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Allens Arthur Robinson

Focus: Workplace Relations – January 2005

In this issue: We look at the protected status of industrial action; workers' compensation benefits; negotiating certified agreements; offshore petroleum OHS legislation; and contract negotiations.

Federal Court weighs-in on Electrolux

In brief: The Federal Court has had an opportunity to consider the range of matters pertaining to the employment relationship, in a recent decision involving a challenge to the protected status of industrial action. Senior Associate Simon Dewberry reports.

Background

Following a breakdown of enterprise bargaining negotiations with the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (the AMWU), maintenance workers at a Wesfarmers Premier Coal Limited (Wesfarmers) mine went on strike in July and October 2004.

Wesfarmers brought an action in the Federal Court alleging that the industrial action was unlawful,1 as the strikes were not covered by the 'protected action' provisions of the Workplace Relations Act 1996 (Cth) (the Act). Wesfarmers argued that the agreement proposed by the AMWU contained provisions that did not pertain to the employment relationship, meaning that the agreement could not ultimately be certified and (based on the High Court's decision in Electrolux2 on 2 September 2004) industrial action taken in support of the agreement was not protected.

Was the strike action protected?

The Federal Court held that the strike action undertaken in July 2004 was protected action by virtue of the Workplace Relations Amendment (Agreement for Validation) Act 2004 (Cth), validating industrial action occurring before 2 September 2004 (see our report on this legislation in AAR Focus: Workplace Relations, December 2004).

However, the court held that the October 2004 strike action was not covered by the amending legislation and was not protected action, because the proposed agreement contained provisions that did not pertain to the employment relationship.

The court held that the object of all of the officers of the union organising the October 2004 strike was to coerce Wesfarmers to make a certified agreement, in breach of section 170NC of the Act.

Which matters pertained to the employment relationship?

The Federal Court held that the proposed agreement included the following matters that did not pertain to the employment relationship:

  • paid leave for employees to attend union meetings when not rostered to work; and
  • restrictions on the employer's right to use independent contractors.

The Federal Court held that the following matters did pertain to the employment relationship:

  • paid leave for employees to attend union meetings when rostered to work;
  • leave for local government representatives in the workplace to attend local government meetings;
  • a prohibition on forced redundancies; and
  • a union right of entry clause entrenching the statutory right of entry.
What guidance?

The Federal Court's interpretation in this case is more akin to the less restrictive approach of the Australian Industrial Relations Commission (AIRC) in cases such as Ballantyne3 (see our report on this decision in AAR Focus: Workplace Relations, November 2004). It is, however, a more restrictive approach than the Federal Court took in the cases that preceded the High Court's decision in Electrolux.

Given the differing views on the allowable limits, negotiating parties are left with no clear guidance about which terms may be the subject of forceful negotiations and which may not. As a result, industrial action retains an element of risk, as there are no guarantees that it will be deemed protected.

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Loss of pay while on workers' compensation deemed unfair

In brief: The Queensland Industrial Relations Commission has used its power to amend unfair contracts to grant an employee the difference between the amount received while on workers' compensation benefits and his usual remuneration package. Lawyer John Naughton reports.

Background

Mr Gersten, a lawyer, applied under section 276 of the Industrial Relations Act 1999 (Qld) to have his contract amended on various grounds of unfairness, including that:

  • the contract did not provide for reimbursement of legal costs for pursuing employment issues; and
  • the contract did not require the employer to pay the difference between workers' compensation payments and the remuneration he ordinarily received while at work.
Consideration of unfairness

The Commission accepted4 Mr Gersten's application in relation to legal costs, but only for his attendance at conciliation conferences that could have been avoided if the employer had made appropriate concessions sooner. The Commission awarded Mr Gersten $10,000 for legal costs on the basis that the contract operated unfairly in light of the employer's conduct.

Significantly, the Commission also accepted Mr Gersten's claim that the contract operated unfairly because it did not contain a term requiring the employer to pay the difference between the workers' compensation payments he received, and his usual remuneration. The Commission came to this conclusion on the basis that Mr Gersten's absence on workers' compensation resulted directly from him being abused and assaulted by his supervisor, who did not give evidence in the proceedings. The Commission considered it unfair that Mr Gersten should be substantially out-of-pocket as a consequence of the supervisor's conduct, and awarded him an additional $12,000.

Case limited to its own facts?

Workers' compensation entitlements in Queensland are usually payable at the rate of 85 per cent of normal weekly earnings. The entitlement is also subject to exclusions that mean that employees do not receive remuneration while absent from work on workers' compensation benefits.

The Commission's decision leaves open the prospect that other employees who proceed on workers' compensation as a consequence of treatment by a supervisor might also claim the difference between statutory compensation and usual remuneration. Given the number of absences on workers' compensation attributed to the alleged conduct of managers and supervisors, the number of potential claimants could be substantial.

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Employers not required to negotiate

In brief: The Queensland Industrial Relations Commission has ruled that an employer cannot be forced to negotiate a certified agreement. Senior Associate Simon Dewberry reports.

Background

The Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland (the AMWU) sought to negotiate a certified agreement with Townsville Engineering Industries Pty Ltd (Townsville Engineering). Townsville Engineering advised the AMWU that it was not prepared to negotiate a certified agreement.

The AMWU applied to the Queensland Industrial Relations Commission to seek assistance to make a certified agreement. After Townsville Engineering held its position (that it was not prepared to negotiate), the Commission referred the matter to arbitration.

Decision

Commissioner Blades ruled that there is nothing in the Industrial Relations Act 1999 (Qld) (the Act) that requires that an employer must make a certified agreement and, therefore, if an employer does not want an agreement and does not wish to negotiate at all, then that is its right.

The Commission also considered its jurisdiction to arbitrate the impasse under section 149(4) of the Act, requiring the Commission to limit its considerations to the 'matters at issue' during negotiations. Commissioner Blades held that if the employer does not seek an agreement, there have been no negotiations, and there can be no 'matters at issue' on which the Commission can arbitrate.

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Offshore petroleum OHS legislation

In brief: On 1 January this year, the National Offshore Petroleum Safety Authority took over OHS regulation of the offshore upstream petroleum industry, which was previously regulated by a complicated state and federal legislative regime. Lawyer Dr Kirk Lovric, a former oil and gas industry OHS consultant, examines the impact and benefits of national regulation.

Background

Under the previous regulatory regime, the legislation of the adjacent state was applied in offshore petroleum operations, unless inconsistent with federal legislation,5 which meant that both state and federal occupational health and safety (OHS) regimes were administered offshore. To complicate matters further, the federal government passed safety case regulations in 19966 that required offshore operators to comply with a federal approved safety case. This meant that the OHS regulation that applied to the offshore upstream petroleum industry was complicated and often inconsistent.

To improve investment in the industry and to assist current operators to improve risk management, the federal government has established the National Offshore Petroleum Safety Authority (NOPSA), which began operating on 1 January 2005.7

The NOPSA regime does not radically change current law; it simply eliminates former inconsistent state-based OHS requirements and provides regulatory administration through a single agency. The only other difference is in its focus on self-regulation, using the OHS safety case system.

Benefits

There should be benefits for multi-state offshore operators in eliminating the administrative costs associated with meeting each state's OHS requirements. It is unfortunate that similar nation-wide consistency, as recommended by the National Productivity Commission,8 has not been a significant focus in recent reviews of OHS legislation in various states.

Impact

Under the NOPSA regime, the safety case regulatory model will be uniformly adopted. NOPSA OHS inspectors will monitor operator compliance throughout the lifecycle of projects by audit, investigation of accidents/incidents and open communication. From 1 January 2005, all facility operators9 are required to report any serious accidents or dangerous occurrences at, or near, their facilities to a NOPSA inspector as soon as practicable.

NOPSA's funding will come from a safety investigation levy, which is incurred when an inspector is required to investigate an incident, and a levy paid when the authority approves safety case applications and pipeline safety management plans. This funding model is controversial, with many members of the oil industry concerned that they will be required to provide funding for their own prosecution.

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Bite your tongue during contract negotiations

In brief: A mine operator has paid a heavy price for statements made by its employees during negotiations with an underground drilling contractor. Senior Associate Simon Dewberry reports.

Background

Newmont Phajingo Pty Ltd (Newmont) entered negotiations with Tomac Enterprises Pty Ltd (Tomac) to engage it as an underground drilling contractor. During the negotiations, Newmont representatives made various statements about Tomac being at the mine 'for years' and 'for a long time, and that there were 'more metres here than Tomac could ever drill'. Despite these statements, the agreement related to only 30,000 metres of drilling, which Tomac completed within a matter of months. The engagement continued afterwards for 10 months and 79,000 metres of drilling was completed.

Tomac purchased a new drill to carry out the work. Newmont requested that Tomac also operate a second drill (that was already on-site) 'for the short term'.

After drilling more than 30,000 metres, Tomac expressed concern to Newmont that the existing agreement did not reflect a long-term arrangement. Newmont said that it would issue a letter of intent to prolong the work. Newmont sent a draft letter of intent to Tomac and asked it to provide proposed changes. Tomac suggested that the drilling rate be increased. In response, Newmont advised Tomac that it had decided to go out to tender for the drilling. Shortly after, Newmont advised Tomac that its tender was unsuccessful, indicating that it had concerns over Tomac's performance, including its safety record.

Application

Tomac applied to the Queensland Industrial Relations Commission under section 276 of the Industrial Relations Act 1999 (Qld) (the Act), alleging that the contract between itself and Newmont was unfair, and seeking various payments, including for loss of profits. Section 276 is comparable with the better-known s106 of the Industrial Relations Act 1996 (NSW) and has not been widely used in the past.

A person can apply under s276 provided that its 'annual wage' does not exceed the statutory cap (currently $90,400). Given that (unlike employees) most contractors are not paid an 'annual wage', there is effectively no statutory cap for contractors.

Decision

The Commission held that the contract became unfair because of the following conduct:

  • Newmont's representatives led Tomac to believe that it was entering into a long-term relationship:
    • through the various statements made during negotiations; and
    • when it encouraged Tomac to look at establishing a workshop facility in Charters Towers;
  • Newmont knew, or should have known, that the amount of work given to Tomac would need to justify its decision to purchase the drill;
  • Newmont knew that Tomac intended to purchase the drill at a significant cost, in reliance on the representations about a long-term relationship. Newmont's representatives encouraged Tomac to purchase the drill;
  • the lower drilling fee paid to Tomac reflected a long-term arrangement;
  • the arrangement included Tomac providing a service crew and other equipment at the mine, for which it made no profit. This action suggested that neither Tomac nor Newmont expected the relationship to be short term;
  • Newmont requested Tomac to operate the second drill so that Tomac could drill as many metres as it could, as quickly as possible. This suggested that Newmont had ample work and that the relationship was long term;
  • Tomac was allowed to continue drilling when it exhausted the initial 30,000 metres;
  • six months elapsed between Tomac requesting Newmont to clarify future work opportunities and Newmont issuing the letter of intent. Tomac was disadvantaged by Newmont's inaction because it had difficulty retaining skilled labour. Further, Newmont ignored Tomac's requests to talk about Tomac's safety performance and operational problems that were affecting Tomac's drilling rate;
  • if Newmont had concerns about Tomac's safety performance and the cost of metres drilled, it had an obligation to discuss these with Tomac. That it did not do so suggests that either the concerns were only raised after the event, that the matters were not really a serious concern, or that Newmont believed that it was under no obligation to talk to Tomac;
  • the whole tender process was a farce and the outcome appeared to have been predetermined;
  • Tomac was given only two weeks to remove itself from site, which was unreasonable; and
  • contrary to Newmont's undertakings that Tomac would be at the mine for a long time, Tomac was forced to leave the site after just 13 months. Tomac was left with a specialist drill, and the potential for work elsewhere was limited, if not impossible. Further, Tomac had lease commitments approaching $14,000 a month. Newmont knew, or should have known, that Tomac would suffer considerable losses.
Remedy

The Commission concluded that the contract should be amended to provide Tomac with 120,000 metres of drilling or a total of two years' drilling (which reflected the intended long-term nature of the arrangement), whichever occurs first. Further, Newmont was to reimburse Tomac for any lease payments it may incur on the drill in the event that it becomes idle because the 120,000 metres of drilling is completed before the expiry of two years. The Commission then calculated that these amendments entitled Tomac to a payment from Newmont of $414,250.

Implications

Tomac may have been able to bring a claim against Newmont in the courts, arguing breach of contract, misrepresentations or misleading and deceptive conduct. However, the Commission's unfair contract jurisdiction provides a more flexible, expedient and cost-effective avenue for claimants.

Employers outsourcing work, thinking that they are limiting their exposure by avoiding the unfair dismissal jurisdiction, should carefully consider the risk of an unfair contract claim. This is particularly so given that there is no cap on the damages that can be awarded in an unfair contract claim (compared to the maximum six months' wages that can be awarded to a successful unfair dismissal applicant).

Footnotes
  1. Wesfarmers Premier Coal Limited v the Automotive Food Metals Engineering, Printing and Kindred Industries Union (No 2) [2004] FCA 1737.
  2. Electrolux Home Products Pty Ltd v The Australian Workers' Union & Ors (2004) 209 ALR 116.
  3. KL Ballantyne and National Union of Workers (Laverton Site) Agreement 2004, 22 October 2004, Vice President Ross, PR952656.
  4. Joseph M. Gersten v Cape York Land Council Aboriginal Corporation (No. B2041 of 2003), Commissioner Fisher, 22 December 2004.
  5. Petroleum (Submerged Lands) Act 1967 (Cth) (section 9).
  6. Petroleum (Submerged Lands) (Management of Safety on Offshore Facilities) Regulations 1996 (Cth).
  7. Offshore Petroleum (Safety Levies) Act 2003 (Cth); Petroleum (Submerged Lands) Amendment Bill 2003.
  8. Productivity Commission (2003), National Workers' Compensation and Occupational Health and Safety Frameworks, Interim Report, Commonwealth of Australia.
  9. As defined under Schedule 7 of the Commonwealth Petroleum (Submerged Lands) Act 1967 (Cth).

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