Lucas Drilling Pty Ltd

[2014] FWCA 4213

[2014] FWCA 4213

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.222 - Application for approval of a termination of an enterprise agreement

Lucas Drilling Pty Ltd
(AG2014/3950)

AJ LUCAS DRILLING DIVISION EXPLORATION EMPLOYEES ENTERPRISE AGREEMENT 2010

Building, metal and civil construction industries
SENIOR DEPUTY PRESIDENT RICHARDS	BRISBANE, 27 JUNE 2014

Summary: application to terminate agreement - objections by CFMEU - s.223 - objections do not challenge statutory declaration - un-evidenced claims - application approved.

[1] On 12 March 2014 Lucas Drilling Pty Ltd (“the employer”) made an application under s.222 of the Fair Work Act 2009 (“the Act”) seeking that the Fair Work Commission (“the Commission”) terminate the AJ Lucas Drilling Division Exploration Employees Enterprise Agreement 2010 (“the Agreement”).

[2] The relevant provisions under which the Commission considers the application referred to above are as follows:

222 Application for the FWC’s approval of a termination of an enterprise agreement

Application for approval

(1) If a termination of an enterprise agreement has been agreed to, a person covered by the agreement must apply to the FWC for approval of the termination.

Material to accompany the application

(2) The application must be accompanied by any declarations that are required by the procedural rules to accompany the application.

When the application must be made

(3) The application must be made:

(a) within 14 days after the termination is agreed to; or

(b) if in all the circumstances the FWC considers it fair to extend that period—within such further period as the FWC allows.

223 When the FWC must approve a termination of an enterprise agreement

If an application for the approval of a termination of an enterprise agreement is made under section 222, the FWC must approve the termination if:

(a) the FWC is satisfied that each employer covered by the agreement complied with subsection 220(2) (which deals with giving employees a reasonable opportunity to decide etc.) in relation to the agreement; and

(b) the FWC is satisfied that the termination was agreed to in accordance with whichever of subsection 221(1) or (2) applies (those subsections deal with agreement to the termination of different kinds of enterprise agreements by employee vote); and

(c) the FWC is satisfied that there are no other reasonable grounds for believing that the employees have not agreed to the termination; and

(d) the FWC considers that it is appropriate to approve the termination taking into account the views of the employee organisation or employee organisations (if any) covered by the agreement.

224 When termination comes into operation

If a termination of an enterprise agreement is approved under section 223, the termination operates from the day specified in the decision to approve the termination.

The application

[3] The nominal expiry date of the Agreement was 7 October 2012.

[4] The statutory declaration filed by way of form F24A of the Commission’s forms declared as follows:

On 26 February 2014 through the employer's bargaining representatives, Lucas proposed new terms and conditions of employment including as requested previously by the employees that all employees would move to individual contracts employment. The Employee Bargaining Representatives had been previously advised that if the employees wanted individual agreements, the current agreement required to be terminated by mutual agreement and this was restated to the Employee Representatives on 26 February 2014.

Between 26 February and 3 March 2014, Lucas and the Employee Representatives agreed a new pay structure for employees.

On 4 March 2014, the memorandum explaining the terms of the new pay structure was sent to all employees via an e-mail. This memorandum stated that:

The agreed pay structure was based on the undertaking that included that Lucas and the Exploration Employees vote to mutually terminate the current Exploration Enterprise Agreement “(EA)”. (sic)

[5] The statutory declaration was declared by the Manager - People Development for the employer, Ms Nicole McDonald. Ms McDonald also provided a witness statement for the purposes of the proceedings and was cross-examined on her evidence in that respect.

[6] Ms McDonald’s evidence included a copy of the memorandum issued to staff on 4 March 2014. The memorandum sets out the process by which, and the consequences of terminating the agreement. In respect of the latter concern, the memorandum stated:

What happens after you vote?

Once the voting numbers are concerned, Lucas will submit all required forms to the Fair Work Commission (FWC) for approval. Your current terms and conditions under the EA will continue to apply until such time as the termination of the existing EA has been approved.

[7] The memorandum otherwise states, in relation to the future terms and conditions, that:

● All current and future exploration employees will be offered individual contracts.
● The terms and conditions of the individual contracts supersede and/or replace any previous agreements and/or arrangements held and agreed to between the employee and Lucas.
● All current drillers will be offered a salary.

[8] On 5 March 2014, all employees were individually called by the HR team to see if they had any questions regarding the memorandum and the next steps in the process of securing the new pay structure.

[9] Ms McDonald’s statutory declaration declared that all employees were informed by the memorandum referred to above (of 4 March 2014) of the date and place of which the vote was to occur and the voting method to be used. This information was buttressed by a toolbox meeting held the following day at the employer’s sites at Moranbah, Bylong, and Illawarra.

[10] The voting process commenced on 5 March 2014 and concluded on 6 March 2014.

[11] Twenty four employees were covered by the Agreement at the time of the vote. All 24 of those employees cast a valid vote. Twenty of the 24 employees voted to terminate the Agreement.

[12] The application for approval of the termination of the Agreement was lodged with the Commission within 14 calendar days of the date of the termination of the Agreement.

[13] In the course of the consideration of the application the Commission sought the views of the Construction, Forestry, Mining and Energy Union (“the CFMEU”), as required (by implication) under s.223(d) the Act for the purposes of taking those views into account in considering the appropriateness of the approval of the application.

[14] In response to that approach, the CFMEU, at least in its written submission, made the following points (set out in summary terms only) by way of objecting to the approval of the termination of the Agreement:

1. There is uncertainty as to how many employees are covered by the Agreement and the Commission cannot be satisfied as a consequence that the requirements of s.220(2) of the Act have been met (which goes to s.223(a) of the Act);

2. the Commission cannot be satisfied that the employees understood the nature of the process in which they are engaged in the employees could not therefore have genuinely approve the proposed termination of the agreement (which goes to s.223(c) of the Act);

3. The Commission should not conclude that it would be appropriate to terminate the agreement pursuant to s.223(d) of the Act; and

4. There is no evidence that the employer issued a notice of employee representational rights in accordance with s.173 of the Act (which may go to s.223(c) of the Act).

[15] The CFMEU provided further elucidation of these points in its oral submissions, which I will address below.

The first objection

[1] The CFMEU’s concerns in this regard arise from the significant changes in the number of employees covered by the Agreement over time.

[2] On the employer’s evidence the number of employees that the Agreement covered has fluctuated significantly over time, and this would be unsurprising given the changing market conditions which have affected the industry. It may also be the case that some confusion about aggregate numbers of employees is a consequence of there being two classes of employees, they being: employees employed under the Agreement and employees engaged on other arrangements and not covered by the Agreement (the subject of this application).

[3] That aside, the statutory declaration before me however declares that at the time of the vote to terminate the agreement 24 employees were covered by the Agreement, and I have no reason to consider that declaration is anything but genuine (given that there is no evidence by the CFMEU to suggest otherwise). This is particularly so given that Ms McDonald was able to set out in her viva voce evidence the precise manner by which she went about identifying the 24 employees for the purposes of the ballot:

If we can stay with paragraph 2.5 of your statutory declaration you see you've declared there were 24 employees covered by the agreement?---Yes.

Can you inform the commission of the process that you undertook to satisfy yourself that there are only 24 employees covered by the agreement?---Yes, I pulled a report from our HR database of all the people that were employed within exploration Queensland and New South Wales which gave a figure of 24. The names are also shared with the project managers too when we helped with correspondence with them.

And the company presumably employs employees other than those in the exploration department, don't they?---That is correct, yes.

So what process did you undertake to ensure that the number given to you through that process was correct? Did you do any reconciliation with a payroll record, for instance?---Well, it's the same database so our HR database reads into payroll. So anyone we're paying that falls under that agreement will come through that same report.

And are these 24 employees solely in Queensland?---No.

So you say they're in both Queensland and New South Wales?---Correct.

At three sites?---Correct. 1

The second objection

[4] I have previously dealt with the employer and a number of the employees covered by the Agreement by way of a dispute application and an application under s.240 of the Act. These applications, at the highest level, were both concerned with the manner in and by which the parties were to align their expectations in the context of a changing market environment. The discussions that arose in the context of the dispute and bargaining applications canvassed a very wide range of options for resolving the expectations, including termination of the current Agreement. That is to say, the employer and its employees have been engaged with the issues for a period of time.

[5] Moreover, the various representatives with whom I dealt were indeed far from disengaged from a bargaining process and its implications for their interests. It was the very determination of those employees to arrive at their desired commercial bargain that caused the long history to this matter.

[6] Putting those observations aside, without contrary evidence, I must accept that the statutory declaration before me explains the circumstances prevailing at the time of the application, and indicates that the employees and the employer had come to a common view following further discussions as to how to proceed in resolving the global issue to which I referred to above.

[7] As I have indicated above, at the very minimum the employees were informed of the purpose of the exercise in which they were involved and its implications by way of the memorandum of 4 March 2014. Further, they were given additional opportunities to raise questions following telephone contact (which was made with each individual employee in advance of the vote). This was Ms McDonald’s evidence under cross examination and there is no good reason for me to set it aside.

[8] The CFMEU did point out that the representation of the issues in dispute in the materials before the Commission suggested an inherent contradiction. That is, on one hand the employer was declaring that the employees concerned were seeking to retain their existing terms and conditions under the Agreement but on the other hand were also agitating for individual contracts of employment. The CFMEU contended that such a contradiction undermined the application as it either indicated confusion on the part of the employees or a misrepresentation of the circumstances by the employer.

[9] The only evidence I have before me in relation to this matter is the evidence provided to me by Ms McDonald. Ms McDonald’s evidence was to the effect that whilst the employees sought the preservation of their terms and conditions under the Agreement, they also actively sought to negotiate what appears to be a salaried arrangement under an individual contract of employment, if that was achievable as an alternative outcome. That latter outcome ultimately was achieved.

[10] The employer, according to Ms McDonald’s evidence, for its purposes focused upon the resolution of the commercial outcomes and was less interested in the avenue by which they were given effect. In any event, Ms McDonald’s unchallenged evidence was that it was the employees who sought to negotiate the individual contracts of employment, which were ultimately agreed and therefore led to the application now before me:

Now, would you agree that the answer that you just gave that as at 17 February 2014 the employees wanted to retain the existing terms and conditions under the Lucas enterprise agreement is inconsistent with the answer you give at paragraph 2.1 of your later declaration on 12 March 2014 where you assert that prior to 26 February 2014 the employees had previously requested to move to individual contracts of employment?---Yes, however when we reached the impasse that was because, well, basically we couldn't - we couldn't agree. We were negotiating and on that basis they didn't want to budge off the agreement. But that's - the fact is that they still were asking during the course of negotiations to go on to individual agreements if we could reach an agreement. 2

[11] On the weight of evidence before me, there is no reason for me to conclude that there was some confusion afoot or a mischief that might otherwise cause me to think that there were reasonable grounds for believing that employees had not agreed to the termination for the purposes of s223(c) of the Act. In all, it appears that the negotiations between the employees and their employer revealed typical flexibility and fluidity overtime, and they had ended up with a bargain with which they could both agree (regardless of whether it was a statutory instrument or not).

The third objection

[12] The CFMEU’s third objection raised a variety of matters. Principal amongst these was that the Commission should not approve the termination of the Agreement because to do so would be inconsistent with the objects of the Act. The CFMEU also argued that the employer had breached its obligations under s.228 of the Act because it did not bargain with the CFMEU as a bargaining representative. The CFMEU also contended (in its written submissions) that the process of the termination of the Agreement in effect constituted an opting out process under an enterprise agreement, and therefore was inconsistent with the decision of the Full Bench in Construction, Forestry, Mining and Energy Union v Queensland Bulk Handling Pty Ltd [2012] FWAFB 7551 (“Re: Queensland Bulk Handling”). Reference was also made to the decisionTahmoor Coal Pty Ltd [2010] FWA 6468. I will consider these references further below.

[13] As to the various concerns, I initially find that there is no reason to consider that the application, in the terms declared, in some manner undermines any of the Act’s objects. Absent any evidenced challenge to the terms of the statutory declaration, the application has met the requirements of the Act and cannot fall into conflict with the Act’s objects as a consequence.

[14] But the CFMEU’s argument goes further than this. It contends that the principle of collective bargaining was undermined for reasons that the CFMEU was excluded from the negotiation process.

[15] The evidence before me is that a notice of employee representational rights was issued in compliance with the Act when the bargaining process commenced.

[16] The employer claims that it issued a notice of employee representational rights and in the context of this matter I have no reason to look beyond that claim. Ms McDonald’s evidence went without challenge:

On 26 September 2012, all Employees who were covered by the Agreement were issued with Notices of Employee Representational Rights and 3 Employee Bargaining Representatives (EBR’s) were appointed.

[17] Nothing was put to me why I should reject or even question Ms McDonald’s claim. The CFMEU led no evidence to the contrary.

[18] The application for the termination of the Agreement is an end process which has been on foot for some period of time (as indicated above). The process did not culminate in the making of a new agreement. The CFMEU did not represent the employees in any prior applications, as the employees actively represented themselves and asserted their interests in contradistinction to those of their employer. The employees so acted despite the employer having issued a notice of employee representational rights.

[19] It may be that the employees did not seek the representation of the CFMEU or were otherwise not members of the CFMEU. Perhaps it is the case that those employees who sought the representation of the CFMEU or had been members of the CFMEU were employees who left the business since the last agreement (noting the very large decline in the workforce). Further, it may be the case the employees had control of their own agenda and sought a salaried arrangement through individual contracts:

Thank you. So that must mean that you can't be certain that the first sentence of paragraph 2.1 of your declaration is correct, can you?---Well, yes, I can because we did, we had those discussions with the employees going back 2013. In May 2013 they approached us and asked us about the individual agreements and that continued on through the course of negotiations so yes, I can say that is correct. 3

[20] Whatever the case, it does not appear to me that there can be any reasonable ground made out that there was a contravention of the objects of the Act so far as they support the principle of collective bargaining. And further, it is not made out that there was any material departure from the good faith requirements set out at s.228 of the Act, to the extent or nature that it would cause me to question the underlying validity of the application.

[21] That is, this is not a case in which there are surrounding circumstances relevant to the application that give me reasonable grounds for believing that the employees had not agreed to the termination for reasons of a want of representation. There are no circumstances arising from the global claims of the CFMEU that would cause me to not to approve the application for reason that I was unable to reach the requisite degree of satisfaction of the requirements of s.222(c) or s.223(d) of the Act.

The fourth objection

[22] The CFMEU, as I mentioned earlier, took me to the decision in Tahmoor Coal Pty Ltd [2010] FWA 6468. In that case, Vice President Lawler considered circumstances in which employees and their representatives contested the termination of an enterprise agreement. In the circumstances before the Vice President he was “satisfied the employees overwhelmingly oppose termination of the agreement [...]. The application, thus, was made under s.225 of the Act.” Here the employees do not contest the termination of the enterprise agreement. The application before me, accordingly, was made under s.222 of the Act. A number of different considerations arise between the applicable statutory provisions. In particular, s.225 (s.226) of the Act includes a public interest test, whilst s.222 (s.223) of the Act does not.

[23] Furthermore, in the case before the Vice President, termination of the agreement would have had the effect of “weakening” the bargaining position of the employees or enhancing the prerogative of management in some areas (amongst other outcomes) which the Vice President found on a subjective basis to be unpalatable or undesirable. The Vice President was dealing with a legislative step in the continuing bargaining process. No such circumstances arise in this matter. This is because this matter concerns the means by which the bargaining process, broadly defined, is to be concluded.

[24] To the above observations, I add that the evidentiary case before me is all one way; the CFMEU presented no evidentiary case of its own.

[25] In all, notwithstanding that the Vice President’s decision is a decision of a single member, I do not find that it assists me in relation to the determination of this application.

[26] The CFMEU referred to the Full Bench decision in Re: Queensland Bulk Handling. There is no need for me to explore that decision in any depth. It is enough to say that the circumstances of this case, which concerns an application under s.222 of the Act, give rise to no circumstances that are applicable to the decision of the Full Bench inRe: Queensland Bulk Handling. It is not a relevant authority. The decision of the Full Bench dealt with an ‘opt-out’ clause in an agreement, which the CFMEU claimed to be analogous to the circumstances of this application. But the facts of this case are as they are, and there is no analogous point of comparison that can cause the application to fail. The application complies with the Act, and that is all that can be concluded.

Conclusion

[27] Given the above considerations in regard to the requirements of s.223(a)-s.223(d) of the Act, I must approve the application for the termination of the Agreement as made under s.222 of the Act.

[28] Given the requirements of s.224 of the Act, I indicate that the termination of the Agreement operates from the date of the publication of this decision.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr M. Coonan, Herbert Smith Freehills, for the Applicant

Mr A. Walkaden, of the Construction, Forestry, Mining and Energy Union

Hearing details:

Brisbane

2014

23 June

 1   Transcript of proceedings dated 23 June 2014, at PN113-119.

 2   Transcript of proceedings dated 23 June 2014, at PN162.

 3   Transcript of proceedings dated 23 June 2014, at PN141.

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