“It’s craziness”: Has enterprise bargaining become unworkable? Guzman Y Gomez and Godfreys feel the heat

Employers are being warned to dot their i’s and cross their t’s when engaging in enterprise bargaining after two high profile Fair Work Commission decisions in recent weeks that will send workers back onto the award.

Workers for franchised businesses Godfreys and Mexican food chain Guzman Y Gomez (GYG) will move back onto their respective awards after having outdated enterprise agreements scrapped by the commission.

Godfreys is alleged to have paid some of its 500+ employees under the General Retail Award rate through a pre-Fair Work Act era agreement from 2009 which was terminated last week.

It follows an application by shoppies union the SDA late last year, which revealed the last time the agreement provisioned a pay rise was in 2011 — over seven years ago.

The union told the FWC level one employees were paid a wage rate of $602.68 per week, while the award is $763.20.

Meanwhile, GYG has fallen into hot water of its own, failing to have a new bargaining agreement approved after some staff successfully applied to have its old expired agreement terminated earlier this year.

Fair Work commissioner Donna McKenna criticised GYG’s outdated agreement in a hearing late last month, saying it appeared workers were denied benefits outlined in the Fast Food Industry Award, including rostering certainty.

“It is being extolled as a virtue in the material that was presented to the employees that they’d be able to work other hours at flat rates and that, to me, on one view of it, is reminiscent of the old preferred hours type-approach, which has long been discredited,” McKenna said.

The business put a new agreement together but withdrew its application on Tuesday — a move which will see its workers moved onto the award next week.

McKenna shared her view on the GYG agreement anyway, lambasting the chain for an apparent failure to provide adequate information about the new agreement to workers.

GYG denies this, insisting it consulted widely with workers.

“We travelled all over the country and held 79 face to face information sessions with our crew where we explained the EA and they provided feedback,” the spokesperson said.

“To suggest we misled our crew during this process is astonishing. We were there with our crew, they fully understood, they are highly educated and intelligent people.”

The spokesperson argued the FWC has approved agreements similar to the one GYG withdrew in the past.

“The Full Bench of the Fair Work Commission previously agreed to the inclusion of identical clauses in other awards that operate in similar industries to GYG and employ similar people to our business,” the spokesperson said.

The case has raised new concerns about the state of enterprise bargaining, following a failed attempt by franchised pizza chain Domino’s earlier this year to pass its own enterprise agreement.

Enterprise bargaining has been on the decline more broadly, with figures from the Department of Employment released earlier this year finding the number of private sector workers covered by an EBA declined 40% over the last four years.

“It’s craziness”

Workplace Law managing director Athena Koelmeyer says it has become much more difficult for SMEs in particular to participate in enterprise bargaining in recent years.

“It has become extremely difficult to get enterprise agreements through the FWC, largely in light of the loaded rates decision that came out earlier this year,” she tells SmartCompany.

Earlier this year the full bench of the FWC caused headaches for Aldi when it doubled down on a 2016 Coles ruling, finding loaded rates — where above award pay is provided in exchange for less or no penalty rates — did not pass the better-off-overall test (BOOT).

GYG’s 2012 agreement included loaded rates, where workers were paid higher base rates in exchange for penalty rates.

The BOOT is applied by the FWC to prospective enterprise agreements and mandates they must make each employee better off overall than the relevant modern award, which serves as the wage safety net.

“SMEs have historically used enterprise agreements to try and promote flexibility that works for their unique businesses,”Koelmeyer says.

“But now the commission has made it very clear that the way they’re approaching the better-off-overall test is essentially when you’re getting an EBA you’re getting the modern award by another name.”

Koelmeyer says she’s seen SMEs struggling first hand with the BOOT.

“Where SMEs were willing to compromise in the name of flexibility in the past, the renewed scrutiny being applied to EBAs is “almost unworkable”, Koelmeyer says.

“It’s craziness, if you are an SME that’s traditionally had an enterprise agreement and there’s been nothing wrong for 15 years, you’re now going to find a problem.”

Koelmeyer believes the BOOT should be re-examined, saying the current landscape was incentivising employers to stick with zombie agreements in an attempt to fly under the radar.

Don’t use EBAs to “undercut award conditions”

Workplace lawyer Peter Vitale agrees it’s become more difficult for employers to secure enterprise agreements, advising firms to learn from the recent GYG case.

“Don’t use enterprise agreements to try and undercut award conditions,” he tells SmartCompany.

“You can use them to perhaps implement more flexible agreements, but you’re not going to achieve any cost savings.”

He adds businesses pursuing EBAs need to make sure they’re doing everything thoroughly to avoid getting rejected by the commission.

“Make sure you follow all the procedural requirements and give employees all the proper information.”

SmartCompany contacted Godfreys for comment but did not receive a response prior to publication.

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