The Zombie Apocalypse Crusade Continues

A full bench of the Fair Work Commission (‘FWC’) in the decision of 233 Victoria Square Hotel Pty Ltd T/A Hilton Adelaide [2023] FWCFB 163 has rejected an application by the Hilton Adelaide to extend the default period for the Hilton Adelaide 2006 Certified Agreement (‘Agreement’).

On 31 May 2006, the Agreement was certified by the Australian Industrial Relations Commission under section 170LT of the Workplace Relations Act 1996 (Cth). It became known as a collective agreement-based transitional instrument under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (‘Transition Act’) and continued operation.

The Transition Act was amended by the Fair Work Legislation Amendment (Secure Jobs, Better Pay Act) 2022 (Cth) which referred to such agreements as ‘zombie’ agreements and provided for automatic termination on 6 December 2023 unless extended by the FWC.

The Hilton Adelaide made an application to the FWC to extend the default period of the Agreement for a period of four years. The application was made under subitem (4) of item 20A of Schedule 3 of the Transition Act. Subitem (6) provides that upon application, the FWC is required to extend the default period for an agreement for a period of no more than four years if the FWC 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.”

The application was made by reference to subitem (6)(a) on the basis that subitem (9) applies and is otherwise appropriate to do so. Subitem (9) applies if:

“(a) the application relates to a collective agreement-based transitional instrument and;

 (b) 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.”

Under subitem (10) of item 20A, ‘award covered employees’ for a collective agreement-based transitional instrument are those employees covered by the instrument who, at the time the extension application is made under subitem (4), are covered by one or more modern awards that are in operation in relation to the work to be performed under the instrument, and are employed at that time by an employer who is covered by the instrument and the modern award(s).

There was no dispute that the Hilton Adelaide was covered by the Hospitality Industry (General) Award 2020 (‘Hospitality Award’) and is the relevant modern award for the purpose of the better off overall test (‘BOOT’).

The full bench applied the decision of Suncoast Scaffold Pty Ltd as trustee for The Warren Family Trust [2023] FWCFB 105 (‘Suncoast Decision’) which is precedent that the BOOT for item 20A(9) of the Transition Act requires a broad evaluative judgment based upon an overall comparison of the terms of the transitional instrument and the relevant award in its application to the award covered employees.

The Hilton Adelaide submitted that employees were better off under the Agreement than the Hospitality Award as follows:

• Clause 24 which provides a minimum guaranteed payment of 1% above the Hospitality Award;
• Clause 23 allows employees at levels 2,3, and 4 to attain an additional classification to levels 2A,3A and 4A with higher wages in recognition of their experience;
• Clause 17(g)(i) provides full-time employees with a 150% penalty for work on Saturday and a 175% penalty for work on Sunday;
• Clause 17(g(ii) provides variable part-time employees with a 110% penalty for all hours performed Monday to Friday;
• Clause 17(g)(iii) provides all part-time employees with a 150% penalty on Saturday and a 175% penalty on Sunday;
• Clause 17(g)(iv) provides all casual employees with a 150% penalty for all hours.

The full bench took issue with clause 24 of the Agreement and noted that the wording of the clause referred to the Hotels Clubs Etc Award (SA) or (when implemented) the Australian Fair Pay Commission Minimum Wage rate. The clause did not refer to the Hospitality Award.

The Hilton Adelaide submitted that the Agreement did not apply to it when made but later applied in about mid-2022 when there was a transfer of business. At this time the Hilton Adelaide applied for an order under section 319 of the Fair Work Act 2009 (Cth) (‘FW Act’) to enable non-transferring employees (those employees employed after the transfer) to also be covered by the Hilton Agreement. When the transfer order was made, the Hilton Adelaide provided the FWC with an undertaking which included that “The Hilton Agreement will be read and interpreted such that any reference to an Award is a reference to the Hospitality Award.” On this basis, the Hilton Adelaide contended that the transfer order read in conjunction with the undertaking and clause 24 of the Agreement provided that the ordinary hourly rate will exceed the minimum rate provided in the Hospitality Award by 1%, which is what it had done in practice. The Hilton Adelaide then submitted that the transfer order granted under section 319 of the FW Act constituted a variation to the Agreement pursuant to section 320 of the FW Act. The full bench rejected this submission on the basis that section 320 of the FW Act is only available upon application, provides limited circumstances for variation and requires consideration of a list of factors. Therefore, the undertaking could not be regarded as a variation to the Agreement as the application was not made under section 320 of the FW Act.

The Hilton Adelaide alternatively submitted that as the undertaking was given to the FWC in proceedings and referred to in its decision, that it had the standing of a court order. However, this was also rejected on the basis that the undertaking was given to address union concerns and the FWC is not a court.

With the undertaking excluded, the full bench proceeded with the BOOT analysis conducted by the FWC Agreement Team. It was noted that the Agreement generally provides full-time and fixed part-time employees with similar terms to the Hospitality Award with more beneficial Saturday and Sunday ordinary hour penalties. However, it provides less beneficial public holiday penalties and overtime provisions. On this basis, full-time and fixed part-time employees could not be considered better off overall than the Hospitality Award.

It was noted that variable part-time employees is not an employment category in the Hospitality Award but receive a 10% loading for work performed Monday to Friday. These employees receive more beneficial Saturday and Sunday ordinary hour penalties and work between 782 and 1981 hours per annum averaged over a four-week period. However, this was inconsistent with the part-time provisions of the Hospitality Award which requires guaranteed hours. The overtime provisions in the Agreement are less beneficial Monday to Saturday and on public holidays. The full bench noted that whether these employees were better off overall than the Hospitality Award was dependent on the number of overtime hours worked. With the higher penalties for working ordinary hours on Saturday and Sunday the full bench was of the view that variable part-time employees who consistently work on weekends may be considered better off overall.

It was noted that the Agreement is silent about most Hospitality Award allowances and does not provide a definition for shift workers. This would leave these employees worse off. While clause 17(f) of the Agreement provides for annualised salaries, it is silent on the safeguards outlined by clause 24.2 of the Hospitality Award thereby leaving these employees worse off. The Agreement provides less beneficial shift penalties for shifts worked Monday to Friday with the full-time and fixed part-time rates in the Agreement not high enough to compensate for this reduction.

It was noted that clause 17(g)(iv) of the Agreement provides casual employees with a 50% premium on the ordinary rate of pay with a minimum engagement of 2 hours. However, it excludes casual employees from overtime penalties and premiums. The full bench referred to the decision of Loaded Rates Agreements [2018] FWCFB 3610 and noted that it is difficult for casual employees with loaded rates to be considered better off due to the ability to roster them to work at various times. Therefore, without other compensation, casual employees could not be considered better off overall.

It was also noted that apprentices are worse off and the safeguards in clause 15.1 of the Hospitality Award providing ordinary hours of work and rostering arrangements for full-time employees were not present in the Agreement.

The Hilton Adelaide submitted that the flexible rostering arrangements for variable part-time employees provided a benefit as these employees are parents or students who are from a demographic that appreciates flexibility. In relation to annual salaries, it contended that in practice it substantially complied with the protections of clause 25 of the Hospitality Award. It also submitted that the less beneficial shift penalties were adequately compensated by the higher rates paid in the Agreement.

The Hilton Adelaide proposed new undertakings so that employees were better off overall on a global basis under the Agreement than the Hospitality Award. However, the full bench expressed the view that undertakings could not be part of the assessment of the BOOT for item 20A(9)(b) of Schedule 3 of the Transition Act. It requires a comparison between the Agreement and the Hospitality Award which is consistent with the approach adopted in the Suncoast Decision.

The full bench expressed the view that the matters raised by the Hilton Adelaide in its evidence and submission would also have been relevant to whether it was reasonable in the circumstances to extend the default period under subitem 6(b). The Hilton Adelaide referred to this subitem but made no submissions. The full bench noted that this subitem requires a broad evaluative judgement as outlined in the Suncoast Decision and concluded that it would not be reasonable to extend the default period in the circumstances.

As neither subitem (6)(a) nor (b) of item 20A of Schedule 3 of the Transition Act were satisfied the full bench was not required to extend the default period for the Agreement. Therefore, the application was dismissed. This means that unless the Hilton Adelaide implements an enterprise agreement, the Agreement will automatically terminate on 6 December 2023 leaving it subject to the Hospitality Award.

Agreement-based transitional agreements such as collective agreements made under the Workplace Relations Act 1996 (Cth) will automatically terminate on 6 December 2023 unless the FWC approves an application to extend their period of operation. The provisions of the Transition Act give primary consideration to whether employees are better off overall under the collective agreement than the applicable modern award. If this cannot be satisfied, the FWC will not grant the application thereby leaving the collective agreement to terminate on 6 December 2023. The FWC is not able to accept undertakings to satisfy the BOOT and therefore guarantee employees more beneficial terms and conditions of employment.

Collective agreements were implemented at a time when the BOOT Test did not apply and modern awards did not exist thereby making it unlikely that a collective agreement will satisfy the BOOT. Employers should be assessing their collective agreements to determine whether an application is viable and if not, take steps to implement an enterprise agreement (time permitting) or prepare to be subject to one or more applicable modern awards.

If you would like to know more about the cessation of collective agreements or enterprise bargaining, please contact us here and a Mapien Workplace Strategist will be in touch ASAP.

Our consultants are continually monitoring the implementation of the amendments to the Fair Work Act, and their implications.