Better Off Overall Test (BOOT)

The Better Off Overall Test (BOOT) is based on the relevant modern award that covers any employees covered by the proposed enterprise agreement.

This test is based on the relevant modern award that covers any employees covered by the proposed enterprise agreement. It requires that each ‘award covered’ employee and each prospective award-covered employee must be better off under the agreement than they would if the relevant modern award applied to them. See Armacell Australia Pty Ltd and others [2010] FWAFB 9985 (24 December 2010)

The Better Off Overall Test is applied as at the test time - this is the time when the application for approval of the agreement was made (the date the application was lodged with the Fair Work Commission).

Any flexibility agreement made under the relevant modern award may not be taken into account for the purposes of the Better Off Overall Test. 
This is because it is assumed that any arrangements made under the flexibility provisions in a modern award would be considered in the negotiating process, and potentially will form part of the agreement, or negotiated again under the flexibility term in the agreement if approved.
 
The Test is not applied as a line by line analysis. It is a global test requiring consideration of advantages and disadvantages to award covered employees and prospective award covered employees. The question posed by the Test is not whether each employee is better off under the agreement compared to their particular existing working arrangements but whether they are better off overall if the agreement applied rather than the relevant modern award.
 
The Better Off Overall Test applies equally to all employees ‘covered’ by the proposed collective agreement, including those who may be subject to the high income threshold. Although the Test requires each award-covered employee to be better off, the Fair Work Commission may ‘assume’ that each employee within a designated class of employees are better off if the agreement passes the Test when applied to that class.

The phrase "class of employees" is intended to refer to a group of employees covered by the enterprise agreement who share common characteristics that enable them to be treated as a group when the Fair Work Commission applies the Better Off Overall Test. An example is where the employees are in the same classification, grade or job level, or woth the same working patterns.
 
The Better Off Overall Test allows award conditions (but not National Employment Standards’ conditions) to be traded off or excluded as long as the total remuneration and/or benefits received by the employee leave them better off than if the conditions remained the same. The application of the Test therefore, requires the identification of the terms of an agreement which are more beneficial to employees when compared to the relevant modern award, and the terms of an agreement which are less beneficial and then an overall assessment of whether an employee would be better off under the agreement.

An agreement may pass the test even if some award benefits have been reduced, as long as overall those reductions are more than offset by the benefits of the Agreement. See Australia Western Railroad Pty Ltd T/A ARG - A QR Company re Australia Western Railroad (Western Australia) Rail Operations Enterprise Agreement 2011 [2011] FWAA 8555 (14 December 2011)  
 
Which modern award?
 
Before the Better Off Overall Test can be conducted, it is necessary to correctly identify the modern award that covers the employees to whom the enterprise agreement will apply. In determining the most appropriate modern award, the award which contains the classifications most appropriate to the work performed, and, to the environment in which the work is normally performed, will generally determine the most suitable award. See Construction, Forestry, Mining and Energy Union v BJ Jarrad Pty Ltd [2013] FWCFB 8740.
 
The employer is required to identify the applicable modern award for comparison when completing Form F17 – Employer’s statutory declaration in support of an application for approval of an enterprise agreement, which accompanies the agreement upon lodgement.
 
Identifying a modern award
 
Modern awards contain interaction rules which govern situations where more than one award may apply. The correct modern award can be determined by comparing the duties performed by the employees to the classification definitions in the modern award.
 
The Fair Work Commission is then required to consider the coverage of the award at the test time and to compare the terms of the agreement to the employees it covers at that time.
 
The Commission is required to examine the major, substantial or principal aspect of the work performed by the employee at test time, including the amount of time spent performing particular tasks, the circumstances of the employment and what the employee was employed to do. The question is one of fact to be determined by reference to the duties actually being performed in the position, rather than the title.  See Newlands Coal Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FWAFB 7325; Transport Workers’ Union of Australia v Coles Supermarkets Australia Pty Ltd [2014] FCCA 4.
 
What if two or more awards apply?
 
Multiple modern awards may need to be used to apply the Better Off Overall Test where different awards apply to different classes of employees to be covered by the agreement. The awards identified as applicable would be those that would cover the employer, and the duties performed by the employees, to be covered by the proposed agreement.
 
The Fair Work Act provides for flexibility by allowing employers and employees to have multiple instruments covering different or even the same operations. The terms and conditions that apply to particular work for employees covered by the agreement are dependent on the scope and operation of the relevant instruments. See Re Cimeco Pty Ltd [2012] FWA 526.
 
Loaded rates of pay
 
An agreement can include loaded rates of pay which compensate for entitlements provided for the comparative instrument, which is generally the applicable modern award. The rate of pay in the agreement is increased to compensate for the removal of award entitlements that would no longer apply.
 
The hourly rate would also need to consider the work arrangements of an employee. Shift work or work performed at times that attract a penalty under the award (night work or weekend work) would need to be taken into account when determining the loaded rate.
 
Entitlements that can be incorporated into a loaded rate of pay include:
  • annual leave loading
  • shift work allowances
  • weekend penalties
  • reasonable additional hours
  • overtime – although the average amount of overtime usually worked by an employee would need to be considered
  • work related allowances
See Re Dominance Enterprises Pty Ltd t/a Dominance Guardian Services [2014] FWCA 4448; Re The Chimney Cake Company Pty Ltd t/a Kurtosh [2013] FWCA 9773.
 
State and territory legislation
 
An enterprise agreement will fail the Better Off Overall Test if it contravenes the applicable state or territory employment statute. For example, an agreement would fail the Test if it provided for the cashing out of long service leave in a state or territory whose relevant law prohibited cashing out, eg New South and Victoria, whereas cashing out of long service leave for South Australian employees would pass the Test as this is allowed by the relevant South Australian long service leave legislation. See St Marys Rugby League Club Ltd [2010] FWA 8300 (12 November 2010).
 
Under s27 of the Fair Work Act, a state or territory law that regulates long service leave is a non-excluded matter, meaning the Fair Work Act does NOT override its provisions. Likewise, the effect of s113 of the Fair Work Act seems to be designed to prevent long service leave from being traded away under enterprise agreements.
 
Preferred hours
 
A proposed agreement that provides that employees may elect to work at times when additional amounts would otherwise be payable under the agreement, and to be paid at the basic hourly rate of pay for working such hours, would not pass the Better Off Overall Test when the terms of a relevant reference instrument provide for payment for ‘preferred hours’ at overtime or penalty rates, and/or the agreement does not provide more beneficial terms and conditions. See Bupa Care Services Pty Ltd and P & A Securities Pty Ltd as trustee for the D’Agostino Family Trust t/a/ Michel’s Patisserie Murwillumbah and Others [2010] FWAFB 2762.
 
 
 

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