Peabody (Wilkie Creek) Pty Ltd

[2017] FWCA 5919

[2017] FWCA 5919

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225—Enterprise agreement

Peabody (Wilkie Creek) Pty Ltd
(AG2017/4541)

WILKIE CREEK COAL MINE ENTERPRISE AGREEMENT 2010

[AE879296]

Coal industry
SENIOR DEPUTY PRESIDENT HAMBERGER	SYDNEY, 10 NOVEMBER 2017

Application for termination of the Wilkie Creek Coal Mine Enterprise Agreement 2010.

[1] On 28 September 2017, Peabody (Wilkie Creek) Pty Ltd (the applicant) applied for the termination of the Wilkie Creek Coal Mine Enterprise Agreement 2010 (the agreement) under s.225 of the Fair Work Act 2009 (the Act).

[2] The agreement came into operation on 28 July 2010 and passed its nominal expiry date on 28 July 2013.

[3] The Construction, Forestry, Mining and Energy Union (CFMEU) is an employee organisation covered by the agreement and was named in the application.

[4] The application was listed for mention before me on 11 October 2017, following which directions were issued for each party’s material to be filed and served before a hearing, by video link, on 6 November 2017.

[5] At the hearing, D Williams, solicitor, appeared with permission for the applicant and J Kennedy, solicitor, appeared with permission for the CFMEU.

[6] Evidence was given on behalf of the applicant by Michael Spry, who is HR Manager, Operations, for Peabody Energy Australia Coal Pty Ltd (Peabody, the applicant’s owner). Evidence was given on behalf of the CFMEU by Shane Brunkner, who is District Vice-President of the CFMEU – Mining and Energy Division, Queensland.

The legislation

[7] The Act relevantly provides 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

the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.’

The facts

[8] The agreement is binding on the applicant and those of its employees employed at the Wilkie Creek Coal Mine (the mine) engaged in the classes of work which are contained in Schedule A (Production and Engineering Employees) to the Black Coal Mining Industry Award 2010 (the award).

[9] The agreement was negotiated when the mine was in full production. However, in 2013, Peabody made a decision to cease mining at the mine. Most employees were made redundant towards the end of 2013. A small number of employees were transferred to other mine sites.

[10] Production at the mine ceased in or around early 2014. Since that time, the mine has been in care and maintenance mode, and progressive rehabilitation work is taking place at the mine. The Coal Handling and Preparation Plant has been decommissioned and Peabody has sold the remnants as scrap metal. I am satisfied that Peabody has no current plans to recommence coal mining operations at the mine.

[11] I accept Mr Spry’s evidence that there have been no employees employed by the applicant since 30 June 2014. I also accept, based on the evidence, that that there have been no employees covered by the agreement since that time. While there are Open Cut Examiners employed at the mine, I am satisfied they are employed by Peabody rather than the applicant. 1

[12] Peabody has a legislative obligation to rehabilitate the site. Its activities at the mine are limited to that purpose.

[13] There have been at least two attempts to buy the mine by other parties, which have not been successful. It is possible that Peabody may sell the mine at some time in the future and that the purchaser could restart operations.

[14] Peabody currently engages five employees at the mine. These employees are involved in the supervision of rehabilitation works. While Mr Spry gave evidence in his statement that these employees are not engaged in classes of work which are contained in Schedule A of the award, I think it is at least arguable that the work they perform is so covered. 2

[15] Peabody also engages a small number of contractors on a casual basis at the mine, through a contracting entity, One Key. From time to time, these contractors may perform tasks set out in the classes of work which are contained in Schedule A of the award. These employees generally work Monday to Friday, between eight and 10 hours a day. 3

[16] In addition to these employees and contractors, Peabody intends to engage a small number of employees to perform rehabilitation work. Peabody’s preference would be for these employees to be engaged directly by the applicant. At least some of the work that would be carried out by these employees would be covered by the agreement. However, Peabody considers that the agreement would be ill-suited to such work. If this application is not successful, Peabody will probably continue to use One Key or a similar contractor to perform the work.

[17] Clause 2.1 of the agreement provides for an annualised base salary with rates of pay incorporating night shift loading, night shift allowance, roster and penalty rates. Different annualised salary rates are specified for 3 panel roster (average 49 hours a week) and 4 panel roster (average 42.875 hours a week) employees, as well as an hourly rate for unrostered overtime and casual ordinary time work. Clause 2.4 does, however, allow for rates of pay to be calculated for alternative roster arrangements that might be introduced.

[18] The agreement also provides, at clause 2.3, for performance payments. It includes the following:

‘The Company will implement a performance based payment scheme to enable Employees to participate in and benefit from a safe and productive operation.

The key performance indicators of the scheme will be safety performance, positive safety indicators and production targets achieved by Employees.

The intent of the scheme is for Employees to prosper with the Company when there are favourable safety results, consistent positive safety indicators and positive production results.

The amount paid to each Employee will be calculated at the end of each month and paid with the normal pay period for each week in the following month e.g. January performance will set the payment for February.’

[19] There then follows a table which sets out weekly payments based on the achievement of safety targets and ‘an Efficient Production Incentive’ with a bonus paid ‘on the rolling 3 month cash cost per product tonne % variance to budget’ with, for example, a payment of $137.46 paid if the cost per product tonne is equal to budget, with an additional 25% of this amount payable where the cost is 5% below budget, and 90% payable where the cost per product tonne is 10% over budget. The agreement also states that ‘[a] minimum performance payment of $200 a week per week will be made’.

[20] Mr Brunker agreed with Mr Williams that it would be hard to adapt the bonus scheme in the agreement to a situation where there was no coal production. 4

Consideration

[21] I first turn to consider what would be the likely consequences if the application were to be granted, compared to if it were declined.

[22] It appears likely that if the application were to be granted, Peabody would directly engage employees to undertake further rehabilitation work on the mine site, rather than using contractors. These employees would be covered by the award. The CFMEU would be entitled to represent these employees. If the application were to be declined, it is likely that Peabody would continue to use contractors to do this work.

[23] It is clear that while the agreement has the potential to cover employees engaged in rehabilitation work, it is not well-suited to such work, particularly where no coal production is taking place. This is most obvious when considering the performance bonus, which is clearly premised on coal production occurring.

[24] It is possible that Peabody might eventually sell the mine to another entity that would then resume coal mining operations. If the application were granted, it would be open to the CFMEU and the new operator to negotiate a new enterprise agreement. If no such agreement were to be negotiated, the employees would be covered by the award.

[25] If the application were declined and a third party bought the applicant outright, it would be bound the agreement and would need to employ employees pursuant to its terms. On the other hand, if a third party simply bought the operating assets it would not be bound by the agreement – particularly as there would be no transferring employees. The employees would, in effect, be in the same situation as if the application had been granted.

[26] The CFMEU put forward four bases on which it said granting the application to terminate the agreement would be contrary to the public interest.

[27] First, it stated that termination would undermine the terms and conditions of employees. However, I have already found that there are no employees currently employed under the agreement. The only conceivable situation in which any employees would have their terms and conditions of employment ‘undermined’ would be if a third party bought the applicant from Peabody and resumed mining operations. While there was no direct evidence on this, I consider that it would be far more likely that a purchaser would buy the assets of the mine, which would mean – in the absence of any transferring employees – that the agreement would have no application, and that situation could not therefore ‘undermine’ anyone’s terms and conditions of employment.

[28] Secondly, the CFMEU submitted that termination of the agreement would be contrary to the maintenance of proper industrial standards. I do not agree with this proposition. Not only is it unlikely that any employees would be covered by the agreement in the future if it is not terminated, but also, any employees engaged in work currently covered by the agreement would have as a minimum safety net the terms and conditions set out in the award.

[29] Thirdly and fourthly, it was submitted that termination would amount to an attempt to avoid dealing with the CFMEU, and would undermine collective and good faith bargaining. Again, I do not agree. The agreement is well past its nominal expiry date and is, I have already found, ill-suited to the sort of work that is likely to be performed at the mine site in the immediate future. The CFMEU will continue to have the right to represent employees engaged at the mine site and could seek to negotiate a new, more relevant and up-to date enterprise agreement, either with the applicant or with any possible future owner of the mine.

[30] Having regard to all of the above, I am satisfied that termination of the agreement would not be contrary to the public interest.

[31] I am also satisfied, having regard to all the circumstances, that it is appropriate to terminate the agreement. There are currently no employees covered by the agreement and the relevant employer wishes that it be terminated. While the CFMEU is opposed to termination, I do not consider that it would suffer any significant prejudice if the application were to be granted.

[32] The agreement is more than four years past its nominal expiry date. It is ill-suited to the sort of work that is currently being performed at the mine site. Termination of the agreement would make it more likely that Peabody would engage employees directly to perform further rehabilitation work, rather than using contractors. If either Peabody or a third party wishes at some point in the future to resume production, it would be open to them to negotiate a new and more up-to-date enterprise agreement.

Conclusion

[33] The Wilkie Creek Coal Mine Enterprise Agreement 2010 is terminated with effect from today’s date.

SENIOR DEPUTY PRESIDENT

Appearances:

Mr D Williams of Minter Ellison appeared for the Applicant.

Mr J Kennedy of Hall Payne appeared for the Construction, Forestry, Mining and Energy Union.

Hearing details:

2017.

Sydney.

November 6.

 1   PN77-PN103.

 2   PN140-PN142.

 3   PN49.

 4   PN206.

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