AGC Industries Pty Ltd

[2019] FWCA 6050

[2019] FWCA 6050

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

AGC Industries Pty Ltd
(AG2019/1523)

AGC INDUSTRIES PTY LTD - CFMEU - NATIONAL REFRACTORY AGREEMENT (EXCLUDING THE STATES OF WESTERN AUSTRALIA AND VICTORIA) 1 JANUARY 2015

Building, metal and civil construction industries
COMMISSIONER WILLIAMS	PERTH, 30 AUGUST 2019

Application for termination of the AGC Industries Pty Ltd - CFMEU - National Refractory Agreement (excluding the States of Western Australia and Victoria) 1 January 2015.

[1] This decision concerns an application made under section 225 of the Fair Work Act 2009 (Cth) (the Act) by AGC Industries Pty Ltd (AGC or the Applicant).

[2] The application seeks to terminate the AGC Industries Pty Ltd – CFMEU – National Refractory Agreement (excluding the States of Western Australia and Victoria) 1 January 2015 Agreement (the Agreement). The nominal expiry date of the Agreement was 31 December 2017.

[3] The application is supported by a Form 24C - Statutory declaration in relation to termination of an enterprise agreement after the nominal expiry date sworn by Mr Matthew Prendergast (Mr Prendergast) the Applicant’s Executive General Manager Business Services, Integrated Services.

[4] The Agreement is a Greenfields Agreement.

[5] The Construction, Forestry, Maritime, Mining and Energy Union (the CFMMEU) is covered by the Agreement. Consequently, the Commission sought the CFMMEU’s view of the application. The CFMEMEU has provided submissions opposing the termination of the Agreement.

[6] Both parties advised the Commission they supported the matter being dealt with only by written submissions and determined by the Commission on the papers.

The Applicant’s submission

[7] Mr Prendergast in his statutory declaration states there are no employees covered by the Agreement.

[8] He says that the Applicant believes terminating the Agreement is in the public interest. The Agreement does not serve the interests of its employees who may become covered by the Agreement in the future because the direct labour costs associated with employees covered by the Agreement are the largest cost component in the business unit and unless these are addressed the Applicant will not be able to compete for commercial contracts in a challenging market.

[9] The level of wages and conditions in the Agreement has led to the Applicant being under considerable pressure when seeking to negotiate and maintain commercial contracts.

[10] He says that the Applicant’s national workforce has reduced to 0 in 2019 from 20 in 2018.

[11] He says the effect of terminating the Agreement would be to remove constraints, restrictions and inefficiencies imposed by a range of terms in the Agreement and allow the Applicant to operate its business without these. It would enable the Applicant to more readily and reasonably reorganise its business so as to meet the demands including the changing demands of its customers in a competitive environment

[12] He says terminating the Agreement would allow the Applicant over time to reduce its operating costs which will allow it to be competitive in a very competitive market, the Applicant would be free to negotiate for the making of a new enterprise agreement if that can be achieved to best secure an efficient and productive workplace for it and its future employees.

The CFMMEU’s submission

[13] It is submitted that the matters referred to by AGC regarding termination of the Agreement not being contrary to the public interest refer directly to the interests of the parties and so are not relevant to a consideration of the public interest.

[14] Once these matters relating to the interests of the parties are removed there are insufficient grounds on which the Commission can be satisfied it is not contrary to the public interest to terminate the Agreement.

[15] The CFMMEU submits it is not appropriate to terminate the Agreement primarily because the effect on the employees or potential employees of the Applicant would be substantial.

[16] The CFMMEU says that in 2018, the Applicant sought to renegotiate the Agreement by offering in essence a wage freeze for employees at Whyalla and lesser conditions to apply elsewhere in Australia. This was rejected by the employee employed at the time.

[17] Terminating the Agreement will mean any employees engaged on new projects or contracts in the near future will be paid in accordance with the Building and Construction General On-Site Award 2010 (the Award). The Award rates for a refractory bricklayer is $28.02 per hour compared to the Agreement rate of $38.45 per hour in Queensland, South Australia, Northern Territory and Tasmania.

[18] The CFMMEU understands the reason the Applicant has zero employees covered by the Agreement in 2019, is because the Applicant lost a maintenance contract at Whyalla to a competitor in 2019. The CFMMEU believes the Applicant still has employees in Western Australia (WA) covered by a separate agreement with superior conditions.

[19] The CFMMEU says it is concerned that employees in WA may be required to work interstate and if the Agreement was terminated, they would not then receive its conditions of employment and the CFMMEU is unaware of employees in WA being consulted over this proposed change.

[20] The CFMMEU says the effects of termination of the Agreement on the Applicant referred to in Mr Prendergast’s statutory declaration are scant on detail.

[21] The CFMMEU submits that taking into account the effect of termination of the Agreement on future employees and the potential effect on existing employees in WA and the lack of details on the effects on the Applicant it is not appropriate to terminate the Agreement and the application should be refused.

The Applicant’s submission in reply

[22] In reply the Applicant says they have not employed any employees under the Agreement since February 2019 and it presently has no current or prospective work which could be covered by the Agreement. The Applicant points out the Agreement does not cover employees in WA.

[23] The Applicant submits that the CFMMEU makes no submission as to what the Commission should consider is a basis for finding that terminating the Agreement is contrary to the public interest.

[24] The Applicant submits that most of the CFMMEU’s assertions are irrelevant to the considerations required of the Commission under section 226(b) of the Act.

[25] The Applicant says the unsuccessful attempt to renegotiate the Agreement in 2018, with employees at Whyalla resulted in the Applicant losing the contract and demobilising from site. The Applicant has not since won any work that would be covered by the Agreement. It is submitted this illustrates the restrictive and uneconomic nature of the Agreement.

[26] The Applicant’s lack of work which would be covered by the Agreement demonstrates there is an imperative for the Applicant to seek improvements in the competitiveness of its employment terms through the termination of the Agreement.

[27] There can be no unfairness on employees in this instance because no one is currently employed under the Agreement.

[28] There is nothing inconsistent with the termination of the Agreement and the CFMMEU’s ability under the Act to exert legitimate industrial pressure on the Applicant in future to bargain for a new Agreement if there are employees then engaged.

[29] For these reasons the application for termination of the Agreement should be granted.

The legislation

[30] Section 226 sets out when the Commission must terminate an agreement and what matters the Commission must be satisfied about and what it must consider. This section is set out below.

“226 When the FWC must terminate an enterprise agreement

If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:

(a) the FWC is satisfied that it is not contrary to the public interest to do so; and

(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:

(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and

(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.”

Consideration

Is it not contrary to the public interest to terminate the Agreement?

[31] If the Agreement is terminated by the Commission the employment of employees in the future who would otherwise have been covered by the Agreement would be subject to the Award. Section 3 and section 134 of the Act explain that awards, with the National Employment Standards, provide a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for employees.

[32] In this matter there is nothing about the factual circumstances that supports a conclusion that termination of the Agreement would be contrary to the public interest.

[33] I am satisfied that it is not contrary to the public interest to terminate this Agreement.

Is it appropriate to terminate the Agreement?

[34] Section 226(b) prescribes that when considering whether or not it is appropriate to terminate the Agreement the Commission must take into account all the circumstances including the views and the circumstances of the employees, employers and organisations including the likely effect that termination will have on each of them.

[35] In this case there are no employees covered by the Agreement so there are no employee views or circumstances or likely effects to be taken account of.

[36] The Applicant employers view is explained in their submissions above and they clearly support termination of the Agreement on the grounds that they view the Agreement as including inefficient, restrictive and costly employment conditions and practices that are making their business uneconomic and uncompetitive in the marketplace.

[37] The CFMMEU’s view is as explained in their submissions above. Significant concerns are that terminating the Agreement will mean future employees, who would otherwise have enjoyed the benefits of the Agreement, will be engaged on the lesser terms and conditions of the Award. Similarly, the CFMMEU is concerned that current employees in WA, who are enjoying the benefits of a separate agreement, should they be working for the Applicant interstate in the future will also then be paid the lesser terms and conditions of the Award.

[38] The facts are not in dispute that if the Agreement was terminated the circumstances of future employees would likely be that they would be paid under the Award only.

[39] If the Agreement was terminated the circumstances of the employer would be that when bidding for future contracts, they are likely to be in a more competitive position than when covered by the Agreement. This is because the terms and conditions the Applicant would be obliged to provide to future employees, which directly impacts the price at which they could tender for contracts, would only be those of the Award which both parties submit are in a number of ways less than what is provided for in the Agreement. The difference in hourly rates of pay alone are significant.

[40] If the Agreement was terminated there is no evidence or submission that this would have any impact on the CFMMEU itself.

[41] In conclusion considering all of the circumstances the Commission is required to take into account prescribed in section 226(b) I do consider it is appropriate to terminate the Agreement.

[42] Consequently, the Commission must now terminate the Agreement and an order [PR711857] to that effect will be issued with this decision.

Printed by authority of the Commonwealth Government Printer

<AE413761  PR711855>