Better Off Overall Test: Enterprise Agreements vs Modern Awards

This article discusses the better off overall test and argues that enterprise agreements are better than modern awards from an employee's perspective. It explores the differences between enterprise agreements and modern awards, the benefits of enterprise agreements, and the limitations of the current model. The article concludes by emphasizing the importance of understanding the terms and conditions of an enterprise agreement before entering into one.

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The better off overall test ensures that, from an employee’s perspective,
enterprise agreements are better than modern awards.
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Introduction
Employment issues have arguably played a prominent role in our life, particularly if
the matter at hand is related to wages and other fundamental conditions of an employee. The
laws have covered major aspects of these considerations .However, some of the more
fundamental laws regarding enterprise agreement and modern awards have received a
significant space in various discussions. The award system in Australia has introduced
standards of employment that would safeguard employees. The enterprise agreement creates
a safety net on matters concerning pay rates and certain conditions of employment. However,
the enterprise agreement introduced new abilities for employees to make an agreement to
different terms and conditions of employment. Therefore, I agree with the statement that the
better off overall test ensures that, from an employee’s perspective, enterprise agreements are
better than modern awards. In order to be ratified by the FWC, enterprise agreement must
pass the 'better off overall' test (BOOT). A contract often passes the test of every award
protected employee, and every potential award-covered worker would be better off overall
under the contract compared to the pertinent modern award.
Discussion and Analysis
The Fair Work Act (FWA) allows both employees and employers to develop binding
enterprise agreements that are achieved when the majority of staffs who have validly voted,
supported an agreement and follow the provisions under S. 182 of the FWA. It is important to
note that once the enterprise agreement is put to effect, a modern award cannot be applied
and thus the enterprise agreement prevails as indicated in s 57 of the FWA. A modern award
can be described as documentation which provides the least possible terms of engagement
above the National employment standards. Enterprise agreement on the other hand sets out
the least possible terms and conditions of employment below the National employment

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standards (Oliver, 2010). Moreover, modern awards are applicable to all workers under the
national workplace association schemes. Therefore, Modern awards are simply occupational
based frameworks that are only applicable to both employers and employees who conduct
their work under unions or other work groups. This simply shows that some employees such
as senior managers among other higher income employees might not be covered by a modern
award regardless of the policy being applied to the industry in which they work. Therefore, to
some extent, the modern award never provides an explicit outline for all employees and
employers.
Fontana, et al., (2015) indicates that if a business is covered by a registered
agreement, it is often that the conditions of a modern award are never applicable or relevant
altogether. However, if the bases of payment rates in an enterprise agreement are much lower
than those provided under the modern award, the modern award might be applicable.
However, this does not guarantee that all employees would be protected by the award. When
an employee is not protected by an award, they are often considered to be award and
agreement free. In such circumstances, the national minimum wage and the National
employment standards are often used to set the minimum terms of employment. This clearly
shows that the agreement will always replace awards as it is designed by both the employer
and the employee and not the industrial relations commission (Penning, 2009).
The establishment of the modern award back in early 2010 imposed new and
challenging employment conditions on many employers. The idea is that most of the
conditions are not suited for most business. Therefore, the majority of employer perspective
consider that enterprise agreement as a better way of addressing these problems, as it suitably
replaces the relevant modern award (Creighton, & Forsyth, 2012).
The introduction of the enterprise agreement by an employer as a centrepiece of
industrial relations has placed significant emphasis on employers and employees handling the

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arrangement of their workplace and making decisions that are solely suitable for their own
interests. The foundational premise is that Enterprise agreement reduces interference by the
state thus improving the productivity of employees. Breyer,& Breyer, (2009) believes that
arrangements on wages and other terms of employment would assist a properly functioning
market and significant employment growth. That being said, most employers have the belief
that reducing the union power and implementing enterprise agreement significantly helps to
grow a properly functioning market. This makes it's clear that it is only through a simplified
agreement-making process, can the full potential for employee productivity can be realised.
The frameworks of enterprise agreement will drive future organisational growth and
employee productivity, and increase further living standards. The clearest expressions by
Forsyth, & Stewart, (2009) claim that agreement making between employee and the
employer, often lift productivity particularly if it is tailored for specific employees .He further
indicates that encouraging employee contribution increases the use of individual workplace
desires which in turn generate a single largest productivity boost compared to the ideas
proposed under the concept of a modern award (Chapman, 2009).
Under the FWA terms, a valid majority must be secured either through a balloting
system or other ways that can be used to obtain employee approval. Informed consent
necessitate that employee has access to all the provisions of the agreement at least 14 days
prior to making the agreement. In this way, the employees are provided with ample time to
make decisions or propose amendments before making the agreement. This also ensures that
they have received proper explanations regarding the provisions of the agreement prior to
signing the agreement. Therefore, such justifications must always be right considering the
specific conditions and the need of the workers (Bray, & Macneil, 2011). However, Modern
awards never define what a better explanation involves. Therefore, most employers feel that
it does not clarify whether any explanations requested by the employees necessitate the

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employer to compare the contract with the award, or top elaborate how it relates with other
provisions within the same industry. Recent studies by the Centre for Employment and
Labour Relations and regulation surveyed the efficiency of various legal statutes in protecting
the workers interests in the enterprise agreement process. The study shows that the Enterprise
agreement has very little gaps particularly to the provisions of informed consent by
employees. Most of the statutory provisions carry ample information regarding the drawbacks
of a contract, and how the conditions set out in the agreement are related to an
award .Therefore, in most statutory declarations its often clarified that the employer has even
gone beyond providing the employee with an opportunity to ask questions regarding the
agreement and further taking positive actions to elaborate the consequences of the terms
(Pocock, Charlesworth, & Chapman, 2013). However, other evidence from the study cast
suspicion on the sufficiency of banking on statutory assertions supplementary to the
certification of the agreement. This is because statutory declaration in most cases is prepared
in standard form both by establishments and unions, even across different businesses. This
implies that there are instances that valid majority and cognisant consent are overlooked.
However tailor-made similar propositions from both the employer and the union are often
prepared on the basis of the key regulatory environment, an issue that makes it’s still a better
option (Oliver, 2016).
Overall the rations for negotiating in good faith often allows workers including
managers and high-income earners to have the ability to negotiate if they pick the same. This
to some degree redresses the power disparity that often exists between an employer and the
employee and has further helped in enabling negotiations. Since the introduction of enterprise
agreement decisions under section 228 of the Fair Work Act of 2009 (Cth), much has been
done to explain the restrictions under the existing provisions (Heron, & Charlesworth, 2012).
A recent instance involved the APESMA v Peabody Energy Coal Ltd. (‘Peabody’). The

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corporation had initially declined to make an enterprise agreement favouring either the
workers remained in modern award terms or individual contracts. Following an application
by the majority to provide a reviewed proposal which considered all matters raised by the
employees and the company, the employer conceded and employer’s matters were put into
consideration. This particular matter follows the decision by the Coal Pty Ltd v APESMA. In
this case, the court determined that the bargaining representative might be held accountable in
case they fell short of the good faith in negotiating the requirements of the relevant parties
(Cooper, 2010).The judges considered this as a failure to put forward the proposals or
counter-proposals terms by the relevant parties. However, the current laws do not necessitate
the negotiating parties to actually come into an agreement which according to Oliver, (2012)
remains as a flaw in the enterprise agreement.
It is pretty evident that through the modern award method, most workers are trading
away other non-financial rights which don’t even seem to be pertinent by authorities in the
negotiation process. These factors might themselves be classified into two factions. One part
involves the quality of working conditions by employees. The negotiation process needs both
parties to apply their considerations “on balance”. Therefore, in such a situation ‘on balance’
might make it challenging to circumvent the assumption that many workers are struggling
with a major decline in the quality of their working condition in multiple aspects. For
instance many have been suffering the loss of explicitly defined weeks, being forced to work
on unbalanced schedules with constant disruptions to personal life (Peetz, & Preston, 2009).
As a result, many workers are denied the opportunity to decide when they want to be off
work. Many do not have authority over the type of job responsibilities and functions as much
of the choices have been given away in modern award arrangements.
The second part involves workplace power. Award often made on unions have given a
foundation for union-based authorities with businesses. In shifting to union based frameworks

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or employment groups systems, employees are in most cases being stripped off their
defensive power to protest against administrative discretion. This implies that not only is the
Modern award process changing what were considered as employment civil rights into
matters of management discretion , but further eliminating the countervailing powers which
might interfere with the exercise of discretion. Most Modern award agreements tend to
extend the powers of the employer on matters such as work schedule, the allocation of job
obligations among others, without the need to consult with the employees (Stewart, 2013).
Most consider that such a shift of power may be termed as a ‘non-union premium’ as part of
the negotiation process. However, as discussed earlier, these matters are considered as
irrelevant by the established order.
Conclusion
To summarise, an Enterprise agreement has brought to both employees and employers
much greater flexibility in organising and managing work. While various studies still show
that there are still areas that need change, it also in the cases to consider it as better often as
compared to modern award. Moreover, the enterprise agreement has protection incorporated
into its processes, often created to protect employee and ensure that their interests are put into
consideration. If you are an employee in an organisation that is considering implementing an
enterprise agreement, it is important to first ensure that you understand the terms and
conditions. This would ensure that the overall negotiations leave you “better off overall.”
Enterprise agreement is key to the creation of more favourable conditions and has a
fundamental role in the future of both employees and employers. However, as discussed
earlier, there still a number of limitations in the existing model. One of the proposals is that
the Enterprise agreement ought to only happen between one employer and their employees.
All the deliberations should not be reflected in other enterprises, even within the same
industry. Even though the process of reaching an agreement might be long , the outcome

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of enterprise agreement can be more beneficial to employees , especially in
circumstances that might not always be foreseeable when applying Modern award
processes. However , the observations that have been made in this paper should not
conceal the significance of a larger-order issue intrinsic in the development of much
better labour laws in Australia .

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