Nick’s Cranes Pty Ltd T/A Nick’s Crane Services
[2015] FWCA 1327
•4 MARCH 2015
| [2015] FWCA 1327 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225—Enterprise agreement
Nick’s Cranes Pty Ltd T/A Nick’s Crane Services
(AG2014/9930)
NICKS CRANES PTY LTD / CFMEU ENTERPRISE AGREEMENT 2011
Building, metal and civil construction industries | |
SENIOR DEPUTY PRESIDENT O’CALLAGHAN | ADELAIDE, 4 MARCH 2015 |
Application for termination of the Nicks Cranes Pty Ltd / CFMEU Enterprise Agreement 2011 - changed circumstances - public interest - termination appropriate.
[1] On 19 November 2014 Nick's Cranes Pty Ltd T/A Nick's Crane Services (Nick's Cranes) lodged an application pursuant to s.225 of the Fair Work Act 2009 (the FW Act) in which it sought the termination of the Nick's Cranes Pty Ltd/ CFMEU Enterprise Agreement 2011 (the Agreement). Shortly after that application was made the Construction, Forestry, Mining and Energy Union (CFMEU) notified the Fair Work Commission (the FWC) that it was opposed to the termination application.
[2] The Agreement was approved on 22 March 2012 and achieved its nominal expiry date on 30 June 2013.
[3] On 21 November 2014 I issued Directions which recorded acknowledgement of the application and the provisions of s.226 of the FW Act and relevantly stated:
“[3] The FAIR WORK COMMISSION (the Commission) notes the information provided in the Statutory Declaration provided by Nick’s Cranes Pty Ltd. The Construction, Forestry, Mining and Energy Union (CFMEU) are a named employee organisation covered by the agreement. In the event that the union or an employee representative seeks to oppose the termination application, advice to this effect should be provided by Friday 28 November 2014. A copy of these directions have been forwarded to the CFMEU.
[4] Nick’s Cranes Pty Ltd are DIRECTED to post a copy of the application (Forms F24B & F24C) and the FWC Directions at an appropriate location for the information of all employees by close of business on Monday 24 November 2014.”
[4] I note that, apart from the participation of the CFMEU in the hearings on this matter, there has been no request from an employee or other employee representative to be heard on the application. The parties appear to be in agreement that the CFMEU represents about 80% of the current Nick's Cranes employees. It is also appropriate that I note that orders to produce documents requested by the CFMEU were issued, and were, I understand fully complied with.
[5] In the proceedings in this matter Nick's Cranes was represented by Ms Bolzon, of counsel and then Mr Warren, of counsel through an unopposed grant of permission made under s.596(2)(a). Ms Dooley represented the CFMEU in the matter.
[6] The application was the subject of hearings on 3 December 2014 and 5 February 2015 at which the parties acknowledged the possibility that ongoing discussions could result in "in principle" agreement on a replacement agreement which would obviate the necessity to pursue the application. At a further hearing on 17 February 2015 Nick's Cranes advised that whilst some matters proposed to be included in a replacement agreement had been agreed, there was no agreement on various other issues and no immediate prospect of any such agreement. Nick's Cranes requested that the FWC should hear and determine the application. The CFMEU sought a further adjournment of the application on the basis that it believed that agreement on the outstanding issues could be achieved in the immediately foreseeable future. I advised the parties that, given the disagreement over progress toward a new agreement, I would hear the application. I advised that I was open to hear submissions about the date upon which any termination of the Agreement should apply.
[7] Evidence on behalf of Nick's Cranes was given by its Crane Coordinator, Mr Addison.
[8] Nick's Cranes seeks the termination of the agreement on the basis that when the Agreement was reached, Nick's Cranes was undertaking work on the South Road Superway project. That project concluded around December 2013. At the time the Agreement was reached, Nick's Cranes employed 24 full time and around 10 casual crane operators/riggers. Nick's Cranes advised that market conditions had changed substantially since the Agreement commenced and that since the conclusion of the Superway project some employees had left voluntarily while others had been made redundant such that it currently employed 8 full time and 4 casual crane operators/riggers.
[9] Nick's Cranes advised that it had also reduced the number of cranes and hence its capacity to undertake various types of work such that it was now only able to compete on smaller projects which involved substantially lower crane hire rates than those that applied on larger projects. It asserted that it was now competing with businesses which did not have comparable agreement terms and that this meant that the Agreement made it uncompetitive.
[10] Mr Addison advised that unless Nick's Cranes was able to operate on a more competitive basis to enable further contracts to be won, further staff reductions may become necessary. Mr Addison's evidence went to the profit and loss position of Nick's Cranes over the last six years and to its estimate of trading losses for the current year.
[11] Mr Addison advised that an agreement proposal prepared by Nick's Cranes, which reduced a number of benefits and conditions in the current Agreement, had been rejected by employees in November 2013 and that discussions since that time had not resulted in agreement on employee benefits which Nick's Cranes regarded as commercially sustainable.
[12] Nick's Cranes advised that it was seeking to reduce employment costs with particular regard to the current working hours provisions where it sought to move from two Rostered Days Off per month to one day. Further, that it sought to reduce the Agreement daily travel payments from $30 per day to the $17.43 per day rate in accordance with the relevant Mobile Crane Hiring Award 2010 provisions. Nick's Cranes sought to reduce the Agreement living away from home payment from $125 per night to $50 per night and also sought changes to the Agreement inclement weather provisions. Nick’s Cranes undertook to preserve the existing Agreement pay rates. Nick's Cranes confirmed that it sought the termination of the Agreement on the basis that it provided the following undertakings, to apply until a new agreement was approved.
“The employer guarantees and to the extent necessary undertakes that upon the termination of Nick’s Cranes Pty Ltd/CFMEU Enterprise Agreement 2011 (‘the Enterprise Agreement’) it will continue to provide to its employees the same benefits and entitlements as were provided under the Enterprise Agreement in respect of the matters set out below until such time as a new Enterprise Agreement is made which applies to the employees (or any operative Award provision provides a higher benefit or entitlement):-
Entitlement/Benefit | The Enterprise Agreement Clause |
Hourly rate | Schedule 1 (1 January 2013 rates) |
Clothing | Appendix A |
Call Back | 32.2 and Appendix C |
Hours of work while away | 41.3 |
Income protection | 18 |
Supplementary labour provisions | 19.2 |
Leading hand allowance | 23 |
Superannuation | 29 |
Further, the employer guarantees and to the extent necessary undertakes that upon the termination of the Enterprise Agreement, it will provide to its employees a living away from home allowance of $50.00 per night as set out in paragraph 10 of the Statutory Declaration of Neil Addison dated 4 February 2015 until such time as a new Enterprise Agreement is made which applies to its employees (or any operative Award makes provision for a higher living away from home allowance).”
[13] In terms of the provisions of s.226, Nick's Cranes asserted that termination of the Agreement was not contrary to the public interest and that taking into account the information before the FWC about the views of the employees and the likely effect of termination of the Agreement and all of the circumstances impacting on Nick's Cranes, it was appropriate to terminate that Agreement.
[14] The CFMEU position was that the Agreement should not be terminated. The CFMEU referred to the negotiation progress such that reduced meal allowances and living away from home allowances had been agreed in principle. The CFMEU acknowledged that future discussions would consider the other reductions sought by the employer. It asserted that termination of the Agreement would disrupt the process of negotiating a new agreement and prejudice the position of employees. The CFMEU argued that while it represented about 70-80% of the employees, no information was before the FWC relative to other employees such that proper account could be taken of those views.
[15] The evidence of Mr Roberts, the Assistant Secretary of the CFMEU (South Australian Branch) went to his attempts to negotiate a new Agreement and the subsequent proposals put directly to employees by Nick's Cranes for an agreement which substantially reduced the benefits specified in the Agreement. That proposal was rejected by the employees in November 2013 and later discussions did not result in new proposals. Mr Roberts' evidence was that Mr Addison had advised him that Nick's Cranes was not seeking to negotiate a new agreement but was obtaining advice about terminating the Agreement.
[16] Mr Roberts provided advice about the progress of negotiations since the application was lodged. His evidence went to his understanding of Nick's Cranes competitors and the pay rates and conditions applicable to employees in these businesses. His evidence was that:
“35. From the Union’s perspective, I am particularly concerned about the impact an enterprise agreement termination could have on the industry as a whole. It would effectively be a signal to other crane hire companies that they need not continue providing the level of wages and entitlements that they currently are providing. Additionally, it would provide Nick’s Cranes with an unfair advantage in the market and allow them to undercut all other crane hire companies.
36. I am also very concerned that terminating the current agreement would reduce the prospects of the Union and Nick’s Cranes of negotiating a new agreement. All the hard-won gains that are contained in the current agreement would be lost in one hit, effectively giving Nick’s Cranes everything they want, and putting employees and the Union at the lowest base possible from which to negotiate.
37. In my view this would lead to more industrial disputation and drawn out protected industrial action.” 1
[17] Mr Robert's evidence continued to detail the particular Agreement provisions which he was concerned would involve reductions for employees.
“38. Terminating the enterprise agreement will mean the loss or diminishment of the following conditions, which would have a detrimental effect on workers and the Union:
39. I am also concerned that the termination would remove the Employee Representation clause currently contained in the Agreement, and thereby impact on the Union’s ability to represent members.” 2
Findings
[18] Before setting out my conclusions about the termination application I note that the evidence before me is contradictory in a number of respects. In terms of the circumstances under which the Nick's Cranes agreement proposal was put to employees in late 2013, I have preferred the evidence of Mr Roberts to the effect that there was little or no negotiation about that proposal. However, I have also concluded that at least the CFMEU has not been particularly pro-active in pursuing a new agreement, until this application was made. I think this may well be related to the extent to which it has been obvious for some time that Nick's Cranes has been seeking to reduce its labour costs. In any event, I do not consider a great deal turns on this and accept the advice of the CFMEU that it is now seeking to expedite negotiations to achieve a new agreement.
[19] I prefer the evidence of Mr Addison in relation to the work Nick's Cranes is now able to bid on and with whom it is competing, to that of Mr Roberts. In this respect it seems to me that Mr Addison is better placed to make this assessment.
[20] I also prefer the evidence of Mr Addison with respect to the trading position of Nick’s Cranes.
[21] I am satisfied that the application was properly made under s.225. Nick's Cranes is clearly a party to the Agreement which has exceeded its nominal expiry date.
[22] Section 226 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.”
[23] I have considered these factors. In terms of the broader public interest considerations I have particularly taken the following issues into account. The CFMEU has expressed concern that the termination of the Agreement for Nick's Cranes could prompt other crane companies with agreements to seek similar arrangements and, presumably, reduce arrangements generally agreed within the industry. That potential must be balanced against the commercial situation confronting Nick's Cranes and the evidence that the work being pursued and won by Nick's Cranes involves smaller projects and competitors who do not generally have current agreements.
[24] In Kellogg Brown & Root Pty Ltd and Others 3 a Full Bench considered termination of an agreement under the previous, and somewhat different legislative criteria. Nevertheless, that criteria referred to public interest considerations. The Full Bench stated:
“[23] 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.”
[25] The Full Bench later continued,
“[27] It should be emphasized that the Commission's consideration of the public interest for the purpose of s.170MH(3) is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.”
[26] In this case there is clearly a relevant underpinning award. Evidence contradicting that of Mr Addison about the commercial pressures confronting Nick's Cranes is not before me and, indeed the CFMEU's bargaining position appears to implicitly recognise that the business environment confronting Nick's Cranes requires a reduction in labour costs.
[27] Evidence about the extent to which other crane hire companies may seek to emulate this application is not before me and any applications of that nature would clearly need to be assessed on their merits.
[28] Just as it is an industrial reality that the commencement of one or more major projects can result in an escalation of wages and conditions for employees working on those projects, a prolonged period of reduced commercial activity has often diminished the rate of growth of wage rates. That much is clear from consideration of general wages growth of many years. In that context the proposition that an agreement reached to accommodate a particular and substantial project may well be difficult to sustain those higher conditions when the major projects have concluded.
[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.
[30] Section 226 is in Division 11 of Part 2-4 of the FW Act. Section 171 sets out the objects of this Division:
“171 Objects of this Part
The objects of this Part are:
(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and
(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:
(i) making bargaining orders; and
(ii) dealing with disputes where the bargaining representatives request assistance; and
(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.”
[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.
[35] In Tahmoor Coal Pty Ltd re Tahmoor Colliery Enterprise Agreement 2006; Tahmoor Washery Workplace Agreement 2006 4 Lawler VP addressed this issue in the following terms:
[39] It goes without saying that what is effectively a discretion conferred by s.226 must be exercised judicially, that is, in accordance with the intent of the legislation and any principles emerging from the authorities, and not on the basis of any personal whim or ideological predisposition. The problem as things presently stand is that there is little by way of developed principle to guide the exercise of the effective discretion conferred by s.226.
[40] The explanatory memorandum in relation to s.226 is a mere summary of the provision and provides no assistance in determining how what is “appropriate” is to be assessed.
[41] In Patty v Commonwealth Bank 22 Ryan J, in a different context, suggested that a power to reinstate subject to the Court considering it “appropriate in all the circumstances” turned “on the exercise of a general discretion circumscribed only by the subject matter and scope and purpose of the legislation.”23 The scope and purpose of the FW Act in relation to bargaining are matters that must obviously guide a proper exercise of the discretion in this case.
[42] Obviously, the matters specified in s.226(b)(i) and (ii) point towards factors that properly bear upon whether termination should be considered “appropriate”.
[43] In relation to the matter specified in s.226(b)(i), if the employees and the employer agree that an expired agreement should be terminated then it would require exceptional circumstances (of which I cannot immediately conceive) before the tribunal could conclude that it was other than “appropriate” to terminate the agreement.
[44] Occasionally it will be the employees and or their union who will want to have an expired agreement terminated (for example, where a modern award provides for superior terms and conditions to those applicable under an expired agreement that passed the no disadvantage test by reference to a pre-reform award or NAPSA that had inferior conditions to those provided for in the modern award). Usually, as here, a contested application under s.226 will see the employer wanting an expired agreement terminated and the employees and union (if any) opposing such termination.
[45] In relation to the matter specified in s.226(b)(ii), the apparent legislative intent is that both beneficial and detrimental effects on the employees, employer and union of termination as against no termination should be considered and that if the comparison of those effects suggests that one of them is disproportionately worse of when the benefits and detriments are balance, this is factor in favour of a conclusion that termination will be inappropriate. Of course, there is a problem of comparison here because it will often be inherently problematic to compare different species of benefit and detriment.
[46] The objects of the FW Act are clearly relevant to a judicial exercise of the power in s.226. If termination will promote the objects then that is a material factor in favour of considering termination appropriate and if termination will work against the objects then that is a material factor against considering termination appropriate.”
[36] In that matter the Vice President then considered the termination proposition sought by the employer but opposed by the employees. His conclusions took into account an assessment of the effect of the termination on the bargaining process, the extent of reduced security of employment arrangements and potential reduced union bargaining capacity. He concluded that termination of the agreement would reduce the prospects of an agreement being reached through the bargaining process. On the other hand he took into account the employer's expectations of increased productivity if the agreement was terminated.
[37] Those conclusions were specific to Tahmoor Coal and while it is appropriate to take those types of issues into account here, the Vice President's conclusions cannot be taken to provide a uniform position relative to applications of this nature.
[38] Equally, in Energy Resources of Australia Ltd v Liquor, Hospitality and Miscellaneous Union 5 Watson VP considered an agreement termination application made under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 which refers the Commission back to the considerations in s.226.
[39] In that decision the Vice President addressed the considerations inherent in s.226(b) in the following terms:
“[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.”
[40] I note that subsequent agreement termination decisions have generally followed these same approaches with each situation addressed on its merits.
[41] In this case I have considered the question of appropriateness on the basis of the undertakings provided by Nick's Cranes. Significantly, those undertakings preserve wage rates and living away from home allowances and at levels substantially higher than the award rates. For instance, the undertaking establishes wage rates of $30.03 - $33.28 per hour.
[42] I have concluded that the expressed views of the employees are that they are opposed to the termination of the Agreement and seek that the Agreement is preserved until a replacement arrangement is agreed. In this respect I have taken it that the employees are concerned at the potential for the termination of the Agreement to prejudice their position in the negotiation of a new agreement. That is somewhat difficult to reconcile with the apparent employee recognition of the need for Nick's Cranes to reduce its labour costs but I have nevertheless taken it into account.
[43] I have taken it that the CFMEU shares these concerns and has added concerns that the termination would potentially result in similar proposition from other employers and possible broad reductions in conditions which it regarded as standards in this industry.
[44] The Nick's Cranes position is that the Agreement should be terminated in order to protect its competitive position and reduce the likelihood of further job losses and shrinkage.
[45] My assessment of the circumstances of the employees is that there is an increased risk of further redundancies in the event that the Agreement is preserved. I think it unlikely that the termination of the Agreement will increase the likelihood of industrial action in support of an alternative agreement proposal. No such action has been foreshadowed since the Agreement achieved its nominal expiry date on 30 June 2013. I doubt that the termination of the Agreement will significantly delay the bargaining process or the balance of that process. On the contrary, the undertakings provided by Nick's Cranes establish base positions which I consider can be added to as the basis for continuation of the bargaining which has recently commenced. Absent those undertakings, there appears to be an increased range of issues which could be the subject of disputation. However, I have concluded that it would be unfortunate if the possibility of a revised agreement referred to by the CFMEU is not fully explored as a matter of urgency.
[46] I accept that termination of the Agreement may have a detrimental effect on the CFMEU as the representative of a broader membership base. In effect it may mean that the union will need to consider, in concert with its members, within and beyond Nick's Cranes fall back provisions which are less than some existing arrangements. However, in situations where there are reduced employment opportunities, this may reflect a reality irrespective of my conclusion in this matter.
[47] Taking all these issues into account, I have concluded that termination of the Agreement is appropriate in these circumstances. Having formed that conclusion, s.226 requires that the FWC terminate the Agreement.
[48] I have decided that this termination decision should take effect from 20 March 2015. This time delay is intended to maximise the opportunity for the parties to conclude their negotiations toward a new agreement and put any "in principle" agreement to employees for endorsement.
Appearances:
S Bolzon / J Warren counsel for Nick’s Cranes Pty Ltd.
L Dooley for the Construction, Forestry, Mining and Energy Union.
Hearing Details:
2014.
Adelaide:
December 3
2015.
Adelaide:
February 5 and 17
<Price code C, AE892550 PR561389>
1 Exhibit C2 - Affidavit of Darren Roberts, 2 December 2014, paras 35 - 37
2 Exhibit C2 - Affidavit of Darren Roberts, 2 December 2014, paras 38 and 39
3 PR955357
4 [2010] FWA 6468
5 [2010] FWA 2434
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