Application by Dairy Technical Services Pty Ltd [2016] FWC 3884 (16 June 2016) [2016] FWC 3884 FAIR WORK COMMISSION DECISION Fair Work Act 2009 s.185 —Enterprise agreement Dairy Technical Services Pty Ltd T/A DTS Food Laboratories (AG2016/2810) DTS Food Laboratories Collective Agreement 2016-2019 Technical services COMMISSIONER BISSETT MELBOURNE, 16 JUNE 2016 Application for approval of the DTS Food Laboratories Collective Agreement 2016-2019. [1] An application has been made for approval of an enterprise agreement known as the DTS Food Laboratories Collective Agreement 2016-2019 (the DTS Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). The DTS Agreement is a single-enterprise agreement. The application was made by Dairy Technical Services Pty Ltd T/A DTS Food Laboratories (DTS). [2] On 5 May 2016 the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) (AMWU) filed a Form F18 in which it indicated that it did not support approval of the DTS Agreement because it does not provide ‘appropriate terms and conditions of employment for our members in comparison with industry standards’. In particular the AMWU indicated three areas of concern (by reference to the decision of Commissioner Roe 1 in approving the predecessor agreement (the 2012 decision)): (i) Overtime provisions for part-time staff are such that part-time staff will only be paid overtime rate after they have worked 38 hours in any week; (ii) Any agreement mutually entered into to structure shift patterns to not continue for at least five successive days should be subject to individual flexibility arrangements; (iii) Shift workers are not entitled to five weeks of annual leave and not otherwise adequately compensated. [3] The AMWU further noted that, in approving the predecessor agreement, Commissioner Roe required undertakings from DTS in relation to the matters it notes as concerns with DTS Agreement. [4] On receipt of the file I conducted a phone mention with respect to the application and matters raised by the AMWU. At that mention it was agreed that the AMWU and the Applicant would each file written submissions in relation to the matters raised by the AMWU. [5] On receipt of this material, the parties were satisfied that the Commission make a decision on the basis of the material filed and they did not seek to be further heard on the issues. Part time employment and overtime [6] Clause 18.2 of the DTS Agreement states: 18.2. Part-time Employees 18.2.1 … 18.2.6. Part-time Employees may agree in writing with the Employer to work reasonable additional hours, in excess of his/her ordinary rostered hours (up to 7.6 hours per day or 38 hours per week), and to be paid for such additional hours worked at the Employee’s ordinary rate of pay, as well as any ordinary time loadings/penalties (such as shift and/or weekend penalties/loadings but excluding overtime penalties) as applicable at the time such hours are worked. Such additional hours will not, however, be considered or counted as ordinary hours. [7] Clause 21 of the DTS Agreement relates to overtime and relevantly states: 21. OVERTIME 21.1. Entitlement to overtime 21.1.1 Any overtime in excess of: (a) 38 hours per week; or (b) Outside the Span of Hours in clause 13 (Hours of work) will be paid at the rate of time and a half for the first three (3) hours, double time thereafter. Overtime penalties are to be calculated on the base rate, with the casual loading for casual Employees added to the calculated rate of pay. 21.1.2. When calculating overtime, each day’s work stands alone. 21.1.3 The Employer may require any Employee to work reasonable overtime at overtime rates (unless otherwise agreed to by Part-time Employees in accordance with clause 18 of this Agreement) and the Employee will work overtime in accordance with such requirements. [8] The AMWU submits that a plain reading of clause 18.2.6 makes clear that any additional hours over and above the agreed part-time hours are not part of ordinary hours and are not treated as overtime so do not attract overtime rates of pay. [9] The AMWU further submits that an employee who does not agree to work additional hours pursuant to clause 18.2.6 would not be able to work overtime. [10] It says that the provisions of the DTS Agreement do not overcome the mischief Commissioner Roe sought to cure in the 2012 decision when he sought undertakings from DTS and these were given. That is, the DTS Agreement as currently before the Commission for approval does not resolve the issues identified by Commissioner Roe in approval of the previous agreement. [11] The AMWU undertook a comparison of a part-time worker at C9 level who normally works three days per week and who works an addition 7.6 hours under the provisions of clause 18.2.6 of the DTS Agreement with one who works an additional 7.6 hours under the Manufacturing and Associated Industries and Occupations Award 2010 2 (the Manufacturing Award) and says that such an employee would be $88.94 worse off in such circumstances under the DTS Agreement compared to the Manufacturing Award. [12] Further, the AMWU says, an employee working additional hours in accordance with clause 18.2.6 does not have the additional hours considered as ordinary time so does not have superannuation paid on those hours (and presumably does not accrue any leave entitlements on the hours). [13] The Victorian Chamber of Commerce and Industry (VECCI), for DTS, says that clause 18.2.6 is conditional on employee agreement; similar provisions exist for part-time employees under the Manufacturing Award; and the AMWU have not properly considered the provisions of clause 21.1.3 where it is reasonably understood that overtime means any hours worked in addition to an employee’s ordinary hours. [14] Further, DTS submits that the comparison done by the AMWU is misleading as it fails to take into account that an employee under the DTS Agreement has agreed to work additional hours at ordinary time rates and the real possibility that a part-time employee will not agree to the provisions of clause 18.2.6 if they are not better off and hence will be paid overtime for the additional hours. [15] DTS agree that an employee agreeing to additional hours pursuant to clause 18.2.6 will not be paid superannuation on the additional hours but says this should be balanced against the other benefits in the DTS Agreement. Consideration [16] Clause 18.2.6 is set out above. [17] The Manufacturing Award provides that, prior to commencing employment, a part-time employee and the employer must agree in writing the hours to be worked and the days to be worked (clause 13.3(a)), these provisions may be varied by consent (clause 13.4), and a part-time employee who is required to work hours in addition to those agreed must be paid overtime for such hours (clause13.8). Further, the Manufacturing Award provides that: 13.6 Except as otherwise provided in this award, a part-time employee must be paid for the hours agreed on in accordance with clauses 13.3 and 13.4. [18] If a part-time employee has agreed to vary his or her hours so as to work additional hours: (i) Under the DTS Agreement, the additional time worked is paid at the ordinary time rate but is not considered ordinary hours and the part-time employee accrues no leave or other benefits such as superannuation of the hours worked. (ii) Under the Manufacturing Award, the additional hours must be treated as ordinary hours with the benefits that come with that including accrual of leave and payment of superannuation. This is a natural conclusion from the operation of clause 13.6 – the hours must be overtime or ordinary hours - there is no other category. [19] In such circumstances it would appear that an employee who has agreed to vary his or her hours would be disadvantaged under the DTS Agreement compared to the Award with respect to the hours worked. [20] The matter to consider is if this disadvantage is adequately offset by the improvements in the DTS Agreement. To the extent that the disadvantage may be offset this could only be through the improvements in the rates of pay. It is not easy, of course, to balance the loss of leave (and the time away from the workplace an integral part of this) and superannuation (necessarily a long term benefit) against an immediate pay increase. This is further considered below. [21] If the part-time employee has not agreed to vary his or her hours and is directed to work additional hours: (i) Under the DTS Agreement the provisions of clause 21 apply. Clause 21.1.1 is set out above. It states that an employee is only entitled to be paid at overtime rates for hours worked in excess of 38 hours per week. Clause 21.1.3 is no cure for this problem as it is no more than a requirement to work the overtime when directed. There is nothing to suggest that such overtime will be paid at overtime rates until an employee has worked 38 hours in the week. (iii) Under the Manufacturing Award a part-time employee directed to work additional hours necessarily requires that the employee receives overtime rates for such work. [22] In such circumstances an employee will be substantially worse off, on a monetary basis, under the DTS Agreement when compared to the Manufacturing Award. This disadvantage could only be offset by substantially better rates of pay in the DTS Agreement compared to the Manufacturing Award. [23] I am not convinced that the purported improvements in allowances, redundancy provisions, an extra day of compassionate leave, rest breaks or shift penalties (which do not benefit employees otherwise covered by the Manufacturing Award) or paid parental leave adequately compensate for the loss of benefits that otherwise accrue to a person for working ordinary hours. [24] Further, I am not convinced that there is such improvement in rates of pay in the DTS Agreement that could make up for the loss of a 50% loading or more for overtime worked. Further, I am not convinced that the other improvements identified in the DTS Agreement could overcome this deficiency. Should an agreement under clause 18.2.6 be an individual flexibility agreement? [25] The Manufacturing Award does not require a variation in part-time hours to be subject to an individual flexibility agreement. There is no reason to require that it be so under the DTS Agreement. Conclusion [26] I am not satisfied that the DTS Agreement, as currently written, ensures a part-time employee will be better off under the DTS Agreement than under the DTS Agreement in circumstances where the employee works additional hours either by virtue of an agreement under clause 18.2.6 or as overtime in accordance with clause 21.1. Shift patterns [27] Clause 14 of the DTS Agreement relates to shift workers. It states: 14. SHIFT WORKERS 14.1 … 14.4. An Employee who works on an Afternoon Shift or Night Shift which does not continue: 14.4.1. for at least five successive afternoon or night shifts or six successive afternoon or night shifts in a six day workshop (where no more than eight ordinary hours are worked on each shift); or 14.4.2. for at least 38 ordinary hours (where more than eight ordinary hours are worked on each shift), must be paid for each shift 50% extra for the first three hours and 100% extra for the remaining hours. 14.5. Should the Employee and Employer mutually agree in writing, however, to structure the Employee’s shift pattern to not continue for at least five consecutive or successive Afternoon Shifts or Night Shifts (i.e. and include day shifts), the Employee will continue to receive Afternoon Shift and Night Shift penalties of 15% and at 30% as they apply in accordance with clauses 14.3 and 14.6 of the DTS Agreement. [28] The AMWU says that this provision should be subject to an individual flexibility arrangement (as occurred arising from the 2012 decision) as this would ensure that the arrangement was subject to the better off overall requirements as set out in Schedule A of the DTS Agreement. [29] DTS says that in the 2012 decision Commissioner Roe made minimal comments on the clause and that the Manufacturing Award allows for individual and majority variation to terms of the Manufacturing Award (the facilitative provisions) to better suit the needs of the employer and employees. It says that these are not required to be subject to an individual flexibility agreement indicating that the ‘Commission is supportive of flexibility in the workplace (without there being a need to achieve this with use of IFAs only) and such measures should be fostered and encouraged, not stifled by bureaucracy.’ [30] Further, DTS says that it does not consider employees are disadvantaged by the level of flexibility and does not want to commit itself to ‘undertaking the onerous process of entering into an IFA, which can be unilaterally terminated with only 28 days’ notice.’ [31] It says that such an arrangement can only be entered into voluntarily and it will provide flexibility for employees. Consideration [32] Clause 8 of the Manufacturing Award provides for facilitative provisions. Whilst these clause 8 provisions operate at either a majority or individual level, a variation to the requirement that an additional payment be made where afternoon or night shift does not continue for at least five successive afternoon or night shifts as provided for in clause 37.3(b) of the Manufacturing Award is not a clause subject to such provisions. DTS’s submissions in this respect are misplaced. [33] The fact that an agreement under clause 14.5 of the DTS Agreement must be entered into voluntarily does not mean that it can operate such that the better off overall test can be ignored. The voluntary nature of such an arrangement does not overcome any otherwise failure in the better off overall test. In this respect the ‘voluntary nature’ of the arrangement is not relevant and submissions to this extent are misplaced. [34] Individual flexibility agreements are a part of the DTS Agreement and the Manufacturing Award. They require a record to be kept and ensure that an employee is better off overall. They allow either party to exit the arrangement with notice. They are, in this respect, hardly a bureaucracy. [35] I note the comments of DTS with respect to its concern that an individual flexibility agreement could be terminated with only 28 days’ notice. This highlights a major concern with its proposal which does not indicate how, having voluntarily entered into such an arrangement under clause 14.5 of the DTS Agreement, an employee can exit that arrangement. In this respect, the longer the arrangement under clause 14.5 of the DTS Agreement goes on the greater the disadvantage may be to the employee. Conclusion [36] It would be erroneous to not take into account any disadvantage to employees just because they may have entered into the arrangement by agreement. That is not the appropriate test in determining advantage or disadvantage of a provision of the DTS Agreement for the purpose of making an assessment under the better off overall test. That an employee may choose to restructure their shift patterns does not overcome a disadvantage when compared to the Manufacturing Award. [37] In this case the loss to employees is 50% to 100% of their earnings (as the loading would not be paid) if they agreed to the provision for part of the time worked. It is difficult to see how this could be compensated for by the identified improvements in the DTS Agreement compared to the Manufacturing Award. This is considered further below. Additional week’s leave for seven day shift workers [38] Clause 31 of the DTS Agreement deals with annual leave: 31.1. Entit l ement 31.1.1 Employees are entitled to four (4) weeks’ paid annual leave in accordance with the Act. 31.1.2. Seven day shift workers are entitled to an additional week’s annual leave. To qualify for the shift work entitlement of five weeks annual leave, the Employee must meet all of the following criteria: a) They are employed in a department where shifts are continuously rostered 24 hours a day for seven days a week; b) They are regularly rostered to work those shifts; and c) They regularly work on Sundays and public holidays. [39] The AMWU relies on the statement of Commissioner Roe in the 2012 decision 3 to support its contention that an undertaking is required in respect to annual leave for seven day shift workers. [40] DTS submits that the comments of Commissioner Roe were made in the context of an Agreement which contained ‘relatively modest’ benefits. This, it says, is in comparison to the DTS Agreement under consideration now which it says contains ‘superior’ benefits. [41] DTS also submits that an extra week of annual leave is equivalent, in monetary terms, to 1.923% of an employee’s salary in the context of an Agreement which contains salaries at least 4.87% above the relevant award rate plus other identified benefits. [42] For this reason it submits no undertaking is required. Consideration [43] In the 2012 decision, Commissioner Roe said, in relation to this matter: [10] Clause 31.1.2(a) of the Agreement provides that seven day shift workers are entitled to an additional week’s annual leave. A seven day shift worker is then defined and the requirements to be eligible for the additional week’s leave include that “they are employed in a department where shifts are continuously rostered 24 hours a day for seven days a week.” The Award provides at clause 41.3 that: “For the purpose of the additional week of annual leave provided for in s.87(1)(b) of the Act, a shiftworker is a seven day shiftworker who is regularly rostered to work on Sundays and public holidays.” [11] In response the Applicant submitted as follows: “At point 5.10 of the F18 Declaration it is stated sub-clause 31.1.2 of the Agreement operates to exclude all employees from a being eligible to accrue an additional week of annual leave. We note even for those employees who would be eligible to receive an additional week, one week of annual leave amounts to 1.923% of an employee’s annual salary while all employees covered by the Agreement will be paid at least 3.5% above the relevant minimum Award annual salary. Furthermore, we note sub-clause 31.1.2 of the Agreement has been written in accordance with section 87 of the Act and consider the numerous benefits contained in the Agreement outweigh the perceived disadvantage of not being eligible to receive an additional week of annual leave.” [12] I do not accept that the benefit of the additional week of annual leave can be reduced to a monetary value. There are other important benefits to employees provided by paid leave. I am satisfied in the context of an Agreement which does provide some benefits beyond the Award but where those benefits are relatively modest the Agreement could not meet the Better Off Overall Test if it denied workers a week’s annual leave. [44] The provisions of the DTS Agreement and the reasoning of DTS as to why employees are better off remains the same for the DTS Agreement as it did in 2012. [45] The Manufacturing Award defines a shiftworker for the purposes of an additional weeks annual leave as: 41.3 Definition of shiftworker For the purpose of the additional week of annual leave provided for in s.87(1)(b) of the Act, a shiftworker is a seven day shiftworker who is regularly rostered to work on Sundays and public holidays. [46] If the definition of a shiftworker is broader in the Manufacturing Award than that provided for under the Agreement, those employees who might otherwise be entitled to the extra week of leave under the Manufacturing Award but are not so entitled under the Agreement may not be better off under the Agreement. Conclusion [47] To merely reflect the dollar value of a week’s leave (at 1.923% of salary) is not the relevant consideration. An employee will receive that amount of money regardless of whether they are at work or on leave. The loss to the employee who no longer has access to the additional leave is the loss of a week away from the workplace and the benefit of that time away from work with respect to the ability to rest and recuperate on a physical and mental basis. I take this as the benefit Commissioner Roe referred to when he said that he did not accept that the loss of the leave could be reduced to a monetary value. [48] I am satisfied that the definition of a shiftworker for the purposes of the additional week of leave is more narrowly construed under the DTS Agreement than it is under the Manufacturing Award. This is a level of disadvantage for employees who would otherwise, under the Manufacturing Award, be entitled to five weeks of annual leave. Better off overall test What are the improvements in the DTS Agreement? [49] Employees covered by the DTS Agreement are covered by one of three awards: • the Manufacturing and Associated Industries and Occupations Award 2010 4 (Manufacturing Award) • the Clerks—Private Sector Award 2010 5 (Clerks Award) or • the Professional Employees Award 2010 6 (Professionals Award). [50] DTS submits that the DTS Agreement contains ‘superior benefits’ when compared to the Award. These are: • Pay rates at least 4.81% above underlying award rates; • 2.5% pay increase in May 2017 and May 2018; • Meal allowance higher than that in the Manufacturing Award and Professionals Award; • First aid allowance higher than that in the Clerks Award and Professionals Award; • Incorporation of the underlying awards; • More generous redundancy scheme; • 3 days paid compassionate leave per occasion; • More generous rest breaks; • Paid parental leave in addition to the Government’s scheme; • Shift penalties equal to or higher than the respective awards. How is the better off overall test to be applied? [51] Section 193 of the Act as is relevant to this exercise states: 193 Passing the better off overall test When a non-greenfields agreement passes the better off overall test (1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if the FWC is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee. … Test time (6) The test time is the time the application for approval of the agreement by the FWC was made under subsection 182(4) or section 185. FWC may assume employee better off overall in certain circumstances (7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee. [52] It is apparent that each award covered employee must be better off overall but that this can be determined on the basis of the class of employees to which an employee belongs. In Re Armacell Australia Pty Ltd 7 the Full Bench said: The BOOT, as the name implies, requires an overall assessment to be made. This requires the identification of terms which are more beneficial for an employee, terms which are less beneficial and an overall assessment of whether an employee would be better off under the agreement. 8 [53] The assessment of an agreement for the purposes of the better off overall test is not a line by line analysis but a global test that requires a consideration of the advantages and disadvantages of the DTS agreement compared to the relevant awards. Consideration of the DTS Agreement [54] Three areas of potential disadvantage have been identified by the AMWU in its submissions with respect to the DTS Agreement. Each of these is discussed above. [55] Whilst the consideration of the DTS Agreement and whether it meets the better off overall test is an overall assessment this must be done in the context of considering if each Award covered employee would be better off overall if the DTS Agreement applied rather than the Award. [56] After considering the submissions of both parties I have come to the conclusion: • that overtime for part-time employees as proposed in the DTS Agreement will result in this group of employees being disadvantaged by the loss of overtime payments under the DTS Agreement when compared to the Manufacturing Award; • that part-time employees who agrees to vary his or her hours as proposed in the DTS Agreement will be disadvantaged by the loss of accrued leave and superannuation on the additional hours worked under the DTS Agreement compared to the Manufacturing Award; • an employee entering into an agreement with respect to five consecutive shifts would be disadvantaged by the loss of a 50% or 100% penalty compared to the Manufacturing Award; and • employees who would otherwise be entitled to five weeks’ annual leave under the Manufacturing Award will be disadvantaged by a narrowing of the definition of shift work for the purposes of annual leave compared to the DTS Agreement. [57] That the additional hours for part-time staff and consecutive shift arrangements are voluntary does not overcome the disadvantage. [58] I have carefully considered those improvements identified by DTS in the DTS Agreement. I agree that the rates of pay are between 4.82% and 6.79% higher than the relevant awards. I also agree that the meal allowance and first aid allowances are, in some instances, more than the relevant awards. I also accept that redundancy pay, compassionate leave, parental leave and rest breaks are an improvement on the awards. [59] The shift work penalties in the DTS Agreement are no different to and, therefore, provide no advantage to employees under the DTS Agreement compared to the Manufacturing Award. [60] I do not consider that the incorporation of the relevant awards into the DTS Agreement is an advantage such that it provides some improvement. Conclusion [61] The material before me relates to the application of the DTS Agreement to employees covered by the Manufacturing Award. I have carefully considered the advantages and disadvantages of the DTS Agreement and Manufacturing Award as outlined above. Whilst the disadvantages identified do not affect everyone, neither do the advantages. There certainly are employees who will be better off overall under the DTS Agreement but these are employees who are not shift workers eligible for an extra weeks’ annual leave, does not include part-time employees who work overtime and does not include employees who agree to forgo the five consecutive shift provisions. [62] I have carefully considered these matters and conclude that I am not satisfied that each award covered employee will be better off overall on the DTS Agreement compared to the Award. [63] I do not consider that this conclusion is overcome by the pay increases provided for in the DTS Agreement. The loss is too great. [64] I am therefore not satisfied that the DTS Agreement passes the better off overall test. [65] I do consider that the deficiencies identified can be overcome by the provision of undertakings. To this extent, I should indicate that I consider the undertakings given arising from the 2012 decision would meet my concerns. I am prepared however to consider any other undertaking DTS consider will overcome the identified problems. [66] DTS are asked to consider this decision and advise the Commission within 10 working days of the date of decision of any undertakings it is prepared to give to satisfy the Commission’s concerns with respect to the DTS Agreement. COMMISSIONER 1 [2012] FWAA 10728 . 2 MA000010 . 3 [2012] FWC 10728 at [12]. 4 MA000010 . 5 MA000002 . 6 MA000065 . 7 [2010] FWAFB 9985 ; (2010) 202 IR 38. 8 Ibid at paragraph 41. Printed by authority of the Commonwealth Government Printer <Price code C, PR 581606>