Application by KCL Industries Pty Ltd [2016] FWC 1031 (18 February 2016) [2016] FWC 1031 [Note: An appeal pursuant to s.604 (C2016/372) was lodged against this decision - refer to Full Bench decision dated 3 June 2016 [ [2016] FWCFB 3048 ] for result of appeal.] FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.185 —Enterprise agreement KCL Industries Pty Ltd (AG2016/71) Manufacturing and associated industries COMMISSIONER ROE MELBOURNE, 18 FEBRUARY 2016 Application for approval of the KCL Industries Enterprise Agreement 2015. [1] An application has been made for approval of an enterprise agreement known as the KCL Industries Enterprise Agreement 2015 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by KCL Industries Pty Ltd. The Agreement is a single enterprise agreement. [2] The hourly rates of pay in the Agreement excluding any penalty payments and allowance which may be applicable are approximately 2% above the corresponding Award rates. The Agreement does not specifically require the payment of allowances, penalty payments and loadings including weekend penalties and most allowances, such as the tool, leading hand and first aid allowances. [3] On 29 January 2016, the Commission wrote to the Applicant outlining a number of issues with the Agreement. Relevantly, I noted that I could not be satisfied employees will be Better Off Overall under the Agreement due to Part III(b) and (h), which provides as follows: b) Payment for work … Tool allowance will be payable weekly where appropriate in accordance with the table, and for casual or part-time staff the allowance will be paid pro-rata. Tool allowance will be absorbed where a higher rate is paid to an employee … h) Additional allowances In general terms, employees are entitled to any allowances, penalties or loadings which would have applied under the Award which would otherwise have applied to their employment, provided that any such additional entitlements will be absorbed where the employee is paid sufficiently above the base rate to cover those entitlements, or to the extent that additional payment covers those entitlements. [4] The employer proposed an undertaking that the above terms would be interpreted in accordance with Part I(c) of the Agreement, which provides that any agreements entered between employer and employee must always provide an entitlement to the employee which is greater than the entitlements provided by this agreement or the industrial instrument which would otherwise have applied. The Commission wrote to the Applicant stating that I still could not be satisfied that employees were Better Off Overall under the Agreement as the clauses referenced in the undertaking were too vague to be clear as to what employees’ enforceable entitlements were. [5] The employer proposed another undertaking in similar terms to the first, providing that the application of Part III(b) and (h) of the Agreement would be made subject to provisions at Part I(c) and (d) of the agreement, resulting in the employee being better off than they would otherwise have been. Once again I am not satisfied that this undertaking is sufficient to address the uncertainty contained in Part III(b) and (h) and therefore satisfy me that employees will be Better Off Overall. This is particularly the case when the rates of pay in the Agreement are not significantly greater than those in the Award. There is a very real prospect that employees would not be Better Off Overall if they were entitled to allowances, penalties or loadings under the Award and these were not required to be paid under the Agreement. [6] The employer provided submissions in relation to the application of the above terms and their inclusion in Agreements previously approved by the Commission as well as in the Modern Awards. I am not persuaded by these submissions. [7] In particular I rely on the Full Bench Decision the 4 yearly review of modern awards, in which it was determined that absorption clauses contained in Modern Awards were intended to be transitional and not directed at over-award payments in the traditional sense, but rather at payments referable to pre-modernisation obligations in award or agreement based transitional instruments. 1 [8] The abovementioned terms and proposed undertakings would give the employer the responsibility of assessing whether or not employees are Better Off Overall under the Agreement instead of the Commission, and as such I cannot be satisfied that employees are Better Off Overall with these terms included. [9] As acceptable undertakings were not provided the Application is dismissed. COMMISSIONER 1 4 yearly review of modern awards [2015] FWCFB 6656 , [37]. Printed by authority of the Commonwealth Government Printer Price code A, PR577118