Fair Work (Transitional Provisions and Consequential Amendments) Act 2009

Sch. 3, Item 20A(4) - Application to extend default period for agreement-based transitional instruments

Payfam Enterprise Pty Ltd T/A Ravenshoe IGA Everyday

Application to extend the default period IGA Ravenshoe (QRTSA) Employee Collective Agreement 2007

[1] Payfam Enterprise Pty Ltd (Applicant or Payfam) has applied under item 20A(4) of Sch 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) to extend the default period for the IGA Ravenshoe (QRTSA) Employee Collective Agreement 2007 (Agreement) for a period of four years. The application was initially made under item 30(4) of Sch 7 to the Transitional Act which deals with applications to extend the default period for an enterprise agreement made during the bridging period, but this was later corrected by the Applicant.

[2] The Applicant operates an IGA supermarket in Ravenshoe, Queensland. The Agreement covers employees working in the supermarket engaged in classifications that would now be covered by the General Retail Industry Award 2020 (the Award).

[3] The application to extend the Agreement was made on 20 May 2023.

[4] The Agreement is a collective agreement-based transitional instrument within the meaning of subitem 2(5)(c) of Schedule 3 of the Transitional Act which continues to apply to employees of Payfam because of item 3 of Schedule 3.

[5] The Transitional Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 to provide for the automatic termination of all remaining transitional instruments. Pursuant to subitem 20A(1) and (2) of Sch 3 of the Transitional Act, the Agreements will terminate on 6 December 2023 unless they are extended under subitems 20A(6) or (11)(e). The main features of item 20A of Sch 3 of the Transitional Act are described in detail in the Full Bench decision in Suncoast Scaffold Pty Ltd[1] and we rely upon what is said in that decision.

[6] The application is made under item 20A(4)(a). Under item 20A(6), the Commission is required to extend the default period for an Agreement for a period of no more than 4 years if the Commission is satisfied that:

• (a) subitem (7), (8) or (9) applies and it is otherwise appropriate in the circumstances to do so; or

• (b) it is reasonable in the circumstances to do so.

[7] Subitem (7) applies to an application which is made at or after the notification time for a proposed enterprise agreement. Subitem (8) applies to an individual agreement based transitional instrument. The Applicant does not contend that subitem (7) and subitem (8) apply to the applications.

[8] The Applicant relies on subitem (9) which applies if the application relates to a collective agreement based transitional instrument and:

it is likely that, as at the time the application is made, the award covered employees for the instrument under subitem (10), viewed as a group, would be better off overall if the instrument applied to the employees than if the relevant modern award or awards referred to in that subitem applied to the employees.[2]

[9] For the purposes of paragraph (9)(b) the instrument under subitem (10) is the Award.

[10] The matter was listed for directions on 8 June 2023.

[11] With the consent of the Applicant, the Commission's Agreements Team prepared an analysis of the Agreement relative to the Award which was provided to the Applicant on 30 June 2023.

[12] The Commission invited the Applicant to review and provide any comments it wished to make on the analysis by 14 July 2023.

[13] On 30 June 2023 Mr Lawrence Payton, Director of the Applicant responded to the analysis and sent a further email to the Commission on 17 July 2023 in relation to current pay and conditions of employees covered by the Agreement.

[14] The Agreement commenced in 2007 and has a nominal expiry date of 30 June 2010. As at 17 July 2023, the Applicant employed 12 employees, all of whom are engaged on a casual basis. The supermarket business hours are Monday-Friday from 6.00am to 7.30pm and Saturday-Sunday from 7.00am to 7.30pm

[15] Schedule A of the Agreement contains classifications definitions of Shop Assistant, two levels of Supervisor, four levels of Ancillary Employee (who are engaged in a restaurant or cafeteria in a retail department or chain store, or staff canteen in premises operated by a retail store or other specified services or businesses operated by a retail store) and five levels of Clerical Employee.

[16] The Applicant states that it does not employ Supervisors or Clerks and that it does not operate a restaurant or cafeteria. As such it appears that the Shop Assistant classification is the only classification in the Agreement which currently applies to employees.

[17] The Agreement contains a rate of pay table in clause 2 of Schedule A with one set of rates. Clause 20.3 of the Agreement states that ordinary weekly rates of pay will be increased in accordance with the determination by the Australian Fair Pay Commission. Although the Agreement does not make provision for rates to be increased by any other body apart from the Australian Fair Pay Commission, the Commission has calculated the following Agreement rates of pay using the rates of pay table at clause 2 of Schedule A and incorporating the dollar or percentage increase from the Annual Wage Review Decision from 2008 through to 2022.

[18] The Award rates of pay in the above table are those which applied when the application was made on 20 May 2023. Although the Applicant does not have employees in any other classification in the Agreement, for completeness, we note that:

• (a) There are no rates of pay in the Agreement for the four levels of Ancillary Employee;

• (b) The First Level Supervisor and Second Level Supervisor classifications rates of pay are less than the Award if these classifications are matched with Retail Employee Levels 4 and Level 8 under the Award;

• (c) The Clerks Level 4 - 1st Year classification rate of pay is less than the Award;

• (d) All other rates of pay for classifications in the Agreement are more than the Award (apart from the junior rates of pay already noted as being below Award).

[19] The rates of pay for classifications in the Agreement where the pay is below the Award are deemed to be equivalent to the Award in accordance with Item 13 schedule 9 of the Transitional Act which provides that if a transitional instrument rate is less than the Award rate, the transitional instrument has effect in relation to the employee as if the instrument rate were equal to the Award rate.

[20] The Agreement expressly excludes the operation of any Award. There are many conditions in the Agreement which are less favourable that the Award including the following:

[21] Clause 12 of the Agreement provides a reduced casual loading of 20%, compared to a 25% casual loading under the Award. The reduced casual loading results in casual Shop Assistants being paid less under the Agreement compared to the Award.

[22] Apart from a casual loading of 20%, casual employees under the Agreement are not entitled to penalties for work engaged in on weekends.

[23] Permanent employees are entitled to a loading of 25% for work engaged in on weekends.

[24] With respect to public holidays, clause 39.2.2 of the Agreement prescribes a penalty of time and a half for permanent employees and time and a half in addition to the casual loading for casual employees, however such penalties are only payable for the following public holidays:

• (a) New Years' Day;

• (b) Australia Day;

• (c) Good Friday;

• (d) Easter Monday;

• (e) Anzac Day;

• (f) Christmas Day; and

• (g) Boxing Day.

[25] Under Clause 22 of the Award, the following penalties are payable for ordinary hours worked on:

• (a) Saturday: 125% penalty for permanent employees and 150% penalty for casual employees (inclusive of casual loading);

• (b) Sunday: 150% penalty for permanent employees and 175% penalty for casual employees (inclusive of casual loading); and

• (c) Public holiday: 225% penalty for permanent employees and 250% penalty for casual employees (inclusive of casual loading).

[26] Having regard to the proximity of the rates of pay between the Agreement and the Award, the rates of pay are not high enough to compensate for these reductions, especially given the likelihood of employees working weekends under the Agreement.

[27] Clause 24.1.1 of the Agreement provides that the commencing and ceasing times for ordinary hours of work is between 3am and 4am each day, Monday to Sunday.

[28] It is not clear from the wording of the clause whether ordinary hours commence from 3am and conclude at 4am the following day. Regardless, the span of hours under clause 15.1 of the Award is between 7am and 9pm Monday to Friday, 7am and 6pm Saturday and 9am and 6pm Sunday (with slight variations for particular shops). Ordinary hours worked Monday to Friday outside of the span set out at clause 15.1 of the Award are paid at a penalty rate of 25% for permanent employees and 50% for casual employees (which is inclusive of the casual loading).

[29] The Agreement however does not contain any shift penalties. Given that the Applicant's current business hours are Monday-Friday from 6.00am to 7.30pm and Saturday-Sunday from 7.00am to 7.30pm, employees who work from 6.00am to 7.00am Monday to Friday, from 6.00pm to 7.30pm Saturday and Sunday and from 7.00am to 9.00am on Sunday are potentially deprived of penalty rates which they would otherwise receive under the Agreement.

[30] Clause 24.3.1 of the Agreement permits employees to work a maximum of 12 hours per shift. Clause 15.4 of the Award prescribes a maximum of 9 hours per shift and on only one occasion per week a shift may be worked up to 11 hours.

[31] The Agreement expressly states at clauses 11, 12 and 24.3.2 that no minimum engagement periods apply per week or per shift to full time, part time or casual employees. The Award prescribes a 3-hour minimum engagement for part time and casual employees (other than in relation to full time secondary school students for which a 1.5-hour minimum engagement applies to shifts worked between 3pm and 6.30pm and where the shorter period is agreed).

[32] Having regard to the proximity of the rates of pay between the Agreement and the Award, the rates of pay in the Agreement which are above the Award are not high enough to compensate for these reductions.

[33] Clause 26 of the Agreement offers both a narrower definition of overtime, due to the span of hours in the Agreement being broader than the Award, and a reduced overtime penalty. Further, employees may agree to work voluntary overtime at ordinary rates of pay.

[34] With respect to overtime penalties, clause 26 of the Agreement provides a penalty of 150% for permanent employees and 150% plus the casual loading for casual employees. Clause 21.2(e) of the Award provides the following overtime penalties:

• (a) Monday to Saturday (first 3 hours): 150% permanent employees and 175% casual employees (inclusive of casual loading);

• (b) Monday to Saturday (after 3 hours): 200% permanent employees and 225% casual employees (inclusive of casual loading);

• (c) Sunday: 200% permanent employees and 225% casual employees (inclusive of casual loading);

• (d) Public Holidays: 250% permanent employees and 275% casual employees (inclusive of casual loading).

[35] It is not clear whether employees covered by the Agreement are regularly engaged to work overtime. However, having regard to the proximity of the rates of pay between the Agreement and the Award, even a small amount of overtime is likely to result in an employee becoming worse off compared to the Award due to the differences in overtime penalties payable under the Award and Agreement.

[36] The Agreement does not offer annual leave loading and other than excess fares and travel time, does not offer allowances otherwise provided in the Award, including for example meal allowance, cold work, first aid allowance, and recall allowance.

[37] Further, clause 42 of the Agreement requires employees to purchase their uniform from the employer and pay for maintenance and laundry associated costs. This is less beneficial compared to clause 19.3 of the Award which provides the employer must reimburse the cost of a uniform that an employer requires an employee to wear and provides an allowance for laundering related costs.

[38] The Applicant's business operates in Ravenshoe, which has a population of 1801. Supermarkets are the largest employers in Ravenshoe, employing 6.2% of the population. The Applicant claims that it pays the best wages in Ravenshoe. The Applicant is owned by a married couple who work in the supermarket every day of the year.

[39] When making the Agreement, the Applicant's intention was to pay all staff one rate to cover all days of the week. This was to prevent a few employees being paid larger amounts during the weekend and refusing to work during the week because the wages were more favourable on the weekend. The Applicant's current experience is that employees are happy to work both on weekdays and weekends as they are paid the same wage during all hours. The Agreement also ensures that superannuation is paid on a higher amount. The Agreement allows both adult and junior employees to work on the weekend. All employees have the right to refuse a shift.

[40] The Agreement does not reflect the Applicant's current pay rates which are higher than the rates prescribed in the Agreement. The Applicant provides employees a 25% casual loading rather than 20% as prescribed by the Agreement and has adjusted the junior rates of pay to reflect the percentages of the minimum rate set out in clause 17.2 of the Award. The current above Award pay rates that the employees receive during 'normal' hours make up for not receiving penalty rates during time worked outside of these hours, including weekends. The rate paid by the Applicant to adult employees at the time that the application was made, including the causal loading was $29.98 compared to the Award rate of $29.23. The rate paid by the Applicant to employees from 1 July 2023, including the causal loading, was $31.73 compared to the Award rate of $30.91.

[41] Most weekend shifts are no longer than four hours. Other shifts are usually five hours and up to a maximum of eight hours. Staff do not work on Christmas Day or Good Friday.

[42] According to the Applicant, if the Agreement is not extended wages will not increase as employees would receive lower rates of pay during time worked when penalty rates do not apply. The business operating hours would also need to be reconsidered to ensure that the business is not exposed to penalty rates prescribed by the Award.

[43] The Applicant uses a single payment method which is simpler to enter into the accounting package than a range of payments which might be applicable at different times. The Applicant is prepared to change any aspect of the Agreement deemed necessary to ensure that employees are 'on par' with legal requirements.

[44] As noted above, the applications relate to collective agreement-based transitional instruments which satisfies the requirements of subitem 9(a).

[45] In its application, the Applicant relies on subitem 9. Subitem 9(a) is satisfied as the application relates to a collective agreement-based transitional instrument. In relation to subitem 9(b), the Applicant claims that it is likely that its employees viewed as a group, would be better off overall if the Agreement rather than the Award applied. In making this assertion the Applicant relies upon the rates and casual loading which are currently paid to employees, rather than the rates of pay and casual loading in the Agreement. As noted in a number of previous Full Bench decisions, current practices which do not reflect the terms of the Agreement subject to an application under Sch 3, item 20A are not relevant to our consideration as to whether the requirements of subitem 9(b) are met.[3]

[46] In considering whether the requirements of subitem 9(b) are met, we are required to exercise a broad evaluative judgment based upon an overall comparison of the terms of the Agreement and the Award in their application to the cohort of award covered employees[4].

[47] The Agreement applies to twelve casual employees. The 20% casual loading in the Agreement ensures that every rate of pay in the Agreement that applies to current employees is less than the Award rate of pay. In addition, casual employees do not receive weekend penalty rates at all and a significantly reduced public holiday penalty rate. The Applicant did not disagree with any specific aspect of the the analysis conducted by the Commission. In our view, the pay and conditions provided by the Agreement are manifestly inadequate compared to the Award and inconsistent with contemporary industrial standards. There is no basis for the Applicant to assert that its employees are better off overall under the Agreement and we reject that assertion.

[48] We therefore do not accept that it is likely that, as at the time the application is made, the Award covered employees viewed as a group, would be better off overall if the Agreement applied to the employees than if the relevant Modern Award applied to the employees.

[49] Having decided that subitem 20A(9) does not apply, we do not need to consider whether it is otherwise appropriate to extend the default period of the Agreement under subitem 20A(6)(a).

[50] We will, however, consider whether it is reasonable in the circumstances to do so under subitem 20A(6)(b). We note that no submissions have been made by employees covered by the Agreement so we are unaware of their views in relation to the application.

[51] The Applicant does not point to any specific disadvantage that would be experienced by either the Applicant or its employees if the Agreement is not extended. Instead, the Applicant relies upon matters in support of the application which appear to relate to the ease with which the Agreement enables it to run its business, including the willingness of staff to work on both the weekends and during the week and the convenience associated with administering its payroll system.

[52] The Applicant claims that it pays employees a higher rate for all hours which compensate them for hours that they would usually be receiving a penalty rate. The Applicant has not provided any modelling or other information to support this assertion. The rates that the Applicant currently pays its employees are only $0.82 per hour more than the Award. In the absence of evidence to the contrary, it does not appear to us that the current pay rates compensate employees for all of the conditions that would be available if the Award applied. Given that the Applicant does not rely upon the Agreement in relation to the minimum rates of pay and casual loading that it pays its employees, it appears that having regard to our conclusion on the better off overall analysis, the continued operation of the Agreement will serve to deprive employees of penalty rates and other Award entitlements.

[53] For this reason, we do not consider it reasonable to extend the default period of the Agreement.

[54] Accordingly, we decline to grant the Application to extend the default period of the Agreement.

[55] The application is dismissed.

[1] [2023] FWCFB 105.

[3] See for example All Seasons Carpet Cleaning Collective Agreement [2023] FWCFB 158 at [23]; Drilled Foundations Contracting Pty Ltd and CFMEU Collective Union Agreement 2007 and the Piled Foundations Contracting Pty Ltd and CFMEU Collective Union Agreement 2007 [2023] FWCA 3011 at [40].

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