In approving an enterprise agreement that did not include conditions that were available under the relevant award, the Fair Work Commission has emphasised that the test is whether employees are better off overall and not on a “line by line or itemised basis”.
- Ensure you have conducted a Better Off Overall Test in support of any new enterprise agreement
- Enterprise agreements can trade off award conditions provided that overall the employees are better off
In approving an enterprise agreement that did not include RDO and TOIL provisions (although these were contained in the applicable award), Deputy President Alan Colman has emphasised that the test is whether employees are better off overall, not whether each employee is individually better off based on their personal circumstances and preferences.
The case concerned an application by BOC Limited for approval of an enterprise agreement. In its objections to the Fair Work Commission, the National Union of Workers submitted that the agreement failed the BOOT as it did not allow employees to accrue rostered days off when this was permitted under the relevant award. The NUW acknowledged that employees were better off in monetary terms, given the higher rate of pay when compared to the award, however it maintained that the inability to accrue and take RDOs meant that employees were not better off overall when taking into account this “intangible” or “lifestyle” benefit that was otherwise available under the award.
In his decision, Deputy President Coleman stated that:
“The better off overall test must be undertaken on an objective basis. If the personal preferences of each employee covered by an agreement had to be taken into account the ‘better off overall test’ would become mired in speculation on subjective and unquantifiable matters.”
“I would also emphasise that the analysis of the better off overall test inquires whether employees would be better off overall under the Agreement than under the relevant award, not better off on a line by line or itemised basis. Trading off award conditions, such as those relating to accrual of RDOs and time off in lieu, is plainly permissible under the Act.”
The Deputy President found that the agreement passed the better off overall test.
Employers and employees alike can be encouraged by the decision and the willingness of the Fair Work Commission to assess the overall effect of a proposed enterprise agreement rather than on a line by line basis. Provided that employees are better off overall as compared to the award, the enterprise agreement does not need to mirror or include all award conditions, even where the exclusion of certain award conditions could be seen as detrimental as long as the exclusion is outweighed by higher payments or overall benefits.