Article written by Julian Arndt
, Associate Director and Elizabeth Kenny
, Senior Associate
As with most things today, the simplicity of the good old days has passed. Bargaining is no exception. Gone are the days when a majority was deemed good enough in passing the Better Off Overall Test (BOOT).
As many of you will know, the agent of change to the good old days was the well-publicised Coles Decision.
In 2016, a single Coles employee (1 out of 20,000) successfully challenged the approval of their enterprise agreement on the basis that the agreement did not pass the BOOT for him.
The effect of the Coles Decision is that the Commission has stopped applying the BOOT in a generalised fashion.
The BOOT is now applied forensically, to every
employee under the agreement. This means that if 99.9% of employees are better off under the agreement, this does not offset the fact that 0.1% are worse off.
THE TRAVAILS OF TRIAGE
All this has ushered in a new process. Agreements no longer arrive at a Commissioner’s Chambers directly. Instead, each new agreement passes through a team of assessors where the agreement is forensically assessed against the relevant award.
This team undertakes a line-by-line study of the agreement to ensure that every single employee covered by the agreement, including theoretical employees, are better off overall in comparison to the award.
Our recent experience shows that it is almost inevitable that this team will identify some aspect of the proposed agreement which could be less beneficial compared to the relevant award.
This seems to increasingly involve any separate defect, not just an “overall” shortfall. When this happens, employers are being asked, usually under tight three day timeframes, to provide explanations as to why the proposed agreement passes the BOOT or otherwise provide undertakings which remedy any identified defect.
Indeed, the latest statistics demonstrate that over 70% of agreements are unable to be approved by the Commission unless the employer provides undertakings.
In our experience, the value of the problems identified by the Commission’s triage team is a mixed bag. While the team undoubtedly picks up some issues which clearly warrant fixing, we are also seeing issues being identified, and undertakings being sought, for matters which are either irrelevant to the employer or for conditions which, although inferior to the relevant award, would be offset by more generous conditions elsewhere in the agreement.
DEFENDING THE DEAL
While it is tempting, and very common, to “just give the undertakings”, you should be aware that once an undertaking is given, the undertaking becomes a term of the EA. Remember, once something is in an EA, it is very difficult to negotiate its removal.
Rather than just adopt the approach of “we just want this over with” wherever reasonable, consider holding the line in the approval process. If you consider your EA passes the BOOT, notwithstanding any issues identified by the Commission process, it is worth arguing that position instead of merely providing an undertaking without a second thought.
Usually this process will involve some back and forth with the Commission.
While there are limits to the amount of resistance that a business can put up (the Commission may reach a point where it will not approve the agreement without undertakings) we have found that you can make significant progress resisting unnecessary (and potentially costly) undertakings where employees are genuinely better off.
Keep in mind these key points and you will be ‘better off overall’:
- Filing an agreement for approval is often the start of a new and often frustrating process.
- You will need to manage how you communicate this to employees.
- Don’t be shocked if you get hit by a long list of issues.
- Try not to get too fatigued and just give-in to undertakings unless they are really required.
- Be very careful in drafting undertakings as they are the same as writing clauses into the EA itself.
If this article has raised concerns for your business or you have any questions, contact us on 1800 565 846 or email@example.com