Application by ALDI Foods Pty Ltd as General Partner of Aldi Stores a Limited Partnership [2017] FWC 534 (24 January 2017) [2017] FWC 534 The attached decision wholly replaces the decision previously issued with the code [2017] FWCA 245 on 24 January 2017, due to an administrative error. Ingrid Stear Associate to Deputy President Bull Dated 24 January 2017 [2017] FWC 534 FAIR WORK COMMISSION INTERIM DECISION Fair Work Act 2009 s.185 - Application for approval of a single-enterprise agreement ALDI Foods Pty Ltd as General Partner of Aldi Stores a Limited Partnership T/A ALDI Stores (AG2016/1058) DEPUTY PRESIDENT BULL SYDNEY, 24 JANUARY 2017 Application for approval of the ALDI Derrimut Agreement 2016 - opposed by SDA - BOOT issues, undertakings provided - NERR compliance considered - interim decision issued re: BOOT [1] An application has been made by ALDI Foods Pty Limited, as General Partner of ALDI Stores (A Limited Partnership) (the applicant) for the approval of an enterprise agreement known as the ALDI Derrimut Agreement 2065 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). The Agreement is a single enterprise agreement. Notice of Employee Representational Rights (NERR) [2] The application for approval of the Agreement was filed with the Commission on 29 April 2016, and contained a copy of the NERR which was provided to each employee by being attached to the noticeboard in each ALDI store in the Derrimut region and the Derrimut Region Distribution Warehouse. On 25 May 2016 ALDI’s legal representative, Enterprise Law, forwarded by email written advice dated 24 May 2016, that the NERR had substituted the word “employer” with the word “leader” in the final paragraph of the NERR. This was presumably raised by ALDI because alterations to the content or form of the NERR notice template provided in Schedule 2.1 of the Regulations has resulted in the non-approval of enterprise agreements by some members of the Commission, relying on the reasons expressed in the Full Bench decision of Peabody Morevale Pty Ltd v Construction, Forestry, Mining and Energy Union 1 ( Peabody ). [3] In written submissions dated 31 May 2016, ALDI submitted that the change in words from ‘employer’ to ‘leader’ could not possibly render the NERR invalid. [4] As discussed below, the issue of whether a valid NERR has been issued to employees has delayed (with the consent of the parties) a final determination on the Agreement approval application. Objections [5] The Applicant’s Form F16 application stated that the Shop Distributive and Allied Employees Association (SDA), the National Union of Workers’ Victoria Branch (NUW) and the Transport Workers’ Union Victoria Branch (TWU) were union bargaining representatives in the negotiation of the Agreement. Each union filed a Form 18 statutory declaration in relation to the approval of the Agreement. The NUW and TWU statutory declarations stated that the unions supported the approval of the Agreement and wished to be covered by the Agreement. [6] The Form F18 filed by the SDA stated that the union did not support the approval of the Agreement and disagreed with the applicant’s statutory declaration made in support of the application. The SDA, while wishing to be covered by the Agreement, stated that in its view the Better Off Overall Test (BOOT) had not been met. [7] In addition to the three F18’s received, the Commission also received written comments from three employees who appeared to be employed in the Transport and Distribution section of the applicant’s business (and who did not wish to be identified to ALDI), raising concerns with the Agreement. These concerns were forwarded (in redacted form) to ALDI for response. Background [8] Due to the issues raised by the SDA and individual employees, the application for approval of the Agreement was listed for hearing on 4 August 2016. [9] ALDI sought and was granted leave (which was not objected to) under s.596(2)(a) of the Act to be represented by Mr G Hatcher SC and with him, Ms A Perigo of Counsel. The SDA was represented by Ms J Fox and Ms R Patena. Mr W Commerford, for the TWU, sought and was granted leave to appear for the unnamed employees who had provided written comment to the Commission and advised that they did not support the Commission approving the Agreement. 2 [10] It was determined prior to the hearing that the issue of NERR compliance would not be addressed by the Commission until a decision in a related matter before a Full Court of the Federal Court was known (the ALDI Regency Park Agreement ). Coverage [11] On its F17 statutory declaration accompanying the application, Mr Andrew Starr, Managing Director, described the group of employees to be covered by the Agreement in the following manner: “The Agreement covers all operational employees who would otherwise be covered by a Modern Award, who are employed in ALDI's Derrimut Region. The only employees employed in ALDI's Derrimut Region that are excluded are administrative employees and senior managers with disciplinary responsibilities. The Agreement covers: • employees engaged in a retail store operated by ALDI in the Derrimut Region in the positions of Store Manager, Assistant Store Manager, Store Management Trainee, Store Assistant and Stock Replenisher; • employees engaged in the Derrimut Distribution Centre located at 60 Swann Drive Derrimut operated by ALDI in the positions of Warehouse Operator, Warehouse Mechanic, Warehouse Caretaker, Palletiser; and • employees engaged in the transport and distribution operations of ALDI in the position of Transport Operator operating from the Derrimut Distribution Centre.” [12] As per the requirements under s.186(3) of the Act, I am satisfied that the group of employees to be covered by the Agreement was fairly chosen, based on the operational and geographical distinction of the employees. Submissions of the SDA [13] The SDA provided attachments to their F18 that addressed the BOOT and identified areas where it is submitted that the Agreement was less beneficial than the General Retail Industry Award 2010 (the Award) being the relevant award for the purposes of the BOOT in respect of employees engaged in a retail store. [14] Ms Patena, a National Industrial Officer for the SDA, provided a witness statement 3 and gave evidence on behalf of the SDA and was subject to cross examination where it was put to her that some errors had been made in her calculations and assumptions. 4 Ms Patena’s evidence was that the Agreement was less beneficial to employees as compared to the Award in respect of the following Award clauses: 28.11 Consecutive days off; 28.12 Ordinary hours and reasonable additional hours not being worked over more than six consecutive days; 28.13 Regularly working Sundays; 29.2(a) Overtime hours in excess of ordinary hours of work, outside the span of hours, or roster conditions that require time and a half and double time to be paid; and 31.2 Break between work periods. [15] The SDA were of the view that undertakings could be provided by ALDI to remedy the BOOT issues. 5 Following the hearing, written submissions dated 17 August 2016, were filed by the SDA. The SDA advised that the undertakings provided by ALDI were not sufficient to address the BOOT and the reasons for this were communicated. Submissions of ALDI [16] ALDI relied upon its written submissions of 19 May 2016, 6 and an affidavit of Ms McNaughton, a solicitor from Enterprise Law, who is named as the ALDI’s bargaining representative for the negotiations. Ms McNaughton was not required for cross examination. [17] A witness statement 7 made by Tahl Katz, the Derrimut Logistics Director, was tendered. Mr Katz’s evidence related to the Agreement’s coverage of the Derrimut Distribution Centre and in particular to the manner in which the Agreement was made available to employees. Mr Katz was cross examined by Mr Commerford. [18] ALDI submitted that the BOOT requires a summation of the disadvantages and advantages under a proposed enterprise agreement and operates as an overall assessment of the Agreement. It does not operate on a line by line basis. 8 [19] The rosters supplied by ALDI were said to be indicative only, as the rosters frequently change to meet the needs of the business. Mr Hatcher, on behalf of ALDI, submitted that the indicative rosters are not the rosters employees typically work but are ‘indicative’ of the hour’s employees typically work. 9 Hours worked by employees will fluctuate. Indicative rosters acknowledge that employees are working a variety of different hours. It was submitted that unlike its competitors ALDI stores do not operate on pattern rosters and employees do not have constant rotating rosters. 10 [20] It was put by ALDI that the SDA’s objections to the indicative rosters were not founded upon any evidence or reasoned analysis. [21] ALDI rely on the BOOT being applied as an overall test in comparison to the relevant Award where regard must be held for the Agreement’s superior conditions of an additional week of annual leave for salaried employees and the Business Review Payments (BRPs) available to specified managerial employees of which a nominated amount is non-discretionary. 11 The rates of pay are also higher than the reference instruments for all classifications. [22] It was submitted by ALDI that the SDA’s analysis is flawed as it uses the most inefficient basis to cost the rosters for the purposes of the BOOT i.e. the method used in allocating overtime. 12 It is further argued that the SDA analysis of the BOOT is the wrong approach as a line by line analysis fails to consider the Agreement overall. [23] Following the hearing ALDI provided additional written submissions dated 30 August 2016, in response to the SDA’s written submissions of 17 August 2016. Better off Overall Test (BOOT) [24] Section 193(1) of the Act defines the BOOT in the following manner: “193(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.” [25] Subsection s.186(2)(d) of the Act provides that in order to approve an agreement the Commission must be satisfied that the agreement passes the BOOT. The BOOT is to be applied at the test time 13 as opposed to when the Agreement is made. 14 The application of the BOOT requires satisfaction that each award covered employee and each prospective award covered employee would be better off overall under the Agreement. [26] The Full Bench in Armacell Australia Pty and Others 15 stated in respect of the BOOT: “The BOOT, as the name implies, requires an overall assessment to be made. This requires 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” [27] In Re McDonald’s Australia Enterprise Agreement 2009 16 the Full Bench held that the role of the Commission includes facilitating enterprise agreements: “[13 ] The appellants emphasised the facilitative aspects of these objectives. We agree that these objectives place the primary role for making enterprise agreements on the parties to those agreements and their representatives and that the role of Fair Work Australia (FWA) [as it was then known] includes facilitating the making of enterprise agreements. In general we believe that the requirements for approval should be considered in a practical, non-technical manner and that reasonable efforts should be made to clarify matters with the parties and consider undertakings to clarify or remedy concerns to the extent that these may be available under s.190 of the Act.” 17 Greater entitlements [28] There are four Remuneration Schedules under the Agreement listed as: 1. Salaried Store Employees; 2. Hourly Rate Store Employees; 3. Warehouse Employees; and 4. Transport and Distribution Employees. [29] The relevant modern awards for the purposes of the BOOT are the: ● General Retail Industry Award 2010; ● Storage Services and Wholesale Award 2010; ● Road Transport and Distribution Award 2010; ● Manufacturing and Associated Industries and Occupations Award 2010; and ● Miscellaneous Award 2010. [30] The applicant submitted that the rates of pay under the Agreement which are higher than the relevant award classifications are high enough to compensate for any entitlements that would otherwise be offered under the relevant awards. ALDI further relied on the reconciliation provision in the Agreement to ensure that no employees would be worse off under the Agreement. Under cl.13 of the Agreement- Remuneration and Salary Sacrifice Arrangements , employees may request reconciliation at any time if they feel they have been paid less than the Award, and any shortfall in total remuneration otherwise payable under the Award is to be paid to the employee in the next pay period after the review is complete. Reduced entitlements [31] The Agreement does not offer overtime, penalty rates or annual leave loading for salaried store employees who receive time in lieu for all hours worked in excess of their agreed hours. For Hourly Rate Store employees, penalty rates are lower in comparison to the relevant Award but calculated on a higher base hourly rate. [32] In support of the application, ALDI provided a number of indicative rosters and calculations demonstrating that indicative rosters worked by employees meant that they would be better off under the Agreement. Undertakings [33] Section 190 of the Act allows the Commission to approve an enterprise agreement with undertakings if it has a concern that an agreement does not meet the requirements set out in s.186 with respect to the BOOT. In Re BUPA Care Services , 18 the Full Bench of the Commission noted that the employer must be given an opportunity, in light of s.190 to address any identified concerns. [34] During the hearing on 4 August 2016, ALDI advised that they would confirm in writing the details of any undertakings they were prepared to provide pursuant to s.190 of the Act. Correspondence dated 10 August 2016, was received by the Commission which provided a number of undertakings as follows: I. Split Shifts ALDI have provided an undertaking due to the concern raised by the SDA in relation to split shifts. The undertaking states that the ordinary hours worked for Salaried Store Employees and Hourly Rate Store Employees on any day will be continuous except for work breaks and meal breaks. II. Store Meetings Employees attending store meetings whether concurrent with their work or otherwise will be paid at their ordinary rate of pay and any period of attendance will count towards their ordinary weekly hours as if worked. ALDI advised that there are seven store meetings per annum, each lasting approximately 1.5 hours. The meetings had been factored ALDI’s calculations. 19 III. Business Review Payment In respect of the non-discretionary and guaranteed component of the BRPs in the Agreement an undertaking has been provided to increase the non-discretionary component. The undertaking provides that: ● Store Managers working 50 hours per week will receive a minimum of $570 per fortnight. ● Assistant Store Managers working 50 hours a week will receive a minimum of $440 per fortnight. ● Store Managers and Assistant Store Managers engaged to work an average of less than 50 hours per week will receive a pro rata payment based on the proportion of hours worked to 50 hours. IV. Rest Breaks Hourly Rate Store employees and Store Management Trainees will be granted at least a 10 hour rest break between the completion of work on one day and the commencement of work on the next day (attendance of employees at store meetings will be disregarded for the purposes of the rest break). Where Hourly Rate Store employees have not received the 10 hour break they will receive double time until the break is taken without loss of pay where the break occurs during ordinary time hours. Where Store Management Trainees have not received the 10 hour break they will receive double the Bankable Hourly Rate of a Store Assistant working any 5 out of 7 days until the break is taken without loss of pay where the break occurs during ordinary time hours. [1] The bargaining representatives were provided with an opportunity to make any comment regarding the proposed undertakings as per s.190(4) of the Act. As noted above, the SDA responded in correspondence stating they were not satisfied that the undertakings were sufficient to address its concerns with the BOOT. The SDA elaborated on its concerns raised at the hearing of 4 August 2016, by again identifying where it believed the Agreement is deficient in comparison with the Award. On 30 August 2016, ALDI further responded to the SDA’s position. BOOT consideration [2] The application of the BOOT is an all-embracing and comprehensive test. It requires the identification of the terms which are more beneficial and the terms which are less beneficial for an employee, and an overall assessment as to whether an employee would be better off under the agreement is then undertaken by the Commission. 20 [3] In this Agreement the rates of pay are significantly higher for most classifications than the comparable modern award classification. [4] I have had regard for the submissions of the SDA but having regard to the undertakings provided by ALDI and the submissions made by ALDI I cannot conclude as the SDA urges that, as at the test time, each award covered employee, and each prospective award covered employee, would not be better off overall. [5] My conclusion is arrived at on the basis of the following: ● the indicative rosters provided by ALDI; ● the undertakings provided by ALDI; ● consideration of the Agreement terms which are more beneficial and terms which are less beneficial and an overall assessment of whether an employee would be better off under the Agreement. [6] The Remuneration and Salary Sacrifice Arrangements , clause allows employees to request reconciliation at any time if they feel they have been paid less than the Award, and any shortfall in total remuneration otherwise payable under the Award is to be paid to the employee in the next pay period after the review is complete. While this Agreement right may provide employees with additional protection regarding the BOOT, it is not a factor in this application that the Commission requires to be satisfied that the Agreement passes the BOOT. [7] The undertakings provided by ALDI and summarised above, are central to addressing the Commission’s concerns in relation to the BOOT for the relevant employees. I am satisfied that by accepting the undertakings the BOOT is met. The undertakings do not result in a substantial change to the Agreement, nor cause any financial detriment to employees as per s.190(3) of the Act. [8] A copy of the undertakings is attached at Annexure A . [9] On 11 August 2016, Enterprise Law on behalf of the applicant advised that some incorrect dates had been recorded on the application’s accompanying employer statutory declaration (F17), these have been noted. Transport and Distribution employees [10] Mr Commerford, on behalf of the three employees who had raised concerns with the Agreement, submitted that the Agreement and relevant wage schedules had not been distributed in full to transport employees. Following the hearing a document titled “ Record of Document Receipt ALDI Stores Derrimut ” was forwarded to the Commission by ALDI 21 . The document records that the three transport employees represented by Mr Commerford signed as having received a copy of the final Agreement. Mr Commerford was invited to make any further observations on receipt of this evidence, however no response was received. [11] Having regard to the evidence of Mr Katz, I am satisfied that transport employees had access to a full copy of the Agreement as per s.180(2)(b) of the Act. [12] Further, I am satisfied that ALDI has complied with s.180(2) of the Act in taking all reasonable steps to ensure that all other employees during the access period were able to access a copy of the proposed Agreement by placing a copy on the noticeboard in each store in the Derrimut Region and in the Warehouse and Distribution Centre. NERR [13] Section 174(1)(A) states that the NERR notice must contain the content prescribed by the regulations and not contain any other content and be in the form prescribed by the regulations. The regulations set out the content and form of the notice at Schedule 2.1. [14] In Peabody, a Full Bench of the Commission held that compliance with the form prescribed for the purposes of s.174(1A) of the Act was mandatory, and that a failure to comply would invalidate the notice. As noted above, ALDI advised on 25 May 2016 that they had substituted the word “employer” for “leader” in the final paragraph of the NERR. [15] On 29 November 2016 the Federal Full Court handed down its decision in Shop, Distributive & Allied Employees Association v ALDI Foods Pty Ltd 22 ( ALDI Regency Park ). The decision traversed compliance with s.174(1)(A) and addressed the decision of the Full Bench in Peabody . [16] The Full Court decision dealt with an identical issue in regard to the alleged non-compliance with s.174(1A) concerning the word ‘employer’ being substituted the words ‘team leader’ in the NERR notice. [17] As discussed in the Interim Decision dealing with the approval application of the ALDI Minchinbury Agreement 2016 [2017] FWCA 202 , the views of the Full Court on this question were obiter, as the matter was determined on other grounds. In respect of the NERR, Katzmann J stated that strict compliance was required, whereas Jessup J concluded otherwise. White J, while preferring not to express a conclusive view, indicated that the views of Katzmann J appeared to have some force. [18] The SDA provided comment on the effect of the Federal Full Court decision. The SDA submitted 23 that despite having the opportunity to do so, the decision did not overturn the decision of the Full Bench in Peabody as such it remains binding in respect of NERR notice deviations. As the notice deviates from the prescribed form the Agreement approval application must be dismissed. [19] In the correspondence of 16 December 2016, ALDI requested that a decision on the application to approve the Agreement be adjourned on the basis that a special leave application to the High Court was to be made. That application was subsequently made on 21 December 2016. The grounds of the application do not address the NERR but other matters, being the ratio of the majority decision of the Full Court. [20] On 21 December 2016, ALDI submitted that in their view the ALDI Regency Park decision does not provide clear guidance to the Commission where the NERR departs from the prescribed form. ALDI advised that they had appeared before the President of the Commission on 1 July 2016, in an application made under s.608 24 9_24296" name="P249_24297">24 of the Act for a referral to the Federal Court of the question of whether strict compliance with the NERR prescribed form in Regulation 2.05 of the Fair Work Regulation 2009 is an essential element of an agreement’s approval. That application was adjourned until the Full Court decision in ALDI Regency Park was known on the basis that the SDA were to include the NERR issue in their Full Court application for judicial review. 25 [21] The ALDI correspondence to the Commission advised that “given the lack of conclusive determination of this issue, we advise that ALDI is now formulating the questions it would seek for the President of the Fair Work Commission to refer to the Federal Court …” On 19 January 2017, ALDI advised that it would be in a position to file a draft case by 23 January 2017. [22] As this application has been on-going for some time it is appropriate that the Commission at least advise the parties of the Commission’s determination in regard to all matters other than the NERR issue. As indicated above, the Commission is otherwise satisfied that the Agreement meets all the legislative requirements for approval, [23] The Full Bench decision in Peabody remains binding on individual members of the Commission, although it is appropriate to note that the actual NERR deviation is not the same as is raised in this matter being a word substitution variation. Since the decision in Peabody a Full Bench in The Australian Maritime Officers’ Union v Harbour City Ferries Pty Ltd 26 has expressed the view that a non-trivial misdescription will render a NERR invalid with the consequence that any subsequent enterprise agreement will be incapable of approval. [24] Where a valid notice has not been issued by the employer the Commission cannot be satisfied that s.188(a)(ii) has been met, with the result that the Commission cannot be satisfied that the Agreement was genuinely agreed to for the purposes of s 186(2)(a). [25] In view of the further legal proceedings to be taken in respect of NERR compliance, this decision will issue as an interim decision with the approval or dismissal of the application stayed until the applicant either requests a final decision to be issued or a conclusive determination is provided by a Full Bench of this Commission or Full Court of the Federal Court or in any other circumstance the Commission deems requires a final decision to issue. DEPUTY PRESIDENT Appearances : G. Hatcher SC and A. Perigo of Counsel for ALDI J. Fox and R. Patena for the SDA W. Commerford on behalf of unnamed employees Hearing details: 2016. Sydney, Video link to Melbourne August 4. Further written submissions SDA - 17 August 2016 ALDI – 10, 30 August 2016 Annexure A 1 [2014] FWFB 2042 2 The TWU Victorian/Tasmanian Branch filed a F18 dated 6 July 2016 supporting the approval of the Agreement 3 Affidavit of Ms Patena dated 2 August 2016 Exhibit B1 4 PN421, PN526, PN551, PN604, PN607, PN645 5 PN722 6 Exhibit A3 7 Exhibit A1 8 ALDI written submissions 19 May 2016 at [14] 9 PN812 10 PN511-PN514 11 See Schedule 1 of the Agreement 12 Applicant’s submissions of 19 May 2016 at [4] 13 S.193(1) Fair Work Act 2009 14 S.182(1) Fair Work Act 2009 15 [2010] FWAFB 9985 at [41] 16 [2010] FWAFB 4602 17 Ibid at [13] 18 BUPA Care Services v P & A Securities Pty Ltd as trustee for the D’Agostino Family Trust T/as Michel’s Patisserie Murwillumbah and others [2010] FWAFB 2762 at [49] 19 See ALDI email of 30 August 2016 written submissions of 30 August 2016 at [18] and Affidavit of Ms McNaughton of 19 May 2016 at [3] 20 AKN Pty Ltd t/a Aitkin Crane Services [2015] FWCFB 1833 ; Armacell Australia Pty Ltd and others [2010] FWAFB 9985 ; National Tertiary Education Union v University of New South Wales [2011] FWAFB 5163 ; Solar Systems Pty Ltd [2012] FWAFB 6397 21 PN294, PN298 22 [2016] FCAFC 161 23 Correspondence dated 14 December 2016 24 S.608 Referring questions of law to the Federal Court 25 See matter C2016/1264 26 [2016] FWCFB 1151 Printed by authority of the Commonwealth Government Printer <Price code C, PR589696>