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IR Reform Series: Simplifying the BOOT

IR Reform Series: Simplifying the BOOT

Published: 08 Sep 2022

IR Reform Series: Simplifying the BOOT
Written by
Luis Izzo
Luis Izzo
Managing Director - Sydney Workplace
Victor Song
Victor Song
Senior Associate

IR Reform Series: Simplifying the BOOT

Published: 08 Sep 2022

The “better off overall test” (BOOT) is an important safeguard in enterprise bargaining.  The BOOT ensures that the terms and conditions an employee would receive under an enterprise agreement are better off overall than what they would otherwise receive under the relevant modern award. An agreement will not be approved unless it passes the BOOT.

As part of the BOOT process, the Fair Work Commission (FWC) compares the proposed agreement against the relevant modern award to ensure that each and every employee will be “better off overall.”   

At the recent Jobs and Skills Summit, the BOOT has taken centre-stage as a feature employers argue is holding parties back from engaging in enterprise bargaining.

The issue with the BOOT

The criticisms of the BOOT lie with both the legislation and how it is administered.

From a legislative perspective, the BOOT requires the FWC to be satisfied that every employee, and every prospective employee who might be covered by an enterprise agreement, is better off overall under the agreement.  This is problematic because it technically requires the FWC to consider every possible rostering scenario that an employee might be engaged under, even if such a scenario was to never occur. 

There is also a significant concern about how the BOOT is practically administered.

Despite the fact that the Fair Work Act only requires employees to be better off ‘overall’, the FWC still defaults too often to a “line by line” approach to comparing award and EA conditions in determining if a particular worker is better off overall. For instance, it is likely that the FWC will determine that an employee is not better off overall under the agreement if the part time engagement provisions or minimum engagement provisions are lower than the award, even though the employee receives increased rates of pay overall. 

Additionally, qualitative considerations and contingent benefits, such as redundancy benefits, paid parental leave benefits, personal leave benefits and accident pay benefits are often given insignificant weighting by the FWC when comparing if employees are better off overall. As such benefits are contingent on an event occurring, the FWC finds it difficult to weigh these types of benefits against other award monetary entitlements.

The result is a BOOT approval process which becomes difficult to navigate and which often requires employers to give a variety of undertakings to have their agreement approved which were not subject to the bargaining process. 

The prevalence of undertakings is particularly inconsistent with the Government’s stated productivity aims because, at the point at which undertakings are given by an employer, these increased benefits are not (and cannot be) traded off for further productivity gains.

Changes proposed by employer groups

Employer groups have consistently maintained that the BOOT, as presently applied, is unnecessarily technical and complex.  

In particular, when it comes to assessing an EA against future working arrangements or prospective employees, employers have argued that the BOOT should be applied to known, existing or likely working arrangements as opposed to every hypothetical roster scenario which may or may not arise.

Employers argue that the decline in enterprise bargaining (only 11% of private sector workforces are now covered by enterprise agreements, compared to 34% in 2013) can be attributed in large part to the difficulties in succeeding in having EAs approved.

The response by Unions and the Government 

Whilst acknowledging that the BOOT could be ‘simplified’, the Australian Council of Trade Unions (Union) has expressed concern about any changes to the BOOT that may leave workers worse off. 

The same sentiments were initially expressed by the Government’s Workplace Relations Minister, Tony Burke. However, in the past week or so, Minister Burke’s public stance has started to soften and there appears to be an openness to considering changes to the BOOT to assist with the approval of agreements, particularly if a consensus position can be reached with interested employer and employee organisations. 

What are the likely reforms?

In advance of the Jobs and Skills Summit, the ACTU and the Business Council of Australia (BCA) collectively agreed to support simplification of the BOOT, provided that “easy safeguards” were put in place.

The reforms we expect to see would likely involve:
  • a removal of the obligation to consider every possible hypothetical scenario employees might work in future in order for an agreement to be approved
  • the introduction of an application process (much like a take-home pay order) where employees could seek to address any payment concerns if they commence employment with an employer and start working hours under an EA which would leave them worse off than compared to the Award
  • possibly a reshaping of the BOOT to compare the award safety net against the EA on an aggregate basis - instead of the FWC needing to be satisfied that each and every employee is better off overall.

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