As Australian businesses get ready for the introduction of the
Rudd Government's Fair Work Act 2009 (Cth) (FW
Act) and its agreement-making provisions, one area that
remains uncertain is how the new "better off overall"
test (BOOT), will be applied to enterprise
agreements under the new Act.
Whilst the bulk of the FW Act (including the new agreement
making provisions) will come into force on 1 July 2009, the BOOT
will not come into operation until 1 January 2010.
This means that in the interim period between 1 July 2009 (when
the FW Act commences) and 1 January 2010 (when modern awards are
introduced), any enterprise agreements lodged will be assessed
against the no-disadvantage test (NDT) and any
applicable common rule award. From 1 January 2010 onwards,
enterprise agreements will instead be assessed against the BOOT, as
against the new modern awards.
So what is the difference between the NDT and the BOOT?
Whilst at first glance the two tests may appear similar in
nature – since they both compare a set of proposed terms
against a set of minimum conditions (for example, an award), much
of the difference lies in what they purport to achieve. The NDT
seeks to ensure that employees will "not be
disadvantaged" as against an applicable award, whereas the
BOOT requires that the employees are in fact "better off
overall". This distinction alone would suggest that the BOOT
test is intended to be a higher bar than its predecessor.
An enterprise agreement passes the BOOT if the new testing body
Fair Work Australia is satisfied, as at the test time, that each
award covered employee (and prospective award covered employee)
would be better off overall if the agreement applied than if the
applicable modern award applied to the employee.
The test time is the time the application for approval
of an agreement is made.
Fair Work Australia also retains the discretion to approve an
agreement which does not pass the BOOT if it is satisfied that,
because of exceptional circumstances, approval would not be
contrary to the public interest.
In an interesting last minute amendment to the legislation, Fair
Work Australia will be allowed to test "classes of
employees", rather than each and every employee (or
prospective employee). The FW Act also provides for an assumption
that unless evidence is provided to the contrary, if a
"class" of employees' passes the BOOT, then each
individual is assumed to pass.
Additional key issues to note with regard to agreements
the nominal life of an agreement will be reduced to 4 years
(rather than a possible 5 years for collective agreements);
any agreements entered into from the commencement of the FW Act
will be subject to good faith bargaining requirements and
notification requirements; and
employers must ensure that from 1 January 2010 that the
agreements provide no less than the base rate of pay from the
modern awards and incorporate the new National Employment
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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