BOOT test explained

For an enterprise agreement to be registered by the Fair Work Commission, it is necessary that the Commission be satisfied that a number of procedural steps have been followed and significantly that the proposed agreement passes the better off overall test; that is to say that the employees to be covered by the agreement will be better off under it than under an applicable modern award.

Here are the principles.

“It is well established that the test requires the identification of terms which are more beneficial for an employee, terms which are less beneficial for an employee, and an overall assessment of whether an employee would be better off under the agreement. 19 The overall assessment involves a global comparison.20 However, it is clear from s.193(1) that this global comparison must be undertaken in relation to ‘each’ award covered and prospective award covered employee.21 The test is not directed at whether most employees or most classes of employees are better off.

S.193(3) permits the Commission to assume that, if a particular class of employees is better off under an agreement, an employee who belongs to that class would also be better off. But the Commission may only make this assumption ‘in the absence of evidence to the contrary’. This provision only serves to underscore what is evident in the language of s.193(1); the test must be conducted in relation to each employee…………………

S.193(1) requires one to consider the position of each existing ‘award covered employee’ and each ‘prospective award covered employee’ under the agreement and the award. S.193(4) defines ‘award covered employee’ to mean an employee who would be covered by the agreement and:

‘(b) at the test time, is covered by a modern award … that

(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(iii) covers his or her employer.’…………………………

Returning again to the wording of s.193(1), the next question is whether this employee would be better off overall if the agreement applied to him or her than if the relevant modern award applied. S.47 of the Act explains when an award applies to an employee, namely if the award covers the employee, is in operation, and no other provision of the Act has the effect that the award does not apply (for example, by virtue of an agreement applying to the person). It appears then that the Award could apply to a prospective casual production employee. The above suggests that, at least on one analysis, the BOOT could be conducted in relation to a prospective award covered casual employee.

The BOOT, in relation to prospective employees, addresses a hypothetical scenario. It is established for the purposes of comparing the position of the notional employee under the agreement on the one hand and the award on the other. The hypothetical scenario is a construct. It does not require that one work backwards to construct a realistic narrative about the employer’s hypothetical decision to engage an employee either under the award or the agreement……………………

For its part, the employer contended that the Agreement incorporates the Award, applies all relevant penalties and loadings, assigns a 25% loading for casuals, and affords an additional 1% remuneration. In this last mentioned respect, the company emphasised that the commitment in clause 5.1 was that employees would receive 1% more remuneration than what they would have received under the Award, applied not just to the rate of pay, but also to other Award benefits. Whatever the total payments under the Award would have been, at least 1% more is paid under the Agreement. 44

At the hearing, the employer adverted to a further benefit arising under the Agreement, namely a travel allowance that is provided through clause 11.2(b). Employees receive $20 a day where transport is not provided by the company to the work site in certain circumstances. However, this is a contingent benefit, and there was no evidence as to the expected or likely incidence of its use. The scale of the benefit is small, and we do not think it has any bearing on the BOOT.

Satisfaction of the BOOT under s.186(2)(d) is a jurisdictional prerequisite for the approval of an enterprise agreement. It also is a matter that involves the exercise of discretion, and involves a degree of subjectivity or value judgement. 45 The issue before us is whether the Commissioner made an error of the kind described in House v The King46 in making his decision.

We do not consider that any such error was made in the Commissioner’s application of the BOOT, or his decision to approve the Agreement. The Agreement incorporates the Award, and guarantees that employees will receive 1% more than the remuneration they would have received under the Award. The casual engagement of production and engineering employees is not permitted under the Award; it is permitted under the Agreement, but affords a 25% loading. In our view, the Commissioner’s conclusion that the Agreement satisfied the BOOT was not affected by appealable error………………”

Construction, Forestry, Mining and Energy Union v SESLS Industrial Pty Ltd (2017) FWCFB 3659 delivered 2 August 2017 per Ross J, Colman DP and Cirkovic C