Better off Overall | Changes to BOOT
Changes to BOOT for Enterprise Bargaining
The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) has introduced a range of changes to the enterprise bargaining provisions of the Fair Work Act 2009 (Cth) (‘FW Act’). One of these changes relates to the operation of the Better off Overall Test (‘BOOT’). These changes will commence on 6 June 2023. This article will focus on the impact on single employer enterprise bargaining.
Better Off Overall Test
The changes are intended to simplify the operation of the BOOT while continuing to maintain appropriate employee protections.
These changes are as follows:
- clarify that the BOOT is a global assessment rather than a line-by-line comparison between the proposed enterprise agreement and the relevant modern award;
- require the FWC to only consider, patterns or kinds of work, or employment types that are reasonably foreseeable at the enterprise to which the enterprise agreement relates;
- while the FWC must undertake its own assessment of the BOOT, it must take into account the views of the parties and give primary consideration to any common view shared by unions and employers about whether the enterprise agreement passes the BOOT;
- allow the FWC to amend an enterprise agreement where necessary to address a concern that it does not satisfy the BOOT;
- allow the FWC to reassess an enterprise agreement against the BOOT at some later time if relevant circumstances were not properly considered during the approval process. This may entail amending the enterprise agreement including retrospectively if necessary to address a concern it does not satisfy the BOOT.
The previous pre-approval steps and genuine agreement requirements will be replaced by a broad genuine agreement requirement. Essentially the FWC will need to be satisfied that an enterprise agreement has been genuinely agreed to by the employees.
- require the FWC to publish a ‘statement of principles’ providing guidance to employers about demonstrating that an enterprise agreement has been genuinely agreed. This will be used by the FWC to determine whether there has been genuine agreement by employees. On 12 May 2023, a full bench of the FWC published a ‘Fair Work (Statement of Principles on Genuine Agreement) Instrument 2023’ (‘Statement of Principles’) which will commence operation on 6 June 2023;
- require the FWC to be satisfied that the employees asked to approve the enterprise agreement had a sufficient interest in the terms and are sufficiently representative in that they are informed and genuinely understand the enterprise agreement being approved;
- retain the FWC’s power to disregard minor procedural or technical errors provided it is satisfied that employees are not likely to be disadvantaged.
These changes will apply to any enterprise agreement made (ie. approved by employee vote) on or after 6 June 2023.
Employers must carefully consider the Statement of Principles published by the FWC. This provides important information to ensure employees have genuinely agreed to the making of an enterprise agreement.
Employers will have to ensure that the employees who voted for the enterprise agreement:
- have a sufficient stake in the terms of the enterprise agreement. For example, employees would not have a sufficient interest in the terms of the enterprise agreement if a small cohort of employees offered rates of pay higher than those contained in the enterprise agreement approved the agreement;
- are sufficiently representative having regard to the coverage of the proposed enterprise agreement. For example, employees engaged in one industry, occupation or classification may not be capable of genuinely agreeing to an enterprise agreement intended to cover employees across a substantially wider range of industries, occupations or classifications.
Take Home Points
Employers must be prepared for these changes to enterprise bargaining laws when developing and implementing a new enterprise agreement.
The BOOT is a fundamental part of the enterprise bargaining process that must be adhered to in order to gain approval from the FWC. The legislative changes may result in the FWC taking a more practical and pragmatic approach to the BOOT. This will provide an opportunity for employers to negotiate flexibilities which better meet their operational needs.
The changes to the approval requirements and the introduction of the broad genuine agreement test will allow the FWC to ignore minor defects and technical errors in the bargaining process. However, employers considering a strategy of negotiating an enterprise agreement with a small cohort of employees will need to be mindful of the new “sufficient interest” requirements.