The Fair Work Commission (FWC) has refused to approve a proposed enterprise agreement (the Agreement) for burger chain Grill’d despite almost 94% of employees voting for the Agreement. The FWC found that Grill’d failed to properly explain to employees the effect of the Agreement, including that:
- some employees would only be 77c better off per week;
- the Agreement fixed penalty rates as a static dollar amount over its lifetime, meaning that employees would become worse off as annual wage increases to the award were applied; and
- employees would be paid significantly less for work performed during weekends, compared to their entitlements under the underlying award.
Key takeaways
- This ruling deals a blow against agreement models that set penalty rates as a fixed dollar amount, rather than a percentage of the base rate. It sends a message that agreements which pass the better off overall test (BOOT) at test time but immediately make employees worse off following an annual wage increase are up for scrutiny. Employers must ensure they explain the full consequences of entering such an agreement to its employees.
- Employers should also consider the demographics of their workforce when explaining the terms and effect of a proposed enterprise agreement, and how that may impact their ability to understand the agreement. High staff turnover and a young, inexperienced workforce are 2 factors that may require employers to be much clearer about the impact of proposed agreements, as it cannot be assumed that the employees understand the terms or effect of the agreement.
- Employers should turn their mind to the ways in which they set out comparisons between a proposed agreement and any underlying awards. For example, if penalty rates are set out as a dollar amount in the agreement and a percentage rate in the award, consider converting the percentage rate to a dollar amount for ease of comparison.
- While employers do not need to explain every variation between a current agreement, proposed agreement and associated award in detail, employers should be careful when choosing which terms to include in their explanatory material. For example, substantive terms which differ significantly should be prioritised over terms which are not changing. Where in doubt, employers should err on the side of explaining a change.
Background
In late 2024, Grill’d applied to the FWC for approval of an enterprise agreement to replace its 2020 agreement, which had passed its nominal expiry date. The Agreement covers approximately 4,278 employees. 3118 employees voted to approve the Agreement, out of 3,319 employees who cast a valid vote (93.94%).
Of the employees who would be covered by the Agreement, approximately 2,774 were under 21 years old.
The relevant modern award for the purposes of the BOOT was the Fast Food Industry Award 2020 (the Award).
Decision and reasoning
The FWC refused to approve the Agreement, finding that Grill’d had painted an overly “rosy” picture of its terms. Although Grill’d explained the pay and conditions in the Agreement, it had not sufficiently explained their effect.
Agreement “barely” passed the BOOT
The BOOT modelling provided by Grill’d showed that employees would be between 77c and $47.52 per week better off (with the median being $4.89) compared to the Award. If certain employees did not take the full value of the $18 free meal offered by Grill’d, they would not be better off under the Agreement. Further, the only guaranteed wage increase in the Agreement was a 1% per year increase over the nominal life of the Agreement.
The Fair Work Act requires the FWC to consider only if the Agreement leaves employees better off than the Award at the time the Agreement is approved. Flagging that she was unable to consider what might occur over the Agreement’s life, Deputy President O’Neill found the Agreement passed the BOOT as at the time of assessment, although “barely for some employees”.
O’Neill DP also noted that the 1% pay rise per year meant that any benefits under the Agreement were likely to be “eroded”, and that rates of pay “may well” dip below the award rate over time.
Grill’d employees did not genuinely agree to the Agreement
Despite almost 94% of employees voting for the Agreement, O’Neill DP found that the employees had not genuinely agreed to the Agreement, as Grill’d had not provided adequate explanations. This was due to a combination of selective disclosure in the explanatory material, the demographics of the Grill’d workforce, and statements provided by Grill’d which painted a favourable picture of the Agreement.
Selective disclosure in explanatory material
O’Neill DP found that Grill’d did not fully explain that, under the Agreement, penalty rates were fixed at a specific amount and not as a percentage of the base rate. Grill’d did not explain that, unlike the Award, the rates under the Agreement remained static for the life of the Agreement. Grill’d also failed to outline the consequences that would flow from that (i.e. that the penalty rates would not change when wages increased).
The explanatory material provided by Grill’d asserted that wage terms were better in the Agreement compared to the Award – for example, the base wage rates were set out in dollar amounts, which clearly showed that the Agreement rates were higher than the rates in both the Award and 2020 agreement. However, the penalty rates in relation to the Award were set out in terms of loading percentages, while the penalty rates in relation to the Agreement were set out in dollar amounts, making it difficult for employees to compare their entitlements.
Additionally, Grill’d provided pay comparisons for hours worked on weekends between 10:00pm and 6:00am, but not for hours worked on weekends between 6:00am and 10:00pm – despite work between 6:00am and 10:00pm being a considerably more common occurrence. Although employees were better off between 10:00pm and 6:00am, work performed between 6:00am and 10:00pm would be paid significantly lower rates under the Agreement compared to the Award. Employees would need to undertake various calculations to understand this.
The explanatory table also excluded substantive terms which differed significantly from the 2020 agreement and the Award, instead including terms where no change was involved. Examples highlighted by the O’Neill DP included:
- a clause providing that employees may be required to work at other locations without being paid for extra travelling time or fares incurred;
- the absence of any reference to the right under the Award to be reimbursed for travel costs in certain circumstances; and
- the absence of any reference to the Award’s provision for accident make-up pay.
Employee demographics
The problems with the explanatory materials were magnified as two-thirds of the employees were under 21 (and as such many would have no previous employment experience), and Grill’d has a staff turnover rate of 60% to 80% per year. Given the demographic of its workforce, merely providing a comparison of the Award to the Agreement was not considered taking reasonable steps to explain the Agreement.
O’Neill DP noted that the proposed agreement was very similar to the 2020 agreement, and that, in many circumstances, this would be a compelling factor in her assessment. Under other circumstances, it could be presumed that employees would have come to understand the current terms and their effects over the course of their employment. However, the high turnover rate coupled with the young age range of the staff meant she could not make that presumption.
Painting a “rosy picture”
O’Neill DP also remarked on various statements made by Grill’d to employees, including:
- that the FWC conducts its own BOOT “to ensure that you are protected and provided with favourable conditions as compared to the Award”; and
- “Grill’d goals are clear, they want to provide our restaurant teams with an agreement that is better than what we would get under the FFI Award”.
O’Neill DP noted that the “combined and cumulative effect of such statements and selections of what was and wasn’t detailed in the explanation” painted a “rosy picture of the Agreement”. Although there was nothing inherently wrong with doing that, the favourable picture combined with the demographics of the workforce and that employees may only be 77c per week better off under the Agreement meant that Grill’d did not take all reasonable steps to explain the effect of the terms of the Agreement.
The risks of overly focussing on an agreement’s positives have also been highlighted in another recent FWC decision, Application by I-MED Regional Pty Ltd [2025] FWC 1221, in which Commissioner Tran rejected an agreement approval application. Commissioner Tran stated that, while it is “acceptable for an employer to encourage employees to vote for an agreement by highlighting the positive aspects … in the absence of pointing out specific differences and changes”, the employer failed to take all reasonable steps to explain the agreement’s terms and effects so the employees could make an informed choice.
Burnt offerings and a push for termination
Following O’Neill DP’s initial decision, Grill’d offered undertakings which would leave some employees $3.10 better off per week, increased from 77c. Although this passed the BOOT “slightly more convincingly” than the previous proposal, this was not enough to convince O’Neill DP. The increased wage undertaking was not enough to address her concerns about the Agreement and, further, the margin remained at a level which was “likely to be eroded” by increases in the Award rates over the nominal life of the Agreement.
The Shop, Distributive and Allied Employees Association (SDA) has also applied to terminate the expired 2020 agreement and revert employees back to the Award. If successful, this will lead to wage increases between 1% and 37% for the workforce. The SDA argues that the expired 2020 agreement means that employees are bargaining from a lower starting point compared to if they were covered by the Award. The SDA is also moving to terminate up to 15 franchisee agreements that leave employees worse off.
We will continue to provide updates as this case evolves – watch this space! In the meantime, employers must be careful about the way they explain their agreements to their workforce, taking into account any demographic characteristics that may impact the level of detail that needs to be provided.
Cases: Grill’d Pty Ltd [2025] FWC 1097 (17 April 2025), Grill’d Pty Ltd [2025] FWC 1275 (8 May 2025)
