HRMT20027 Employment Relations For Suggested Enterprise Arrangement

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Write a report to the President of the Fair Work Commission advising him of any changes that you consider should be made to the Better Off Overall Test or BOOT

Answer:

Introduction

The better off overall test is an important test that needs more improvement given that it is the test used in the process of determining whether or not to accept a suggested enterprise arrangement.

The better off overall test has constantly been used by Fair Work Commission when making important decisions of whether to reject or accept enterprise agreements. This test is still relevant and as such, it needs to be improved further by incorporating essential changes in the test. The better off overall test is founded on the presently applicable award which incorporates all employees that are to be included in a suggested enterprise arrangement according to Ghosn et al, (2016)). This test necessitates that each employee (award covered employees), as well as a potential employee who are also award covered all, have to be at an advantaged position. Stewart, Bray, Macneil & Oxenbridge, (2014) elaborates that they have to be "in a better position in the proposed arrangements as compared to the situation that they would have been in the event that the relevant modern award applied to them"(p.77)

The importance of the better off overall test is that it permits award settings and not the National Employment Standards settings to be traded off (Charlesworth & Macdonald, 2015). This is so provided that in the long run, the total compensation puts the employee in a better position as compared to the position they would be in if the conditions were left the same. The better off overall test is very important in today's business environment given that it applies in an equal measure to all employees (Shields et al, 2015). All employees, those covered by the suggested collective agreement as well as those who to some extent may be exposed to a lofty income edge, all are catered for under the better off overall test as applied by Fair Work Commission. In this regard, Fair Work Commission always, therefore, holds the assumption that all employees are better off in the event that the test passes (Colvin & Darbishire, 2013).

The introduction of better off overall test

The better off overall test was introduced in order to cushion all employees as well as the general public (who are also stakeholders in most agreements) against destructive situations. In light to this, it was necessary that all enterprise agreements pass some test in order to have some level of efficacy. The better off overall test stood out as one of the best tests by which all agreements could be subjected. Fair Work Commission was therefore tasked with conducting the BOOT test in order to ensure that employers and employees are better off under the suggested enterprise arrangement. The better off overall test was also adopted in order to address statutory requirements. It was noted that acting in accordance with statutory requirements with regard to coming up with an enterprise arrangement that is valid was an uphill task not easy to achieve (Ellem, 2013). This brought about several employers to look for legal direction before any particular agreement would be reached. This test, therefore, helped in addressing this particular situation.

The aspect of better off overall comes in during approvals and the test is not normally done as a line by line analysis as is the case in numerous situations. This is a global test requirement that requires a clear and objective deliberation with regard to the possible advantages and disadvantages. These considerations look deeply into award covered workers in the same manner in which it looks at prospective award covered workers.

Cole and H&M Case

In Cole’s case, the application for Fair Work Commission’s to approve its agreement was initiated in mid-2015. In this case, In this case, several agreements that were in existence that covered nearly 77,000 employees would be repealed and replaced. Out of 36,000 participants that did participate in the voting, about 33,000 voted for the agreement and as a result, the suggested arrangement was approved based on the fact that Cole made provision to look at the fears cited by Fair Works Commission with regard to better off overall test. This decision was later appealed. The contested fact here was whether the arrangement passed the better off overall test (Ombudsman, 2013).

BOOT test requirements

According to Gospel, Pendleton & Vitols, (2014), the requirements dictate that for an enterprise’s agreement to be deemed to pass the BOOT test, then such an agreement must cover all employees. As is the case, Pocock, Charlesworth & Chapman (2013), explains that "It would be better off if the suggested arrangement covers all the employees as when the relevant modern award would cover them" (p.596). In this case, the bench would be tasked with identifying terms as stated in the arrangement that proved to be more beneficial to the employee. It would also check for terms that were less beneficial to the employee as well. After a careful examination of these terms, the bench would make an assessment to determine if an employee would be better off under such particular agreement.

The bench’s approach to Cole’s case

Cole’s arrangement had the following provisions, a higher hourly rate as compared to the applicable award rate while on the other hand used a lower drawback compensation for evenings, public holidays as well as weekends. Going by these provisions, the bench made the following observations; an employee will be better off as long as the employee works at such hours when the hourly rates are high. Two, an employee will be worse off while working for more hours when the hourly rate is high compared to the award. Three there is a high likelihood that the contract will be counterbalanced in the event that an employee works mostly on weekends or at night.

In the end, the bench using the BOOT test held that some of the employees were not better off overall. In the overall assessment, the commission was able to establish that the loss in monetary terms was substantial especially amongst casual employees as well as part-time employees who on many occasions worked mostly at such times that significantly attracted the lower penalty rates under the existing proposes arrangement as compared to the Award. Further, the benefits as stipulated in the agreement were not able to make up for the loss.

In reaching their decision, the bench was able to arrive at several findings which assisted in making decisions. The bench was able to establish that:

On comparison, it was evident that the impact of the proposed contract resulted in an overall loss for a majority of the employees.
The bench was also able to establish that not all employees would possibly remain employed throughout the whole period of the projected contract.
It was also concluded that the uptake of other benefits such as disaster leave and others like accident makeup leave were much less likely to be uniform.

The bench stated that in making its decisions, it used its evidence which suggested that the commission majorly focused its view on those employees who were seriously affected by the prevailing situation. This test (Better off Overall Test) which is commonly referred to as BOOT applies correspondingly to all employees.

Lessons from this case

Going by this case, very important lessons are learned. The major lesson, in this case, is that it is essential to ensure that the terms of the agreement bring about all employees (all and not just a section of the majority) being better overall as compared to when they are under the applicable award. This is so because it has been observed that the approach that is most often taken by employees tend to bring about a significant benefit to just the majority and not all employees. This is very detrimental to the smaller minority. This is vital given that the smaller majority may substantially lead to a contract not passing the BOOT (Creighton et al, 2016)

Strengths and weaknesses of the BOOT

Strengths

One of the strengths of BOOT is that it provides a much simpler method of compensating one's employees as compared to the very stringent use of the current relevant modern award. In the workplace, numerous awards apply to employees. However, the interpretation and application can at times be very complicated as well as time-consuming for the employer (Bray & Stewart, 2013). In this particular case, this test can help in streamlining instances such as overtime, allowances and penalty rates. With this test, all new employees are simply supplied with the Enterprise Bargaining Agreement copy. In this particular case, there is no need for individual employment agreements (Lee, Brown & Wen (2016).

Todd et al, (2017) also observe that another strength of this test is that it helps an organization to tailor its contracts in such a manner that they are in line with specific needs of the organization's needs. It also ensures that there is transparency in the contract. In addition to this, this test also helps to safeguard an organization (especially during the normal Enterprise Bargaining Agreement’s life) against industrial action (Smith, (2017).

In addition, the strengths of this test lie in the fact that it offers an assurance that the Enterprise Bargaining Agreement's terms are in a position to ensure better off overall as compared to when the payments were done in accordance with the relevant modern award.

Weakness

In as much as this test has strengths, it also has weaknesses. Its weakness arises from the fact that it is time-consuming and costly for negotiating Enterprise Bargaining Agreements. There some level of strictness and fixed time frames which in many occasions tend to lead to the rejection of Enterprise bargaining Agreements on the side of employers.

Approval sometimes requires a majority vote (Roberts, 2017). This may be devastating since challenging such decisions are also time-consuming and may require resources even though a successful appeal can be launched.

Practical issues

Most often issues tend to arise in such situations in which mistakes in the proposed agreement are noticed sometimes, and most often after the entire process has begun. The problem with this situations is that in the event that the process has commenced then it is almost impossible to amend the contract's terms and conditions. In the event that the terms and conditions of the contract are amended then the entire process may have to begin a fresh given that this nullifies various provisions. On the other hand, if a manager recognizes some minor errors such as typographical errors then it follows that in the arrangement, typically the best way to handle these is to coordinate with the union in order to come to an agreement with regard to the required changes. This is a weakness that this system has and need to be fixed.

How to improve the BOOT

Given the seriousness and importance of the BOOT, it is important that some changes are made. This will ensure that there is harmony between the employees and the employers. Besides, the entire process of enterprise bargaining agreement will also be more efficient. The following changes need to be incorporated in order to make the entire process easy.

In order to improve the BOOT, it is essential for the employer to conduct a comparison to check how employees will be compensated going by the terms of the suggested agreements as compared to the compensation they would receive under the modern award. Where there is the need for correction, changes should be made immediately. This is vital if an organization is to avoid such instances as were observed in Cole and M&H case. This comparison should seek to address the concerns of the most vulnerable workers in an organization.

Policies should also be put into place to enable employers together with employees to assess whether or not the given rate will leave all individual employees better off overall compared to how they would have been had they been subject to the applicable modern award (Townsend, & Loudoun, (2016). To make the BOOT better it is necessary that this particular assessment is conducted prior to the finalization of a given enterprise agreement before such an agreement is subjected to a vote. This will enable the employer perfectly handle any emerging issues. This is an important aspect given that it is likely that emerging issues are inevitable as they may be discovered in the process of undertaking a better off overall assessment. This assessment ought to be carried out in advance before an employer can submit an enterprise agreement to the Fair Works Commission for purposes of approval.

The explanation of terms as used.

Improving the boot begins by explaining the terms as used in the agreement. This process should include a legal practitioner to define legal terms given that employees can at times not understand legal terms and that may lead to misunderstanding or even misinterpretation by the employees who have no legal background or understanding. The employers must, therefore, take it upon themselves to ensure that the terms of the agreement are well understood. The effect of such terms ought to be effectively demonstrated to new and young employees. Employees come from different cultural backgrounds and this too must be factored in.

Vote of approval

There is over-reliance on the vote of the majority for purposes of approval. It is important, therefore, to come up with a system that listens to all employees be they part of the majority of the minority. This is because the better off overall test is not meant for the majority but for all individual employees. As such it is important that this test comes up with a system that looks at the agreement through the lens of an individual employee in order to a certain the appropriateness of the EBA.

According to Capuano, A. (2016) whenever the BOOT is to be conducted, “it is essential for those concerned to appropriately ascertain the modern award that presently covers the employees in question and to whom the specific enterprise agreement is intended to apply”(p.23). In process of making determining as to ascertain which is the most appropriate modern award for employees and employers as (Damiani, Pompei, & Ricci, (2016) elaborates, it is important that the award which encompasses the categorizations most suitable to the work done, besides, the setting in which the work is accomplished, ought to be used to generally determine the most suitable award (Pekarek, Landau, Gahan, Forsyth, & Howe (2016).

Conclusion

In conclusion it is worth noting that in the event that employers are caught up in a situation where they have to negotiate an agreement (EBA) with employees, then it is mandatory that these employers must, by all means, ensure that they put into consideration all the necessary conditions, advantages as well as the possible disadvantages and be able to effectively balance all these elements against the modern award (Wilson, (2016). In the process of drafting enterprise contracts, it is essential for employers to be very concerned with certifying each and every condition in the EBA (Australia, 2010).This is because if such element does not leave the employee better off than if they were covered by the modern award then it follows that such an agreement can by no means pass the BOOT. This applies even in circumstances in which it can be pinpointed that some benefits in the award under consideration have been significantly reduced or to some extend excluded. Buchanan & Oliver (2016) observe that in all this "the relevant test is whether the employees will be better off overall under the enterprise agreement than under the relevant award" (p.800). Generally, it takes a reasonable amount of time to set up an Enterprise Bargaining Agreement. Nevertheless, it is worth the time and resource. This is because they are valuable to both the employer and the employee. It brings about efficiency and a streamlined way of operations in the management of activities (Charlesworth & Macdonald, 2015).

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