John Stephens v Esso Australia Pty Ltd

[2017] FWC 900

[2017] FWC 900

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

John Stephens
v
Esso Australia Pty Ltd
(U2016/2884)

COMMISSIONER CRIBB MELBOURNE, 14 FEBRUARY 2017

Application for relief from unfair dismissal - jurisdiction - high income threshold - whether covered by modern award or enterprise agreement.

[1] An application has been made by Mr John Stephens (the Applicant), under section 394 of the Fair Work Act 2009 (the Act) for an unfair dismissal remedy. The application is in relation to his dismissal by Esso Australia Pty Ltd (Esso, the Respondent) on 27 May 2016.

[2] A conciliation conference was held on 8 July 2016 but no settlement was reached between the parties. On 8 September 2016, Esso’s representative notified a jurisdictional objection to the application. The grounds of the objection are that Mr Stephens was not an employee protected from unfair dismissal as he was not covered by a modern award or enterprise agreement at the time of his dismissal and that his annual rate of earnings exceeded the high income threshold.

[3] The application was listed for a jurisdictional hearing on 1 December 2016. Esso was represented by Mr Andrew Pollock of Counsel and Mr Stephens by Ms Kirsty Stewart of Counsel, via video link to Adelaide. Counsel for both parties agreed that no witnesses would be required for cross-examination at the hearing.

[4] This decision deals solely with the jurisdictional objection made by Esso.

Legislative requirements

[5] Section 382 of the Act provides as follows:

“382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person’s annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold.”

Background

[6] It is useful in this matter to set out a brief chronology of events. The chronology is factual and therefore represents common ground between the parties.

• Mr Stephens commenced employment with Esso on 2 June 2008 in the initial position of Offshore Maintenance Technician, Power and Control in Production, based offshore. 1



• The Esso Offshore Certified Agreement 2006 applied to this role. This agreement was later replaced by the Esso Offshore Enterprise Agreement 2011 (the 2011 Agreement). 2



• In November 2011, Mr Stephens received an expatriate rotational assignment job offer as Lead Instrument and Electrical Technician with ExxonMobil Exploration and Production Malaysia. 3 Mr Stephens accepted this offer and commenced the assignment in December 2011.



• The letter, dated 3 November 2011, sent to Mr Stephens indicated that his base salary was based on the current Power and Control Technician II rate. It also stated that, during the assignment, Mr Stephens would be employed as a salaried employee and that his salary would be adjusted in line with any increase in his current enterprise bargaining agreement. The letter also stated that, following the completion of this and any future assignments, Mr Stephens would be returned to a waged position consistent with his skills and interests as well as a position being available at that time. 4



• In May 2013, Mr Stephens ceased the Malaysian assignment.



• About two months later, Mr Stephens commenced another expatriate assignment in PNG as an Instrument/Electrical Technician. The letter dated 19 June 2013 set out the terms of the assignment. 5



• Mr Stephens’ assignment to PNG was terminated from 7 April 2016 and Mr Stephens returned to South Australia whilst Esso began looking for a new position for him. Mr Stephens was paid the same base salary as he had received whilst on assignment in PNG.



• During the two overseas assignments, Mr Stephens remained employed by the Respondent. 6



• On 27 May 2016, Mr Stephens was dismissed by Esso.

Was Mr Stephens covered by an enterprise agreement or modern award at the time of his dismissal?

[7] It was common ground between the parties that Mr Stephens’ salary exceeded the high income threshold (section 382(b)(iii)). The issue in dispute between the parties, which requires determination by the Commission, is whether a modern award covered Mr Stephens or whether an enterprise agreement applied to Mr Stephens’ employment at the time of his dismissal (section 382(b)(i) and (ii)).

Esso

[8] It was submitted on behalf of Esso by Mr Pollock that the Commission was required to resolve only two questions. These were said to be whether, at the time of Mr Stephens’ dismissal, Mr Stephens was covered by the Esso Offshore Enterprise Agreement 2011 7 (2011 Enterprise Agreement) or by the Hydrocarbons (Upstream) Award 20108(the award). Esso stated that, if the answer to both questions was no, as Mr Stephens was above the high income threshold, there would be no jurisdiction to proceed further.9 It was Esso’s contention that Mr Stephens was covered by neither the offshore enterprise agreement nor the award.10

[9] Esso stated that the international assignments were variations to the existing contract and that the assignments were not covered by the enterprise agreement. It was explained that Esso remained the employer for payroll purposes but for all other purposes, the assignment was managed by the host affiliate. Mr Pollock indicated that this was similar to a labour hire type arrangement. 11 It was explained that the assignment to the client (of Mr Stephens) had ended but an employment relationship with Esso continued with, in this case, no substantive position being performed by Mr Stephens at the time of his dismissal.12

[10] In addition, Mr Pollock highlighted that the position an employee held before they accepted an international assignment was not held open. However, it was said that there was an obligation on Esso to find another role for the employee on their return which was consistent with the employee’s skills and interests. 13

[11] It was submitted by Esso that there was still an employment relationship but that that did not necessarily mean that the offshore enterprise agreement applied to Mr Stephens at the end of the PNG assignment. It was contended that, simply because the contract says that you will be covered by an instrument, does not mean that you will, at law, be covered by that instrument. It was said to be a question of whether or not the coverage clause of that enterprise agreement actually applies to the work performed. 14 Esso indicated that, as the time of Mr Stephens’ dismissal, there had been two variations to Mr Stephens’ contract of employment (the Malaysian and PNG variation letters).15

[12] With respect to Esso’s contention that the 2011 Enterprise Agreement did not cover Mr Stephens at the time of his dismissal, it was stated that the coverage clause required Mr Stephens to be employed offshore and engaged in work that is covered by a classification in the agreement. This was said to be specifically that Mr Stephens was employed offshore in relation to the duties carried out by an employee in the production of oil and gas at Esso’s offshore oil and gas platforms in Bass Strait. 16

[13] Reference was made to a number of authorities that stand for the proposition that “engaged in work” is much narrower than simply “employed”. 17 The Commission was referred to the Full Bench decision in O’Connell v Catholic Education Office, Archdiocese of Sydney T/A Catholic Education Office, Sydney18 and the decision in Tse v Ready Workforce (A division of Chandler Macleod) Pty Ltd19 in this regard.20

[14] It was stated by Mr Pollock that there can be an employment relationship without a position or role at a particular time. This was said to be exactly the situation in this case. Esso explained that it had sought to identify a position for Mr Stephens, at which point, Mr Stephens’ contract would be varied and simultaneously but separately, a new enterprise agreement would begin to cover him. It was argued that the enterprise agreement that would apply would be based on the coverage clause of the agreement i.e. engaged in work in a classification and employed in Bass Strait if it was the offshore enterprise agreement. Esso contended that, at the time of his dismissal, Mr Stephens was doing neither of these things. 21

[15] Further, it was argued that Mr Stephens’ initial role of Offshore Maintenance Technician ceased when he accepted the Malaysian role. Therefore, it was contended that Mr Stephens’ employment was no longer covered by the offshore enterprise agreement. Esso argued that the Malaysian role ceased when Mr Stephens accepted the PNG role. When that ended, whilst Mr Stephens’ contract of employment continued on foot, it was stated that while the Respondent identified a new suitable role for Mr Stephens, he was not employed offshore in relation to the Bass Strait operations nor engaged in any work at all. 22

[16] Further, Esso explained that Mr Stephens’ offshore position had ceased at the time he undertook the Malaysian assignment as there was no obligation to return Mr Stephens to that position at the end of the assignment. It was stated that Mr Stephens was not returned to any agreement covered position on his return from PNG. Esso contended that, until Mr Stephens accepted an agreement covered position on his return, he was still a salaried employee as his contract had not changed. 23

[17] Esso submitted that the same issue arose in relation to the award. It was not disputed that Esso is an employer in the hydrocarbons industry. However, it was stated that it also had to be identified that work was being performed i.e. a position or set of duties. As it was not possible to do this, it was argued that Mr Stephens failed to be covered by the award. 24 Esso stated that it could not be said that Mr Stephens had returned to Australia and had started performing a role that was covered by the offshore agreement.25

[18] Further, it was argued that the period of time when Mr Stephens had returned to Australia from PNG but had not taken up another position was not akin to going on annual leave. Rather, it was described as a period when Mr Stephens was being remunerated at a contractual level rather than under a particular enterprise agreement. This was said to be in accordance with the terms of the assignment which were that, at the end of the assignment, Mr Stephens would be returned to a waged position that was consistent with his skills and interests. 26

[19] The crux of the matter was described as being that, for over four years, Mr Stephens had performed no work in Bass Strait. When Mr Stephens moved to Malaysia, it was said that he had concluded his role in Bass Strait. On his return from PNG, Mr Stephens had been offered an onshore position which he had rejected. 27 Had Mr Stephens accepted the role, the question would then have been whether an enterprise agreement covered that employment, irrespective of what Mr Stephens’ contract of employment said. If Mr Stephens had begun performing that role, he would have fallen within the coverage clause and classifications in the Longford and Long Island Point agreement. Esso argued that, when Mr Stephens returned from PNG, he performed no work at all and was not engaged in a position that could fall under the offshore agreement or the award.28 Therefore, there was no position at that time that either the enterprise agreement or the award could hang off.29

[20] Further, it was submitted by Mr Pollock that Mr Stephens, when he was between the two international assignments, was not in a position covered by an enterprise agreement and so was agreement free for that period. 30 Esso explained that, for administrative convenience, it gave the percentage enterprise agreement increases to its international assignment employees. However, it was stated that this did not carry with it any connotation that the enterprise agreement applied to them. The mere fact that Esso had flowed through those increases was said to not carry the suggestion that, as a matter of industrial law, the enterprise agreement applied or the employees were covered by it.31

[21] With respect to the fact that Mr Stephens was sent the information for the ballot for the enterprise agreement, it was said to be irrelevant. This was because Mr Stephens was sent the material prior to his departure to Malaysia as, at that time, he would have been one of the employees to have been covered by the agreement. 32

[22] In terms of the distinction between the award and agreement coverage and its contractual position, the Commission was referred to a number of authorities. These included City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union, 33 Kucks v CSR Ltd34 and Transport Workers’ Union of Australia v Coles Supermarkets Australia Pty Ltd.35 It was further argued that there is no presumption that an employee who was once covered by an enterprise agreement or award will always be covered by an industrial instrument during the course of their career as their role changes.36

[23] Finally, Esso submitted that there is a question of the extraterritorial application of the Fair Work Act in the circumstances. Section 35(3) of the Act and Regulation 1.15 were referred to. It was stated that this is a question of whether or not Mr Stephens was an Australian based employee when he was engaged to perform duties outside Australia. 37

[24] In reply, Mr Pollock referred to the submissions regarding the principle purpose test and stated that there is no one clear delineation of this test and that it also depended on whether it arose in relation to award or agreement coverage or union eligibility rules. It was argued that it was very clear that one needs to consider this test more broadly and not just the duties but also the work environment and the location. Esso stated that, at the time of the dismissal, Mr Stephens had not performed any duties whatsoever in Bass Strait for four years. 38

[25] Further, Mr Pollock distinguished between the Clements-Kupsch v Saxon Energy Services Australia Pty Ltd 39 (Clements-Kupsch) case and this one on the basis that, in the Clements-Kupsch decision, there was no dispute that the employee was performing duties. It was stated that, in this matter, Mr Stephens was not performing any duties at the time of his dismissal.40

Applicant

[26] On behalf of Mr Stephens, it was submitted by Ms Stewart that the issue to be determined was exactly what were the terms of Mr Stephens’ employment when he was dismissed on 27 May 2016. It was stated to be common ground between the parties that the terms of employment which applied were the offer letter that had been put in place at the commencement of Mr Stephens’ employment. There was also said to be no dispute that what a contract of employment says about whether or not an enterprise agreement applies to an employee is not determinative of whether an enterprise agreement does apply. 41

[27] However, Ms Stewart submitted that, what a contract of employment does do, is set out the position that an employee is employed to perform. It was argued that, in this case, the position that Mr Stephens was employed to perform was that of an offshore maintenance technician. The test set out in the authorities was stated to be the “principal purpose” test for determining the coverage of an award or enterprise agreement. The Applicant argued that the principal purpose for which Mr Stephens was employed was clearly set out in the letter of offer and that is what applied at the time of Mr Stephens’ dismissal. 42

[28] It was submitted that, when the 2011 Enterprise Agreement refers to employees engaged in work under the classification, this means employees engaged to perform the work or duties under these classifications. The authorities were said to provide for the proposition that it is the work which the employee is employed to do which is the relevant consideration. 43 Therefore, it was submitted that the Applicant needed to demonstrate that, at the time of his dismissal, he was employed by the Respondent, to perform duties set out in one of the classifications under the enterprise agreement and which related to the operations carried out by the Respondent at its offshore platforms in Bass Strait.44

[29] The Applicant contended that, when you take that position and compare it against the coverage of the 2011 Enterprise Agreement, the position of offshore maintenance technician is quite clearly covered. The fact that Mr Stephens was not actively performing that role of the time of his dismissal was said to not be the point. This was because the issue comes down to what the terms of Mr Stephens’ employment reveal the principal purpose of his employment was. 45

[30] With respect to Mr Stephens’ international assignments, it was argued that Esso had conducted itself in a way that was consistent with the enterprise agreement continuing to apply. It was stated that, as far as Mr Stephens was concerned, the nature of the duties that he was required to perform, whilst on assignment, remained the same. As a result of that, it was contended that, consistent with the assignment letter, Mr Stephens continued to be paid in accordance with the enterprise agreement in terms of his base salary. When there were pay increases under the enterprise agreement, Mr Stephens received those increases. 46

[31] Further, Ms Stewart submitted that, whether or not the enterprise agreement applied during the international assignments, does not really matter. Rather, it was stated that the contractual position did not alter materially as the underlying offer letter continued to apply all the way through subject to some variations as a result of being on an international assignment. 47

[32] Secondly, it was argued that the nature of the work did not change. The Applicant accepted that, if Mr Stephens had performed a fundamentally different position whilst on assignment, it was arguable that the underlying contract had been effectively amended to the point that it had become a different position. It was stated that this was not the case. The Applicant contended that the duties he carried out whilst on assignment were effectively the same as he was performing in Bass Strait. 48

[33] In the alternative, with respect to the award, it was stated that the coverage clause says that it applies to employers who are engaged in the hydrocarbons industry in relation to the work by their employees engaged in the classifications listed in the award. This was said to support the Applicant’s argument that the distinction between “engaged” and “employed” held no weight as the award refers to the position the employee is employed to do. Mr Stephens’ position was said to fit into the level 4 Advanced, Modification and Maintenance Trade employee classification of the award. 49

[34] On behalf of Mr Stephens, it was submitted that it is sufficient for the Commission to conclude that the award covered Mr Stephens’ employment. The Commission was referred to the Clements-Kupsch case in support of this contention. In this case, the Applicant argued that the approach taken by the Commission was simply to note that the employee had been appointed as a driller in his letter of appointment and that the award coverage clause stated that the work of the driller was covered. Therefore, it was contended that the same argument applied in this case and so that should be the end of the matter from the jurisdictional perspective. 50

[35] Further, with respect to the issue of whether or not there was a geographical restriction, the Applicant relied on the terms of the contract of employment. This was said to employ Mr Stephens in a position that was based in Australia related to the Bass Strait facilities. As Mr Stephens had been repatriated back to Australia, it was argued that no geographical prohibitions applied. 51

[36] Finally, Ms Stewart argued that the Respondent could not escape the fact that the underlying contract of employment remained in place and that it was those terms and conditions that applied at the time of Mr Stephens’ dismissal. In addition, it was contended that what was determinative was not that Mr Stephens had not been appointed to an alternative waged position but the underlying terms which are determinative. 52

Considerations and conclusion

[37] I have carefully considered the submissions of the parties and the other material before me. Firstly, in relation to the question of whether Mr Stephens, at the time of his dismissal, was covered by the 2011 Enterprise Agreement, I have been persuaded by the Respondent that Mr Stephens was not so covered at the relevant time. However, it is not for all of the reasons put forward by the Respondent.

[38] It was common ground that Mr Stephens commenced as an employee with Esso in the position of Offshore Maintenance Technician, Power and Control in Production based offshore and continued to be an employee throughout the two international assignments and then following. The parties also agreed that, at the time he commenced with Esso, Mr Stephens was covered by the Esso Offshore Certified Agreement 2006. This agreement was later replaced by the Offshore Enterprise Agreement 2011.

[39] The relevant clause in the 2011 Enterprise Agreement is as follows:

“2. Area, incidence and parties covered by this Agreement

This Agreement shall cover:

(a) Esso Australia Pty Ltd (“the employer”);

(b) the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (“AMWU”), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia -Electrical Division ("CEPU") and the, Australian Workers Union (“AWU”) (the “unions”); and

(c) employees of the employer, whether members of one or more of the unions or not, engaged in work under the classifications set out in clause 13 and employed offshore in relation to the operations carried out by the employer in the production of oil and gas at its offshore oil and gas platforms in Bass Strait where such operations and platforms are in production at the date of approval of this Agreement.”

[40] It is my view that, at the point in time when Mr Stephens commenced the Malaysian assignment, Mr Stephens became no longer covered by the enterprise agreement. This situation continued during the PNG assignment. When Mr Stephens was repatriated back to Australia from PNG, Esso started the process of identifying a suitable role for Mr Stephens. At the time of his dismissal, Mr Stephens had not commenced work in a new position as there was no agreement between the parties in relation to the alternative position which was being offered by Esso (an onshore position).

[41] The Applicant’s argument that Mr Stephens was engaged to perform the work of an Offshore Maintenance Technician, based offshore, and that Mr Stephens remained engaged on that basis throughout his employment with Esso, is accepted. It is considered that, whether or not at the time of his dismissal, Esso was providing Mr Stephens with work, is neither here nor there. It is also accepted that the work that Mr Stephens was engaged in during the two international assignments was essentially that of an Offshore Maintenance Technician.

[42] The specific requirement for coverage under the 2011 Enterprise Agreement is for employees to be engaged in work under the classifications in the agreement and to be employed offshore in relation to the Bass Strait operations. At the time of his dismissal, Mr Stephens was not engaged to perform duties in Bass Strait. Mr Stephens’ contract of employment continued to engage him to perform offshore maintenance technician work. However, the enterprise agreement required this work to be performed in Bass Strait. As Mr Stephens was not in a position where he was working in Bass Strait, I find that Mr Stephens could not therefore be covered by the terms of the 2011 Enterprise Agreement.

[43] With respect to whether Mr Stephens was covered by the Hydrocarbons Industry (Upstream) Award 2010, the coverage clause of the award is in different terms to that of the 2011 Enterprise Agreement. Clause 4.1 and Schedule B2 .5 of the award provide as follows:

“4. Coverage

4.1 This industry award covers employers throughout Australia who are engaged in the hydrocarbons industry in respect of work by their employees engaged in the classifications listed in this award, to the exclusion of any other modern award.”

“B.2.5 Hydrocarbons Industry Modification and Maintenance Trades Employees

A Hydrocarbons Industry Modification and Maintenance Trades Employee is designated as such by their employer, performs all tasks onshore or offshore as directed by their employer and is trade qualified.”

[44] It was common ground that Esso is an employer covered by this award and that the classification structure in the award provides for Modification and Maintenance Trades employees. It was the Applicant’s view that he fell under Level 4 - Advanced (Schedule B.3.5) of the classification structure.

[45] The award coverage clause does not specify whether the work engaged in is to be either or both of offshore or onshore or at a specific location (e.g. Bass Strait). However, a Hydrocarbons Industry Modification and Maintenance Trades employee is defined as performing all tasks directed by their employer - onshore or offshore. It is accepted that the work that Mr Stephens was engaged to perform meets the classification criteria in the award for a Modification and Maintenance Trades employee and that Mr Stephens continued to be engaged on that basis throughout his employment with Esso. The classification criteria in the award, unlike the terms of the 2011 Enterprise Agreement, states that the tasks can be either offshore or onshore. Therefore, for these reasons, I find that Mr Stephens is covered by the Hydrocarbons Industry (Upstream) Award 2010.

[46] It was common ground that Mr Stephens was employed by Esso for nearly eight years. Therefore, section 382(a) of the Act has been met. In relation to the requirements of section 382(b), I am satisfied that Mr Stephens’ employment was covered by the Hydrocarbons Industry (Upstream) Award 2010 (section 382(b)(i)). Therefore, the high income threshold is not relevant and so Mr Stephens is protected from unfair dismissal.

[47] Accordingly, Esso’s jurisdictional objection is dismissed. An order 53 to this effect will be issued separately. The matter will now be listed for Arbitration before the Commission as currently constituted, on a date to be advised.

Appearances:

A Pollock of Counsel for the Respondent

K Stewart of Counsel for the Applicant

Hearing details:

2016.

Melbourne and Adelaide (video hearing):

December 1.

 1   Exhibit A2 at Attachment JS 1

 2   Ibid

 3   Ibid at Attachment JS 10

 4   Ibid

 5   Exhibit A1 at Attachment JS 3

 6   Exhibit R3 at paragraph 9(d)

 7   AE890812

 8   MA000062

 9   Transcript PN 62 - 63

 10   Exhibit R3 at paragraphs 19 and 23

 11   Transcript PN 69 - 71

 12   Ibid PN 131

 13   Ibid PN 72 - 73 and 121

 14   Ibid PN 109 - 110 and 141 - 142

 15   Ibid PN 117

 16   Ibid PN 145 - 147 and Exhibit R3 at paragraphs 16 - 17

 17   Ibid PN 148

 18   [2016] FWCFB 1752

 19   [2010] FWA 8751

 20   Transcript PN 183 and 189 - 195

 21   Ibid PN 196 - 197

 22   Exhibit R3 at paragraphs 18 - 19

 23   Transcript PN 286 - 293

 24   Ibid PN 198 - 200 and Exhibit R3 at paragraphs 20 - 22

 25   Ibid PN 210 and Exhibit R3 at paragraph 23

 26   Ibid PN 203 - 206

 27   Ibid PN 150 - 151

 28   Ibid PN 150 - 160

 29   Ibid PN 276

 30   Ibid PN 163 - 168

 31   Ibid PN 171 - 174

 32   Ibid PN 175

 33 (2006) 153 IR 426

 34 (1996) 66 IR 182

 35 (2014) 245 IR 449

 36   Transcript PN 181

 37   Ibid PN 215 - 216

 38   Ibid PN 278 - 282

 39  [2015] FWC 4081

 40   Transcript PN 341

 41   Ibid PN 230 - 232 and Exhibit A3 at paragraph 3

 42   Ibid PN 232 - 234 and ibid at paragraph 10

 43   Exhibit A3 at paragraph 10

 44   Ibid at paragraphs 12 and 31 - 32

 45   Ibid at paragraph 11 and Transcript PN 235

 46   Transcript PN 236 - 238

 47   Ibid PN 239

 48   Ibid PN 240 - 242

 49   Ibid PN 244 - 245 and Exhibit A3 at paragraphs 34 - 40

 50   Ibid PN 246 - 249 and ibid at paragraph 41

 51   Transcript PN 250

 52   Ibid PN 345 - 346

 53   PR590220

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