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Better off overall test – common defects & issues
Agreement making – the better off overall test
An enterprise agreement passes the better off overall test (BOOT) if the Fair Work Commission is satisfied, at the test time, that each award covered employee, and each prospective award covered employee, would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee. It is not sufficient that a majority of the employees would be better off.
Performing the BOOT requires the identification of those terms of an agreement that are more beneficial and those that are less beneficial to an employee than the relevant award. An agreement may pass the BOOT even if some award entitlements have been reduced, as long as overall those reductions are more than offset by the benefits of the agreement. Each employee must be better off under the agreement, not just receive benefits equivalent to what they would have received under the relevant award.
Where award entitlement has no counterpart in the agreement or the corresponding entitlement under the agreement is less beneficial or more restricted in application than in the award, this will affect the Commission’s assessment of whether the agreement passes the BOOT.[1]
Reduced or omitted award entitlements – common defects & issues
| Defect or issue | Requirement |
|---|---|
|
Some examples of omitted award entitlements:
|
When performing the BOOT, the Commission will consider whether any entitlement under a relevant award is reduced or omitted, or its application is more restricted, under the agreement. |
Make sure all award conditions that are excluded from the agreement are identified in 3.4 of the Form F17.
The Commission must consider all award entitlements, even if the enterprise does not presently operate in a way where all entitlements are enlivened.
For example: if an agreement does not include weekend rates of pay provided in the award because the enterprise does not currently open on weekends, the employer may be requested to give an undertaking to pay the relevant award rates if the enterprise were to begin operating on weekends in the future.
Related information
Loaded rates – common defects & issues
| Defect or issue | Requirement |
|---|---|
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An enterprise agreement can include 'loaded rates' of pay which compensate for benefits under the relevant modern award that are not separately identified in the agreement. Typical award benefits that may be incorporated into a loaded rate include allowances, penalties and overtime. |
When considering the BOOT the Member must be satisfied that all employees will be better off under the agreement working any pattern of hours permitted by the agreement. The Commission is required to not just consider current actual working arrangements in assessing the BOOT. In determining 3 of the applications in the Loaded Rates Agreements case[2], the Commission found there is difficulty in establishing a loaded rate structure for casual employees which is capable of passing the BOOT. |
Including a reconciliation term in an agreement that provides for an audit or reconciliation of employees' earnings under the agreement compared to what their earnings would have been under the relevant modern award may sometimes be useful however the term must specify:
- that reconciliations will be carried out in a timely manner and,
- if a shortfall is identified, the requirement for the employer to compensate the employee must be enforceable.
Any shortfall paid as a result of the reconciliation must ensure the employee is better off and not just 'no worse off'. That is, the compensation cannot merely equal the amount an employee would have been entitled to under the award.[3]
Related information
References
[1] Fair Work Act 2009 ss.186(2)(d) and 193.
[2] See Loaded Rates Agreements [2018] FWCFB 3610 (Hatcher VP, Catanzariti VP, Gostencnik DP, Lee C, Harper-Greenwell C, 28 June 2018).
[3] See for example Shop, Distributive and Allied Employees Association v Beechworth Bakery Employee Co Pty Ltd t/a Beechworth Bakery [2017] FWCFB 1664 (Hatcher VP, Gostencnik DP, Bissett C, 6 April 2017); see also ALDI Foods Pty Limited v Shop, Distributive & Allied Employees Association [2017] HCA 53 (6 December 2017).
Updated time
Last updated
24 May 2019
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