McDonald’s Australia Enterprise Agreement 2009 [2010] FWA 1347. ( 23 rd April 2010)

Commissioner Donna “Big Mac” McKenna, formerly of the Industrial Relations Commission of New South Wales, now a Commissioner of Fair Work Australia, has rejected an Application filed by Mc Donald’s, for an Enterprise Agreement to cover its 80,000 employees, employed in all McDonald’s outlets in Australia. The Application under s 185 of the Fair Work Act filed by McDonald’s was supported by the union, the Shop Distributive and Allied Employees Association (SDA) which was closely involved in the making of the Agreement and supported its approval . The Commissioner handed down a 102 page judgment of 383 paragraphs, setting out many reasons why the approval of the proposed Agreement would be declined .

The length of the judgment is more telling, in that there was no contradictor in the case. The application for approval had been filed last December. The matter had been listed for hearing at various times earlier this year when the Commissioner had raised a number of preliminary concerns about the Application. In February this year, she made a Statement expressing further concerns about the proposed Agreement. The parties provided statutory declarations in addition to the material originally filed, in order to allay the concerns of the Commissioner.

The Commissioner’s judgment noted that a number of the declarations made by the Applicant were either insufficient or incorrect, which observation was admitted by the Applicant [6]. Notwithstanding the additional declarations, the Commissioner still found the Application deficient with respect to the provision of information required in support of such an application for approval [10]. The Commissioner considered the pre-approval requirements for an Enterprise Agreement found at s 180 of the Act. The deficiencies and failures individually identified by her would have been sufficient for her to reject the application let alone cumulatively. Of great concern to the Commissioner was that she found the pre-approval requirements under s 180 were not met. These requirements provide that employees need to have a free vote, in possession of all relevant information and explanation of the Agreement with special emphasis on McDonald’s employees, subject to some kind of disability such as their comparative youth, See sub-section 180(6). She could not find that the Agreement was one which the employees in question could have genuinely agreed (s 188),[84[ to [97] inclusive .

In dealing with the issue of whether the Agreement could pass “the better off overall test” (s 186(2)(d)), the Commissioner found that she could not be so satisfied. In considering this test, the Commissioner had regard to the previous industrial regulation applicable to employees at McDonald’s, which had largely been based on discreet industrial instruments in the States and Territories which regulated the minimum pay and conditions of employment for certain classes of employees [1]. The Commissioner had regard to what are called reference instruments, being the industrial instruments currently applicable to McDonald’s throughout the States and Territories in Australia [21] and [22].

Having regard to those pre-existing documents, she stated,

“I am not satisfied the multitude of disadvantages presented by the Agreement is, in a form of overall industrial equilibrium, offset by its marginal advantages. I do not consider the Agreement satisfies the no disadvantage test.” [357]

The depth of the Commissioner’s feelings in relation to the failure of the Agreement to pass this test also known as the no disadvantage test can be gleaned from some of the pejorative descriptors she used regarding aspects of the proposed Agreement. She said,“… the Agreement allows potentially quite exploitative arrangements for rostering of employees—“ [118]; “— the Agreement would provide only flat hourly rates for casual employees in the Territories. This would represent a significant financial disadvantage of around 20% on the hourly rate as against the reference instruments.” [141]; “— wages would be decreased for certain classes of employees.” [155]; “— the Agreement appeared to displace, remove, omit or reduce conditions that would have applied under the reference instruments.” [296]; “An examination of the wage rates shows that in the case of Queensland employees, the starting wage rate for level 1 employees is said to compensate, in an overall sense, for the loss of a range of conditions under the reference instrument is no more than the standard national minimum of $543.78 a week.” [299]; “However, if the adjustments are considered over the life of the Agreement, the adjustments are, in some instances, less than the national minimum adjustment.” [306]; “While I accept the Agreement contains a mix of advantages and disadvantages, I have concluded the Agreement would represent an emphatic diminution in overall terms and conditions for the employees who would be subject to its proposed operation.” [379].

As a parting shot at McDonald’s, in the final paragraph of the judgment, the Commissioner referred a copy of the decision to be sent to the Fair Work Ombudsman to investigate evidence which would suggest that the Applicant or its licensees, or both, may have been underpaying some employees. [383].

The cheapest item for sale at McDonald’s restaurants is the 50c soft serve cone. Commissioner McKenna gave the parties, particularly the bargaining agent the SDA, a serve but certainly not a soft one. This rebuke , a particularly embarrassing one to the SDA, is a reminder that tribunals such as Fair Work Australia will not rubber stamp Agreements. Over twenty years ago during the days of the Wages Accord the Federal Commission investigated wage deals in industrial instruments, which were suspected to have provided wage increases in excess of those permitted under the wage fixation principles . It appears now that a not insignificant part of Fair Work Australia’s duty is to investigate the converse .