Is your Enterprise Agreement a time bomb?

The public have expressed outrage regarding recent revelations surrounding Bakers Delights’ employment arrangements at some of its Victorian franchises.

Earlier this week most media outlets jumped on the story of a young girl allegedly being paid just $38.50 for a 4 hour Sunday shift (which is reportedly around half of what she would be entitled to under the applicable modern award).

It is clear from even a cursory review of the media articles and commentary on this matter that Bakers Delight is being portrayed as being “dodgy” or ripping off their workers.

The truth is, however, that Bakers Delight has an enterprise agreement in place that legally allows them to pay the rates that they are paying.

Many employers entered into workplace agreements under the “Work Choices” regime which allowed them to reduce or otherwise totally exclude penalty rates, loading and allowances. Whilst such an agreement could not be made now, old agreements continue to operate unless they are replaced by a new enterprise agreement or are otherwise terminated by the Fair Work Commission (either by agreement between the parties or following a unilateral application).

Whilst many would argue that these old Work Choices agreements operate unfairly (in that they permit employees to be paid much less than they would otherwise be entitled to if the agreement was made now), the fact remains that employers that have these agreements in place are lawfully able to apply them.

Unless Bakers Delight has been paying less than what their agreement requires, or less than the minimum hourly rate (excluding penalties, loadings and allowances) that would otherwise apply under an applicable award, they have done nothing wrong.

However, the public clearly takes a dim view of such agreements and employers that operate under such agreements could find themselves under scrutiny like Bakers Delight is currently facing. You would also expect that employers that pay far less than the current award entitlements (and therefore likely far less than their competitors) may also struggle to attract and retain quality employees.

The employee at the centre of this recent scandal is seeking to have the workplace agreement terminated by the Fair Work Commission. This is something that any employee covered by a workplace or enterprise agreement can do once it has passed its nominal expiry date.

In circumstances where an agreement is many years past its nominal expiry date and provides for inferior terms and conditions compared to the current award, it is extremely likely that the Fair Work Commission would grant an order to terminate the agreement (assuming an eligible person makes a termination application).

If a workplace or enterprise agreement is terminated, the employees that were covered by the agreement fall back on to any other applicable enterprise agreement or, failing that, the applicable award.

In Bakers Delights’ case, the Fair Work Commission has dismissed the employee’s application for termination of the agreement on the basis that she had resigned at the time the application was made and therefore was not eligible to bring such an application. A lucky escape for Bakers Delight, albeit likely only a temporary reprieve as you would expect some other employee (or their union) to make a similar application in due course.

This matter shows that it only takes one unhappy employee to potentially unravel your entire workplace or enterprise agreement. Essentially, an out of date agreement is a time bomb waiting to go off. 

An unplanned or unexpected termination of a workplace or enterprise agreement can be very disruptive (and expensive) for businesses. If your organisation operates under an expired agreement you may wish to seek advice on your risks and options in relation to the agreement.  

Kristin Ramsey is a Director at Hynes Legal and heads up the firm's Employment and Workplace Relations team. She predominately acts for medium sized businesses in the hospitality, retail, health & fitness, engineering, labour hire & recruitment, and aged care industries. 

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