Boom Logistics Ltd
[2016] FWCA 82
•15 January 2016
[2016] FWCA 82
DECISION
| Fair Work Act 2009 |
s.225 - Application for termination of an enterprise agreement after its nominal expiry date
Boom Logistics Ltd
(AG2015/3386)
BOOM LOGISTICS LTD HUNTER VALLEY ENTERPRISE
AGREEMENT 2013
Building, metal and civil construction industries
| DEPUTY PRESIDENT LAWRENCE | SYDNEY, 15 JANUARY 2016 |
Application for termination of the Boom Logistics Ltd Hunter Valley Enterprise Agreement
2013.
[1] On 22 July 2015 Boom Logistics Limited (Boom) lodged an application pursuant to
s.225 of the Fair Work Act 2009 (the Act) to terminate an enterprise agreement after its
nominal expiry date. The relevant agreement is the Boom Logistics Ltd Hunter Valley
Enterprise Agreement 2013 [AE401840] (the Agreement).
[2] The nominal expiry date of the Agreement was 1 September 2013.
[3] The Construction, Forestry, Mining and Energy Union (the CFMEU) is the employee
organisation covered by the Agreement.
[4] Attached to the application was a Statutory Declaration by Boom’s General Manager
NSW, Anthony Raby. Inter alia it noted:
| | The Agreement covered 57 employees at Boom’s Singleton depot. Boom hires mobile |
| cranes and other mechanical equipment to customers in the coal mining industry in the | |
| Hunter Valley. | |
| | The precipitous fall in the coal export price from Newcastle has led to coal industry |
| employers, Boom’s customers, seeking to reduce costs and increase productivity. | |
| | The level of wages and conditions in the Agreement has led to Boom being under |
| considerable pressure in seeking to negotiate and maintain contracts. Revenue from | |
| the Singleton depot has dropped 35% between 2012/2013 and 2014/2015. | |
| | Boom and the CFMEU have been seeking to negotiate a replacement Agreement since |
| October 2013 but have not been successful. In fact, employees voted comprehensively | |
| on 1 July 2015 to reject a replacement agreement. |
[2016] FWCA 82
| | Boom says that it does not intend to cease trying to get a new agreement but that it is |
| in the public interest for bargaining to be underpinned by the relevant modern award | |
| and the National Employment Standards in the Act, rather than the Agreement. | |
| | Boom will make certain undertakings to maintain parts of the status quo for the next |
| six months. |
Direct labour costs of employees covered by the Agreement are the largest cost
component in the business unit. Unless they are addressed, Boom will not be able to
compete in a challenging market.
| | Boom’s national workforce has reduced from 952 in 30 June 2013 to 565 on 31 May |
| 2015. At Singleton, the number has dropped from 129 in June 2013 to 87 in June | |
| 2015. |
The application is designed to ensure that there are no further reductions in
employment.
Commission Proceedings
[5] The application was dealt with in conference in Sydney on 13 August 2015.
[6] It became clear that the matter would not be resolved by agreement.
[7] Accordingly, directions were issued for the filing of submissions and witness
statements.
[8] The matter was set down for hearing in Newcastle on 14 and 15 October 2015. A
further day was necessary for submissions in Sydney on 5 November 2015.
[9] Boom was represented by Mr W. Swain and Mr B. Mitchell and the CFMEU by
Mr P. Quinn.
Main Features of the Agreement
[10] The Agreement operated from 20 June 2013 until 1 September 2013. It is expressed as
applying to Boom’s Muswellbrook, Singleton and Mount Thorley sites, to employees in the
classifications specified. These are described as being the mobile crane hiring industry as
defined.
[11] The terms of the Mobile Crane Hiring Award 2010 [MA000032] are incorporated into
the Agreement, except where expressly excluded.
[12] The Agreement provides for, inter alia:
| | A joint consultative committee. |
| | A detailed dispute settlement clause which does not provide for arbitration by the |
| Commission as the final step. |
[2016] FWCA 82
| | A 4 level Crane Operator/Dogman classification structure and a 4 level Transport |
| Operator classification structure. |
Redundancy benefits through Australia Construction Industry Redundancy Trust
(ACIRT).
| | Various allowances including a travel allowance. |
| | 36 hour week to be worked in a 9 day fortnight. |
Notices to Produce
[13] At the request of the CFMEU the Commission issued an order requiring Boom to
produce an extensive list of documents and other material relating to:
| | EBA negotiations and the voting process in July 2015. |
| | Financial information. |
| | Contract and tender negotiations. |
| | Staffing and employment matters. |
| | Other commercial material. |
[14] The CFMEU objected to Boom’s compliance with the order, alleging that not all the
relevant material had been produced. Debate took place on this issue prior to and at the start
of the hearing in Newcastle. I decided that what had been produced complied with the orders.
[15] In addition, at the request of Boom a range of this material, together with aspects of
some witness statements were marked “confidential” because they contained commercial-in-
confidence financial, commercial and/or contractual information. Aspects of the transcript
were treated similarly.
Workshop Enterprise Agreement
[16] I note that there is another agreement that applies to Boom’s Hunter Valley operation.
This is the Boom Logistics Ltd Hunter Valley Workshop Enterprise Agreement 2013 – 2016
[AE404172] (the Workshop Agreement). It applies to workshop employees undertaking
maintenance and repairs on plant and equipment. The nominal expiry date is 1 April 2016.
[17] The relevant modern Award is the Vehicle Manufacturing, Repair, Services and Retail
Award 2010 [MA000089]. There is a 5 level classification structure mainly consisting of
trades and above.
[18] The format of the Workshop Agreement appears similar to that of the Agreement
which is the subject of this case and the machinery clauses, e.g. dispute settlement, appear to
be the same. However, there are some key differences such as redundancy pay and 38 hour
week.
[2016] FWCA 82
Relevant Legislative Provisions
[19] The sections of the Act that are relevant in this case are as follows:
“225 Application for termination of an enterprise agreement after its nominal expiry date If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement; (b) an employee covered by the agreement; (c) an employee organisation covered by the agreement. 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.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates
from the day specified in the decision to terminate the agreement.”
[20] In accordance with s.226, if the Commission is satisfied that it is not contrary to the
public interest to do so, it must terminate the agreement that has passed its nominal expiry
date. It must carry out a broad weighing of all circumstances, including the views of the
employer, employees and union together with the effect the termination would have on each
of them. Further, it is an “all or nothing” case. It is not open to the Commission to make some
modification to the existing agreement or to implement a variation on a new agreement that
the employer may be proposing in negotiations to renew the agreement, as is the case here, in
order to settle the dispute. That is a matter for the parties.
Boom’s Case
[21] Boom submits that the agreement should be terminated because the market conditions
have deteriorated over the last three years due to the collapse of coal export prices. This has
[2016] FWCA 82
meant that Boom has had to cut costs significantly to clients in the Hunter Valley to get and
maintain work.
[22] Boom reported a $6.3 million loss to the end of June 2015. Hourly rates for the hiring
out of its cranes has fallen 15% to 41%. Total direct labour costs have increased from 58% of
revenue to nearly 62% of revenue for the year to 30 June 2015. For the Hunter Valley
operation, labour costs for employees covered by the Agreement represent 76% of direct
labour costs. Continuing with the Agreement, in Boom’s submission, means it is not
competitive in the market.
[23] Boom has lost market share in the Hunter Valley because it lost or did not bid for
contracts on price. Accordingly, Hunter Valley number(s) have dropped from 129 in June
2013 to 87 in June 2015.
[24] The proposed Agreement voted down on 1 July 2015 by employees is no longer
sustainable because of the continued deterioration of the market.
[25] Boom undertakes to continue to seek to bargain on the basis of a number of
undertakings to maintain the status quo (see below).
[26] Brenden Mitchell, Boom’s Chief Executive Officer and Managing Director, gave
principal evidence about the financial and market challenges of the business. Attached to his
statement (Exhibit S13) were the various communications sent to employees over the almost
three years. He noted that in some other locations in Western Australia and Queensland,
where Enterprise Bargaining Agreement (EBA) flexibilities could not be achieved, Boom had
been forced to close depots. The Hunter Valley depot is Boom’s largest. He summarised a
range of economies that had been taken including freezing salaries across the group for three
years in a row, various asset sales and restructuring.
[27] Further evidence was given by Anthony Raby, Boom’s General Manager, New South
Wales and Queensland. His evidence built on the statutory declaration attached to the
application. Detailed documentation attached to his statement (Exhibit S1) dealt with the coal
price declines, declines in revenue of the Hunter Valley business, declines in crane charge-out
rates, declines in the labour force already summarised above. Because of the requirement for
commercial confidentiality I have not set out in detail all of this evidence. He noted that his
regular contact with clients and potential clients confirmed that there was no prospect of
improvements in the foreseeable future.
[28] Attachment AR9 to Exhibit S1 was the list of undertakings that Boom committed to
maintain on top of the relevant award and legislative provisions should the Agreement be
terminated. These were as follows:
“1. Boom undertakes that, upon termination of the Agreement, it will continue to provide to its employees the same benefits and entitlements as were provided under
the Agreement in respect of the matters set out below until such time as a new
agreement is made which applies to the employees (or any operative Award provision
provides a higher benefit or entitlement) -
[2016] FWCA 82
Entitlement/Benefit Agreement Clause Redundancy 15.2 (with exception of the first 2 paragraphs; i.e. Boom will no longer contribute to ACIRT) Travel allowance 18 (with exception that Boom will amend payment of Travel Allowance to $21.00 per day) Sleeper Cab allowance 20 Mixed function 23 Overtime Meal allowance 24 [with exception that only an employee required to start prior to 4am (not 5am) will be entitled to combined meal & meal break allowance] Safety Equipment 37 Protective Clothing 38 [with exception that clothing/footwear referred to is replaced only on an “as needs basis” (i.e. new for old) rather than annually] Income Protection 40 Long Service Leave 41
Accommodation and Overnight Appendix C (with exception that Boom will allowance amend additional payment to $50.00 per day per employee for meals and expenses incurred, and will not make payment prior to an employee staring distant work)
[2016] FWCA 82
[31] Because of the EBA, Boom’s single largest cost component is unable to be addressed.
With no reasonable prospect of a new agreement, Boom’s competitive position will continue
to deteriorate. The 41% decline in employees covered by the Agreement between July 2012
and July 2015 is likely to increase.
[32] Boom re-affirmed its intention to continue to bargain with employees. All of the
provisions of the Act will continue to apply. It submitted that the CFMEU’s determination to
maintain the status quo means that Boom is unable to make the operational changes that it
requires to be competitive. Boom emphasises that the Commission is required to take into
account its expectations of increased productivity if the Agreement is able to be re-negotiated
from a starting point of removal of the existing Agreement.
[33] In response to the CFMEU’s assertion that Boom’s competitors provide better wages
and conditions, it is submitted that these comparisons do not include all the circumstances. In
any event, Boom submits that this is not the issue. The determination of the mining
companies to reduce costs is the only factor that should be taken into account.
The CFMEU’s Case
[34] The CFMEU opposes Boom’s application. It submits that the application was lodged
in response to the rejection vote by employees on 1 July. It is designed to weaken the
bargaining strength of the union and the employees in the re-negotiation of the Agreement.
The termination will have the effect of holding up rather than promoting bargaining.
[35] The CFMEU submits that Boom has not made its case on economic and financial
grounds.
[36] It also submits that overall Boom’s wages and conditions are less than its competitors
in the Hunter Valley. Termination of the Agreement would give it an unfair advantage in the
contracting marketplace. It is likely that this will lead to a spiral to the bottom with its
competitors seeking to follow.
[37] The CFMEU submits that termination of the Agreement will have a profound financial
effect on the employees of Boom. It estimates that Level 1 employees would lose $18,137.60
per year and Level 3 employees $19,757.90, based on ordinary hours.
[38] The CFMEU submits that the undertakings provided by Boom are not legally binding.
In any event they do not make a significant difference to the impact of the termination on
employees and their families.
[39] The main witness for the CFMEU was Peter Harris who is the organiser responsible
for the Hunter Valley operation of Boom. He has been a union official for 27 years and held
his current position, based in Newcastle, for 12 years. Mr Harris was critical of Boom’s
business model and the lack of experience of local managers in the crane industry.
[40] Mr Harris, in his statement, (Exhibit Q3) says that the main reason the draft
Agreement was voted down on 1 July was because it “attempted to reduce wages for casual
employees below the Award”. He gave extensive evidence about the conduct of the
[2016] FWCA 82
negotiations. He stated that the union negotiating team had taken a flexible and constructive
approach based on extensive consultation with the membership.
[41] Mr Harris prepared a comparison document (Attachment H to Exhibit Q3) of Boom
with its competitors in the Hunter Valley crane industry, namely Walter Wrights Cranes Pty
Ltd, Bolgers Crane Hire and Rigging Pty Ltd, Big Lift Cranes Muswellbrook Pty Ltd and
Muswellbrook Crane Services Pty Ltd. Their agreements were tendered. The comparison
includes the Award, the Boom undertaking rate and the current Agreement. It is submitted
that this comparison shows that the rates of its competitors are in excess of Boom’s for
comparable key classifications. None of the competitors have reduced wages and conditions
because of the downturn in the coal mining industry.
[42] The comparison of hourly rates in Annexure H is as follows:
Comparison – Annexure H
Boom Wright Bolgers Big - Muswell Award Boom Boom (existing) Lift Crane (proposed) (Vic)
Level 1 34.15 plus
| 20 Tonnes | 33 | 37.65 | 3.50 per | 34.73 | 39.54 | 20.13 | 26.4 | 49.51 |
hour
productivity
Level 2 36.56 plus
| 80 Tonnes | 37.1 | 39.37 | 3.50 per | 38.77 | 42.3 | 21.39 | 29.68 | 49.51 |
hour
productivity
ACIRT 68 77 77 68 68 0 0 (separate
fund)
Daily fares
27.5 35 30 30.5 40 17.43 21 39.3
[43] Of course the validity of this comparison depends on the assumption that other
allowances and conditions are broadly comparable between the identified employers.
[44] Evidence was also given by Aaron Farley who had been a level 3 Crane operator for
Boom for around 10 years, (Exhibit Q5). His flat salary is $60,000 per year with total
earnings of $140,000 to $150,000 because of overtime. He estimated he would be $20,000
worse off on his basic salary if the Agreement was terminated. Mr Farley’s personal and
family commitments, with three young children, meant that he would not be able to cope with
such a drop in income.
[45] Tony Forbes gave evidence as well. He has been employed by Boom since 2013 and is
a CFMEU delegate. His statement, (Exhibit Q4) dealt with the conduct of negotiations. He
stated that the workforce had thought that agreement had been reached in early 2014 but
management representatives then changed. A wage freeze was then implemented together
with an agenda which appeared to promote the employment of casuals. His evidence was that
the main issue in the voting down of the proposed new Agreement in July was the reduction
in the casual loading and an intention to increase the use of casuals. Mr Forbes’ view was that
the workload for employees remains high requiring overtime and casual workers. The
financial impact of the termination of the Agreement on Mr Forbes would be similar to Mr
Farley.
[2016] FWCA 82
Approach of the Commission
[46] In Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union
[2010] FWA 2434 (ERA), Watson VP, having come to the view that it would not be contrary
to the public interest to terminate the agreement dealt with s.226(b) as follows:
“[15] Section 226(b) is a new requirement for termination of agreements enacted in
the FW Act. It has not as yet been subject to any Tribunal consideration. In my view
the requirement calls for an overall consideration of the context and all of the relevant
circumstances involved and the exercise of an overall judgment based on those
circumstances.
[16] As with other broad judgements under the Act there will often be competing
considerations which will need to be balanced. The specific matters raised in s 226
will need to be given full consideration. Taking into account the views and
circumstances of the parties involves far more than the expression of their views in
support or opposition to termination. It should involve a consideration of the reasons
for their views and the validity of their concerns.
[17] Section 226 requires a positive conclusion that termination of the Agreement is
appropriate before the requirement for termination is satisfied. It is not desirable to
attempt to formulate a test in substitution of the words of the section itself.
[18] In this matter the views and circumstances of the employees directly affected,
other employees, the employer and the LHMU will clearly need to be taken into
account. The proposed termination will need to be considered in the context of the
current legislation including its objects and regard will need to be paid to the role and
effect of the Agreement if it is to be terminated and if it is to continue.
. . .
[26] The prevailing legislative provisions have provided for the continuation of
agreements after their nominal expiry date subject to an ability to make application to
terminate the Agreement. Different tests have applied, some more limited than the
current provisions and some less restricted. It is clear that enterprise agreements are
intended to apply for a limited period and either be renegotiated, renewed, varied,
replaced, terminated or left unaltered depending on negotiations between the parties
and the operation of the legislative provisions.
[27] The primary object of the FW Act is to provide a balanced framework for
cooperative and productive workplace relations that promotes national economic
prosperity and social inclusion. The means by which this is to be achieved include
providing workplace relations laws that are fair to working Australians, are flexible for
business and promote productivity and economic growth and achieving productivity
and fairness through an emphasis on enterprise level collective bargaining.”
[47] The Vice President balanced all of the circumstances in this case and decided that it
was appropriate to terminate the agreement. I note that the agreement had passed its nominal
expiry date by almost 10 years and it applied to less than 1% of employees because most were
covered by Australian Workplace Agreements. Accordingly, the Vice President was satisfied
[2016] FWCA 82
that termination of the agreement would have a negligible impact on employees overall. It
would also promote consistency of conditions of employment throughout the workforce.
[48] The decision of Senior Deputy President O’Callaghan in Cranes Pty Ltd / CFMEU
Enterprise Agreement 2011 [2015] FWCA 1327 (Nicks Cranes) related to the crane
contracting industry and was relied on by Boom.
[49] In dealing with the public interest Senior Deputy President O’Callaghan stated:
“[29] In terms of public interest considerations relative to the objects of the FW Act,
the general fairness considerations referred to in s.3 incorporate considerations that
require a balance between employee and employer interests. The very fact that this
balance must be struck does not go against those objects. In terms of the emphasis on
enterprise arrangements in s.3(f), the parties retain the capacity to negotiate an
agreement acceptable to them and Nick's Cranes have provided undertakings specific
to its current operating circumstances. I do not consider that the broader objects of the
FW Act in s.3 mitigate against the termination of the Agreement.
. . .
[31] Nick's Cranes’ concerns about the impact of the Agreement on its ability to
compete for, and win work, appears consistent with the objective referred to in
s.171(a) and the application does not otherwise appear to be inconsistent with this
section.
[32] I am unable to discern a public interest consideration which goes against
termination of the Agreement.
[33] In terms of the requirement in s.226(b) I am unable to accept the CFMEU
position that an assessment of this nature cannot be undertaken because I have not had
the benefit of hearing from all of the employees covered by the Agreement. In this
respect the CFMEU refers to the 20-30% or 3-4 employees, not members of the
CFMEU. I am satisfied that all of the employees were advised of the application and
that no individual employee has sought to participate or to be heard in these
proceedings. Accordingly I have considered the provisions of s.226(b) on the basis of
the views expressed by Nick's Cranes, the CFMEU as the only union organisation
covered by the Agreement and as the representative of its members covered by the
Agreement.
[34] Again, the question of what is appropriate requires a balanced assessment.”
[50] He quoted the ERA decision and the decision of Lawler VP in Tahmoor Coal Pty Ltd
re Tahmoor Colliery Enterprise Agreement 2006; Tahmoor Washery Workplace Agreement
2006 [2010] FWA 6468 (Tahmoor Coal). He then stated:
“[40] I note that subsequent agreement termination decisions have generally followed
these same approaches with each situation addressed on its merits.”
[51] The Senior Deputy President then balanced the various relevant factors especially:
| | The undertakings by the employer. |
[2016] FWCA 82
| | The views of employees and the union opposing the termination. |
| | The employer’s desire to protect its competitive position and avoid job losses. |
He decided it was appropriate to terminate the agreement.
[52] In Tahmoor Coal Vice President Lawler stated:
“[53] While his Honour emphasised only the object in s.3(a), for the reasons I have
given, I consider that the objects in s.3(f) and s.171 are also of particular importance
and should be seen as qualifying the general object in s.3(a). I respectfully agree with
the outcome in ERA. However, it needs to be born in mind that the circumstances in
that case were very unusual indeed. The agreement in question was some 10 years past
its nominal expiry date and had a continuing application to only three employees - less
than one per cent of the employer’s workforce. The remainder of the relevant
workforce was employed on statutory individual contracts and the terms and
conditions of their employment would not be directly affected by termination of the
agreement in that case. Clearly enough, ERA was not a case where bargaining for a
replacement agreement had been on-going since the passing of the nominal expiry date
of the agreement in question.
[54] I respectfully agree with his Honour that it is not intended by the legislation that
agreements should remain in place indefinitely and that it is unreasonable to lock an
expired agreement in place indefinitely. On the other hand, this does not mean that a
party to an agreement has a prima facie right to have the agreement terminated merely
because the agreement has passed its nominal expiry date.
[55] It seems to me that under the scheme of the FW Act, generally speaking, it will
not be appropriate to terminate an agreement that has passed its nominal expiry date if
bargaining for a replacement agreement is on-going such that there remains a
reasonable prospect that bargaining (in conjunction with protected industrial action
and or employer response action) will result in a new agreement. This will be so even
where the bargaining has become protracted because a party is advancing claims for
changes that are particularly unpalatable to the other party. While every case will turn
on its own circumstances, the precedence assigned to achieving productivity benefits
through bargaining, evident in the objects of the FW Act, suggests that it will
generally be inappropriate for FWA to interfere in the bargaining process so as to
substantially alter the status quo in relation to the balance of bargaining between the
parties so as to deliver to one of the bargaining parties effectively all that it seeks from
the bargaining.”
[53] In SDV (Australia) Pty Ltd [2013] FWC 5385 Deputy President Sams said:
[39] In addition, Roe C observed in Royal Automotive Club of Victoria [2010] FWA
3483 at para [23]:
‘It has certainly been the case since the introduction of a legislative scheme for
collective bargaining in Australia that the platform for bargaining replacement
agreements has been with very few exceptions the old agreement.’
[2016] FWCA 82
[40] It is pellucidly clear that the legislature has deliberately made it more difficult to
terminate an expired agreement than has been the case in the past. This is so, because
unlike its predecessor legislation, (Workplace Relations Act, 1996) there is no capacity
for the unilateral termination of an expired agreement, simply upon the giving of
written notice by an employer. It seems to me that the continued operation of an
expired agreement is desirable for the following policy reasons:
it permits the parties to negotiate from the standpoint of the ‘status quo’ and there is
no significant shift in the balance of the forces of bargaining; and
employees do not suffer an immediate reduction in the terms and conditions of their
expired agreement.
[41] Obviously, the practical effect of terminating an agreement is to substantially
alter the ‘status quo’ in relation to the bargaining process. I agree with Lawler VP’s
comments in Tahmoor Coal that it would generally be inappropriate for the
Commission to interfere in the bargaining process by terminating an existing
agreement.”
[54] Finally, I note the Full Bench decision in Aurizon Operations Limited; Aurizon
Network Pty Ltd; Australia Eastern Railroad Pty Ltd [2015] FWCFB 540 (Aurizon) in which
the Full Bench decided that the Aurizon Agreements must be terminated because the
preconditions under s.226 were met. Emphasis was placed on the particular aspects of the
Agreement which resulted from the Queensland Government’s decision to privatise
Queensland Rail, especially the “no forced redundancy” provision. These provisions made
Aurizon uncompetitive as against Pacific National and the other lesser competitors.
[55] The Full Bench relied on the undertakings given by Aurizon but it did not decide that
they were legally enforceable:
“[111] Ultimately it is not necessary for us to determine whether the Undertakings will
be legally binding and enforceable as terms of an employment contract or otherwise.
For our part there is no reason to suppose that the Undertakings have not been given or
proposed in good faith or that Aurizon is not genuine in giving or proposing the
Undertakings. We are satisfied that Aurizon intends to and will, if the enterprise
agreements are terminated, make good on its Undertakings. The Undertakings are
given to the affected employees, not to the Commission. As such the question of the
power of the Commission to accept the Undertakings is moot. However, that Aurizon
has or proposes to give the Undertakings, and the terms of the Undertakings is a matter
that is relevant in our assessment of whether it is appropriate to terminate the
enterprise agreements. We propose therefore to take the Undertakings into account for
that purpose.”
[56] The Full Bench considered s.226 alongside the objects of the Act and the bargaining
provisions and then stated:
“[129] Section 226(a) requires a consideration of whether termination of the
agreements is not contrary to the public interest. It seems to us that a consideration of
the public interest will involve something that is distinct from the interests of the
[2016] FWCA 82persons and bodies covered by the agreements. This distinction seems to be reflected
in the structure of s. 226. The question of how the public interest is to be assessed was
considered by a Full Bench of the Australian Industrial Relations Commission in Re
Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified
Agreement 2000. The decision in Kellogg Brown concerned an application to
terminate a certified agreement pursuant to s. 170MH of the WR Act. The Full Bench
observed:
‘The absence of any reference to the interests of the negotiating parties in
s.170MH(3) is significant. It follows that the views of persons bound by the
agreement may be relevant to the exercise of the discretion if they shed light
upon the effect of termination on the public interest, but they should not be
given any independent weight. To do so would be to import into the application
of the section something which on its proper construction it does not include.
The notion of public interest refers to matters that might affect the public as a
whole such as the achievement or otherwise of the various objects of the Act,
employment levels, inflation, and the maintenance of proper industrial
standards. An example of something in the last category may be a case in
which there was no applicable award and the termination of the agreement
would lead to an absence of award coverage for the employees. While the
content of the notion of public interest cannot be precisely defined, it is distinct
in nature from the interests of the parties. And although the public interest and
the interests of the parties may be simultaneously affected, that fact does not
lessen the distinction between them.’ ”
[57] The Full Bench concluded:
“[138] This is the first occasion on which a Full Bench of the Commission has had the
opportunity to consider the operation of s. 226 of the Act. To the extent that the
decision in Tahmoor Coal and the decisions which have followed it suggest that:
the object related provisions in s. 3(f) and s.171 override, are more important than or
are to be given greater weight in construing and applying s. 226 than the object related
provision in s. 3(a);
the precedence assigned to achieving productivity benefits through bargaining than
by other means, is evident in the objects of the Act; or
generally speaking, it will not be appropriate to terminate an agreement that has
passed its nominal expiry date if bargaining for a replacement agreement is ongoing
such that there remains a reasonable prospect that bargaining (in conjunction with
protected industrial action and or employer response action) will result in a new
agreement,
we would respectfully disagree.
[139] In our view, there is no statutory imperative that the promotion and delivery of
productivity benefits at an enterprise level is primarily or exclusively to be achieved
through enterprise bargaining in good faith rather than by other means. True it is that
bargaining, where it occurs, must occur consistently with the good faith bargaining
[2016] FWCA 82
requirements. But there is no imperative that an agreement must result in productivity
improvements. Much less is there any requirement that a resulting agreement must
deliver a productivity benefit at the enterprise level. Good faith bargaining for an
enterprise agreement may, or may not, deliver productivity benefits at any enterprise
level.
[140] The statute also mandates that on application by the person covered, an
agreement that has passed its nominal expiry date must be terminated if the
circumstances identified in s. 226 exist. Productivity benefits might also be delivered
by terminating an agreement that has passed its nominal expiry date. Such benefits
might be delivered through a combination of both means.
[141] As we have already observed, s. 226 forms part of a scheme in Part 2 – 4 of the
Act to which the object in s. 171 is directed. Self-evidently s. 226 is then a part of a
scheme of provisions through which the parliament intended that the object might be
achieved. There is no basis for concluding, at a level of generality, that continuing the
operation of an agreement that has passed its nominal expiry date (whether bargaining
is continuing or not) will be any more an effective means by which the object in s. 171
is to be achieved than terminating that agreement. Continuing the operation of an
agreement that has passed its nominal expiry date may impede rather than enable an
enterprise agreement to deliver productivity benefits at an enterprise level. It may also
impede rather than promote good faith bargaining resulting in an agreement which
delivers those benefits. The same may be true for the termination of the agreement.
Ultimately, the circumstances will dictate the matter.
[142] In our view, to approach the construction of s. 226 in the manner suggested in
Tahmoor Coal, particularly at [55] results in a predisposition against the termination
of an enterprise agreement that has passed its nominal expiry date. There is no
indication in the section or elsewhere in the Act that this should be the case. Section
226 operates according to its terms. Its application is guided by the language and
purpose of the provision by reference to the language and purpose of the Act as a
whole so that the meaning and effect of the provision is properly understood.
[143] Further, there is nothing in the structure or content of the Act to suggest that its
object (of providing a balanced framework for cooperative and productive workplace
relations that promotes national economic prosperity and social inclusion for all
Australians) is to be exclusively or primarily to be achieved by enterprise level
collective bargaining.”
[58] The Full Bench went on to say:
“[151] Section 226 of the Act is part of the simple, flexible and fair framework,
established by Part 2–4 to which the objects in s. 171 relate. There is nothing
inherently inconsistent with the termination of an enterprise agreement that has passed
its nominal expiry date and collective bargaining in good faith. There is nothing
incompatible with the termination of such an agreement and the continuation of
collective bargaining that has commenced in good faith at an enterprise level for an
enterprise agreement that delivers productivity benefits. The framework that is
established by Part 2–4 provides for applications and orders to be made for the
termination of an enterprise agreement that has passed it nominal expiry date. It is not
[2016] FWCA 82too difficult to suppose that such an agreement in particular circumstances might no
longer deliver productivity benefits, or that such an agreement has never done so. It is
not too difficult to suppose that the termination of such an agreement might better
support good faith bargaining for an agreement that delivers productivity benefits at
the enterprise level.
[152] In our view, there is no express or contextual indication that the objects in s. 3 or
s. 171 operate on s. 226 in the way suggested in Tahmoor Coal. It follows that we do
not propose to follow Tahmoor Coal in its construction of s.226 to the extent that the
construction appears to place limits on the discretionary considerations in s. 226(b)
because of that which we regard as an incorrect interpretation of the interrelationship
of the objects in s. 3 and s. 171 of the Act. In our view the limitation is not justified.”
[59] The Full Bench decided that termination of the agreements was not contrary to the
public interest, stating:
“[158] As we have earlier indicated, there is nothing inherently inconsistent with the
termination of an enterprise agreement that has passed its nominal expiry date and the
continuation of collective bargaining in good faith for an agreement. Neither the
Unions nor Aurizon have suggested that bargaining will stop if the agreements are
terminated. Neither have suggested that they will not pursue new agreements or that
they will cease bargaining if the agreements are terminated.
[159] While we accept that a termination of the agreements will disturb the current
bargaining positions, we do not accept, as the Unions submit, that this is counter to the
object of a fair framework for collective bargaining and facilitating good faith
bargaining. Collective bargaining will remain available to the bargaining parties. The
bargaining parties in their bargaining will continue to be required to meet the good
faith bargaining requirements. The disturbance of the bargaining position does not
result in the disappearance of collective bargaining or the rules by which the
bargaining parties must abide.
[160] Moreover the Unions and employees will have available to them the full arsenal
of tools under the Act to exert legitimate industrial pressure on Aurizon to bargain and
to reach agreement. It is therefore not correct that the termination of the agreements
results in little or no incentive on Aurizon to bargain.
[161] We also do not accept that by terminating the agreements, the Commission
becomes the effective arbiter of terms and conditions of employment of the employees
of Aurizon, because the effect is to alter the terms and conditions of employment of
the employees. The Act sets out the safety net terms and conditions of employment.
They comprise the relevant modern award and the NES. Whether an agreement passes
the better off overall test is also measured by reference to these instruments, not the
antecedent enterprise agreement.
[164] The circumstances in which the agreements were made is a significant factor. As
part of the privatisation processes the Queensland government required Aurizon to
provide a three year employment guarantee and formalise that in the enterprise
agreements. The pressure exerted by the government led to other concessions to
claims that Aurizon would not have otherwise agreed on. The three year period
[2016] FWCA 82
expired some 18 months ago, yet they continue to apply, and to restrain Aurizon’s
capacity to conduct its business more effectively and productively.
[165] Many of the provisions sought to be removed or varied are not common in most
enterprise agreements. They restrict Aurizon in making business changes that it wishes
to make in response to a competitive market situation. The restrictive provisions
restrain Aurizon’s capacity to effectively manage its labour resource needs. Aurizon
has endeavoured to negotiate changes to those provisions but the lengthy and
comprehensive negotiations have not led to an agreement. Many of the changes sought
by Aurizon in the negotiations seem to us to be rationally based. We readily
understand its desire that its now private sector business no longer be restrained by
provisions that were effectively imposed through the privatisation process. We do not
think the changes proposed, objectively viewed, involve exploitation or unfairness in
the terms and conditions of employment of Aurizon employees.
[166] The question of whether it is contrary to the public interest needs to be
considered against all of the circumstances and for the reasons given we are satisfied
that it is not contrary to the public interest to terminate each of the agreements.”
[60] The Full Bench then decided that it was appropriate, in the circumstances of that case,
to terminate the agreements, stating:
“[167] All of the circumstances also need to be taken into account in considering
whether termination of the agreements is appropriate. In particular the views of
employers and employees covered by the agreement, their circumstances, and the
impact of termination need to be taken into account. The requirement in s. 226(b) to
take into account all of the circumstances including those set out in s. 226(b)(i) and (ii)
is a requirement to take the matters into account and to give them due weight in
assessing whether it is appropriate to terminate an enterprise agreement. In assessing
appropriateness by taking into account all of the circumstances, we approached the
task by reference to the construction of s. 226 and the contextual matters that bear
upon that construction dealt with earlier as well as giving specific consideration to the
matters identified in s . 226(b)(i) and (ii).”
[61] Ultimately, the Full Bench was satisfied that the detriment to employees, which it
accepted resulted from the removal of the agreement, was outweighed by the other factors in
the case particularly given the undertakings that Aurizon had made. Particular stress was
placed on the unusual nature of some of the content of the agreement and on analysis of the
dynamics of the rail industry.
[62] The Full Bench’s decision was endorsed by the Federal Court in Communications,
Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of
Australia v Aurizon Operations Ltd [2015] FCAFC 126 (3 September 2015)
Consideration
[63] I take it that the Aurizon decision is authority for the approach of weighing each of the
factors relevant to the two heads of s.226 in the circumstances of each case. Assumptions are
not to be made about the inappropriateness of terminating an agreement when bargaining has
not concluded, as occurred in Tahmoor.
[2016] FWCA 82
[64] The notion of the public interest in s.226(a) refers to matters which are distinct from
the interests of the parties. These have usually related to the objects of the Act, the desire to
promote enterprise bargaining and the overall impact on the economy and/or an industry.
[65] I accept Boom’s submissions as to the impact of the decline in the price of coal on its
business. The pressure that the coal mining industry is under is a matter of public notoriety. It
is unlikely to improve in the foreseeable future. A lot of emphasis was put by Boom on the
state of the market generally. The CFMEU took issue with this as being too general and not
being specific to the Hunter Valley operation. The evidence of the CFMEU witnesses was that
there was still “a lot of work”. Nevertheless, there have been redundancies and Boom has had
difficulty in obtaining and maintaining contracts. In short I accept Boom’s evidence of its
financial issues as applicable to the Hunter Valley operation.
[66] The question is whether termination of the Agreement is an appropriate response to
the market difficulties in all the circumstances of the case.
[67] The conduct of negotiations since October 2014 was the subject of conflicting
submission and evidence. It appears that the CFMEU and the employees may have had an
incorrect opinion as to the content of Boom’s final offer with respect to casual employees.
(See Peter Harris evidence, Transcript [1277] – [1301], [1326] – [1333]) Communication had
effectively broken down in the context of Boom’s unilateral decision to put the agreement to
the vote.
[68] In any event, the 1 July proposal did not contain the level of wages and conditions
reductions which would be involved in the termination of the Agreement even with the
undertakings offered. The CFMEU submitted that there is no evidence to justify the change in
Boom’s position in the three weeks from the vote to the application being made.
[69] The CFMEU submits that the timing of the application demonstrates that it is intended
to pressure employees and the union in bargaining. I have not relied on this point. The
application needs to be judged on its merits in accordance with s.226 without any assumptions
about motive which cannot be proved, in any event.
[70] The Aurizon decision makes it clear that the fact that bargaining has not concluded
when an application to terminate an agreement is made cannot be regarded as a determinative
factor. Nevertheless, it is a factor that needs to be weighed together with other factors.
[71] The negotiations were protracted and difficult. This is not surprising, given the market
conditions and Boom’s desire to make significant changes to the status quo. I am not satisfied
that if the Agreement is not terminated a new agreement could not be reached. It may be that
termination of the Agreement would make the re-negotiation more difficult because of the
deterioration of the relationship between the parties.
[72] This is not a case, such as Aurizon, where the agreement contains a range of conditions
of employment which are in excess of community standards or which appear to unreasonably
constrain the employer from being competitive. It is also different from Nicks Cranes where
the Agreement appears to have provided wages and conditions well in excess of those
received by employees of competitors.
[2016] FWCA 82
[73] The CFMEU’s comparison document is set out in paragraph [42]. I requested Boom to
respond to that comparison. Their response is contained in Exhibits S19 and S21. These are
more detailed comparisons of wages, allowances and some conditions for the same competitor
companies as against:
| | The current Boom Agreement; |
| | The proposed agreement voted down on 1 July 2015; |
| | Boom undertakings; |
| | The Mobile Crane Award. |
[74] Perhaps, inevitably, Exhibits S19 and S21 show that such comparisons are complex. It
is difficult to compare like with like to obtain a total package. Nevertheless, I am satisfied that
the general picture painted by the CFMEU comparison is not misleading. It is clear that
Boom’s package of wages and conditions is not in excess of its competitors.
[75] Exhibit S21 shows that, even with the undertaking rate, Boom employees would lose
between $6.60 and $8.24 per hour. In addition, the travel allowance would reduce from $27 to
$21 per day. These are significant reductions in earnings, in my view. At the very least, they
would give Boom a significant advantage in the market. It is likely in my view, that this
would lead to moves by competitors to match these wages and conditions.
[76] On the basis of the issues considered above, I am not satisfied that it is not contrary to
the public interest to terminate the Agreement. To do so would shift the balance in bargaining
when the evidence shows that the Agreement does not place Boom in a position of
disadvantage in the market place.
[77] In addition S.226(b) requires me to take into account all of the circumstances,
including the views and circumstances of the employees, employers and the union.
[78] The views of each of the parties are clear and in conflict. There was no evidence of
any division amongst employees or divergence between them and the union.
[79] Vice President Watson noted in ERA, quoted above, that there must be consideration
of the reasons for the views of the parties and the validity of their concerns.
[80] Based on Exhibit S20 there were, at the time of the hearing, 56 employees potentially
affected by the application. 53 are permanent with an average length of service of between
7.76 and 8.9 years. Employees live in a regional area where alternative employment
opportunities are limited. The reductions in take home pay resulting from the termination of
the Agreement would not able to be absorbed by employees, according to the CFMEU
witnesses.
[81] Exhibit S22, prepared at my request by Boom, is a list of those matters which would
actually be lost by employees, in addition to the loss of wages already summarised. Some of
these are significant matters such as:
| | Reversion to the award dispute settlement clause; |
| | Payment for redundancy into ACIRT to be ended; |
| | Ordinary hours increased from 36 to 38 per week; |
| | Reduction in overtime and penalty rates; |
[2016] FWCA 82
| | Reduction in compassionate leave and changes in personal leave. |
[82] The CFMEU questioned the credibility and validity of Boom’s financial, market and
contract evidence. Much of this material was marked confidential as were aspects of the
evidence of Mr Raby and Mr Mitchell. Accordingly, I have not set out this evidence in detail.
I found Mr Raby and Mr Mitchell to be credible witnesses. As I have already stated in
paragraph [65] above, I accept that Boom’s evidence is applicable to the Hunter Valley
operation.
[83] The significant reduction in wages and conditions of Agreement-covered employees
which would flow from the termination of the Agreement would obviously provide a cost
saving to Boom. This is not necessarily the same as an increase in productivity and efficiency.
[84] The substantial reduction in take-home pay and conditions of employment resulting
from the termination is not offset in any meaningful way by the undertakings. The effect on
the living standards and family circumstances of employees is not outweighed by the
efficiency benefit to the employer, in my view.
[85] Accordingly, my consideration of the views and circumstances of employees, the
employer and the union does not lead me to the conclusion that it is appropriate to terminate
the Agreement.
Conclusion
[86] For the reasons outlined above, I am not satisfied that the requirements of s.226(a) and
(b) of the Act have been established, such that I must terminate the Agreement. Indeed, I have
concluded that termination of the Agreement is not appropriate in all of the circumstances
[87] Accordingly, the application by Boom Logistics Limited to terminate the Boom
Logistics Ltd Hunter Valley Enterprise Agreement 2013 is dismissed.
DEPUTY PRESIDENT
[2016] FWCA 82
Appearances:
W. Swain with B. Mitchell for Boom Logistics Ltd;
P. Quinn for the CFMEU.
Hearing details:
2015
Sydney:
August 13 (Conference);
November 5.
Newcastle:
October 14, 15.
Printed by authority of the Commonwealth Government Printer
<Price code C, AE401840 PR575847>
2. Boom further undertakes that, upon termination of the Agreement, the
classification and wage rates contained in the Appendix to this undertaking will be
applicable to its employees (previously covered by the Agreement). Those wage rates,
and the allowances expressly provided for in undertaking 1 (above), will continue to
be paid until such time as a new agreement is made which applies to the employees (or
any operative Award provision provides a higher benefit or entitlement).”
[29] Boom also undertook to preserve employees’ existing accrued entitlements (Exhibits
S24 and S25).
[30] Nevertheless, losses in take-home pay are still potentially considerable. Exhibit S12
was a summary of total annual earnings for a particular employee, including allowances and
loadings. It showed a shortfall of $29,641 between actual earnings under the Agreement and
what would apply, including the undertakings.
Other evidence was given by Paul Whelan, Boom’s Hunter Valley Regional manager (Exhibit
S8). This concentrated on the negotiations leading to the vote rejecting Boom’s proposal on
1 July 2015. It appears that the principal changes sought involved, inter-alia:
| | More flexibility to utilise casuals |
| | Changes to starting times |
| | Changes to shift work arrangements. |
(see Exhibit S18)
4
7
0