Noranda Pacific Pty Limited T/A Lady Loretta

[2016] FWCA 8978

[2016] FWCA 8978

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

Noranda Pacific Pty Limited T/A Lady Loretta
(AG2016/1653)

LADY LORETTA ENTERPRISE AGREEMENT 2012

Mining industry
DEPUTY PRESIDENT ASBURY	BRISBANE, 15 DECEMBER 2016

Application for termination of the Lady Loretta Enterprise Agreement 2012.

BACKGROUND

[1] Noranda Pacific Pty Limited (Noranda) applies under s. 225 of the Fair Work Act 2009 (the Act) to terminate the Lady Loretta Enterprise Agreement 2012 (the Agreement). The Agreement has a nominal expiry date of 26 June 2016.

[2] The Agreement was approved on 26 June 2012 as a greenfields agreement to operate from 3 July 2012. The Agreement sets the terms and conditions for nominated employees of Noranda who were engaged at the Lady Loretta Mine (the Mine), which is a zinc-lead-silver underground mine, located approximately 140 km North-West of Mount Isa, Queensland. The Mine is owned and operated by Noranda which is a subsidiary in a group of companies operated by Glencore plc.

[3] The Form 24C – Statutory declaration in relation to termination of an enterprise agreement filed by Noranda states that production ceased at the Mine in October 2015 and that all employees were retrenched at that time. Noranda further states that: termination will not have any adverse effect on the public, local communities or the State and does not offend the objects of the Act; the balance of bargaining is not altered; the guaranteed safety net comprised of the National Employment Standards and the Black Coal Mining Industry Award 2010 remains; and negotiation of a new agreement is not prevented if employees are employed in the future.

[4] Noranda also states that termination is in the public interest because it will have effect on the terms and conditions of any employee and will enable the Company to undertake a “clean sheet review” of all aspects of the operation, with the aim of being able to return to operations when market conditions (zinc prices) justify reopening, which will in turn provide benefits of increased employment and increased royalties to the State.

[5] My Associate corresponded with the Australian Workers’ Union of Employees, an organisation of employees covered by the Agreement, to ascertain the views of the Union in relation to the application. In its correspondence in reply the AWU advised that it objects to the termination of the Agreement on the basis that it provides better terms and conditions than the Award and that should the mine become operational again it is in the public interest that workers should be able to obtain the benefit of those terms and conditions. The AWU also said that a decision to terminate the Agreement would be detrimental for workers who are members or eligible to become members of the AWU in such circumstances. Further the AWU said that Noranda does not require the termination of the Agreement to undertake a “clean sheet review” and that the Commission cannot be satisfied that:

● the Mine will return to operations should the decision to terminate the Agreement be made;

● the mine becoming operational will deliver any increased social and/or economic benefits to the community; and

● it is not in the public interest to terminate the Agreement.

[6] In light of the opposition of the AWU to the application, Directions were issued requiring the parties to file and serve outlines of submissions and statements from witnesses they proposed to rely on in relation to their respective positions. The Directions also indicated that the parties were to advise the Commission whether they wished to be heard and if no advice was received the matter would be determined on the basis of the material filed. Both parties filed material in accordance with the Directions and the AWU advised the Commission that it did not wish to be heard in relation to the matter and that it should be determined on the basis of the material filed.

[7] Noranda filed an outline of submissions and a supplementary affidavit made by Mr Chris McCleave, General Manager of Assets, Mount Isa for Glencore. Noranda also relied on the matters set out in the application and a supporting statutory declaration also made by Mr McCleave. The AWU filed a written submission.

LEGISLATION

[8] Legislative provisions in relation to termination of enterprise agreements after their nominal expiry date are found in Subdivision D of Part 2-4 of Division 7 of the Act as follows:

“225 Application for termination of an enterprise agreement after its nominal expiry date

If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:

(a) one or more of the employers covered by the agreement;

(b) an employee covered by the agreement;

(c) an employee organisation covered by the agreement.”

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.

[9] Relevant principles from cases in relation to termination of enterprise agreements in such circumstances are as follows:

● The application of s. 226 of the Act is an exercise in discretion by the decision maker and requires the agreement must be terminated if the Commission is satisfied that it is not contrary to the public interest and after having taken account of all the circumstances, including the views of the employees, each employer and each employee organization (if any) covered by the Agreement and the circumstances of those employees, employers and organisations including the effect the termination will have on them; 1

● Because s. 226 of the Act requires consideration of likely effects assessments about these matters are necessarily speculative; 2

● Enterprise agreements do not operate in perpetuity but have a finite nominal life and at the end of that life parties may bargain for a new agreement or a person to whom the agreement applies may apply to terminate it; 3

● It does not follow as a matter of course that the existence of a previously negotiated enterprise agreement provides particular encouragement in enterprise bargaining and there is no statutory policy evident in the Act that there should be a predisposition towards regarding it as contrary to the public interest to terminate an enterprise bargaining agreement while collective bargaining is taking place; 4 and

● The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of various objects of the Act, employment levels and the maintenance of proper industrial standards, and is distinct in nature from the interests of the parties. 5

[10] In Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 a Full Bench of the Australian Industrial Relations Commission was considering an appeal in relation to a decision refusing an application for termination of an agreement under statutory provisions which also required that termination not be contrary to the public interest. The Full Bench noted that an example of public interest relevant to the maintenance of proper industrial standards in the context of terminating an agreement 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 employees.

[11] The Full Bench in that case also observed that the direct consequence of termination of the Agreement would be that employees would fall back under the coverage of relevant awards. The Full Bench observed that termination of a certified agreement carrying with it the loss of significant benefits is not of itself contrary to the public interest. In determining to terminate the agreement the Full Bench took into account that a proposed roster change sought by the employer could not be implemented under the relevant award without the agreement of employees and that undertakings were offered by the employer that higher wages under the agreement would be maintained for a period and then reduced by an amount of 10%.

CONSIDERATION

Application for termination of enterprise agreement after its nominal expiry date - s. 225

[12] The Agreement has passed its nominal expiry date; Noranda is an employer covered by the Agreement; and Noranda has applied for termination of the Agreement.

Views of the employees, each employer, and each employee organisation (if any), covered by the agreement - s. 225-

Views of the employer

[13] Noranda seeks the termination of the Agreement. In its written submissions, Noranda said that the operations of the Mine were impacted by a significant downturn in the prices of zinc and lead in the 12 months leading up to October 2015. This downturn rendered operations at the Mine unsustainable, and production at the mine ceased in October 2015. The Mine has now been placed into care and maintenance. Mr McCleave’s evidence as set out in his supplementary affidavit, is that the zinc price decreased by 39% and the lead price by 24% between May and December 2015. As a result of this volatility, Glencore announced a reduction of 500,000 tonnes in its mined zinc metal production across its operations including in Australia. This decision resulted in a suspension of operations at Lady Loretta and a reduction in production at two other zinc-silver-lead mines in Australia. Operations at Lady Loretta Mine were suspended because they were considered to be uncompetitive and unsustainable in light of the downturn in the commodities markets, production rates and the costs of running the mine.

[14] Mr McCleave also submitted that when the Agreement was negotiated in 2012, skilled labour was scarce, and the remuneration levels, and terms and conditions of employment specified in the Agreement now exceed current market standards. Mr McCleave gave evidence about other Agreements for similar operations which have lower wage rates. Further the Agreement is based on the mine being operated by a predominantly FIFO/DIDO workforce which may not be appropriate for future operations. If the Agreement is terminated, it will facilitate the consideration of alternative ways of operating including:

● The use of a local workforce;

● The engagement of a contractor to operate the mine;

● The use of a mix of labour types including employees, contractors and labour hire to manage the risk in the event of another unexpected downturn; and

● The co-ordination with other Glencore operations in the Mount Isa region which would enable Glencore to utilise resources across its operations more efficiently.

[15] Noranda submitted that there has been a sharp rise and fall in the commodity prices of zinc and lead over the past few months, which has left the industry in a state of uncertainty. This uncertainty has prevented management of Noranda from foreshadowing when prices will stabilise to a sustainable level, and in order to identify ways in which greater value and more sustainable returns on investment could be achieved Noranda proposes to undertake a ‘clean sheet review’ of the Mine.

[16] Mr McCleave’s evidence is that in order to recommence operations, it will be necessary to establish that an appropriate and sustainable return on investment will be achieved. Mr McCleave states that the Agreement is preventing a review from being conducted that reflects current market conditions and current commodity prices. The conditions existing at the time of negotiation of the Agreement were very different to those currently being experienced. The higher labour prices, together with the way in which the operation was commenced are limiting consideration of the way that operations can be recommenced sustainably.

Views of employees

[17] Mr McCleave’s evidence is that at the time operations at the Mine ceased, there were 242 employees in total, including 151 employees who were covered by the Agreement. As a result of the downturn, the roles of all the employees at the Mine, including those who were coved by the Agreement were made redundant. The Agreement passed its nominal expiry date on 26 June 2016, and there are no employees of Noranda covered by the Agreement whose views need to be taken into consideration in the application for termination of the Agreement.

[18] Mr McCleave, also said that should operations recommence with an employee workforce at the Mine, it is likely that a new enterprise agreement would be negotiated.

Views of the AWU

[19] The Australian Workers’ Union (AWU) is a party to the Agreement, and filed material in relation to the matter. The AWU submitted that the Agreement should not be terminated, as the Agreement currently provides for better terms and conditions for workers than the Mining Industry Award 2010 (the Award).

[20] The AWU accepts that there has been (or had been at the time the decision to cease operations was made) a downturn in lead and zinc prices. However, the AWU also submits that Noranda has not provided documentary evidence to show the extent of the impact of the downturn on its viability and profitability. Without supportive evidence, statements that termination of the Agreement would likely facilitate a return to profitability at the Mine were nothing more than assertions and the Commission should apportion appropriate weight to those submissions.

[21] Further, the AWU submitted that there had been no comparative evidence provided to show how the Agreement compares to what Noranda claims are the current market conditions and the Company’s submission is little more than: “we had to pay what the rates are in the Agreement previously when the labour market was strong but now that people are looking for work, we don’t have to pay as much. It is commonplace that market conditions change during the life span of an enterprise agreement and to suggest that an employer should be able to terminate an agreement on that basis after the nominal expiry date, simply because s. 226 of the Act allows for the Agreement to be terminated, goes against the objects of the Act “providing workplace relations laws that are fair to working Australians.”

s.226(b)(ii) - the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.

[22] Noranda submits that s.226(b) does not expressly require the Commission to consider the circumstances of potential future employees that may be employed by it to work at the Mine, nor members of the AWU, or workers eligible to be members of the AWU. Noranda submits that there is nothing to indicate that the termination of the Agreement will be detrimental to such workers.

[23] The AWU refutes Noranda’s submission in this respect and states that the Commission is not restricted to considering the effect of the termination upon current employees only, and given the Noranda’s suggestion that it may reopen the Mine, the effect of the termination on future employees should also be considered, as required by s.226(b).

[24] Noranda submits that the likely impact of the termination of the Agreement on the AWU would be minimal. In this regard, Noranda refers to the decision of Senior Deputy President Hamberger in RUS Mining Services Pty Ltd 6, which involved an application to terminate an enterprise agreement which had passed its nominal expiry date, and no longer covered any employees as a result of a downturn in the Queensland coal mining industry. Senior Deputy President Hamberger considered that the immediate foreseeable consequences of terminating the agreement as ‘minimal’, and that in the circumstances ‘it would be appropriate for the applicant to be given the opportunity to try and negotiate a new agreement reflecting the current circumstances, unimpeded by the continued application of the agreement”.

[25] The AWU submitted that Noranda has not provided any evidence or an analysis to support its assertion that the termination of the Agreement would likely facilitate a suitable return to operation at the Mine. The AWU stated that without evidence supporting these statements they are nothing more than assertions and should be given minimal consideration.

s.226(a) - the FWC is satisfied that it is not contrary to the public interest to do so

[26] Noranda also submitted that the termination of the Agreement will not be contrary to public interest and would likely facilitate a return to sustainable operations at the Mine, resulting in increased employment, increased royalties for the Queensland Government and economic and social benefits for the local community. Noranda stated that this would subsequently result in increased employment, increased royalties for the Queensland government, as well as economic and social benefits for the Mount Isa local community.

[27] The AWU submitted that it would not be in public interest to terminate the Agreement, as it provides for better conditions than the Award, and should the Mine become operational again, it is in public interest that employees have the benefit of those terms and conditions under the Agreement. The AWU stated that the termination of the Agreement would provide detrimental circumstance for employees who are members or eligible to become members of the AWU. The AWU contended that Noranda does not require the termination of the Agreement in order to undertake a ‘clean sheet review’.

[28] The AWU submitted that the existence of the Agreement in no way prevents an analysis of the potential to return to operations in a competitive and sustainable way. The AWU stated that the Applicant has failed to provide any analytical evidence in support of these claims that would assist in determining whether the existence of the Agreement impinges on the ability to be sustainable, and how terminating the Agreement will make a difference to the operations of the Mine.

[29] Additionally, the AWU submitted that it is commonplace by the end of the life span of an agreement for economic conditions to vary from those at the time the agreement was approved. Therefore, to suggest that any employer be allowed to terminate an agreement after the nominal expiry date simply because section 226 of the Act allows it, goes against the very first object of the Act “providing workplace relations laws that are fair to working Australians”, which cannot possibly be considered to be in the public interest.

[30] Noranda submitted that the Mine had contributed $210 million to its local and regional community, therefore it would not be contrary to public interest for the Agreement to be terminated, as termination of the Agreement would serve to increase the prospect of productivity benefits that would essentially flow from a return of the Mines operation.

CONCLUSION

[31] I am satisfied that Noranda is able to make the application for termination of the Agreement and that the requirements in s.225 of the Act are met. In relation to s. 226, I am satisfied that it is not contrary to the public interest to terminate the Agreement. The only direct effect of termination of the Agreement will be on Noranda and the AWU. There are no employees currently employed whose interests can be affected. This is not a case where the termination of the Agreement will result in a circumstance where there is no award coverage for any prospective employee. If any person is employed in the future, that person will at least be covered by a modern award and entitled to minimum terms and conditions in accordance with that award. There is no evidence of any detrimental effect on the public.

[32] This lack of evidence of negative impact on the public can be weighed against the evidence that there is at least a prospect that the mine will commence operations again. In light of the evidence of Mr McCleave, it is more probable that the mine will recommence operations if the Agreement is terminated than if the application for termination is refused. While this involves some speculation, I think it more probable that the mine will reopen if a clean sheet review is conducted than not, and I accept that such a review cannot be conducted with the Agreement in place. I accept that if the Mine is able to recommence operations, there will be a benefit to the public regardless of the industrial arrangements under which this might occur. This is because employees will be required to operate the mine, those employees will engage with the local community and may come from the local community and the population of Queensland will benefit from any royalties paid to the Queensland Government as a consequence of production recommencing.

[33] I accept that the AWU opposes the termination of the Agreement. However, the Union’s opposition relates to the bargaining position of future employees if the Agreement is terminated and its desire to maintain industrial standards pending the employment of persons in the future. While this is a legitimate objective for the AWU to have, it must be balanced against the fact that there are no current employees who will suffer any detriment if the Agreement is terminated. It is also the case that if the mine does recommence operations the AWU will be able to seek to negotiate a new agreement to cover employees regardless of the entity which employs them.

[34] I do not accept that the terms of s. 226(b)(i) and (ii) require the Commission to consider the circumstances of prospective employees as outweighing the lack of impact on current employees due to the fact that there are no current employees. The term “employees” could include prospective employees, and that the list of circumstances the Commission is required to consider is not limited to the views of employees, employers and employee organisations covered by the Agreement.

[35] It is also the case that s. 226(b)(i) of the Act requires the Commission to take into account the views of employees covered by the Agreement. By virtue of s. 15 of the Act the ordinary meaning of the term “employee” includes a reference to a person who is “usually such an employee”. Further, by virtue of s. 53(1) and s. 53(1)(5) of the Act, an enterprise agreement covers an employee where it is expressed to cover the employee and is in operation and in accordance with s. 53(1)6) a reference in the Act to an enterprise agreement covering an employee is a reference to the agreement covering the employee in relation to particular employment.

[36] The Agreement in the present case is expressed to cover employees of Lady Loretta Mine and covers employees in relation to their employment in classifications within the Agreement. If the Agreement can be said to cover prospective employees, on the basis that they are employees as defined in s. 15 of the Act, then it is difficult to understand how their views could be obtained or their circumstances assessed to ascertain the likely effect of terminating the Agreement will have in circumstances where there are no employees currently employed or proposed to be employed and the question of whether the mine will recommence operations at all is still unresolved.

[37] In short, while technically the provisions of s. 226(1)(b) of the Act could be construed so that the term “employees” includes prospective employees, the requirements in that section with respect to taking into account their views and the likely effect of the termination of the Agreement tells against such a construction, particularly in circumstances where there are no identifiable prospective employees from whom views could be obtained or whose circumstances could be considered. If I am wrong on this point then it is equally probable that prospective employees will not wish to work on a FIFO/DIDO basis and that they will wish to negotiate with their employer for terms and conditions of employment that will meet their needs and circumstances. Noranda and its parent company have negotiated enterprise agreements in the past and there is no reason to suppose that they will not do so in the future, and if there is no agreement negotiated then a modern award will apply to any employees at the Mine in the event that it recommences operations.

[38] I have considered the circumstances relevant to whether it is appropriate to terminate the Agreement and after weighing the submissions and evidence of the employer and the submissions of the AWU in relation to its views and its perspective on the views of employees, I have determined that it is appropriate to terminate the Agreement. For the reasons set out above, I am also satisfied that termination of the Agreement would not be contrary to the public interest. Accordingly, I must terminate the Agreement and an Order to that effect will issue with this Decision.

DEPUTY PRESIDENT

 1   AWX Pty Ltd [2013] FWCFB 8726 at [18].

 2   Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd [2016] FWCFB 3591 at [21] and [25].

 3   Re Aurizon Operations Ltd [2015] FWCFB 540 at [126].

 4   Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union v Aurizon Operations Ltd [2015] FCAFC 126 at [24].

 5   Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34.

 6   [2014] FWC 496.

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