Urban Drilling Pty Ltd

[2019] FWC 2776

[2019] FWC 2776

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date

Urban Drilling Pty Ltd
(AG2018/6551)

Building, metal and civil construction industries
DEPUTY PRESIDENT MASSON	MELBOURNE, 31 MAY 2019

Application for termination of the Urban Drilling Pty Ltd and the CFMEU Building and Construction Industry Enterprise Agreement 2011-2015.

Introduction

[1] Urban Drilling Pty Ltd (Urban Drilling) has applied under s. 225 of the Fair Work Act 2009 (the Act) to terminate an enterprise agreement that has passed its nominal expiry date pursuant to s.226 of the Act. The enterprise agreement is the Urban Drilling Pty Ltd and the CFMEU Building and Construction Industry Enterprise Agreement 2011 – 2015 1 (the 2011 Agreement). The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) opposes the application to terminate the Agreement.

[2] The application was listed for hearing on the 14 March 2019. Mr. Reid was given permission to appear on behalf of Urban Drilling pursuant to s 596 of the Fair Work Act 2009 (the Act). Mr D Vroland represented the CFMMEU.

[3] Evidence was provided by Mr Bradley Hepworth, sole director of Urban Drilling. The CFMMEU did not lead any witness evidence in the matter.

Background and Evidence

[4] Urban Drilling is a small business that employees 8-10 casual employees and is engaged in the “conduct of below-ground investigation by boring, sampling and testing of soil strata to establish its compressibility, strength and other characteristics.” 2These operations are undertaken for the purpose of preparation of subsurface profiles which assists subsequent construction projects that may be undertaken.

[5] Urban Drilling’s services are mainly sought by large engineering firms for the purpose of completing geotechnical surveys for civil and mechanical projects in the industrial, commercial and building sectors. 3 The majority of Urban Drilling’s work is undertaken on greenfield locations, i.e. vacant sites. Recent contracts undertaken have included wind farm sites, transmission line sites and level crossing removal project sites in Melbourne.4 A spreadsheet detailing various contracts undertaken since mid-2016 was provided in evidence.5

[6] Urban Drilling is bound by the 2011 Agreement which came into operation on 6 June 2012 and reached its nominal expiry date on 31 March 2015. According to Mr Hepworth, that agreement was entered into in circumstances where Urban Drilling were undertaking work on a construction site in Melbourne in 2012 and were advised by a CFMMEU representative at the time that they needed to have an agreement in place in order to work on the particular site. 6 No steps have been taken to renegotiate the 2011 Agreement since it reached its nominal expiry date in 2015.

[7] Prior to the 2011 Agreement Urban Drilling had entered into previous agreements with the CFMMEU, on which Mr Hepworth made no reference to in his evidence. Those agreements were the;

(i) Urban Drilling Pty Ltd and the CFMEU Building and Construction Industry Enterprise Agreement 2008-2011 (2008 Agreement); and

(ii) Urban Drilling and CFMEU Building and Construction Industry Collective Bargaining Agreement 2002-2005 (2002 Agreement).

[8] Clause 4 of the 2011 Agreement, which prescribes the scope of coverage and is in identical terms to the scope clause of the 2008 Agreement, states as follows;

“4.1 This Agreement applies in the state of Victoria to:

a) The Company in respect of all of its employees engaged in building and construction work as defined by the Award.

b) Employees of the Company who are engaged in any of the occupations, callings or industries specified in the award.

c) The CFMEU.

d) Construction work in the cottage/housing industry shall not fall within the scope and application of this Agreement. For the purposes of this Agreement, cottage/housing industry means the construction, erection, assembly, maintenance ornamentation or demolition of a single occupancy dwelling, and multiple occupancy residential units being of not more than two living levels height.”

[9] The “award” referred to in Clause 4 of the 2011 Agreement is the pre-reform award – the National Building and Construction Industry Award 2000 (the 2000 Award) which is incorporated at clause 6(a) of the 2011 Agreement. The 2000 Award does not define “building and construction” but defines “construction” in the following terms at clause 4.14.2 of the 2000 Award;

“……for the purpose of 6.1.1 of this award, means all work performed under this award in connection with the erection, repair, renovation, maintenance, ornamentation or demolition of building or structures.”

[10] Following the filing of its application to terminate the 2011 Agreement, Mr Hepworth wrote to employees on 10 December 2018 seeking feedback from employees as to whether they had “any issue with terminating the Agreement”. 7 The letter to employees states as follows;

“To All Urban Drilling Employees

Termination of Urban Drilling Pty Ltd and the CFMEU Building and Construction Industry Enterprise Agreement 2011 – 2015

I am writing to you to make you aware that Urban Drilling has submitted an application to the Fair Work Commission under section 226 of the Fair Work Act 2009 to terminate the Urban Drilling Pty Ltd and the CFMEU Building and Construction Industry Enterprise Agreement 2011 – 2015 (the Enterprise Agreement).

As an employee of Urban Drilling you are covered by this Enterprise Agreement.

If the termination of this Enterprise Agreement proceeds, you will of course remain employed as a valued member of the Urban Drilling team in line with your current terms of employment.

Urban Drilling has made this application as we are of the view that the provisions of this Enterprise Agreement are no longer relevant to Urban Drilling, and the pay and entitlements in the Enterprise Agreement have largely been superseded.

Urban Drilling are seeking to ensure we have consistent provisions for pay and conditions through contracts underpinned by the relevant Award across the entire business.

You will continue to receive a rate of pay above the Building and Construction General On-site Award 2010 as per your current terms of employment.

To assist you I have attached a copy of the Enterprise Agreement to this email.

The Fair Work Commission is interested in your views on the proposal of Urban Drilling to terminate this Enterprise Agreement. Accordingly, attached to this letter is a questionnaire concerning your thoughts on the Enterprise Agreement termination. If you would like to express your views, please complete the questionnaire and return it to me.

………” 8

[11] Attached to the letter sent to Urban Drilling employees was a questionnaire including the following questions;

“1. Have you read the letter that has been sent to all staff about the application to terminate the enterprise agreement?

Yes/No

2. If the application is successful, Urban Drilling will not decrease your current rate of pay and entitlements. Do you understand what that means?

Yes/No

3. How do you feel about that?

Is there anything that you wish to add or any other views you would like to express concerning the proposed termination of the enterprise agreement?” 9

[12] Responses to the questionnaire were received from 7 employees indicating support for the termination of the Agreement, 10 and there were no responses received from any employees opposing termination of the Agreement.11 Mr Hepworth also confirmed that when employees responded to the questionnaire regarding the proposed termination of the 2011 Agreement, they would have been under the impression that the 2011 Agreement didn’t or rarely applied to their work, and that this impression would have been based on information provided to them by him.12

[13] Mr Hepworth is of the belief that the 2011 Agreement has limited if any application to Urban Drilling’s work by reason of the 2011 Agreement scope. Further, Urban Drilling has never applied the terms of the 2011 Agreement in the period since it was made in 2012. 13

[14] Notwithstanding Mr Hepworth’s belief regarding the application of the 2011 Agreement, a dispute has been raised by the CFMMEU on behalf of one of its members employed by Urban Drilling, Mr Dale Hicks, in relation to the application of the Agreement. 14 The dispute is in relation to the CFMMEU’s contention that Urban Drilling has not paid Mr Hicks in accordance with the terms of the 2011 Agreement for several years.

[15] Mr Hepworth concedes that while there may be uncertainty as to when the 2011 Agreement applies, Urban Drilling doesn’t apply the 2011 Agreement even when it occasionally goes on to a “union site”. 15 While denying that Urban Drilling ignores the 2011 Agreement he states that the decision not to apply the 2011 Agreement arose from an “agreement between the guys”.16 He also concedes a lack of familiarity with both the Building and Construction General On-site Award 2010 (the Award)¹⁷ and 2000 Award, with the latter being incorporated into the 2011 Agreement.18

[16] Mr Hepworth acknowledges that if the 2011 Agreement doesn’t apply on particular work or projects then the Award would apply. Urban Drilling has entered into verbal agreements with their employees to pay flat hourly rates inclusive of allowances that would otherwise apply under the Award. The flat rates applied are $40 per hour for Drillers and $30 per hour for Labourers, for all hours worked Monday to Friday including overtime, with penalty rates applied for any weekend work. 19

[17] Aside from Mr Brad Hepworth and his brother who both hold drilling licenses, none of the other employees of Urban Drilling possess or are required to possess formal qualifications according to Mr Brad Hepworth. Mr Hepworth states that Drillers would be classified at CW3 level and Labourers would be classified at CW1 under the Award. The current minimum hourly rates of pay provided for under the Award for the classifications cited by Mr Hepworth as relevant are that of $20.98 (CW1 Level D) and $22.04 (CW3). Mr Hepworth concedes that Urban Drilling’s classification matching was not informed by a rigorous analysis and may not be correct. 20

[18] Mr Hepworth states that the maintenance of the 2011 Agreement would require Urban Drilling to pay its employees strictly in accordance with the 2011 Agreement when engaged on work covered by the the scope of the 2011 Agreement, and then pay employees their normal flat hourly rates when not engaged on such work. This situation is, according to Mr Hepburn, complicated by the fact that there is considerable doubt about when the 2011 Agreement does in fact apply. 21 He did however acknowledge that any such confusion over the scope and application of the 2011 Agreement to particular projects or work, could have been resolved by negotiation of a new agreement but Urban Drilling had not sought to negotiate a new agreement.22

[19] Mr Hepworth states that termination of the 2011 Agreement should occur for the following reasons 23;

(1) The positive effects that will flow from the Agreement’s termination, including specifically that it would;

(a) result in a simplification of the Applicant’s payroll system ensuring there is only one rate of pay payable;

(b) remove the ambiguity as to when (and if) the 2011 Agreement applies to each specific project for which the Applicant is engaged; and

(c) remove the complexity of adhering to the outdated 2000 Award.

(2) It will allow the Applicant to more readily recognise its overall obligations to employees, which will be of benefit in budgeting and tendering for future projects;

(3) It will allow the Applicant to provide longer term sustainable employment for its employees and will enable the Applicant to utilise its workforce to a much greater benefit during working and paid hours.

(4) It will create more workplace flexibility for the Applicant.

[20] To mitigate the impact of the termination of the 2011 Agreement, Mr Hepworth states that the Applicant already pays its employees more than the rate mandated by both the 2011 Agreement and the Award, as a result of a long standing verbal agreement with employees referred to in paragraph [15]. Mr Hepworth further states that Urban Drilling will continue to pay these higher hourly rates post termination of the 2011 Agreement, and employees will not be adversely impacted by such termination. 24

[21] Mr Hepworth did however concede during cross examination that despite his evidence that the rates paid to Urban Drilling employees are higher than the rates contained in the Agreement, 25 the rate being paid to Labourers, that of a flat $30 per hour, is actually less than the minimum rate of $34.11 per hour contained in the Agreement.26 Mr Hepworth further concedes that no detailed comparison was prepared of employee entitlements under the 2011 Agreement, versus what employees currently receive and would continue to receive were the 2011 Agreement to be terminated.27

Urban Drilling Submissions

[22] Urban Drilling submit that termination of the 2011 Agreement would not be contrary to the public interest (s 226(a)) and would be appropriate taking into account all of the circumstances (s 226(b)). They further submit that leaving the 2011 Agreement in place would be contrary to the public interest.

[23] Termination of the 2011 Agreement would, according to Urban Drilling, have little or no effects on employees due to them being already paid well above both the Award and the 2011 Agreement and that no reduction in earnings would be suffered as a consequence of termination of the Agreement.

[24] Urban Drilling also submits that by reason of the scope clause of the Agreement, the operation of the 2011 Agreement is confined to “construction” work as defined in the 2000 Award which only includes work performed in connection with the construction of buildings and structures. In relying on various authorities cited, 28 Urban Drilling contends that their work is not sufficiently proximate or close to actual construction to be regarded as “in connection with” the construction industry as defined in the 2000 Award.

[25] Urban Drilling go on to submit that based on the evidence of Mr Hepworth, the overwhelming majority of their work falls outside of the scope of the 2011 Agreement although conceding that it would fall within the scope of the Award.

[26] As regards the relevant principles to be applied Urban Drilling referred the Commission to Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 29(Kellogg) in respect of the assessment of public interest, and to Aurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd30(Aurizon)more generally.

[27] With respect to consideration of the “public interest” pursuant to s 226(a), Urban Drilling variously contend that;

(i) Objects 3(a), (b) and (g) of the Act are relevant, in particular that Urban Drilling is a small business.

(ii) Termination of the 2011 Agreement is unlikely to have an impact on employment levels nationally.

(iii) Termination of the 2011 Agreement would not result in an erosion of industrial standards in that the Award and NES would continue to apply and underpin employee entitlements.

(iv) Employees will continue to receive rates of pay well above the Award.

(v) Reduction of the safety net from that of the 2011 Agreement to the Award is not contrary to public interest, as the Act does not guarantee the continuation of terms and conditions contained within an agreement that has passed it nominal expiry date.

(vi) The continued operation of the 2011 Agreement which applies in limited circumstances causes confusion and uncertainty for employees and Urban Drilling.

(vii) The 2011 Agreement is underpinned by the outdated and obsolete 2000 Award which threatens the maintenance of proper industrial standards, and would inevitably lead to a future situation where the provisions of the 2011 Agreement (as a whole) are less beneficial than the Award.

(viii) The circumstances in which Urban Drilling entered into the 2011 Agreement, i.e. the alleged pressure of the CFMMEU, is a significant factor in the determination of the public interest question.

[28] The fact that Urban Drilling had entered into the 2002 and 2008 Agreements with the CFMMEU was raised with the parties following the conclusion of the proceedings. Urban Drilling submit that the existence of prior agreements should not affect the Commission’s determination of the application to terminate the 2011 Agreement. While, acknowledging that the evidence of those prior agreements may be relevant to the circumstances of Urban Drilling entering into the 2011 Agreement, it was not a determinative factor in the present case or the issue of public interest generally.

[29] As regards consideration of s 226(b), Urban Drilling variously contends that;

(i) Urban Drilling strongly supports termination of the Agreement;

(ii) Urban Drilling gave notice to its employees of its intention to make an application to terminate the Agreement;

(iii) Urban Drilling’s employees were provided an opportunity to give their views and no employees expressed opposition to termination of the Agreement;

(iv) Termination of the 2011 Agreement would;

•  Result in simplification of Urban Drilling’s employee relations processes,

•  Clarify Urban Drilling’s obligations to its employees which would be of benefit for budgeting and tendering purposes;

•  Allow Urban Drilling to provide longer term sustainable employment for its employees;

•  Enable Urban Drilling to utilise its workforce to much greater benefit during working and paid hours; and

•  Create more workplace efficiency and economic flexibility for Urban Drilling.

(v) Employees will not be adversely impacted by the termination of the 2011 Agreement, as Urban Drilling have committed to maintaining the current common law arrangements that provide for flat hourly rates that are in excess of the Award; and

(vi) That if the 2011 Agreement does in fact apply on some limited work that Urban Drilling undertakes each year, the flat hourly rates paid throughout the rest of the year which are higher than Award rates would offset any underpayment for those short periods when the work undertaken is covered by the Agreement.

[30] Urban Drilling also submit that any failure of Urban Drilling to pay its employees in accordance with the 2011 Agreement is not a relevant consideration as to whether the 2011 Agreement should be terminated. It is not relevant to the consideration of s 226(a) as that is concerned with the interests of the public at large rather than individual employees. To the extent that any underpayments were relevant to the application it would be confined to consideration of the “appropriateness” test. Urban Drilling go on to submit that termination of the 2011 would not prevent an employee pursuing an action to recoup underpayments.

CFMMEU Submissions

[31] The CFMMEU reject Urban Drilling’s construction of the scope clause of the 2011 Agreement and variously contend in relation to the application and coverage of the 2011 Agreement that;

(i) Urban Drilling wrongly focus on the absence of a definition in the 2000 Award for the term “building and construction” with the definition in that award confined to “construction work”, and ignore the relevance of the term “building” in clause 4.1(a).

(ii) It should be presumed that the parties intended the word “building” to have some work to do and it is submitted that the phrase “building and construction work as defined by the Award” was clearly intended to refer to the entirety of the coverage of the 2000 Award. This is supported by Clause 4.1(b) of the 2011 Agreement which refers to “any of the occupations callings or industries specified in the award.”

(iii) It is clear the parties intended the 2011 Agreement to have coverage and application commensurate with the 2000 Award’s coverage save for construction work in the cottage/housing industry per clause 4.1(d).

(iv) Urban Drilling employ drillers and labourers, both of which classifications are listed amongst the occupations and callings specified within the 2000 Award.

(v) Relevant authority 31 also supports the CFMMEU submission that, in the alternative, Urban Drilling’s employees are engaged “in connection with the erection, repair, renovation, maintenance, ornamentation or demolition of buildings or structures”.

(vi) The work of Urban Drilling is carried out in the investigative phase of construction prior to commencement of construction, and it is work that is patently one of the first in an unbroken series of steps in the construction process.

[32] With respect to consideration of the public interest pursuant to s. 226(a) the CFMMEU variously submit that;

(i) On the authority of the Full Bench decision in "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) v Griffin Coal Pty Ltd (Griffin Coal), 32 there is no predisposition to termination of the 2011 Agreement and Urban Drilling is put to proof to demonstrate that it is not contrary to the public interest.

(ii) The claim of Urban Drilling that it pays its employees a rate higher than both the Award and 2011 Agreement is inaccurate.

(iii) On the authority of the decision of Hamburger, SDP in Wollongong Coal Limited T/A Wollongong Coal 33 (Wollongong Coal), it would be inconsistent with the Objects of the Act and consequently contrary to the public interest to terminate the 2011 Agreement in circumstances where no attempt has been made by any party to bargain for a replacement agreement.34

(iv) There is no evidence, despite subjective opinion expressed by Urban Drilling, that employees are confused in relation to the application and coverage of the 2011 Agreement.

(v) While conceding that the Commission may have regard to the circumstances of the making of an agreement on the authority of Aurizon, Urban Drilling only provide vague assertions as to the circumstances of the making of the 2011 Agreement and no weight should be given to those submissions.

(vi) The existence of prior agreements entered into between Urban Drilling and the CFMMEU should also lead the Commission to give no weight to the evidence of Mr Hepworth regarding the circumstances of the making of the 2011 Agreement. The existence of two predecessor agreements does not support the suggestion that Urban Drilling was “blind-sided” in entering into the 2011 Agreement.

[33] Subsequent to the proceedings in the present matter the Wollongong Coal decision referred to by the CFMMEU was quashed on appeal 35 (Wollongong Coal No. 2) and remitted for re-determination to another member of the Commission. This development was raised with the parties and the CFMMEU submitted that their submissions that termination of the 2011 Agreement would be contrary to the public interest, in circumstances where no effort has been made to re-negotiate an agreement, stood. This submission they contend is supported by comments of the Full Bench in Wollongong No. 2 where it stated;

[22] Although we have found that the conclusions in paragraphs [63] and [64] of the Decision were reached in a way which involved a denial of procedural fairness to Wollongong Coal, we do not disagree with the general sentiment expressed in those paragraphs that discussions between Wollongong Coal and the CFMMEU concerning future employment conditions which would support the re-opening of the Russell Vale Colliery would be desirable. It may be accepted that such discussions could not give rise at this time to a new enterprise agreement or a variation to the 2011 Agreement because no employees are engaged. However that does not mean they would be futile: they could lead to a draft of a new agreement to be proposed when employees are engaged, or a template for an enterprise agreement which a contract labour supplier could use, or standard-form employment contracts for future use, or undertakings which Wollongong Coal could offer in return for a consent termination of the 2011 Agreement. Accordingly we will direct that the member who is to re-determine the application shall first make endeavours to have the parties confer in relation to Wollongong Coal’s application. 36

[34] With respect to consideration of the views of the parties and effects of termination pursuant to 226(b)(i)-(ii) the CFMMEU variously submit that;

(i) Urban Drilling’s submissions regarding the views of employees appear to be based on the responses received to a letter sent to employees with a questionnaire attached.

(ii) The communication by Urban Drilling with its employees regarding its application to terminate the 2011 Agreement was inadequate having regard to its consultation obligations under the 2011 Agreement and also misleading.

(iii) There is no basis for Urban Drilling’s statement in the letter to employees that the pay and entitlements under the 2011 Agreement have been “largely superseded”. That view expressed by Urban Drilling was likely to have been relied upon by employees as correctly representing the nature of their terms and conditions of employment relative to the Agreement.

(iv) Contrary to the view expressed by Urban Drilling to its employees it would appear that Urban Drilling has not met its obligations under the 2011 Agreement and may indeed be liable for underpayment of its employees.

(v) The documents attached to Mr Hepworth’s statement which purport to represent the views of Urban Drilling’s employees should be given no weight.

(vi) The existence of a live dispute between Urban Drilling and one of its employees regarding entitlements under the 2011 Agreement is a further relevant factor that should be taken into account. Termination of the 2011 Agreement would operate to the prejudice of the employee that has raised that dispute, and would not be consistent with the status quo prevailing under the dispute settlement term of the Agreement.

Statutory Provisions

[35] Subdivision D of Division 7 of Part 2-4 provides for the termination of an enterprise agreement after its nominal expiry date. This subdivision consists of ss. 225, 226 and 227, the terms of which are 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.

227 When termination comes into operation

If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.”

[36] In construing the above provisions the Full Bench in Aurizon relevantly stated as follows;

[120] As we have indicated above, these provisions, and relevantly s. 226, must be construed in a manner that is consistent with the language and purpose of the provisions by reference to the language of the Act as a whole, and so the context, general purpose and policy of the provision are an important means by which the meaning and effect of a provision is to be ascertained.

[121] These provisions form part of a scheme established by Part 2-4 of the Act designed, inter alia, to enable bargaining for, making of, approving, varying and for the termination of, enterprise agreements. 37

[37] The Full Bench in Aurizon when considering s 226(a) cited various passages of Kellogg in which decision a Full Bench dealt with similar provisions contained in the Workplace Relations Act 1996 (the WR Act). The relevant passages from Aurizon were as follows;

[129] Section 226(a) requires a consideration of whether termination of the agreements is not contrary to the public interest. It seems to us that a consideration of the public interest will involve something that is distinct from the interests of the persons and bodies covered by the agreements. This distinction seems to be reflected in the structure of s. 226. The question of how the public interest is to be assessed was considered by a Full Bench of the Australian Industrial Relations Commission in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000. The decision in Kellogg Brown concerned an application to terminate a certified agreement pursuant to s. 170MH of the WR Act. The Full Bench observed:

“The absence of any reference to the interests of the negotiating parties in s.170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include.

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.” 

[130] After considering the decision in Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia, the Full Bench in Kellogg Brown said:

“It is clear from this passage that the ascertainment of the public interest may involve balancing countervailing public interests. That the Commission should take all of the circumstances into account is made clear by Dawson J in Re Australian Insurance Employees Union; Ex parte Academy Insurance Pty Ltd  [(1988) 78 ALR 466 at 467]. These authorities provide useful general guidance in the application of the test in s. 170MH(3). They illustrate the types of interests which can be properly described as public interests and confirm the breadth of circumstances which may be relevant to the ascertainment of those interests.

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.” (footnotes omitted) 38

[38] The Objects of Part 2-4 of the Act provide that context referred to by the Full Bench in Aurizon and state as follows:

“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.”

[39] The broader Objects of the Act are also relevant to the context and state as follows;

“3 Object of this Act

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g) acknowledging the special circumstances of small and medium-sized businesses.”

[40] Some general principles that may be relevant to the present matter before me that arise from the Full Bench’s consideration of s 226 in Aurizon can be summarised as follows;

(1) The promotion and delivery of productivity benefits at an enterprise level is not primarily or exclusively to be achieved through enterprise bargaining in good faith rather than by other means. 39

(2) There is no pre-disposition to achievement of the Objects in s. 171 through continuing the operation of an agreement that has passed its nominal expiry date as any more an effective means than by terminating that agreement. 40

(3) There is nothing in the Act that predisposes against termination of an agreement. 41

(4) There is nothing in the object of the Act (to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians), that requires that it is to be exclusively or primarily achieved by enterprise level collective bargaining. 42

(5) Sub-sections 3 and 171 of the Act, when read harmoniously, do not suggest that the emphasis on promoting productivity (in s.3(a)) is primarily to be achieved through collective bargaining in good faith (in s. 3(f) and s. 171) rather than by other means, such as termination of an expired agreement.

(6) The termination of an enterprise agreement that has passed its nominal expiry date in not inherently inconsistent with collective bargaining in good faith. 43

(7) It cannot be expected that terms and conditions of employment contained in an enterprise agreement will continue unaltered in perpetuity after the agreement has passed its nominal expiry date. 44

[41] In summarising, the Full Bench in Aurizon said about this part of the Act:

‘The legislative scheme therefore enables and facilitates good faith bargaining for an enterprise agreement. It also facilitates the making of enterprise agreements but does not mandate that result. Once an enterprise agreement is made and approved by the Commission, it seems clear that the legislative scheme does not intend that such agreements operate in perpetuity. Agreements have a finite nominal life. At the end of the nominal life of an agreement, bargaining parties may bargain for a new agreement utilising all of the tools available under the Act; or a person to whom an agreement applies may take steps to bring the agreement to an end in accordance with the provisions of the Act; or both may occur.’ 45

[42] In determining this matter I intend to apply the construction of s 226 as detailed by the Full Bench in Aurizon.

Section 226(a) – Is termination of the agreement contrary to the public interest?

[43] Urban Drilling is a small business that employs 8-10 casual employees. In these circumstances I am satisfied that the public interest considerations of employment levels and inflation are not material to a decision to terminate the 2011 Agreement. This weighs in favour of a finding that termination of the 2011 Agreement would not be contrary to the public interest.

[44] It is also clear based on the job classifications of employees that were the 2011 Agreement terminated, the terms and conditions of employment of Urban Drilling’s employees would be underpinned by the Award and NES. I am further satisfied that the maintenance of proper industrial standards, consistent with Object 3(b) of the Act, would not be compromised by the termination of the 2011 Agreement, and as such weighs in favour of a finding that it would not be contrary to the public interest to terminate the 2011 Agreement.

[45] As regards to the contention of Urban Drilling that Object 3(g) of the Act is relevant to my consideration of the application before me, it is unclear on what basis that submission is put beyond the obvious fact that Urban Drilling is a “small business”, which I accept. Some references were made by Urban Drilling to its lack of sophistication in understanding and applying the industrial instruments that regulated the employment of their employees. That submission is however undermined by the history of agreement making between Urban Drilling and the CFMMEU which stretches back to at least 2002.

[46] Nor in my view is there any warrant for allowing Urban Drilling to apply a “relaxed” approach to its agreement and award obligations simply because it is a small business. I am not persuaded in the circumstances of this matter that consideration of Object 3(g) of the Act weighs in favour of a finding that termination of the 2011 Agreement would not be contrary to the public interest.

[47] It is palpably clear that Urban Drilling do not regard the 2011 Agreement as relevant to their business. This is due to their belief that it has limited application to the work they perform by reason of the scope clause which they contend limits the Agreement’s coverage to “construction” work which they submit they are rarely engaged in. The narrow construction advanced by Urban Drilling is strongly contested by the CFMMEU. Both parties advanced arguments as to the scope of application of the 2011 Agreement by reference to the 2000 Award coverage, the meaning of the term “construction”, the intentions of the parties at the time of the making of the agreement and various case law going to the meaning of the terms “in or in connection with”.

[48] I find it unnecessary for the purpose of the application before me to resolve the contest over the scope of application of the 2011 Agreement. This is because despite their view that the 2011 Agreement has limited application, Urban Drilling concedes in any event that the 2011 Agreement would apply to some work that it undertakes. Tellingly, Urban Drilling also advised employees in correspondence dated 10 December 2018 that the employees were “covered” by the 2011 Agreement. Notwithstanding its evidence that the 2011 Agreement would cover some of its work, Urban Drilling state that they have not applied the 2011 Agreement since it came into operation in 2012. This serves to reinforce the relevance that Urban Drilling attaches to the 2011 Agreement and its apparent disregard for its obligations under the 2011 Agreement in circumstances when it does apply.

[49] It is no answer for Urban Drilling to say that any underpayments for work performed that fell under the scope of the 2011 Agreement would be offset by the flat hourly rates paid throughout the rest of the year. This is so because no detailed analysis has been provided to the Commission by Urban Drilling of those jobs where they say the 2011 Agreement would apply, and how that would translate to earnings under the 2011 Agreement for such work. While a summary of the jobs undertaken by Urban Drilling over recent years was provided in evidence, 46 it is not possible from reviewing that list of jobs to identify which work may or may not fall under the contended construction of the scope clause advanced by Urban Drilling.

[50] Taken at its highest, Urban Drilling’s case is that the 2011 Agreement would apply to limited work that they perform. Nevertheless, Urban Drilling do not and have not applied the 2011 Agreement since it came into operation, even when on its own admission the agreement would cover work undertaken by it. While no evidence was adduced, the concession by Urban Drilling as to it not applying the terms of the 2011 Agreement, also raise questions regarding their compliance with prior agreements. It is however in the present application unnecessary to deal with the question of Urban Drilling’s compliance with prior agreements.

[51] In my view there is a compelling public interest consideration that parties once having entered into agreements are required to comply with the terms of such agreements. While I accept there may be a lack of certainty on the part of Urban Drilling as to when the 2011 Agreement applies, such uncertainty is not properly resolved by simply ignoring the agreement for reasons of apparent administrative expediency.

[52] Urban Drilling acknowledge that they have not applied the terms of the 2011 Agreement, to the extent it concedes that the agreement may apply. That conduct, the application they now make for termination of the 2011 Agreement and the result of the 2011 Agreement’s termination, if successful, cannot in my view be easily reconciled with the Objects of the Act. That is both as to the maintenance of proper industrial standards and the achievement of productivity and fairness through an emphasis on enterprise-level collective bargaining. Urban Drilling’s conduct weighs strongly against a finding that termination of the 2011 Agreement would not be contrary to the public interest.

[53] As regards the circumstances in which the 2011 Agreement was entered into by Urban Drilling, I do not intend to take those circumstances into account. My reasons for this are that the evidence adduced from Mr Hepworth as to Urban Drilling being pressured by the CFMMEU at the time the 2011 Agreement was made, was vague and incomplete. No relevant dates or names of CFMMEU officials involved was provided that would have allowed the CFMMEU to properly challenge Mr Hepworth’s evidence. Furthermore, Mr Hepworth for reasons that are unclear neglected to give evidence as to the history of prior agreements which would have provided some further relevant context, within which the Commission could consider the circumstances in which the 2011 Agreement was made.

[54] The contended confusion and uncertainty of employees as to the application of the 2011 Agreement appears to be confected by Urban Drilling in circumstances where the agreement has never been applied. It is difficult to understand how employees could be confused, in the absence of direct evidence, in circumstances where they have not been paid in accordance with the 2011 Agreement during its term of operation. Confusion is more likely to arise in circumstances where the employees’ terms and conditions of employment change according to the particular work being undertaken. That, on Urban Drilling’s own evidence, has not occurred since the 2011 Agreement commenced operation.

[55] Urban Drilling’s submission that the underpinning of the 2011 Agreement by the “obsolete” 2000 Award would inevitably lead to a situation where the 2011 Agreement is as a whole less beneficial than the Award does not bare proper scrutiny. The minimum rate of pay in the 2011 Agreement of $34.11 is approximately 60% higher than the relevant minimum rate of pay in the current Award, that of $20.98 (CW1 Level D). This leads me to conclude that it would be many years before minimum rate adjustments to the Award resulted in the relevant minimum Award rate overtaking the 2011 Agreement minimum rate of pay. Furthermore, no analysis was provided by Urban Drilling comparing the terms and conditions under the 2011 Agreement versus the Award.

[56] I turn now to consider the CFMMEU submission that the absence of any bargaining for a new agreement should lead to a conclusion that termination of the 2011 Agreement is also contrary to the public interest. In advancing this submission reliance was placed by the CFMMEU on the Wollongong Coal decision of SDP Hamberger, since quashed on appeal by a Full Bench in Wollongong Coal No. 2. In acknowledging the quashing of Wollongong Coal on appeal, the CFMMEU nonetheless pressed their submission and drew attention to paragraph [22] of the Full Bench’s decision in Wollongong Coal No. 2 which they contend supports their submission.

[57] I do not accept that the comments of the Full Bench at [22] of the decision in Wollongong Coal No. 2 support the CFMMEU submission that it would be contrary to the public interest to terminate the 2011 Agreement in the absence of negotiations for a replacement agreement. The Full Bench in Wollongong Coal No. 2 were expressing support for the sentiment that discussions between the CFMMEU and Wollongong Coal directed towards establishing an agreement to support the re-opening of the mine would be desirable. The Full Bench’s quashing of SDP Hamberger’s decision was for reasons of a denial of procedural fairness on the very issue the CFMMEU seek to rely on in the Wollongong Coal decision. The Full Bench did not express a view let alone a final view as to whether the absence of bargaining for a new agreement would be a decisive public interest consideration weighing against the termination of the particular agreement in that matter.

[58] The circumstances in the present matter are wholly different from that that exists in Wollongong Coal. Urban Drilling have ongoing operations and a number of casual employees. There is a level of acute indifference on the part of Urban drilling to the 2011 Agreement and also no apparent interest on the part of employees, or the CFMMEU, since the 2011 Agreement expired in 2015 to bargain for a replacement agreement. Noting the principles arising from Aurizon that I have sought to summarise at [40] above, I do not accept that the absence of bargaining for a replacement agreement should inevitably lead to a conclusion that termination of an agreement is contrary to the public interest. Such a conclusion would in my view favour a pre-disposition to realising the various Objects of the Act through enterprise bargaining rather than through other means, such pre-disposition being rejected by the Full Bench in Aurizon.

[59] In the circumstances of the application before me, that being of a business with a small number of casual employees and no evidence of interest on the part of any of the parties to the 2011 Agreement to negotiate a new agreement since it expired in 2015, I am not persuaded that the absence of bargaining for a new agreement weighs against the termination of the agreement on public interest grounds.

[60] Having considered the various matters raised by the parties in relation to consideration of the public interest pursuant to s 226(a) I am satisfied that the absence of any material economic impacts and the preservation of appropriate industrial standards through the Award and NES weigh in favour of a finding that termination of the 2011 Agreement would not be contrary to the public interest. There are certain matters that I regard as neutral considerations including the absence of bargaining since the 2011 Agreement reached its nominal expiry date in 2015. I have also rejected particular arguments advanced by Urban Drilling in support of its application including; the circumstances in which the agreement was entered into, the contended confusion of employees over the application of the 2011 Agreement and the claim that the 2011 Agreement will over time, on balance, fall below the Award by reason of its incorporation of the “obsolete” 2000 Award.

[61] Balanced against the factors weighing in favour of termination of the 2011 Agreement is that of the conduct of Urban Drilling. It would in my view be antithetical to the Objects of the Act and consequently contrary to the public interest to terminate the 2011 Agreement in circumstances where Urban Drilling has ignored its obligations under that agreement. This weighs strongly against a finding that termination of the agreement would not be contrary to the public interest.

[62] In the circumstances of this matter I am not persuaded that the factors weighing in favour of termination of the 2011 Agreement are sufficient to displace the findings I have made regarding Urban Drilling’s conduct of ignoring its obligations under the 2011 Agreement. I am consequently not satisfied that it is not contrary to the public interest to terminate the 2011 Agreement.

Section 226(b) – Is it appropriate to terminate the agreement?

[63] Given my conclusion above, it is not strictly necessary for me to consider whether it is appropriate to terminate the Agreement. Nevertheless, I do make the following observations.

[64] I am guided in my consideration by the approach adopted by the Full Bench in Aurizon where they relevantly stated as follows;

[167] All of the circumstances also need to be taken into account in considering whether termination of the agreements is appropriate. In particular the views of employers and employees covered by the agreement, their circumstances, and the impact of termination need to be taken into account. The requirement in s. 226(b) to take into account all of the circumstances including those set out in s. 226(b)(i) and (ii) is a requirement to take the matters into account and to give them due weight in assessing whether it is appropriate to terminate an enterprise agreement. In assessing appropriateness by taking into account all of the circumstances, we approached the task by reference to the construction of s. 226 and the contextual matters that bear upon that construction dealt with earlier as well as giving specific consideration to the matters identified in s . 226(b)(i) and (ii). 47 (Footnotes omitted)

[65] I turn first to consider the views of the employer, employees and employee organisation. Unsurprisingly, Urban Drilling strongly support the termination for the reasons detailed in paragraph [29] whereas the CFMMEU oppose the termination of the 2011 Agreement.

[66] Urban Drilling refer to a range of benefits that will accrue to their business from the termination of the 2011 Agreement including; simplification of employee relations processes, clarifying terms and conditions of employment obligations, providing longer term sustainable employment, increasing workforce utilisation and creating more workplace efficiency and economic flexibility. There was no evidence adduced by Urban Drilling beyond the broad statements I have referred to as to the impact termination of the agreement would have.

[67] Given my earlier findings regarding Urban Drilling’s admitted conduct of not observing the 2011 Agreement, it is difficult to see how termination of the 2011 Agreement would yield any particular benefits beyond removing any doubt or confusion as to the agreement’s application to particular work. Certainly there would appear to be no cost saving benefit given they do not currently and have not previously applied the terms of the current agreement. A compelling business case for the termination of the 2011 Agreement is not made out by Urban Drilling. This weighs against a finding that it is appropriate to terminate the agreement

[68] The CFMMEU call into question the weight if any that should be given to the views of employees given the misinformation they claim was provided to employees by Urban Drilling in its 10 December 2018 letter. They further contend that Urban Drilling has failed to meet its obligations under the 2011 Agreement. They also claim that the process of recovery of any wages underpayment, which the CFMMEU has raised on behalf of one of its members, will also be compromised by the termination of the 2011 Agreement.

[69] With respect to the submissions made by the CFMMEU on the views of employees I will shortly deal with that consideration. As regards the impact of termination of the 2011 Agreement I do not accept that it (termination) would hinder recovery of any wages underpayment. While termination may deny the CFMMEU a means of pressing a dispute before the Commission in respect of a term or terms of the agreement, the recovery of an underpayment is properly to be pursued in a court of competent jurisdiction. That right would be unaffected by the termination of the 2011 Agreement. I am not persuaded that the particular concern raised by the CFMMEU regarding the recovery of any wages underpayment weighs against a finding that termination of the agreement would be appropriate.

[70] I turn now to consider the views of employees. The Applicant did not lead evidence from any employees but sought to rely on the responses of several employees to the questionnaire that was attached to the 10 December 2018 letter. Those responses, which were in evidence, appeared to indicate that there was support for, or at least, no opposition to the application to terminate the 2011 Agreement. Those responses were likely informed, at least in part, by Urban Drilling’s representations regarding the 2011 Agreement. Those representations included that the 2011 Agreement provisions were no longer relevant and that the pay and entitlements in the agreement had been largely superseded. Mr Hepworth also concedes that employees would have been under the impression that the 2011 Agreement didn’t or rarely applied to their work, such impression being based on information provided to them by Mr Hepworth.

[71] The statement by Urban Drilling to its employees that the 2011 Agreement rates had been largely superseded is plainly wrong. The minimum rate in the 2011 Agreement (of $34.11) remains above the “flat” hourly rate of $30 currently being paid to employees engaged as labourers by Urban Drilling. Furthermore, the minimum agreement rate is, as I have previously observed, some 60% above the comparable Award classification rate of pay. There was no evidence adduced by the Applicant that any other terms or conditions of employment under the 2011 Agreement had been superseded, either by the Award or the actual terms and conditions being applied to employees. Nor was there any evidence that any such detail or explanation was provided to employees.

[72] I am not satisfied that the views of employees on which Urban Drilling seek to rely were informed by accurate or comprehensive information going to the incidence of application of the agreement or a proper analysis of the terms and conditions under the 2011 Agreement, versus those terms and conditions proposed to be applied by Urban Drilling post termination of that agreement. In these circumstances, and in the absence of direct evidence from employees, I am unwilling to rely on or attach weight to the views attributed to employees.

[73] As to the circumstances of the employees, the employer and employee organisation, including the likely effect that termination will have on each of them, Urban Drilling’s case was that various efficiency benefits would derive from termination of the 2011 Agreement. For the reason given above, I am not satisfied that Urban Drilling has made out a case that the 2011 Agreement operates as an impediment to its productivity and efficiency. This weighs against a finding that termination of the 2011 Agreement would be appropriate.

[74] As to the likely effect on employees it is simply not possible to discern from the material presented what impact the termination would have, beyond glibly stating that termination would have no effect given the 2011 Agreement’s terms and conditions have been ignored by Urban Drilling, even in circumstances where they concede the 2011 Agreement apply. Urban Drilling have not sought to provide any detailed analysis of when the 2011 Agreement would have applied and how that would have translated to earnings due under the agreement.

[75] While it is unnecessary in the circumstances for me to do so, if I were required to determine s 226(b) on the evidence before me I would not be satisfied that it was appropriate to terminate the 2011 Agreement.

Conclusion

[76] For the reasons outlined above the application to terminate the 2011 Agreements is dismissed. An order giving effect to this decision is separately issued in PR707310.

DEPUTY PRESIDENT

Appearances:

M Reid counsel for Urban Drilling

D Vroland for the CFMMEU

Hearing details:

2019
Melbourne
March 14

Printed by authority of the Commonwealth Government Printer

<AE894366  PR707309 >

 1   AE894366

 2   ExhibitA1, Witness Statement of Mr Bradley Hepworth, paragraph [4]

 3   Ibid at paragraph [9]

 4   Ibid at paragraphs [13] – [14]

 5   Exhibit A1, Attachment 1

 6   Ibid at paragraph [18]

 7   Exhibit A1 at paragraph [35]

 8   Ibid, Attachment 4

 9   Ibid

 10   Exhibit A2, Questionnaire Responses

 11   Exhibit A1 at paragraph [35]

 12   Transcript at PN184-PN186

 13   Ibid at paragraph [22]

 14   Exhibit A1at paragraph 36, Attachment 5

 15   Transcript at PN103-PN106

 16   Ibid at PN107

17 MA000020

 18   Ibid at PN109-PN115

 19   Exhibit A1 at paragraph [25]–[26]

 20   Transcript at PN116-PN120

 21   Exhibit A1 at paragraph [23]

 22   Transcript at PN158-PN161

 23   Ibid at paragraphs [30]-[32]

 24   Ibid at paragraph [34]

 25   Ibid at paragraph [29]

 26   Transcript at PN86

 27   Ibid at PN176-PN179

 28 Willcox J in Our Town FM Pty Ltd and Australian Broadcasting Tribunal (1987) 77 ALR 577, Macfarlan J in Re Nanaimo Community Hotel Ltd [1944] DLR 638, R v Moore; ex parte Australian Workers Union 91976) ALR 449

 29 139 IR 34

 30   [2015] FWCFB 540

 31 Wilson J in R v Isaaac; Ex parte Transport Workers Union, (1985) 62 ALR 323 at [346]

 32   [2016] FWCFB 4620 at [41]-[42]

 33   [2019] FWCA 216

 34   Ibid at [63]-[64]

 35   [2019] FWCFB 3306

 36   Ibid at [22]

 37   [2015] FWCFB 540 at [120] - [121]

 38   Ibid at [129]-[130]

 39   Ibid at [[139]

 40   Ibid at [141]

 41   Ibid at [141]

 42   Ibid at [143]

 43   Ibid at [151]

 44   Ibid at [176]

 45   Ibid at [126]

 46   Exhibit A1, Attachment 1

 47   [2015] FWCFB 540 at [167]