John Holland Queensland Pty Limited

[2014] FWC 783

[2014] FWC 783

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185 - Application for approval of a greenfields agreement

John Holland Queensland Pty Limited
(AG2013/12079)

SENIOR DEPUTY PRESIDENT RICHARDS BRISBANE, 3 FEBRUARY 2014

Summary: application for approval of greenfields agreement - whether “genuine new enterprise” - change in method of operation - s.172(4) and s.172(2)(b)(i) - whether permitted content - contractors/labour hire clause - industrial disruption.

[1] This matter concerns an application for the approval of a greenfields agreement referred to as the John Holland Queensland Pty Ltd Building and Construction Enterprise Agreement (QLD and NT) 2012 - 2016 (“the Agreement”). The Agreement purports to apply to employees of John Holland Queensland Pty Ltd engaged in classifications set out in the Agreement on general building and construction projects in Queensland and the Northern Territory.

[2] Following receipt of the application for approval of the Agreement, a cursory examination of the Agreement and the supporting declarations gave rise to a number of queries, which were directed (on 3 January 2014) to the Applicant (John Holland Queensland Pty Ltd) and copied to the employee organisation with which the Applicant had made the Agreement, the Construction, Forestry, Mining and Energy Union (“the CFMEU”) The relevant correspondence was as follows:

Dear Mr Zadow [the Employee Relations Manager NSW/ACT/QLD/NT]

The application to approve the John Holland Queensland Pty Ltd Pty Limited Building and Construction Enterprise Agreement (QLD & NT) 2012 – 2016 is allocated to Senior Deputy President Richards, who advises as follows:

At the outset I note the following issues in relation to this application.

Genuine new enterprise

Section 172 of the Fair Work Act provides as follows:

Single-enterprise agreements

(2) An employer, or 2 or more employers that are single interest employers, may make an enterprise agreement (a single-enterprise agreement):

(a) with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or

(b) with one or more relevant employee organisations if:

(i) the agreement relates to a genuine new enterprise that the employer or employers are establishing or propose to establish; and

(ii) the employer or employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

Note: The expression genuine new enterprise includes a genuine new business, activity, project or undertaking (see the definition of enterprise in section 12).

...

Greenfields agreements

(4) A single-enterprise agreement made as referred to in paragraph (2)(b), or a multi-enterprise agreement made as referred to in paragraph (3)(b), is a greenfields agreement.

In the F20 – Employer’s declaration in support of the Agreement, the employer has indicated that the agreement does not cover a genuine new enterprise that the employer is establishing or proposing to establish.

The agreement cannot be approved on the basis of this statutory declaration because the application does not accord with the requirements of s. 172(4) and (2)(b)(i) of the Act.

You are of course entitled to put further submission to me in respect of this matter, and I would ask that you do this no later than COB 14 January 2014.

Use of Contractors/Supplementary Labour Hire

I refer to clause 8.9 of the Agreement (and clause 5 of appendix D). I have previously issued a decision – [2013] FWC 5033 (attached) – whereby I explained that I considered that a similar clause, as it purported to restrict or qualify the employer’s right to use contractors or utilise contracted labour, may not comprise permitted content for the purposes of s.172 of the Act. I would draw your attention to this decision, and request that the employer as Applicant provide a response by COB on 14 January 2014 (assuming the application is being pressed regardless of the matter raised immediately above).

If upon receipt of your material I continue to have concerns as to whether the agreement can be approved I will provide an opportunity for you to request a hearing.

Kind regards

[3] On 14 January 2014, the Applicant’s legal representatives, Ashurst Australia, replied in writing to the above correspondence.

[4] In respect of the query as to the Applicant having declared that the Agreement does not cover a genuine new enterprise that the employer is establishing or proposing to establish, the Applicant’s legal representative contended that in actuality the Agreement did seek to cover such a new enterprise (contrary to the Applicant’s prior declaration).

[5] In essence, it was argued that the Agreement related to a genuine new enterprise that the Applicant was establishing or proposing to establish. It was further advanced that the concept of a genuine new enterprise included a genuine new business, activity, project or undertaking by the Applicant (and in respect of which there were no employees currently employed), and applied to the circumstances now relevant to the Applicant.

[6] More specifically, it was contended that the Applicant does not perform building work on its building projects through its own employees. In the past, this work has been subcontracted to contractors who provide the required labour for the Applicant’s projects.

[7] The genuine new enterprise or project arises in so far as the Applicant is proposing to conduct building worked on the new and existing projects by way of its own direct employees rather than through a subcontractor.

[8] That is, the employer had altered its method of operation and departed from the usual course of its business as it had been conducted on building projects in Queensland.

[9] Further, no employees had been employed in respect of the genuine new enterprise that the Agreement sought to cover.

[10] This change in the method of operation has not been such as to create a new or separate entity. But it was contended nonetheless that the Agreement relates to a “genuine new enterprise” in so far as the business will need to operate in a significantly different way (by discretely managing and administering its own direct employees, albeit through its existing systems and management processes).

[11] The CFMEU agreed with the submissions of the Applicant in these regards.

[12] It would appear that a genuine new enterprise would require some degree of segmentation from an existing enterprise. Here the Applicant is essentially contending that it is transforming its method of operation to create a genuine new enterprise, and that the segmentation arises from this fact, not the physical creation of a new, identifiable entity/project, as might ordinarily be the case.

[13] This argument may not always be available to a business that changes its method of operation. An important issue of degree must be considered. But here the extent of the change in the nature of the business, as I have explained it above, is so significant so as to favour a finding that the Agreement for which approval is sought will cover a genuine new enterprise.

[14] There may well be persons who may be employed to support incidentally that new enterprise, but this is no different from situations in which some preparatory work may have been undertaken or the wider administrative systems necessary to supporting the genuine new enterprise were in place or being brought into place. Existing employers in the construction industry who make new (greenfield) enterprise agreements routinely have systems in place to support the operations of the new projects etc, and this does not detract from either the genuineness of the enterprise (etc) or whether it can be characterised as new or not.

[15] These matters aside, the Applicant submitted ultimately a new declaration, declaring on this occasion that the Agreement did in fact cover a “genuine new enterprise”.

[16] I consider the matter in question resolved on that basis.

Contractors and Labour Hire

[17] As indicated above, I also brought to the parties’ attention that the Agreement included clauses relating to contractors and labour hire which appeared to not concern permitted content for the purposes of s.172 of the Act. The clauses in question read as follows:

8.9 EMPLOYMENT SECURITY, STAFFING LEVELS, AND REPLACEMENT LABOUR

The Company recognizes that in certain circumstances, the use of contractors and labour hire may affect the job security of Employees covered by this agreement.

The Use of Contractors and Use of Supplementary Labour Hire requirements shall not apply to Old Projects.

The application of these requirements shall recognize the location and circumstance, and where the requirements as noted below would provide a competitive disadvantage to the company. In these circumstances the Company and the Unions may agree to vary these requirements in a Project Specific Agreement. This agreement may not be unreasonably withheld.

This clause shall not operate to breach the Fair Work Act 2009 (Cth), the Fair Work (Building Industry) Act 2012 (Cth), the Competition and Consumer Act 2010 and National Building Code 2013 and relevant State Code's of Practice for the Construction Industry and associated Guidelines.

In the event any matter contained in this clause is in breach of any relevant legislation, regulation and/or the Code/Guidelines, then that matter will be deemed invalid to the extent of any breach.

a) Use of Contractors

If the Company wishes to engage independent contractors or their employees to perform work described in the classifications of this Agreement, the Company must first consult in good faith with potentially affected Employees and their Union.

If, after consultation, the Company decides to engage bone fide contractors, these contractors must be afforded the same terms and conditions of engagement (or terms no less favourable) as they would receive if they were engaged as Employees under this Agreement performing the same work.

The use of sham sub-contracting arrangements would constitute a breach of this Agreement.

b) Use of Supplementary Labour Hire

Where there is need for supplementary labour to meet the temporary/peak work requirements, such labour may be accessed from bona fide businesses, including sub-contractors and labour hire companies, following consultation with the Company Consultative Committee and/or union(s) party to this Agreement. The company shall ensure that any workers engaged by such businesses and performing work described in the classifications of this Agreement shall receive wages, allowances and conditions not less than those contained in this Agreement.

Supplementary labour is defined as temporary 'top up' labour designed to meet short situations such as absences due to sick leave, annual leave and short term work peaks. The Company undertakes not to use supplementary labour in any position on site for a period of more than six weeks. Any departure from this maximum period shall require the consent of the Unions. [my emphasis]

[18] A mirror clause to this is also set out at clause 5.9 of Appendix D to the Agreement. That clause operates in respect of supplementary labour hire in the Northern Territory.

[19] I considered these same clauses (in part) in my decision in [2013] FWC 5033. The clauses appear as a matter of routine in many building and construction industry template agreements. At that time I contended as follows:

[10] In my view, properly characterised, the second paragraph of sub clause 35.3 of the Agreements, because it imposes limitations on persons who may be sub contractors or the employees of labour hire contractors, may be a matter that does not pertain to the employment relationship. That is, it may not be a matter contemplated at s.172(1) of the Act, and as a consequence may not comprise permitted matter in an enterprise agreement.

[11] The sub clause may be inconsistent, therefore, with the decision of (then) Justice French in  Wesfarmers Premier Coal Limited v the Automotive Food Metals Engineering, Printing and Kindred Industries Union (No 2) [2004] FCA 1737. It may also be inconsistent with the seminal authority in The Judges of the Commonwealth Industrial Court and Others; Ex parte Cocks and Others (1968) 121 CLR 31. In that judgement, the High Court found the clause before it:

“[...] extends to forbidding an employer bound by the award from entering into a contract, not being a contract of service, with another person for the execution of work outside the employer’s workshop or factory.”

[12] The clause was held to be impermissible by the High Court for reason that it imposed a prohibition or a limitation on the use of contractors.

[13] I add that the circumstances before me do not concern a term of an agreement that seeks to regulate the wages and conditions to be afforded to contractors (support for which as a permitted term arguably is provided by the judgment of the High Court in R v Moore and Others; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470). They are matters elsewhere addressed in the Agreements before me, and they are uncontroversial on the prevailing authorities.

[14] Neither is the sub clause an ancillary clause. Nor does it otherwise perform some kind of machinery function within the Agreements. It is a discrete clause in its own right.

[15] The sub clause before me, however, is more akin to the circumstances which were considered by the Full Bench in PR962259 (“Re: NUW”). In that decision, the Full Bench considered various clauses regulating the use of employees engaged by contractors by the employer. The Full Bench unanimously found as follows:

[26] We turn first to clause 15.3.2(e) of the Agreement applying to Addamo Fresh Pty Ltd. It provides as follows:

“15.3.2(e) That none of the work covered by this Agreement will be contracted to be performed or organised by any third party.”

[27] This term constitutes a direct prohibition on the engagement of contractors. For that reason the decision in Cocks is relevant and binding. A prohibition of that kind does not pertain to the relationship. It follows that the Agreement is not one in respect of which application can be made pursuant to s.170LI.

[28] Similar considerations apply to a term which appears in the Agreement applying to Caprice Australia Pty Ltd and Melbourne Logistics Pty Ltd. The term reads:

“The role of casuals is to cater for peaks in demand for labour. Casual employment will not be used to replace full-time or part-time permanent employment. Accordingly casuals will not be employed for extended periods.”

[29] The relevant provisions are set out in full in Schedule A. When the term we have just set out is read in context it is clear that the reference to casuals includes not just casuals engaged by the employer bound by the Agreement but also casuals engaged by contractors to the employer. So interpreted, the term purports to prohibit the employer bound by the Agreement from allowing a contractor to engage casual employees to replace permanent employees, subject to the further limitation that casuals should not be engaged for an extended period. This raises a difficult question of characterization. It seems to us that when properly considered the term constitutes a prohibition on the engagement of contractors’ employees which, although only partial, is nevertheless sufficient to take it outside the relationship between the employer bound by the Agreement and the employees covered by the Agreement. It follows that the Agreement are not ones in respect of which application might be made pursuant to s.170LI.

[16] It appears to me that the unanimous finding of the Full Bench in Re: NUW, particularly in respect of paragraphs 28-29 above, is relevant to the circumstances before me (in respect of the second paragraph of sub clause 35.3 of the Agreements). It appears to me that when properly characterised the sub clause in the Agreements “constitute [...] a prohibition on the engagement of contractors’ employees which, although only partial, is nevertheless sufficient to take it outside the relationship between the employer bound by the Agreement and the employees covered by the Agreement.”

[17] Indeed, the sub clause before me travels further than that before the Full Bench. It requires the consent of the CFMEU before such time as supplementary labour may be sourced beyond a specified limitation.

[18] Consequently, sub clause 35.3 of the Agreements appears not to be content about which an agreement could be made for the purposes of s.172(1) of the Act, at various levels.

[20] The CFMEU did not agree with my characterisation of the clauses on that occasion, as I noted at the time. It does not on this occasion either, observing in broad terms only that “the permissibility of the clause in question is well-settled”.

[21] The submissions by the legal representatives for the Applicant, however, stated as follows:

The Applicant concedes that the second paragraph at clause 8.9(b) and clause 5.9 of Appendix D of the Enterprise Agreement is not content about which an agreement could be made for the purposes of s.172(1) of the FW Act.

[22] It appears to me that this is a matter not only about permitted content, but a matter about which the employer and the CFMEU have opposing views and in respect of which are likely to fall into dispute. And this is despite the fact that the employer and the CFMEU have ‘made’ the Agreement.

[23] I can only alert the parties at the time of the approval process to the potential for future disputation, I cannot take steps to remove that risk, however.

[24] Further, the Commission has no jurisdiction under the Act remove agreement content that does not conform to the requirements of s.172 of the Act. I have set out in a prior decision ([2013] FWC 912) the general approach as I see it:

[23] Notwithstanding, I have not pursued this issue to the point of making determinative findings as I might otherwise (for example, in respect of an issue arising for purposes of s.443 of the Act) as the Act does not ascribe to the existence of non-permitted terms any particular status for the approval process. Indeed the Explanatory Memorandum to the Act suggests the following is the intended effect of the Act:

...is not intended to that FWA will have to scrutinise each enterprise agreement to ensure that all its terms are about permitted matters as this would unduly delay the agreement approval process.

[24] I have been mindful of not delaying the approval process by instigating processes that would delay the approval of the Agreement before me.

[25] I note too, that s.253 of the Act provides as follows:

253 Terms of an enterprise agreement that are of no effect

(1) A term of an enterprise agreement has no effect to the extent that:

(a) it is not a term about a permitted matter; or

(b) it is an unlawful term; or

(c) it is a designated outworker term.

[...]

(2) However, if an enterprise agreement includes a term that has no effect because of subsection (1), or section 56 or 326, the inclusion of the term does not prevent the agreement from being an enterprise agreement.

[26] It follows that notwithstanding that whilst it is arguable that clause 23 of the agreement (other than in relation to persons engaged as forklift drivers) is not a term about a permitted matter (though the CFMEU begs to differ in its view), the inclusion of a term to that effect does not prevent the agreement from being an enterprise agreement. It further follows that the inclusion of the term does not invalidate the application nor cannot give the Commission reason to not approve the agreement, despite the term being of no effect. The Full Court of the Federal Court put it this way:

Section 253(1) and s 356 of the FW Act have the effect of preserving the overall bargain reached and approved by the employees. Insofar as the two may have both lawful and a potentially unlawful operation, those provisions limit the operation of the term only to that which is lawful.

[27] The matter, then, may ultimately be one for the parties to consider themselves as a matter of legal risk, when and if the clauses are acted upon.

[25] The CFMEU agitated, consistent with the Explanatory Memorandum, that “the Commission is not required to embark on a detailed analysis of each clause and sub clause of a proposed agreement to determine whether those clauses are about permitted matters”. I have not had occasion to adopt such a forensic approach in this regard, and there may well be other matters that I have not given close examination. In short, I do not know if “all” the terms in the Agreement comply with s.172 of the Act, and have not set out to so determine.

[26] In any event, the opportunity to conduct a robust evaluation of “all” the terms would cause delay in the approval process, and in this instance, could also lead to further industrial disruption, about which the CFMEU has duly warned me in email correspondence to the Commission:

From: Travis O'Brien

Sent: Friday, 31 January 2014 8:00 AM

To: Chambers - Richards SDP

Cc: [email protected]; Chambers - Ross J

Subject: RE: AG2013/12079 - Application by John Holland Queensland P/L - Submissions of Applicant

Dear Associate,

In the submissions provided by the CFMEU on 23 January we requested “your earliest advice” as to the course that His Honour intended to take regarding this application.

As you would be aware, this Enterprise Agreement was the subject of a protracted dispute which has now been resolved by the filing of this application.  CFMEU is concerned that further delays in dealing with this application may cause disquiet amongst our membership and we ask that His Honour advise what course His Honour intends to take so that we can advise our membership, and make the necessary preparations if a hearing is required.

Travis O’Brien

Senior Industrial Officer

[27] Subject to satisfaction of some further matters, it is my intention to approve the Agreement by way of separate instrument, and I will do so as soon as practicable. But in saying so, there may be other matters highlighted in the final decision about which the employer and the CFMEU may also find themselves in prospective dispute.

SENIOR DEPUTY PRESIDENT

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