Gippsland Contracting Pty Ltd T/A BJ & BJ Murphy Contracting

[2018] FWCA 6557

[2018] FWCA 6557

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

Gippsland Contracting Pty Ltd T/A BJ & BJ Murphy Contracting
(AG2018/4846)

BJ & BJ MURPHY CONTRACTING VEGETATION ENTERPRISE AGREEMENT 2012-2014

Electrical contracting industry
DEPUTY PRESIDENT MASSON	MELBOURNE, 31 OCTOBER 2018

Application for termination of the BJ & BJ Murphy Contracting Vegetation Enterprise Agreement 2012-2016.

[1] Gippsland Contracting Pty Ltd T/A BJ & BJ Murphy Contracting (BJ Murphy Contracting) made an application (Application) to the Fair Work Commission (the Commission) on 30 July 2018 to terminate the BJ & BJ Murphy Contracting Vegetation Enterprise Agreement 2012-2016 1(Agreement) pursuant to section 225 of the Fair Work Act 2009 (the Act).

[2] The Agreement is a single enterprise agreement made pursuant to s 185 of the Fair Work Act 2009 (the Act) that reached its nominal expiry date on 30 April 2016.

[3] The Agreement is expressed to cover BJ Murphy Contracting and its employees employed in any of the classifications contained in the Electrical, Electronic and Communications Contracting Award 2010 2 (the Award).

[4] The Application was filed by Mr Dean Ellen, Director of BJ Murphy Contracting, who provided a Statutory Declaration in support of the Application and states that if the Agreement is terminated, the Employees will instead be covered by the Award.

[5] Directions were issued on 12 September 2018 (Directions) that required BJ Murphy Contracting to provide a copy of an outline of submissions and other material on which it intended to rely to the Commission on or by Friday, 25 September 2018. BJ Murphy Contracting was also directed to provide their outline of submissions and material to all employees and conduct communication and information meetings with such employees on or by 2 October 2018. The employees were also invited to lodge any outline of submissions and other material on which they intended to rely on or by 16 October 2018.

[6] On 25 September 2018, the Commission received submissions from BJ Murphy Contracting which included information regarding further consultation conducted with employees on 24 September 2018. A ballot of employees regarding the termination of the Agreement was conducted at the workplace on 24 September 2018 resulting in a vote in support of the Agreement’s termination.

[7] A telephone hearing was subsequently listed and conducted on 24 October 2018. BJ Murphy Contracting was represented by Mr Ellen while Mr Brett O’Halloran (OH&S Representative) attended on behalf of employees.

Statutory Provisions

[8] Section 225 of the Act states:

“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.”

[9] Section 226 of the Act states:

“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.”

Background and Evidence

[10] Mr Ellen states that BJ Murphy Contracting is engaged in vegetation management specialising in the cutting of vegetation in the vicinity of transmission and powerline assets in regional Victoria. Mr Ellen further states that BJ Murphy Contracting has up until recently been engaged as a principal contractor to AusNet Services but was unsuccessful in securing renewal of a direct contract with AusNet Services during a retender process in late 2017. As a consequence, BJ Murphy Contracting is now engaged on a sub-contract basis, on reduced rates, to the successful principal contractor, Active Tree Services Pty Ltd (ATS). According to Mr Ellen, BJ Murphy Contracting will be significantly impacted in terms of reduced contract income in 2019 with an estimated rate reduction of 10% flowing from the loss of the direct contract with AusNet Services.

[11] Mr Ellen states that BJ Murphy Contracting is fully committed to the AusNet and ATS contract and has no other contracts. As a consequence of the loss of the principle contractor status, the sub-contracting arrangements now in place and the reduced contracting rates, BJ Murphy Contracting are unable to compete on the basis of the wage rates in the current Agreement, according to Mr Ellen. Mr Ellen states that ATS have advised BJ Murphy Contracting that their labour rates are not competitive being some 14% higher than that of ATS’s direct hire employees. Mr Ellen also states that if BJ Murphy Contracting are unable to reduce their contracting rates it is likely that ATS will engage lower priced sub-contractors.

[12] Of particular concern to BJ Murphy Contracting is the guaranteed minimum wage increase of 3% per annum provided for at Clause 15 Wages of the Agreement, which will over time render BJ Murphy Contracting even less competitive and will threaten the viability of the business and the employment of approximately 40 employees.

[13] According to Mr Ellen, the prior principal contractor arrangements allowed BJ Murphy Contracting to provide more generous terms and conditions relative to the Award which include higher base rates of pay and a guaranteed annual wage increase.

[14] Mr Ellen states that prior to making the Application, he had consulted with employees in meetings on 20 June 2018. Consistent with directions issued by the Commission, he also conducted a further meeting with employees on 24 September 2018 and explained the circumstances, purpose and effects of the Application. Mr Ellen further states that employees were supportive of the Application on the basis that it would mitigate the risk of loss of work for the business and redundancies.

[15] Mr Ellen states that all employees covered by the Agreement signed a document in support of the Application, a copy of which was appended to Mr Ellen’s supplementary submission received on 25 September 2018. Mr O’Halloran confirmed that employees were briefed on the Application, understood the implications and were supportive of the Application.

[16] Mr Ellen further states that it would not be financially viable for BJ Murphy Contracting to maintain the current Agreement given the above Award pay rates and guaranteed annual wage increase and the impact this has on the competitiveness of the business.

[17] An undertaking 3 was also provided by BJ Murphy Contracting that it would, in the event of the Agreement being terminated:

1. Maintain current base rates of pay of existing employees for a two year period effective 31/10/18 – 31/10/20; and

2. Maintain award rates of pay for overtime performed by employees in all circumstances.

Consideration

[18] As the Agreement has passed its nominal expiry date and the Applicant is an employer covered by the Agreement, I find that the Applicant has standing to make the Application pursuant to s 225(a) of the Act.

[19] No opposition to the Application was received by or on behalf of any employees.

[20] Based on the material contained in the statutory declaration filed with the Application, there is nothing before me which raises public interest considerations which might weigh against the termination of the Agreement. I am therefore satisfied that it is not contrary to the public interest to terminate the agreement.

[21] In considering whether it is appropriate to terminate the Agreement, I have had regard to the undertaking provided by BJ Murphy Contracting regarding maintaining base rates of pay of existing employees and the impact on employees not being guaranteed an annual wage increase. Against these factors, I have balanced the risk of employment losses that may otherwise flow from an uncompetitive labour cost structure. This is of particular significance in a regional area where the business is a significant employer. I have also had weighed the views of BJ Murphy Contracting, particularly with respect to the commercial and competitive position of the business, and that the employees are not opposed to the Application.

[22] I am consequently satisfied that it is appropriate to terminate the Agreement taking into account all of the relevant circumstances.

[23] Pursuant to s 225 of the Act, and having considered and being satisfied as to each of the matters contained in subsections 226(a) and 226(b)(i) and (ii) of the Act, the Agreement is terminated.

[24] The termination will come into effect from 31 October 2018.

DEPUTY PRESIDENT

 1   AE893635-3.

 2   MA000025.

 3   Undertaking of BJ Murphy Contracting, dated 29 October 2018.

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