examined by the FWC. There were multiple problems, ranging from the most basic of all – not enough money, through to problems with breaks between shifts. The employer gave undertakings which committed it to a complex administration of rostering, with all manner of restrictions on how staff could be deployed across the various shifts.

Oddly, the employer also submitted an undertaking which included rates of pay lower than had been previously advised. This alone threw the legitimacy of the agreement into question, since the FWC doubted the employees could have “genuinely agreed” to the deal if subsequently, the employer reduced the salaries for these classifications. (In one case the reduction was $5,000.)

Despite the large number of complicated undertakings the employer was prepared to give, the FWC found the agreement was still deficient and refused to approve it. In scenario after scenario, the FWC found that employees would not be better off overall under the agreement – a fundamental requirement.

A key defect arose because penalty rates for certain times/days were reduced in favour of higher rates in non-penalty times, so an employee who worked only, or predominantly in the former periods could never be better off, just worse off. This issue was thoroughly canvassed, and a matter of some note in the retail sector, in the Coles case handed down in May 2016. It stressed the legal point that each and every employee must be better off.

This debacle exemplifies the need for careful costing of agreements where substantial structural change is contemplated. But it also highlights that where there are serious issues at play, engaging in a lengthy process as this employer did, only to still fail at the end, is bad policy. Transactions costs (the case dragged on from March to December) and loss of face aside, the big negative here is that the employees of this business now know they voted for a very much substandard agreement. This is likely to make them have reservations about trusting their employer and is the real damage potentially done here.

H&M Pty Ltd Enterprise Agreement Case [2017] FWC 310 (16 January 2017)