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A teenage employee of a yoghurt shop has successfully applied to the Fair Work Commission (FWC) for the termination of a workplace collective agreement that was “out of step with the contemporary minimum standards set by modern awards”.

In a blog late last year, we discussed the process by which an enterprise agreement can be terminated. In short, the Fair Work Act 2009 (Cth) (FW Act) provides that, once the nominal expiry date of an agreement has passed, a party covered by the agreement can apply to the FWC to have it terminated (although it can also be terminated prior to the nominal expiry date with agreement from all parties).

The FWC must terminate an agreement if:

• It is not contrary to the public interest to do so; and
• It is appropriate in the circumstances, taking into account the views of the parties and the likely effect that termination of the agreement will have on them.

In this particular application, the employee, represented by her mother, submitted that The Yoghurt Shop Pty Ltd Collective Agreement Number One (2006) (the Agreement) should be terminated.

The Agreement was made prior to the commencement of the FW Act and became a collective agreement-based transitional instrument when the FW Act was introduced. The effect was that the Agreement has continued to operate past its nominal expiry date in late November 2009.

The employee submitted that over time, the Agreement had failed to keep up with the minimum standards for employees under the applicable modern awards since their introduction in 2010. As a result, the Agreement failed the Better Off Overall Test that proposed enterprise agreements are required to satisfy before being approved by the FWC.

Given that The Yoghurt Shop had been on notice of this issue since at least December 2017, the employee submitted that the termination of the Agreement should have immediate effect and employees should be allowed to fall back on the applicable modern award.

The employers operating under The Yoghurt Shop franchise conceded that “the Agreement is now a very old instrument and that its termination was not inappropriate and was supported in principle”.

However, a request was made that its termination be delayed for some two months noting that under the FW Act, the FWC was required to have regard to the views of other employees (which were yet to be canvassed) and, from a practical perspective, the increase in wages resulting from termination of the Agreement would require the employers to give consideration to restructuring and implementing more cost-effective and profitable business structures.

The FWC noted that this application had been made with no opposition, and that there was a very strong case that termination was in the best interests of the employees. It was nonetheless agreed that immediate termination would inevitably result in changes to staffing and other arrangements, but given the nature and small size of the franchises, this was likely to be uncomplex.

A one-month delay (to 23 March 2018) was granted, which the FWC noted would also allow the employers to identify the modern award most relevant to their employees.

In the meantime, the employers are bound to pay the base rate of pay provided by the relevant modern award (but not penalties and other additional payments) and are also bound by the National Employment Standards (NES) set out in the FW Act.

Lessons for employers

This decision is a reminder to employers that the right to make an application for the termination of an enterprise agreement is given to all parties covered by the agreement – including individual employees. Accordingly, employers with agreements that have past their nominal expiry date should be prepared for the possibility that the agreement may be terminated on application by a single employee and they should have a plan for falling back to the coverage of a modern award or negotiating a new agreement.

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