The Full Bench of the Fair Work Commission in its recent decision Loaded Rates Agreements  FWCFB 3610 (28 June 2018) held that employers must apply the “better off overall test” (BOOT) to every employee covered by an Enterprise Agreement.
The decision involved a consideration of five applications for the approval of Enterprise Agreements containing “loaded rates”. That is, rates which are all-inclusive, or a ‘flat’ rate of pay, which absorb or set off more generous entitlements against the minimum entitlements under a modern award.
The BOOT requires a finding that each award covered employee and prospective employee would be better off under the agreement than under the relevant modern award. If any employee is not better off overall, then the Enterprise Agreement would not pass the BOOT.
With respect to an Enterprise Agreement containing loaded rates in whole or partial substitution for award penalty rates, the Commission confirmed:
“…it is not sufficient that the majority of employees – even a very large majority – are better off overall if there are any employees at all who would not be better off overall.”
Particular reference was made to the 2016 Full Bench decision of Hart v Coles Supermarkets Australia Pty Ltd  FWCFB 2887. In that case, an agreement containing loaded rates higher than in the modern award, which were intended to compensate for lower penalty rates for evenings, weekends and public holidays, was found not to pass the BOOT. The loaded rates in that agreement were found to disadvantage employees who worked predominantly at times attracting a lower penalty rate under the agreement compared to the award.
Principles applied by the Full Bench
The Full Bench of the Fair Work Commission confirmed the applicable principles regarding the application of the BOOT to loaded rates agreements, notably the following:
Employers need to ensure that all employees and prospective employees are better off under the proposed Enterprise Agreement than the applicable modern award. This narrow interpretation of the principles of the BOOT may see more employers remain under the modern award regime as opposed to entering into an Enterprise Agreement.
If you have any questions regarding your Enterprise Agreement or the BOOT following this decision, please contact Jonathon Hadley on +61 7 3231 1653 or email email@example.com.
Jonathon Hadley, Partner