The Case

ALDI Foods Pty Ltd (ALDI) wished to expand its operations by opening stores in South Australia. In May 2015, 17 existing ALDI employees who were already working in New South Wales, Victoria and Queensland accepted offers of employment to work in South Australia once the new stores were constructed. In the interim, they continued to work in their home states.

ALDI negotiated an enterprise agreement with the 17 employees who would work in the new South Australian stores. The employees voted to approve the agreement. The Fair Work Commission (the FWC) approved the agreement.

The Shop, Distributive & Allied Employees Association (SDA) was not a bargaining representative to the agreement-making process and so was not a party to the first hearing before the FWC where the agreement had been approved.

The SDA appealed the approval, however the Full Bench of the FWC dismissed the appeal.

The SDA then appealed to the Federal Court on three grounds:

1. the agreement was not genuinely agreed to because the employees had not commenced employment in the new South Australian stores;

2. the FWC had misapplied the Better Off Overall Test (BOOT); and

3. the Notice of Employee Representational Rights (NERR) sent to the employees was not in the required form.

The Verdict

The Full Court of the Federal Court overturned the FWC’s approval of the enterprise agreement on the following grounds:

• the employees who voted to approve the agreement had not commenced employment in the South Australian stores and hence were not employees who were “covered by” the agreement – as such, they could not vote to approve it; and
• the FWC had misapplied the BOOT. The FWC had relied on a clause that gave employees the right to request that ALDI compare their pay with what they would have been paid under the modern award. ALDI had to compensate the employees for any shortfall. This meant at best the employees were in the same position as if they were employed under the modern award but were not better off than under the modern award.

The Full Court of the Federal Court found that the NERR sent to the employees was not in the required form as it used the word “leader” instead of “employer” in one sentence.

However, the Federal Court did not rely on this as a reason for overturning the approval of the agreement because the SDA had not argued this before the FWC.

Lessons For You

Only greenfield agreements can be made when employees are not yet performing the work that will be covered by the agreement.

If the terms and conditions of an enterprise agreement simply put employees in an equivalent position to what they would be under a relevant modern award, this will not satisfy the BOOT. Employees must be better off under the enterprise agreement when compared with the relevant modern award.

You must check that a NERR conforms to the requirements in the Fair Work Act 2009 (Cth), otherwise the agreement may not be approved.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.