Wollongong Coal Limited T/A Wollongong Coal
[2021] FWCFB 2161
•1 JUNE 2021
| [2021] FWCFB 2161 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.225 —Enterprise agreement
Wollongong Coal Limited T/A Wollongong Coal
(AG2018/2488)
NRE NO 1 COLLIERY WORKPLACE AGREEMENT 2011
Coal industry | |
DEPUTY PRESIDENT ASBURY | BRISBANE, 1 JUNE 2021 |
s. 225 Application for termination of the NRE No 1 Colliery Workplace Agreement 2011 – No employees employed under Agreement – Termination not contrary to public interest – Termination appropriate in all the circumstances – Application granted.
Background
[1] This Decision concerns an application by Wollongong Coal Limited (the Applicant) under s. 225 of the Fair Work Act 2009 (the FW Act) for the termination of the NRE No 1 Colliery Workplace Agreement 2011 (the 2011 Agreement). The 2011 Agreement commenced operation on 17 November 2011 and has a nominal expiry date of 30 September 2015. The Agreement applies to Wollongong Coal Limited (Company) and its employees at the Russell Vale Colliery who are members or eligible to be members of the Construction, Forestry, Mining and Energy Union, as the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) was formerly known. No employees have been engaged under the 2011 Agreement since 17 September 2015, as mining at Russell Vale ceased in August 2015 and the Mine was placed under care and maintenance.
[2] The application has some history which for present purposes can be briefly stated. The application was made on 7 June 2018. In a decision issued in 2019 Senior Deputy President Hamburger dismissed the application (the first decision) 1 and on appeal, that decision was overturned by a Full Bench of the Commission (the first appeal)2 and the matter was remitted to Commissioner Riordan with a direction that he conduct conferences of the parties and if the matter was not resolved, hear and determine it. When the matter was not resolved the Commissioner conducted a hearing and decided to dismiss the application (the second decision).3 The Company successfully appealed the second decision and this Full Bench quashed the second decision (the second appeal)4 and decided to rehear the Company’s application to terminate the 2011 Agreement, having regard to the material that is already before the Commission and any additional evidence and submissions the parties wished to make in relation to developments that have occurred since the matter was heard (the rehearing).
[3] In the rehearing, the Company continued to be represented, with permission, by Mr G Hatcher SC and Mr K Brotherson of Counsel and the Respondent by Mr A Walkaden, its National Legal Officer. Permission was granted on the basis that representation would allow the matter to be dealt with more efficiently having regard to its complexity and to the fact that the same representatives have been involved in the matter from the outset.
[4] The parties relied in the rehearing on statements and oral evidence in earlier proceedings before Senior Deputy President Hamberger and Commissioner Riordan which were contained in the Appeal Book for the second appeal. The material in the Appeal Book was referred to in the rehearing and we have considered it. Both parties filed consolidated submissions and statements from witnesses updating their evidence in earlier proceedings were also tendered. Evidence for the Company was given by Mr Sanjay Sharma, 5 Company Secretary and Mr Wayne Sly,6 Chief Operating Officer, who were cross examined. Evidence for the CFMMEU was given by Mr Robert Timbs,7 District Vice President of the Union’s South Western District Branch. Mr Timbs was not required for cross-examination and his statement in the rehearing was tendered without objection.
[5] This decision should be read in conjunction with the second appeal decision.
The approach to considering an application to terminate an agreement
[6] As previously noted, the application is made under s. 225 of the FW Act, which provides that an employer covered by an enterprise agreement which has passed its nominal expiry date may apply to the Commission for termination of the agreement. In respect of an application made under s.225, s. 226 provides:
“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.”
[7] Section 226 must be considered in the context of the Objects of the FW Act and the Part in which that section is found. The Object of the FW Act in s.3 may potentially be achieved by various means including enterprise level collective bargaining with an existing agreement in place, and by other means, such as the termination of an expired agreement and the continuation of collective bargaining that has commenced in good faith, for an enterprise agreement that delivers productivity benefits. While enterprise agreements are an important mechanism in the regulation of terms and conditions of employment under the FW Act, it does not follow that the existence of a previously negotiated agreement should be regarded as providing particular encouragement to collective bargaining. 8
[8] There is no presumption under the FW Act that an enterprise agreement will continue unaltered in perpetuity after it has passed its nominal expiry date. The legislation guarantees the continuation of the relevant modern award and NES safety net, not the terms and conditions of employment contained in a nominally expired agreement. 9 There is also no legislative presumption that the termination of an enterprise agreement upon reaching its nominal expiry date is appropriate.10
[9] Section 226 of the FW Act involves a narrow discretion in the sense that if the Commission is satisfied in relation to the specified matters it must terminate the agreement. However, the evaluative assessments required by s. 226(a) and (b) allow a degree of latitude on the part of the Commission as to the conclusions to be reached. 11 The evaluative process involves the Commission treating the considerations as a matter of significance in the decision-making process.12
[10] In relation to the public interest consideration in s. 226(a) the Commission is not required to be satisfied that termination of an agreement is in the public interest but rather, that it is not contrary to the public interest – a lower threshold. There is no predisposition that the termination of an enterprise agreement that has passed its nominal expiry date is contrary to the public interest. Public interest is distinct from the interests of the parties, notwithstanding that the public interest and the interests of the parties may be simultaneously affected. 13 Where the termination of an enterprise agreement will have no effect on anyone other than the parties, it is likely not to be considered contrary to the public interest.14
[11] Section 226(b) requires the Commission to consider whether termination of an enterprise agreement is appropriate, having regard to all the circumstances including the views of the employees, each employer and each employee organisation (if any) covered by the agreement and their circumstances, including the likely effect that termination will have on each of them. A statutory requirement that a matter be taken into account means that the matter is a “relevant consideration” the Commission is bound to take into account. 15 This is an evaluative assessment and each of the matters must be treated as a matter of significance in the decision-making process and given due weight.16 A matter is not taken into account by being noted and erroneously discarded as irrelevant.17
[12] In considering the views of the employer, the Commission may place weight on the impact of restrictive provisions in the enterprise agreement sought to be terminated, 18 that termination of the agreement may result in improvements in productivity and efficiency19 and/or the financial or trading position of the employer.20 Further, the impact of termination upon employees by way of diminished terms and conditions of employment is an important matter and any proper undertakings about those matters by an employer would be relevant to that assessment and the exercise of the discretion more generally.21 In addition, the impact of any termination upon the bargaining dynamic, including the impact upon the bargaining positions and options then available to the parties, is a relevant consideration.22
[13] Taking into account the views of the parties, involves more than the expression of those views and should involve the reasons for and the validity of their concerns. 23 Relevant considerations relating to the appropriateness of the termination of an enterprise agreement may include:
• The length of time since the nominal expiry date of the enterprise agreement;
• The number of employees affected by the proposed termination;
• The reduction or absence of reduction in terms and conditions of employment; and
• The presence or absence of proper industrial standards for employees.
[14] We have applied these principles in the present case.
Evidence and submissions
Company
Evidence
[15] In his statement for these proceedings, Mr Sharma said that his earlier evidence contained in witness statements tendered in proceedings before Senior Deputy President Hamberger and Commissioner Riordan and oral evidence, remains true and correct. 24 Mr Sharma’s evidence can be summarised as follows. The Company owns two collieries in the Illawarra region – Russell Vale and the Wongawilli Colliery. Jindal Steel and Power (Mauritius) Limited (JSPL) has been the major shareholder in the Company since February 2015. JSPL is a wholly owned subsidiary of Jindal Steel and Power Limited (Jindal). The Company is reliant on JPSL/Jindal for ongoing financial support.
[16] An off-market bid was lodged by JSPML on 21 December 2020, to acquire the remaining ordinary shares of the Company at a cash price of $0.0001 per share. At that time JSPML owned approximately 60.4% of the shares in the Company. The Off Market Bid opened on 21 December 2020. The Company’s independent directors have recommended that shareholders accept the Off Market Bid. The Company’s remaining directors have not expressed a view as they are nominees of JSPML and directors of Jindal Steel and Power (Australia) Pty Ltd (JSPAL)which is a related entity to JSPL. The Off Market Bid closed on 29 January 2021.
[17] From the time of the Company’s application to terminate the 2011 EA on 7 June 2018, the Company has not produced any coal from the Russell Vale Colliery with the Mine having been placed into care and maintenance in September 2015. No employees have been covered by the Agreement from 17 September 2015. The Wongawilli Colliery, was put into care and maintenance in February 2014 and while operations recommenced at various stages in 2016 and 2017 the Wongawilli Colliery was again placed under care and maintenance in April 2019.
[18] The Company submitted an Underground Expansion Plan (UEP) to the New South Wales Department of Planning and Environment for approval in July 2019. In December 2020 the Independent Planning Commission found that the UEP should be approved subject to 118 conditions. In November 2020, the Company also lodged an application with the NSW Department of Planning and Environment to develop the Wongawilli Colliery. The Company anticipates that the next approval process to recommence mining at the Wongawilli Colliery will take approximately two to three years. This assumes that the Company is otherwise in a position to recommence mining at Russell Vale in a viable manner in the interim.
[19] In relation to evidence in earlier proceedings about the Company’s conduct, Mr Sharma conceded that the Company had previous issues in relation to its financial obligations and payment of certain employee entitlements but said that the Company has entered into a repayment plan with the Australian Taxation Office (ATO) and has given an Enforceable Undertaking to the NSW Resources Regulator. By June 2020 the Company had paid the ATO in full and remains up to date with ATO and other government dues and continues to comply with the requirements of the Enforceable Undertaking.
[20] Mr Sharma updated his previous evidence about the further steps that would be required to recommence mining at Russell Vale if the Minister approves the UEP. Mr Sharma revised his initial estimate of $15 million of capital investment required to recommence mining at Russell Vale and now estimates the amount of start-up and ramp-up costs required to recommence mining to be $30 million. This is to source and refurbish equipment, conduct repairs to infrastructure, meet environmental obligations, carry out construction and development works and to meet the 118 conditions required by the ICP.
[21] The Company will rely on JSPL to fund the $30 million needed to recommence mining. JSPL has supported the Company since acquiring the majority shareholding through JSPML in 2013. JSPL has invested in excess of $940 million by way of equity and interest free unsecured loans in the business since 2013. Following approvals having been granted by the IPC, the Company’s management team is in near daily discussions with JSPL management in India relating to the investment required to meet the start-up and ramp-up costs for the recommencement of mining at Russell Vale. Mr Sharma participates in many of those discussions. To date, the Company has not received any commitment from JSPL for further funding and has been asked to demonstrate the viability and profitability of recommencing mining at the current market price by focusing on taking all prudent steps available to reducing the cost per tonne at which the Company is able to operate.
[22] Mr Sharma said that JSPL’s continued willingness and capacity to support the Company depends upon the Company being in a position to demonstrate to JSPL that, should mining recommence, it is in a position to do so viably and commercially. Mr Sharma’s observation is that JSPL is cautious about any further investment in the Company. This has put a focus on the Company’s ability to demonstrate to JSPL that it can operate at the lowest possible cost per tonne ratio in the event mining was to recommence. It is and remains Mr Sharma’s view, which he has shared with JSPL, that mining cannot recommence viably and commercially if employees are engaged under the terms of the 2011 Agreement.
[23] Mr Sharma states that the emphasis by JSPL on cost per tonne is also important where the terms of the UEP are only to extract 3.7 million tonnes of run of mine coal over the five year term of the approval. The focus on lowering cost per tonne as a prerequisite for further funding and support from JSPL also reflects that the coal market is volatile. The only factors that the Company can effectively control are its costs of production. According to Mr Sharma, JSPL, being an established and astute steel and power producer, will not continue supporting the Company unless the Company can reduce and control its costs of production. In fact, JSPL is already sourcing coal from the global market and is not reliant on the Company. It is Mr Sharma’s view that if the Company cannot demonstrate its viability and competitiveness, JSPL will not provide further funding. Mr Sharma also detailed steps to the Company has taken to lower its costs to be in a position to demonstrate to JSPL that it can lower the cost per tonne at which it can produce coal. These include:
• Delisting from the Australian Securities Exchange;
• Restructuring loan facilities;
• Sale of redundant assets;
• Cessation and deferral of long term projects;
• Voluntary decreases in staff remuneration to be repaid upon Russell Vale producing certain tonnages;
• Nominees of JSPML on the board of the Company not being remunerated by the Company; and
• The Company not making any remuneration increases since 2014.
[24] Mr Sharma gave the following evidence in relation to the impacts on the costs and other operational restrictions in the 2011 Agreement. The 2011 Agreement has an ordinary hour wage rate of $37.98 per hour for the “Level 4 - Experienced Mineworker” classification (as a result of applying the further wage rate increases provided in clause 11.2 to the wage rates in clause 11.1 of the Agreement). The current ordinary hour rate for the Mineworker classification in the Black Coal Mining Industry Award 2010 (Award) is $26.61. The Agreement ordinary rate is 42.7% above the equivalent rate in the Award, and that does not include other costs such as the fixed bonus in Appendix 1 of the 2011 Agreement (which resulted in an additional $478 a week paid to employees when it was last paid in 2015).
[25] Mr Sharma also said that other employees in the region have been engaged under terms of enterprise agreements approved by the Fair Work Commission at lower rates than in the 2011 Agreement and despite the age of the 2011 Agreement. For example, the equivalent classification to the Level 4 classification in the 2011 Agreement is currently paid $28.37 as an ordinary hourly rate under the terms of the WorkPac Coal Mining Agreement 2019 (WorkPac Agreement). This is a 6.6% increase on the equivalent rate in the Award. Mr Sharma observed that WorkPac is a contract mining company as opposed to an owner operator and the engagement of WorkPac in the Illawarra region has been subject of public comment by the CFMMEU.
[26] Further, Mr Sharma provided a comparison of amounts paid to employees under the Award, the 2011 EA and the WorkPac Agreement for a notional 35 ordinary hour week using the rates for the equivalent of a level 4 mineworker under the 2011 Agreement as follows:
• $1,329.30 under the 2011 Agreement ($37.98 x 35);
• $992.95 under the WorkPac Agreement ($28.37 x 35); or
• $931.35 under the minimum rates in the Award ($26.61 x 35).
[27] Using a notional 35 ordinary hour week there would be an additional annual cost of approximately $17,490 for engaging an employee at that level under the 2011 Agreement in comparison to the WorkPac Agreement. This assumes 52 weeks are worked in a year, no overtime is worked (including rostered overtime) and that the wage rates in the WorkPac Agreement do not increase in this period. The analysis excludes payment of bonus under the 2011 Agreement (which, using 2015 rates, would be an additional $478 per week). While this analysis is simplified, it demonstrates that there are employees being employed in coal production in the Illawarra region at lower wage rates than are currently in the 2011 Agreement.
[28] Mr Sharma also referred to clause 24 of the 2011 Agreement (the contractors clause), which provides that:
“Contractors employed at NRE No 1 Colliery will be paid as per the conditions of the NRE No 1 Colliery Workplace Agreement unless they are employed under the terms and conditions of an agreement recognised by the CFMEU South/Western District.”
[29] Mr Sharma said that if this clause operates in the manner described by Mr Timbs in his evidence in proceedings before Senior Deputy President Hamberger – that non-recognition of a contractor by the South Western District would result in the contractor being required to pay the 2011 Agreement rates – it would prevent the Company from accessing labour at rates used by WorkPac. This is even appreciating there may be a margin charged on top of these rates by WorkPac. Clause 24 would impose these additional costs on the Company when it needs to be in a position to demonstrate to JSPL that it can operate at the lowest fixed costs structure possible to remain viable and deliver a return on the investment made to date.
[30] Mr Sharma said that the Company’s application to terminate the 2011 EA is now pressing. The remaining regulatory steps before operations are permitted to recommence are expected to be completed by mid-April 2021. The Company’s ability to recommence mining will then only be subject to its ability to access financial support for the investment and further ramp up period of operations that would follow. In order to obtain financial support from JSPL, the Company will need to demonstrate to JSPL that it is able to lower its costs of production. Mr Sharma also said that JSPL is aware of these proceedings to terminate the 2011 Agreement and he is required to provide regular updates about the matter to JSPL. Mr Sharma’s understanding, based on various discussions regularly occurring with JSPL senior management team members located in India, is that JSPL is not going to continue funding the Company unless the 2011 Agreement is terminated to reduce costs per tonne and assist the Company to operate viably and commercially.
[31] Mr Sharma endorsed the statements made by the Company’s former Chief Executive Officer Mr Mitch Jakeman, at hearings before Commissioner Riordan on 13 November 2019 and 28 January 2020, to the effect that he would not recommend to the Board that mining should recommence if the 2011 Agreement is not terminated by the Commission. Mr Sharma’s view, consistent with that of Mr Jakeman, is that the viability of the Company requires the termination of the 2011 Agreement. Mr Sharma is not aware of any circumstances that would change the views Mr Jakeman has earlier expressed on behalf of the Company and does not believe JSPL will advance the further considerable investment needed if the 2011 Agreement continues to affect the way in which the Company is able to engage labour at Russell Vale.
[32] Mr Sharma stated that despite significant losses year after year, JSPL continued supporting the Company because its guarantee provided for the secured debt of around US $430 million (in October 2013) that would have become due and payable immediately and secured lenders invoking JSPL guarantee. Now that the secured debts have been successfully restructured and significantly reduced to US $219.2 million (in November 2020), Mr Sharma strongly feels that this major barrier keeping JSPL supportive is no longer there.
[33] Mr Sharma also stated that the Company is in a unique commercial position and cannot be compared to the other coal mine operators in the Illawarra region. In the event mining recommences, the Company will have approval to mine 3.7 million tonnes of run of mine coal for a period of five years using a bord and pillar mining method. By contrast other coal mine operators in the region use a longwall mining method, and also have their own washeries. Mr Sharma set out information from his review of publicly available documents published by South 32 for its assets in the Illawarra region which show in FY2020 South 32 has produced in the Illawarra in excess of twice the amount of coal the Company expects to be in a position to produce at Russell Vale over the entire 5 year period in which it has sought approval under the UEP. This was also in FY2020 when coal prices have been historically low and where production difficulties have arisen resulting from COVID-19.
[34] The Company’s commercial position (which depends on the ongoing support of JSPL, including for a period of further investment to re-commence mining at Russell Vale) means it will essentially be operating as a new entrant to the market if mining recommences. It is not in a comparable position to established operators in the region and the scale and proposed change in mining method means it will never be truly comparable.
[35] Mr Sharma also gave evidence in response to that of Mr Timbs about comments attributed to a person referred to as Mr Wright said to be the Company’s Chief Executive Officer, to the effect that if mining recommenced former employees would be re-employed. Mr Sharma said that in the time he has been employed by the Respondent, no one by the name of Mr Wright has held the role of Chief Executive Officer or any managerial role in the Company. Mr Sharma also referred to the undertaking in relation to terms and conditions of employees given by Mr Jakeman in the event that the 2011 Agreement was terminated, set out in his statement of 11 October 2019 (the 2019 undertaking).
[36] Mr Sharma said that the Company remains prepared to give an undertaking that would supplement the terms of the Award and the National Employment Standards that would otherwise apply to employees at the Russell Vale Colliery if an order was now made terminating the 2011 EA. The Company has reviewed the terms of the undertaking it is in a position to give in light of changing circumstances since October 2019 and provides a revised undertaking (the 2021 Undertaking), the effect of which is to apply a higher minimum rate than is set out in clause A of Schedule A of the Award for a basic weekly 35 hour rate.
[37] Mr Sharma said that the 2021 Undertaking reflects the equivalent ordinary hour rates of pay in the WorkPac Agreement which the Company is prepared to adopt for employees who would be covered by the classifications in Schedule A of the Award. This reflects the Company’s understanding of the wage rates that are available to entities such as WorkPac in the industry. The further penalties, loadings and other rates in the Award would be applied to the ordinary hour rates provided by the undertaking. The minimum rate in the 2021 Undertaking is lower than the wage rate Mr Jakeman had earlier been prepared to provide in the Company’s previous undertaking. Mr Sharma said that the minimum rate the Company is now prepared to undertake to pay reflects adverse changes in market conditions and the Company’s commercial position since the hearing before Commissioner Riordan being:
• Significant reductions in the coal price which is currently trading at approximately US$102 per tonne which is a reduction from the approximate US$150 per tonne price at the time of the January 2020 proceedings before Commissioner Riordan;
• Future anticipated volatility in the coal price resulting from trade tensions with China;
• The increased cost of capital investment required for mining to recommence; and
• The 118 conditions recommended by the IPC through the approval process.
[38] As with the terms of the undertaking proposed on behalf of the Company by Mr Jakeman, and the comments made by the Full Bench in the first Appeal 25 the Company would be prepared to implement the 2021 Undertaking through contracts of employment underpinned by the Award, recommended to contractors engaged by the Company as a suitable minimum rate or as a starting position for minimum wage rates in any future negotiations the Company may have with employees directly employed at Russell Vale. Mr Sharma confirmed that Company consents to the terms of the 2021 Undertaking being published to accompany any order terminating the 2011 Agreement.
[39] Under cross-examination, Mr Sharma said that he is not aware of any coal company in Australian that pays mine workers at the Award rate of $26.91 per hour 26 although Mr Sharma is not aware of the specific amounts being paid by other companies. Mr Sharma also said that he is aware that mining companies in the Illawarra region are all paying above the Award rate and that he is not aware of any Company in the region paying the rate offered by the Company in its undertaking to the Commission in the event the 2011 Agreement is terminated.27 In relation to the comparison between the rates in the 2011 Agreement and those in the WorkPac Agreement, Mr Sharma agreed that he was not aware at the time he undertook the comparison, that WorkPac is paying employees at a rate above that in its Agreement, but now accepted that this is the case.28 Mr Sharma accepted that when the amount paid by WorkPac in excess of the WorkPac Agreement is included in calculations, the difference between the actual rates paid to an experienced miner under the WorkPac Agreement and the rate in the 2011 Agreement is approximately 10% or $139.30 per employee per week.29 Mr Sharma also agreed that labour hire companies charge a margin above the rates that are paid to employees and said that this margin is around 15%.
[40] Mr Sharma was also cross-examined in relation to oral evidence he gave in proceedings before Senior Deputy President Hamberger in relation to the first decision. In that evidence, (while under cross-examination) Mr Sharma accepted that in the period of time before the 2011 Agreement commenced, the Company did not make a profit, notwithstanding that the coal price at that time was “sky high”. Mr Sharma also agreed that the financial results achieved by the Company since the commencement of the 2011 Agreement cannot be attributed to the Agreement. 30 Further, in that evidence, Mr Sharma stated that the Company had not quantified what cost savings would be made if the Agreement was terminated and confirmed that he could not say that the termination of the Agreement would make a material difference to the performance of the Company.31
[41] In relation to his evidence in the rehearing, Mr Sharma said that he has not had a discussion with the Company’s head office to quantify cost savings that it was hoped to realise as a result of terminating the 2011 Agreement and nor had he informed head office that it is his view that terminating the 2011 Agreement would not make a material difference to the performance of the Company. 32
[42] In his statement for the rehearing, Mr Sly also referred to his evidence in earlier proceedings 33 and said that it remained true and correct. In relation to bord and pillar mining, Mr Sly said that this method is not used by any other black coal mining operator in the Illawarra region as the primary means of coal production. Other black coal mines in the Illawarra region, such as Dendrobium, Metropolitan, Appin and Tahmoor, use longwall mining. Bord and pillar mining is only used at these mines as first workings to facilitate longwall mining operations. In his first statement made on 11 October 2019, Mr Sly said that a bord and pillar mining method is regarded as a more environmentally responsible mining method compared to longwall mining and that the Company expected to obtain UEP approval on this basis.34
[43] Mr Sly also said in his first statement that that longwall mining was previously used at Russell Vale from 2011 until its closure. Mr Sly explained that bord and pillar mining fundamentally differs from longwall mining. The process involves a continuous miner unit cutting coal according to a grid based mine plan. The areas of the grid that are cut out and mined are the “bord” and the remaining areas that are not mined are the “pillars” that support the roof. A continuous miner unit used in bord and pillar mining has a 3.3 metre cutting face. At least two cuts are required to form the 5.5 metre wide bord between the pillars. This limits the amount of coal that can be cut at any one time.
[44] According to Mr Sly, bord and pillar mining is systematic and labour intensive. Subject to underground conditions, a continuous miner will advance approximately six to eight metres over a period of two hours. The continuous miner will then relocate to another area to cut out the next section of bord and advance a further six to eight metres resulting in a gradual grid pattern. A shuttle car is used to transport coal from the continuous miner unit to an underground conveyor belt while this occurs.
[45] A roof bolting unit is sequenced to follow the mining undertaken by the continuous miner unit. Once the continuous miner relocates, the roof bolting unit enters the area and secures the roof. This process gradually repeats. It is labour intensive as crews operate the continuous miner unit, the roof bolt unit and shuttle cars as part of a closely sequenced operation. These crews are further supported by personnel performing ventilation work, secondary support, maintenance, inspections and general panel organisation works.
[46] A longwall mining method is fundamentally different. A longwall mining unit likely has a 350 metre cutting face. A shearer runs up and down this cutting face as mining gradually advances. The crew operating the longwall mining unit are located under shields attached to the unit that supports the roof as mining progresses. The latest longwall mining processes are assisted by automated technology which means approximately only half the number of personnel is required when compared with bord and pillar mining. Longwall mining results in higher rates of production that will not be available to the Company under the bord and pillar mining method that is the subject of the UEP.
[47] The levels of investment required before mining at Russell Vale could re-commence has increased from the time of Mr Sly making his first statement and is now anticipated to be in the vicinity of $35 million. The anticipated increase in capital investment needed to re-commence operations is in part due to the 118 approval conditions set by the IPC. These conditions require further mitigation works (addressing noise and air quality), the implementation of additional monitoring systems and other matters. The increased level of capital investment further requires the Company to demonstrate to its majority shareholder (who will ultimately fund the further investment) that it is able recommence mining as a viable and sustainable operation.
[48] Mr Sly maintained that the terms of the 2011 EA that restrict or inhibit the Company from reopening the Mine include clause 8.1 which requires the ordinary working hours of any shift to be worked between those hours agreed between the Company and the employee’s representatives and said that this clause gives an employee’s representative (which may be a third party) the capacity to refuse any variation of an employee’s span of hours. The ability to pursue an operational change that may be required by the Company is then through the grievance and disputes procedure in clause 20 of the 2011 EA which may ultimately require the Commission to arbitrate the dispute. Mr Sly said that the Company will require the flexibility to vary the span of hours worked by employees as operations recommence. Changing mining conditions and operational circumstances may mean that the span of hours initially worked by employees needs to be changed. Clause 8.1 also does not allow rotating shifts to be introduced without agreement. Mr Sly said that rotating shifts are common in the industry and are a roster pattern the Company may look to introduce.
[49] Mr Sly also referred to clause 8.2 which requires shift lengths to be worked up to a maximum of 10 hours, unless otherwise agreed. Mr Sly said that shifts lengths of more than 10 hours are common in the industry with shifts lengths of 12 or 12.5 hours a common feature at other operations. The proposed bord and pillar mining method would preferably be implemented with a changeover occurring underground between crews to ensure continuity in mining operations. The travel time underground and time required for a changeover ultimately reduces the productive mining time in a shift.
[50] Mr Sly gave evidence about the difference between the rates in the 2011 Agreement and the WorkPac Agreement and restrictions in the 2011 Agreement on the use of contractors, in similar terms to the evidence of Mr Sharma on this point. Mr Sly also said that the WorkPac EA does not contain the operational restrictions on the working of hours and rostering that are contained in the 2011 Agreement. While Mr Sly appreciates there would be a margin charged by Workpac on top of the rates paid under the Workpac Agreement, this is an example of a contractor that would be available to be used by the Company in the region.
[51] Having reviewed the oral evidence of Mr Timbs on 10 October 2018, Mr Sly said that the view that Mr Timbs appears to have taken is that the Company would need to nonetheless apply the terms of the 2011 Agreement when engaging workers employed by WorkPac Pty Ltd, unless the WorkPac Agreement was recognised by the officials of the South Western District of the CFMMEU. Based on Mr Sly’s understanding of Mr Timbs’ evidence, this would require some kind of further approval by the CFMMEU. If Mr Timbs’ view is correct, the views of the officials of the CFMMEU have the capacity to determine the commercial basis upon which the Company is able to engage contractors. This would mean that otherwise viable contractors, including WorkPac, are not available to the Company if the officials of the South Western District of the CFMMEU so determine.
[52] Mr Sly said that the operational restrictions and costs in the 2011 Agreement do not support direct employment given the inflexibilities and costs imposed by the 2011 Agreement. The Company is investigating the available options in the market under which contractors could be engaged on a commercially viable basis. It has been the Company’s preference to directly employ a workforce under a varied labour model supplemented by contractors. It is Mr Sly’s view that the engagement of contractors seems likely to lead to disputes with the CFMMEU as to the application of clause 24 of the 2011 Agreement given the views expressed by Mr Timbs.
[53] Mr Sly said that the Company anticipates shortly recommencing mining, subject to support from its shareholder or independent investors. The ongoing application of the 2011 Agreement has resulted in the Company being required to explore more contractor intensive labour mode. The terms of the 2011 Agreement simply do not have the flexibilities that are required, for example in relation to rostering, that allow the Company to accommodate start-up operations and a further ramp up period to full production. The Company is concerned about the potential for disputes with the CFMMEU over contractors which it needs to avoid, for mining to get up and running and for the Company to start paying its way.
[54] In cross-examination, Mr Sly was taken to the statement he made on 11 October 2019 in proceedings in relation to the first decision in which he described a process by which labour might be gradually ramped up when the Mine recommenced operations. Mr Sly agreed that his evidence at that time was that the Company would start with one group of employees working an 8 hour shift Monday to Friday and would then bring on more crews to work a five day operation. The next stage would involve working weekends with some crews working 9 hour shifts Monday to Thursday and other crews working 12 hour shifts on weekends. Mr Sly agreed that this roster could be implemented under the 2011 Agreement but maintained that negotiation would be required in relation to changes to rosters, shift lengths and related matters. 35
[55] Mr Sly was also asked about clause 18 of the 2011 Agreement which provides that when the Company decides to recruit employees, then ex-employees of NRE No 1 Colliery who were made redundant voluntarily will be re-employed subject to a number of criteria. In terms of labour requirements going forward, Mr Sly said that the Company planned to employ some workers directly and there would also be a role for specialised and contract labour. Mr Sly accepted the proposition that if the workforce was totally outsourced, the clause dealing with re-employment of retrenched employees would not apply. 36 Mr Sly agreed that he did not know that WorkPac was paying in excess of its Agreement when he prepared his statement. Mr Sly was also asked to assume that the reference in clause 24 of the 2011 Agreement to contractors having an agreement “recognised by the CFMEU South/Western District” meant an agreement which covered the CFMMEU. Mr Sly agreed based on that assumption, that the WorkPac Agreement covers the CFMMEU and there would be nothing preventing WorkPac from performing work at Russell Vale and that WorkPac would pay its employees in accordance with the WorkPac Agreement for undertaking such work.37
Submissions
[56] In submissions the Company contended that having regard to the requirements of s. 226 of the FW Act, the Company’s position is that there is now, and has always been, a compelling case that the Commission should be satisfied that termination of the 2011 Agreement is not contrary to the public interest and taking into account all the circumstances of the matter it should consider it appropriate to terminate the 2011 Agreement. The reasons for the Company’s position include that:
a. Mining of coking coal at the Company’s Russell Vale Colliery (Russell Vale) to which the 2011 Agreement relates ceased in August 2015, and the mine has been in care and maintenance mode since that time;
b. There have been no employees covered by the 2011 Agreement since September 2015;
c. The nominal expiry date of the 2011 Agreement was 30 September 2015;
d. Any resumption of mining at Russell Vale:
● is dependent on the Company satisfying the conditions required by the Independent Planning Commission (IPC) for its Underground Expansion Plan (UEP), receiving final regulatory approvals for its mine plan and the Company being able to obtain the necessary funding to undertake the required capital investment and development works in order for production to re-commence; and
● will be on a small scale compared to other operating Illawarra mines, utilising a more labour intensive bord and pillar mining method as opposed to longwall mining.
e. The financial situation of the Company is challenging, with no assets currently producing revenue, and at this point the Company is dependent on funding for its ongoing viability from its major shareholder;
f. The coking coal market is significantly less favourable than when the 2011 Agreement was made;
g. The cost, operational restrictions and other inflexibilities imposed by the 2011 Agreement are an impediment to the Company recommencing operations at Russell Vale in a cost-efficient and flexible manner;
h. The FW Act does not provide a means by which the Company can seek to re- negotiate the 2011 Agreement, either to vary it or make a new agreement absent employees; and
i. If mining is able to re-commence at Russell Vale it will create direct employment at the mine for approximately 200 people, as well as;
● royalties for the NSW Government;
● indirect employment and income;
● payment of PAYG and payroll tax to the Australian Tax Office; and
● increased prospects of community involvement.
[57] The Company also submits that the particular evolution of the matter over the 2.5 years since the Application was filed, including that there continue to be no employees covered by the 2011 Agreement, the on-going challenges the Company continues to face to be viable, the realistic possibility of a resumption of operations at Russell Vale in 2021 and the unsuccessful attempts at the Company and the CFMMEU reaching agreement on future employment conditions, add significant further support for the Application, and that the 2011 Agreement must now be terminated.
[58] The Company submits that the possible resumption of operations at Russell Vale Colliery in 2021, is now subject to final approvals of the UEP and the Company receiving further financial support from its major shareholder JSPL. The evidence of Mr Sharma is that given the focus of JPSL on cost per tonne, he does not believe that further funding will be available, and therefore the mine will not recommence operation if the 2011 Agreement continues to apply. The Company also points to the fact that enterprise agreements applicable to the Applicant’s operations at Wongawilli, were terminated by the Senior Deputy President Harrison in decisions on 8 May 2015, without objection of any party. The Company also submits that following the closure of Russell Vale in 2015 and the extended (and on-going) process to secure approval to re-commence mining there, as well as the issues at Wongawilli, its financial position since at least 2015 has been very difficult and it has incurred successive losses and accrued significant liabilities. 38
[59] During the rehearing the Company acknowledged that its history included failure to meet certain employee entitlements and other financial obligations. The Company has however long ago satisfied all of the entitlements of its former employees, and otherwise has agreed arrangements with the ATO, and also for regulatory compliance with the Resource Regulator. 39 Mr Sharma confirms that the Company continues to comply with these agreed arrangements.40 The Company submits that it should not be criticised or impeded in pursuing its commitment to turn its business around, and to be in a position to viably resume operations at Russell Vale.
[60] As part of its on-going efforts to contain cost, the Company has recently de-listed from the ASX. Further recent cost saving steps include loan restructuring, sale of redundant assets and voluntary salary reductions of the Company’s current employees and of director fees for directors. 41 The Company submits that the terms of the 2011 Agreement impose considerable operating restrictions and costs beyond the Award and that labour cost is a significant operating cost. The Company also submits that in the event it is in a position to resume operations at Russell Vale, its aim is to have the full range of options open to it which, absent the 2011 Agreement, enable the Company to implement work arrangements tailored to the needs of the business as it now is. This will best position the Company to secure the required on-going funding and recommence operations.
[61] The application for termination of the Agreement was made and continues to proceed in circumstances where the Company’s viability is currently dependent on its majority shareholder and it is looking to establish arrangements that will allow it to be as cost effective as possible. The Company cannot however be assured of the ongoing support of its majority shareholder if it is unable to operate in a commercial and cost-efficient manner. 42 In earlier proceedings evidence was given by the former Chief Executive Officer Mr Jakeman that even if regulatory approval was granted to resume mining, he would not recommend to the Board re-opening the mine if the 2011 Agreement remained in operation.43 Whilst Mr Jakeman is no longer with the Company, the evidence of Mr Sharma is that if the 2011 Agreement remains in place, he thinks it likely mining cannot viably and commercially recommence.44
[62] Whilst the Company does not assert that the 2011 Agreement is responsible for its financial position or that it ceasing to apply will resolve all its issues in becoming a viable operation, the 2011 Agreement is one of the impediments to re-commencing operations at Russell Vale in as cost-efficient and flexible manner as possible. The Applicant’s UEP was submitted to the NSW Department of Planning and Environment for approval in July 2019. The UEP seeks approval for a 5 year right to mine. The UEP is based on utilising a bord and pillar operation, as opposed to the longwall method previously used, and which is utilised by other Illawarra coal miners. As detailed in the evidence of Mr Sharma and Mr Sly, Bord and pillar mining will mean a smaller scale and more labour-intensive operation.
[63] In comparison to other Illawarra coal miners, Russell Vale also does not have a washery, meaning any coal sold from a resumption of mining would be at a discount of approximately 55% to washed coal. The current status of the UEP is that on 8 December 2020, the IPC found that the UEP should be approved subject to 118 conditions. The remaining barriers to the recommencement of mining at Russell Vale now relate to the approval of final Company mine plans and further capital investment.
[64] The Company had previously estimated the capital investment required to recommence mining to be approximately $15 million, including to source and refurbish equipment, conduct repairs to infrastructure, meet environmental obligations (such as installing additional water monitoring stations), carry out construction and development works. The Company now estimates that to meet the 118 conditions imposed by the IPC, the required capital expenditure to be approximately $35 million.
[65] The Company contends that there is a time critical element that now exists, that was not as prescient when the Application was first made or at earlier stages of hearing and it now needs to know what arrangements will apply if it starts to engage workers. Those arrangements will impact materially on, if the mine is to recommence, how it would operate, and in turn the viability of the Applicant. The evidence of Mr Sly is that the continued effect of the 2011 Agreement is a barrier to direct employment, and that there are concerns at the prospect for disputes under clause 24 of the Agreement in relation to the engagement of contractors.
[66] Without reciting the full history of Commission proceedings and the position of the CFMMEU, the Company submits that it is relevant that in the first decision, Senior Deputy Hamberger considered the application “premature,” 45 and the direction to the Commission (Commissioner Riordan ) in the first appeal decision was in effect, a bargaining order, premised on the fact and understanding that:
“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.” 46
[67] The parties conferred and when agreement could not be reached, agreed on a statement of facts including that they had exchanged views and correspondence in relation to their positions, drafts of the proposed agreement and position papers. The Company submits that it is reasonable for it to consider that a key reason no agreement was possible with the CFMMEU is that the union will not agree to arrangements that are overall different to enterprise agreements of other companies in the region. According to the Company, such a position by the CFMMEU is incompatible with the requirements of the FW Act, including the object of enabling “collective bargaining, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits”. 47
[68] The Company also submits that in objecting to the termination of the 2011 Agreement, the CFMMEU has at times expressed a belief that the Company never wished to again directly engage employees in the event of mining recommencing at Russell Vale and a particular objection has been that clause 24 of the 2011 Agreement in relation to contractors, continues to have effect. In this regard, reference was made to the claim by Mr Timbs that clause 24 of the 2011 Agreement gave the CFMMEU (and in particular its District officials) the ability to “recognise” which contractors the clause (and the 2011 Agreement) would or would not apply to 48, and to effectively determine the conditions of employment and rates of pay required by contractors at Russell Vale.
[69] The Company submits that the CFMMEU’s position in opposing termination of the 2011 Agreement based on clause 24, is not related to the security of employment of any relevant employees (as there are none) and is therefore directed to an improper purpose of regulating contractors. Such a position by the CFMMEU has nothing to do with an enterprise agreement – it is not about permitted matters (s172(1)) – and is otherwise unlawful. The Company has actively and in good faith engaged in the discussions facilitated by the Commission and proposed alternative arrangements (including draft enterprise agreements). Further, the Company has done everything required by the first appeal decision, and everything otherwise reasonably possible to resolve with the CFMMEU the issues it has with the 2011 Agreement before the application proceeds to further final hearing.
[70] In relation to the impact of the 2011 Agreement remaining operative, the Company points to evidence given by Mr Sharma and Mr Sly that there are enterprise agreements made in accordance with the FW Act for coal mining in the Illawarra and elsewhere allowing for mining production and engineering work covered by Schedule A of the Award, but at a lower cost than will arise under the 2011 Agreement. There are also contractors in the market available to undertake such work in accordance with lawful arrangements at a lower cost than will arise under the 2011 Agreement.
[71] The Company submits that its capacity to utilise contractors is purportedly subject to clause 24 of the 2011 Agreement i.e:
• It will not terminate the employment of Employees on the grounds of redundancy in order to replace the Employee with a contractor or, have the job of the Employees performed by a contractor.
• Contractors employed at NRE No 1 Colliery will be paid as per the conditions of the NRE Colliery Workplace Agreement unless they are employed under the terms and conditions of an agreement recognised by the CFMEU South/Western district.
[72] The Company also submits that it should not be required to contractually impose on contractors the terms of the 2011 Agreement, and otherwise be denied the opportunity of sourcing the most cost effective and flexible labour arrangements lawfully available. Nor should the Company have to endure the potential disruption and incur the expense of having to dispute the operation of clause 24 of the Agreement with the CFMMEU. The Company further submits that such a provision alone is likely to prevent a resumption of operations at Russell Vale. In the event the Company does in the future seek to utilise contractors in mining work at Russell Vale it will require those contractors to comply with legal requirements in relation to their employees, which will be subject to the operation of the FW Act and any applicable modern award.
[73] The Company identified what it submits are significant differentials between the 2011 Agreement and other options. These differentials significantly impact on cost per tonne, and would be available to anybody operating Russell Vale, other than the Company given the application of the 2011 Agreement. In this regard, the Company submits that notwithstanding the age of the 2011 Agreement, the current hourly rate it provides for an experienced (Level 4) mine worker is 42.4% higher than the current rate under the Award and is also in excess of the rates in the WorkPac Agreement. In addition to base wage cost, the 2011 Agreement also provides for a bonus which in 2015 resulted in an additional $478/week per employee, or nearly $25,000 per employee per year. That is not taken into account in Mr Sharma’s analysis described above.
[74] The Company also pointed to issues other issues which restrict operational flexibility and efficiency and/or impose further cost over and above the Award including: work shift arrangements; the broad scope of the dispute settlement provision in the 2011 Agreement causing concern that the Company will be tied up in on-going disputes; and overtime provisions. Reference was also made to clause 18, Workforce Reductions, which provides among other things that if the Applicant needs to recruit a new workforce that “ex NRE No 1 Colliery employees who were made redundant involuntarily shall be re-employed” subject to certain conditions. The Company submits that whilst former employees would not be excluded from future employment, it will need to appoint any future employees on merit directed towards future operating needs. More than 5 years after mine closure and termination of employment, and in contemplation of a different, more labour-intensive form of mining, the recruitment requirement of the Agreement should not prevail.
[75] In the proceedings before Commissioner Riordan relating to the second decision, the Company, through Mr Jakeman in his statement made on 11 October 2019, provided an undertaking to the Commission as to the terms under which it would employ employees at Russell Vale if the 2011 Agreement was terminated (2019 Undertaking). 49 In these proceedings the Company again provides an undertaking to the Commission based on the circumstances that now prevail (2021 Undertaking),50 which reflect the ordinary hour rate the Company has identified as being available under the WorkPac EA and which is above the Award in any event. The 2021 undertaking provides overall for wage rates and conditions superior to the statutory safety net afforded by NES and the Award. The 2021 undertaking would be implemented “through contracts of employment underpinned by the Award”.51 Mr Sharma’s explanation of the differences between the 2021 undertaking and the earlier undertaking should be accepted by the Commission as commercially sound, fair and well-reasoned.52
[76] The Company further submits, in comparison to other cases, that there are no employees currently engaged under the 2011 Agreement who would be disadvantaged by the termination of the 2011 Agreement and the acceptance of employment subject to the 2021 Undertaking, as opposed to employment strictly in accordance with the safety net of the NES and Award. Neither will termination of the 2011 Agreement and employment subject to the 2021 undertaking change the dynamics of any current enterprise bargaining process. Further still, the Company recognises that future employees may seek to negotiate an enterprise agreement in accordance with the FW Act.
[77] In relation to the public interest consideration, the Company notes that it has never been contended by the CFMMEU that termination of the 2011 Agreement was contrary to the public interest, only that it is a matter for the Commission to determine. The position of the Applicant is that the Commission should be readily satisfied, in accordance with s226(a) of the FW Act, that termination of the 2011 Agreement is not contrary to the public interest. The Company has previously asserted that in fact it is positively in the public interest for the 2011 Agreement to be terminated, given the benefits of mining resuming at Russell Vale. This is especially the case where the public interest concern in the first decision, and sentiment shared in the first appeal decision, was the absence of discussions between the parties. In circumstances where those discussions have now occurred, the central focus for rehearing should be any remaining contest over s226(b), and whether, taking account of all the circumstances, it is appropriate to terminate the 2011 Agreement.
[78] In terms of the matters the Commission is to take account of in accordance with s. 226(b) of the FW Act, the Company maintains that there are compelling reasons why it is appropriate to terminate the 2011 Agreement, including that there have not been employees covered by the 2011 Agreement since September 2015 and there are no employees who will (or can) be impacted by its termination. The Company also submits that there is no evident impact on the CFMMEU, other than losing its claimed ability to regulate the terms of employment of employees of contractors, but importantly disputes over that issue based on clause 24 of the Agreement will not be possible. Other reasons given by the CFMMEU as to why termination of the 2011 Agreement is not appropriate, including views of ex-employees (whose employment was terminated over 5 years ago), should in the circumstances of this matter, be given little if any weight and do not outweigh the reasons relied on by the Company as to why in all the circumstances termination of the 2011 Agreement is appropriate.
[79] In oral submissions, the Company referred to the evidence of Mr Conkey, a former employee and a witness for the CFMMEU in the hearing in relation to the first decision. In his evidence, Mr Conkey stated that a significant number of former employees with whom he has kept in touch, do not want their jobs back and have vowed never to work in the coal industry again and would not accept employment with the Company if it was offered. Mr Conkey also said that of those who had found employment in the coal industry, including Mr Conkey, the jobs had inferior wages and conditions to those they had previously enjoyed while working for the Company. 53 It was submitted that this evidence indicated that the Company’s conditions were superior. It was also submitted that the only evidence of any former employee wanting to return to employment with the Company was Mr Conkey and that he only wished to return on the basis of the terms and conditions in the 2011 Agreement.
[80] It was also submitted that Mr Sharma’s concession that other coal mine operators in the Illawarra region compete with the Company did not undermine the evidence about the difference between the way in which the Company extracts coal in comparison with other coal mine operators. In this regard, the difference between the bord and pillar method of mining coal and longwall mining had been accepted by Mr Timbs in his evidence in the proceedings relating to the first decision, including that: bord and pillar mining is an older and less common method 54; is less efficient in terms of tonnes per person;55 and that this style of mining is not typical in the Illawarra region.56
[81] In response to the CFMMEU’s submission in relation to Aurizon, it was submitted that in that case the parties were actively bargaining and it was appropriate that the Commission not interpose itself by expressing views about clauses subject of bargaining. In the present case, the parties are not bargaining, there are no employees and there is no possibility of the Company engaging in bargaining. It is also the case that the decision whether to reopen the Mine is dependent on finance and if the Agreement is not terminated the Company would be required to employ people on conditions that were negotiated ten years ago in very different circumstances. Further, if those conditions remain, the Company will not get finance to reopen. The fact that other employers in the Illawarra region have found those conditions appropriate is not a reason to maintain them in the Agreement subject of these proceedings.
[82] It was also contended that, as the FW Act provides, the Company should be in position to go to market and employ such people as will accept employment on whatever terms it is necessary to negotiate with them to accept employment. When the Company has employees and is in a position to bargain, the employees will have all their rights available under the legislation to enforce their demands in bargaining, and to be represented by the CFMMEU. If the Union is correct that it will not be possible for the Company to operate on lesser conditions than those in the 2011 Agreement, the Union will succeed in negotiating such an agreement. However, the Company is entitled to feel confident that it will be able to negotiate a different arrangement even with the presence of the Union given that it played a part in the negotiation of the WorkPac Agreement.
[83] In relation to the submission of the CFMMEU to the effect that “a deal is a deal” it was contended that this is plainly nonsense in circumstances where the FW Act contemplates that enterprise agreements will live for a particular time and then die and restricts the time they can apply. It was also contended that the time agreements operate is restricted because the FW Act recognises that circumstances change, and the submissions of the CFMMEU in this regard would make a nullity of s. 226. In relation to the CFMMEU’s submission about the effect of clause 24 of the Agreement dealing with contractors, it was contended that the position put by Mr Walkaden in relation to its operation was at odds with that advanced by Mr Timbs. The fact that there is a contest between them as to the proper operation of such a vital clause, is reason in itself to terminate the 2011 Agreement. In response to a question from the Full Bench, Mr Hatcher said that in his view, the fact that there is a reference in the clause to the South Western District Branch of the Union reinforces the view of Mr Timbs and he would certainly advise the Respondent that it would be at risk if it acted on the interpretation of the clause advanced by Mr Walkaden. 57
[84] In relation to clause 18 of the 2011 Agreement dealing with workforce reductions, it was submitted that while the Company had not offered an undertaking to re-employ such persons it did not state that it would not employ them. With respect to the CFMMEU’s assertion of a broken promise to retrenched employees, reference was made to the evidence given by Mr Timbs in earlier proceedings where it was conceded that such a clause was not common in the industry. 58 Reference was also made to the evidence of Mr Timbs about the commitment that was alleged to have been given. While the Company does not challenge that a commitment was given, it submits that when the evidence of Mr Timbs is considered, the extent of the commitment said to have been given in 2015 was that the Company agreed to comply with the terms of the 2011 Agreement, at a time when the Agreement was within its term. It was also submitted that to the extent that reliance is placed some six years later, on what is said to be an undertaking proffered by the Company so many years ago, when the undertaking was limited in terms to complying with the legal obligations that then applied, is stretching the matter.
[85] What is then relied on by the CFMMEU is that former employees have a legitimate interest in maintenance of conditions in an enterprise agreement that expired years ago and that such interest is sufficient to warrant not terminating the 2011 Agreement. This is not an appropriate consideration for the provisions of s. 226 of the FW Act. The contractors clause also cannot be justification for continuing the 2011 Agreement in circumstances where there are no employees whose interests may be protected by such a clause. In the absence of such employees the contractors clause does not pertain to the relationship between employer and employee.
[86] In response to the assertion by the CFMMEU that the Company’s representative had previously accepted that it’s previous conduct could be likened to that of a “recalcitrant citizen” reference was made to the submission of Counsel in proceedings before Commissioner Riordan in relation to the second decision. In those proceedings, the Commissioner put a proposition to counsel that the corporate history of the Company was not positive in relation to the community and its employees, to which counsel had responded in the following terms:
“MR BROTHERSON: But what you’ve had since 2015 is some issues with the Department of Planning & Environment that have been addressed. Any recalcitrant citizen, be it in any area of law, criminal or corporate, is allowed to address its faults, rectify them, serve the time and move on. We say that’s where the company is at. Its dealt with its issues with the ATO; its got a plan in place there. That’s in the evidence of Mr Sharma. Its got a plan in place with the Department of Planning & Environment. The one it doesn’t have is this issue her, this application where it says this agreement is a problem for us if we want to turn ourselves into a viable operation.
So it comes to you, admittedly and acknowledging its past faults, but saying we are trying to turn it around, and they shouldn’t be criticised for that. I understand the apprehension, but its certainly not something to be criticised for. Because otherwise, what’s the alternative? You’ve got Mr Jakeman saying that if that agreement stays in place, I won’t open it. Where does leave the Company? It doesn’t have Wongawilli opening; it can’t operate Russell Vale.
That means the consequences, the reasonably foreseeable consequences is a deep dark one, where the alternative is there are those possible very positive outcomes that we say support the making of the application.” 59
[87] It was submitted that this passage indicated that Counsel was simply putting into perspective a difficulty that the Company had in previously meeting some obligations with another authority. Those problems have plainly been overcome, and in a circumstance where that authority now says that it is in the public interest to allow the Company to open the mine.
[88] In oral submissions in reply, the Company emphasised that:
• The FW Act does not mandate that Unions bargain from a protected position whereby terms and conditions in an existing agreement continue unaltered in perpetuity;
• Although the Commission can act on unrebutted assertions from the bar table it cannot do so contrary to evidence in the matter;
• It is not possible to cross-examine Mr Timbs about a commitment allegedly made by an unnamed person and this is where credibility comes into play;
• An examination of the Annexure to Mr Timbs’ statement said to establish that WorkPac is paying in excess of the rates in its Agreement indicates that the difference in the rate of $28.37 referred to by Mr Sly and Mr Sharma in their calculations in relation to the difference between the rates in the WorkPac Agreement and the 2011 Agreement is because of the inclusion of a flexible reward system payment of $5.63 per hour equating to the $34.00 rate referred to by Mr Timbs; and
• If the market rate is $34.00 per hour as posited by Mr Timbs the Company could secure employees at that rate which is $4.00 per hour less than the rate under the 2011 Agreement.
[89] In conclusion, it was contended that when the Company seeks finance to reopen, it does not need to justify the contractors clause in its enterprise agreement. Rather, it needs to justify its cost of production per tonne and to do so, the Company needs the most efficient operation it can bargain for. Presently the Company is unable to bargain for, or adopt, any different arrangements that those provided by the 2011 Agreement and it should be entitled to do so.
CFMMEU
Evidence
[90] Mr Timbs’ evidence at the rehearing is that the South Western District Branch of the CFMMEU covers workers employed in or in connection with the coal industry around the Illawarra, Southern Highlands, Lithgow and Mudgee regions of New South Wales. The South Western District Branch also covers mineworkers working in Metalliferous mines around Broken Hill, and other workers in the Far West of New South Wales.
[91] As the District Vice President, Mr Timbs is responsible for advancing the industrial interests of CFMMEU Mining and Energy Division members in the Southern District. The Southern District refers to the Coal Mines south of Sydney. In carrying out his role as District Vice President, Mr Timbs regularly attends the mines in the Southern District and consequently is familiar with their operations. Prior to commencing as District Vice President, Mr Timbs worked as an underground and CHPP fitter for 23 years at the Tahmoor Mine. During this period, Mr Timbs held a number of elected positions, including site check inspector, Lodge Vice President and Lodge President.
[92] In relation to the evidence of Mr Sly dealing with shift work provisions in the 2011 Agreement, Mr Timbs said that there is not a single coal mine in the Southern District of NSW that has rotating shifts. Mr Timbs said that 12 hour shifts are more common in the Southern District of NSW on the weekends (i.e 3 x 12 hour shifts worked Friday – Sunday). To the best of Mr Timbs’ recollection, 3 x 12 hour shifts were worked Friday – Sunday prior to the Russell Vale Mine going onto care and maintenance. Other than weekend shifts, the majority of mineworkers in the Southern District of NSW do not work 12 hour shifts during the week. In the main, the shift length during the week is usually no more than 10 hours.
[93] In relation to the evidence of Mr Sharma and Mr Sly about the WorkPac Agreement, Mr Timbs said that the only coal mine in the Southern District where WorkPac is currently engaged is the Appin Mine. The WorkPac employees at the Appin Mine are paid an hourly rate of pay that is above the wage rate prescribed by the WorkPac Agreement. A WorkPac employee who is classified as a Level 3 Mineworker (Experienced) under the terms of the WorkPac EA is currently paid $34.00 for each ordinary hour worked. The WorkPac employees are also paid a bonus (which is not provided for in the WorkPac EA). The bonus paid to these employees includes a fixed component of $201.00 per employee per week plus additional remuneration subject to performance. Mr Timbs tendered a redacted copy of a notice of offer provided by WorkPac to one of the CFMMEU’s members employed by WorkPac to work at the Appin Mine.
[94] In his earlier statement in proceedings before Senior Deputy President Hamberger relating to the first decision, Mr Timbs gave evidence that the 2011 Agreement while more restrictive in relation to some matters and imposing costs not found in other agreements, the 2011 Agreement is not more restrictive or costly on an overall basis. Mr Timbs also said that the Agreement is typical of an enterprise agreement that applies to a coal mining company operating in the Southern District. Mr Timbs noted in his earlier witness statement that a key change in the revised UEP for the Mine is the change in the mining method from longwall to a bord and pillar operation. While acknowledging that the bord and pillar method of mining is an older form of mining now uncommon, Mr Timbs maintained that the workers who were made redundant at Russell Vale would have the necessary skills and experience to work in a bord and pillar operation.
[95] Further, Mr Timbs said in his earlier evidence that clause 24 of the 2011 Agreement dealing with contractors is virtually identical to clause 24 of the Wongawilli Colliery Enterprise Agreement 2011 which was approved before the 2011 Agreement. Mr Timbs also said that the enterprise agreements that apply to the Appin Mine, the Dendrobium Mine and the Metropolitan Mine contain provisions that impose limitations the engagement of contractors and enhance job security. Further, the agreements at the Appin and Denbrobium Mines require South32 (the operator of both mines) to terminate the services of contractors performing production and engineering work before making any employees forcibly redundant. This provision is a significant restriction on management prerogative and there is no such provision in the 2011 Agreement.
[96] Mr Timbs also gave evidence in earlier proceedings about a provision in the 2011 Agreement referred to as an “increase in hands clause”. The relevant provision is found in clause 18 Workforce Reductions and is in the following terms:
“When the Company decides to recruit employees, then ex NRE No 1 Colliery employees who were made redundant involuntarily shall be re-employed provided that:
• The personnel covered by th is agreement are those people who were ex-full time employees of NRE No 1 Colliery.
• The positions being recruited for are full time permanent.
• The applicants have the necessary skills and experience for the position.
• Applicants are capable of performing the inherent requirements of the job for which they apply. For this purpose a medical examination will be required.”
[97] In proceedings before Senior Deputy President Hamberger in relation to the first decision, Mr Timbs said in relation to retrenched employees that:
“When they were made redundant, the company actually promised in front of us all, that if they were going to restart the mine they would enact the re-employment of hands clause and that the guys would get their jobs back. They stood up in front of them when they put them off, and promised them they’d get their jobs back. So when you say I haven’t got a problem with the contractors coming on there, well fundamentally I do, because the company has broken a promise to us and to the workforce, so yes I do have a problem.” 60
[98] Mr Timbs also said that he did not suggest in proceedings before Commissioner Riordan that the person who made a commitment on behalf of the Company to re-employ the retrenched miners was Mr Wright. Mr Timbs said that he could not recall the name of that person when asked by Commissioner Riordan and that this continues to be the case.
Submissions
[99] The CFMMEU submits that the Applicant has failed to mount a compelling argument in support of its application to terminate the 2011 Agreement. In support of this submission the CFMMEU asserts that the Company’s arguments are at odds with the following facts. Firstly, the position that the Company finds itself in cannot be attributed to the 2011 Agreement. That position can be summarised in these terms – FY2011 has been the only year since 2004 that Wollongong Coal has made a profit 61 on the basis that:
• At the time that the Agreement was made (in 2011), the Company Coal knew that the coal price was “sky high” and volatile and would not reman “sky high” for the term of the Agreement; 62
• There was a boom in the coal price in 2009 with the coal price in 2009 being similar to the coal price when the Agreement was made; 63 and
• Even during the earlier boom in the coal price in 2009, which was well prior to the commencement of the Agreement, the Company did not make a profit. 64
[100] Even on the earlier evidence of Mr Sharma (which Mr Sharma continues to rely on) it is evident that the terms of the Agreement that Wollongong Coal freely agreed to, but now complains about, pale into insignificance in the context of the long term performance and viability of the company. In this regard, reference was also made to the evidence of Mr Sharma conceding that the 2011 Agreement had nothing to do with the $73 million loss the Company incurred in FY18 and that the financial results that have been achieved by the company since the commencement of the agreement in November 2011, cannot be attributed to the agreement. 65
[101] Secondly, the CFMMEU submits that there is no evidence to support a finding that the Agreement has adversely affected the viability or even the profitability of the Applicant. Thirdly, the CFMMEU submits that there is no evidence – as distinct from the self-serving opinions of senior executives invested in the termination of the Agreement – to support a finding that termination of the Agreement will even improve the viability, profitability or the reopening of the Mine. Indeed, the earlier evidence of Mr Sharma was that termination of the Agreement would not make a material difference to the Applicant’s performance. Fourthly, the CFMMEU submits that the Applicant’s complaints about the terms of the Agreement are overblown and that their effects are exaggerated and/or misrepresented.
[102] Fifthly, the CFMMEU submits that when considered in the appropriate industrial context – that is, an operator of an underground coal mine in the Illawarra producing metallurgical coal – it is evident that the Agreement is a typical enterprise agreement. Many of the restrictions complained about by the Applicant are expressed in similar, if not more restrictive, terms in the enterprise agreements binding on the other coal mining operators in that context.
[103] This is said to be clear from the evidence of Mr Timbs. In his earlier evidence, Mr Timbs compared the terms of the Agreement complained about by Wollongong Coal against those same terms applicable to the other coal mining operators in the Southern District of NSW. 66 In those earlier proceedings, the Company did not challenge the comparison undertaken by Mr Timbs67 or otherwise submit that the Agreement was atypical when compared against other enterprise agreement binding on coal mining operators in the Southern District.
[153] The enterprise bargaining issues arise because the Company is not able to make an enterprise agreement in the current circumstances. By virtue of s. 172(2) an employer may make an enterprise agreement with employees employed at the time the agreement is made or with one or more relevant employee organisations, if the agreement relates to a genuine new enterprise and the employer has not employed any persons. There are no employees with whom the Company could make an enterprise agreement and the Mine is not a genuine new enterprise. The Company is also unable to seek to vary the 2011 Agreement under any of the provisions in Division 7 of Part 2-4 of the FW Act. Section 207 provides that the employer and employees covered by an agreement may apply to vary it. Section 208 provides that an employer may request employees to approve a proposed variation and s. 217 provides a mechanism for an employer, an employee or employee organisation covered by an agreement to apply to vary it to remove an ambiguity or uncertainty. As previously noted, there are no employees to apply for a variation with the Company or to approve a variation proposed by the Company and the 2011 Agreement is not ambiguous or uncertain, or to the extent that the agreement is ambiguous or uncertain, the significant issues the Company has with the Agreement could not be addressed by such an application.
[154] If the Agreement is not terminated the Company’s only option is to employ persons under the 2011 Agreement and attempt to bargain with them. Given the issues with the suitability and cost effectiveness of the Agreement, we accept that the Company’s concerns about this course of action are valid. We also accept that it is unlikely that the parties will reach agreement in principle for a replacement to the 2011 Agreement while it remains in effect on the basis that conferences conducted by Commissioner Riordan following the first appeal, did not result in such agreement, even in the face of an application to terminate the Agreement remaining on foot.
[155] The views of the CFMMEU as articulated in its consolidated submissions, are that the 2011 Agreement should not be terminated because the Company has not made out its case that termination is appropriate in all of the circumstances and protection of the interests of former employees of the Company who are members of the CFMMEU on the basis of the rights of employees to return to their employment with the Company under clause 18 of the 2011 Agreement. The CFMMEU also puts a succinct argument against termination of the Agreement to the effect that “a deal is a deal” and that the Company should not be permitted to walk away from its obligations under an enterprise agreement based on matters such as the age of the agreement, that the agreement was made in different circumstances or because of complaints about the terms of the agreement. Further the CFMMEU contends that the terms about which the Company complains are not out of the ordinary in the Illawarra region or the industry and in earlier proceedings expressed concern that terminating the 2011 Agreement would adversely affect the market rates for labour in the Illawarra region.
[156] We do not understand that the CFMMEU relies on the maintenance of contractors clause as a basis for the Commission considering the appropriateness of terminating the 2011 Agreement. The CFMMEU contends that the Company has overstated the adverse impact of this clause along with other clauses relied on as a basis for termination of the 2011 Agreement and that the Company has not made out its case for termination of the 2011 Agreement.
[157] It is convenient to deal first with the interests of former employees that the CFMMEU seeks to protect by opposing the termination of the 2011 Agreement. Firstly, we observe that while the Company does not dispute that a commitment may have been given in relation to the return of retrenched employees, Mr Conkey’s evidence does not establish that any person, other than Mr Conkey, wishes to exercise a right they may have under the clause to return to the employment of the Company. To the contrary, Mr Conkey’s evidence is that a significant number of former employees with whom he has kept in touch, do not wish to return to the employment of the Company. Mr Conkey’s evidence in relation to his own position is that his wish to return is predicated on the maintenance of the 2011 Agreement.
[158] Secondly, there can be no return to employment of the Company for Mr Conkey or any other former employees unless the Mine reopens. For reasons we have stated, it is our view that it is more likely that the Mine will reopen if the 2011 Agreement is terminated than if it remains in effect. It follows that it is unlikely that Mr Conkey or any former employees will be in a position to avail themselves of any rights under the 2011 Agreement to return to employment with the Respondent if the Mine reopens, while the 2011 Agreement remains in effect.
[159] Thirdly, the right the CFMMEU seeks to protect is not an unqualified right to return to employment with the Company. As the Union points out, any such right is subject to conditions which those former employees seeking to return may or may not be capable of fulfilling. Fourthly, the length of time that has elapsed since the last employees were retrenched by the Company reduces the probability of reemployment by virtue of effluxion of time. Fifthly, the fact that there are no employees presently covered by the Agreement is relevant to the weight that should be placed on the CFMMEU’s views in respect of the interests of former employees. The persons whose interests are being advanced are not employed by the Company and have not been employed for over five years. There are no existing employees with an interest in preserving the clause to maintain a right to return to employment in the event of retrenchment after the Mine reopens.
[160] We next consider the CFMMEU’s assertion that the Company has overstated the effects of the terms of the 2011 Agreement about which it complains. We have considered those terms at some length earlier in this decision. We do not accept that Aurizon is authority for the general proposition that it is not appropriate to form a view about provisions of an agreement subject of a termination application. As the Company points out in its submission, the facts in Aurizon were that the parties were bargaining and it was in this context that the Full Bench in that case did not think it was appropriate to express a view about terms of the Agreements other than the legacy terms the Full Bench was considering. In the present case, there is no bargaining and no employees with a present interest in maintaining the terms and conditions in the 2011 Agreement. It is appropriate that we consider the terms about which the Company complains. For the reasons set out above, we consider that the issues raised by the Company have some substance, particularly given the changing circumstances and the implications for the mine reopening.
[161] We now consider the proposition advanced by the CFMMEU that “a deal is a deal” and that in the present case, it is not appropriate to allow the Company to walk away from terms it has agreed to, because of a change in circumstances or because it has become dissatisfied with those terms.
[162] The issue of the Company seeking to walk away from provisions in an agreement was considered by a Full Bench of the Australian Industrial Relations Commission in Cochlear Limited v AMWU. 78In that case the Full Bench was determining an appeal against a decision refusing to terminate a preserved State agreement under s. 178MH of the former Workplace Relations Act 1996. Section 170MH required that the Commission take steps as it considers appropriate to obtain the views of persons bound by the agreement about whether it should be terminated, and provided that if, after complying with that requirement, the Commission considers that it is not contrary to the public interest to terminate the agreement, the Commission must, by order, terminate the agreement.
[163] Relevantly in that case, the agreement contained a provision that it would remain in effect until varied or terminated or replaced by agreement of the parties. Upholding the decision to refuse to terminate the agreement the Full Bench observed that when the agreement was made, it was the intention of the union party to the agreement to maintain its terms in the context of impending changes to the legislation and that the company knew that this was the case and went on to state:
“[35] It is self-evident that it is in the public interest that parties to an agreement abide by the terms upon which they had agreed. The principal object of the Act, as was the case with the pre-reform Act, is to provide a framework for cooperative workplace relations. Nothing could be more inimical to that object than to have parties reneging on their commitments as embodied in agreements made under the Act. It follows that it is, at the least, likely to be contrary to the public interest to encourage or facilitate the breaching of an agreement by one of the parties to it.
[36] In this matter, the very clause of the Agreement in issue is the clause that deals with its termination. The appellant, having agreed that the Agreement would only be terminated by the agreement of the parties, by its very application to the Commission seeks to have the Agreement terminated against the will of the union party to it.
[37] To allow a party to use the machinery of the Act and the auspices of the Commission to terminate an agreement that it said it would not terminate unilaterally would be obviously contrary to the public interest.”
[164] Cochlear Limited was cited by a Full Bench of the Commission in CFMMEU v AGL Loy Yang t/a AGL Loy Yang. 79 In that case, an application was made under s. 225 of the FW Act to terminate an enterprise agreement which contained a commitment by the employer to maintain certain conditions of employment if it sought to terminate the agreement after its nominal expiry date. At first instance a member of the Commission in deciding to terminate the agreement, determined that the clause containing the commitment was irrelevant to the consideration under s. 226(b) on the basis that it had doubtful legal effect. The Full Bench held that this was an error and stated that regardless of the legal effect of the clause, it constituted a representation by the company, from which it could reasonably be inferred that employees took into account as a benefit in voting to approve the agreement. It was therefore relevant to consider whether it would be appropriate to terminate the agreement in circumstances where the company in that case had expressed an intention to depart from the commitment embodied in the clause.80 The Full Bench went on to state:
“In the exercise of the discretion embodied in s. 226, it was necessary for the Deputy President to have regard to the objections of Pt. 2-4 of the FW Act, which included (in s. 171(a)) the object “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 also as required by s. 578(b), to “equity, good conscience and the merits of the matter”. Considerations of fairness, good faith, equity and good conscience arising from these provisions necessarily draw attention to AGL Loy Yang’s intentions with respect to clause 4.” 81
[165] In Cochlear Limited, the Full Bench upheld the decision to refuse to terminate the agreement accepting that if the agreement was terminated the terms and conditions of the employees concerned would be governed by their individual contracts of employment underpinned by the five Australian Fair Pay and Conditions Standards set out in Part 7 of the Act. The Full Bench also accepted termination of the Agreement would adversely affect the ability of the workforce to bargain given that the workforce was constituted predominantly of female production workers of whom approximately 95% were from non-English speaking Asian countries. In AGL Loy Yang, the Full Bench held that notwithstanding the error, an undertaking given by the Company removed the matter as a relevant consideration and rendered the error immaterial to the outcome. Accordingly, the decision to terminate the Agreement was upheld. In our view it is significant that in both cases there were employees who would be directly affected by the termination and in AGL Loy Yang the parties were in the throes of bargaining and had been engaged in the process for two years without reaching agreement.
[166] While we generally accept the proposition that a deal is a deal and that parties should not be permitted to simply walk away from agreements because of a change in circumstances or dissatisfaction with the bargain they have made, this proposition is qualified by the fact that s. 225 of the FW Act provides a mechanism by which an employer, employee or employee organisation covered by an enterprise agreement may apply to have the agreement terminated and s. 226 provides that the agreement must be terminated if the Commission is satisfied about the matters specified in that section. This is a mechanism by which parties who make out a case under s. 226 of the FW Act can be released from their deals if the Commission is satisfied in relation to the requisite matters.
[167] Finally, in relation to the views of the CFMMEU, we do not accept the earlier submission that the termination of the 2011 Agreement will significantly impact on wages and conditions in the Illawarra region generally. The CFMMEU established in cross-examination that there are certain market rates which the Company will need to address to attract labour to reopen the mine or in any bargaining for a replacement agreement. It is also the case that if the Russell Vale Mine reopens the manner in which it is operated will differ significantly from other mines in the region. It is therefore not necessarily inappropriate that the terms and conditions of employment at the Russell Vale Mine may differ from those applicable to employees at other mines in the Illawarra regions. In any event, as we discuss later, if and when employees are engaged at the mine, bargaining for enhanced wages and conditions can be undertaken.
[168] We next consider the circumstances of the employees, employer and the CFMMEU, and the likely effect that termination of the 2011 Agreement will have on each of them. There are no employees covered by the Agreement whose circumstances may be considered and accordingly the termination of the Agreement will have no effect on any current employees.
[169] The circumstances of the Company are that it is in a difficult financial situation and dependent upon finance from its majority shareholder to meet its objective to reopen the Mine. As we have previously observed, it is more likely that the Mine will reopen if the 2011 Agreement is terminated than if it is not terminated. If the 2011 Agreement is terminated and the Mine reopens, the Company will be placed in a position where it can engage employees on terms and conditions they are prepared to accept and commence operations at the Mine. The 2011 Agreement directly impacts the Company by placing a range of obligations on the Company in terms of wages, conditions of employment, rosters and hours of work. Those terms and conditions impose inefficiencies and inflexibilities on the Company in circumstances where it needs to be flexible and efficient if the Mine is to become a viable operation.
[170] The CFMMEU is also covered by the 2011 Agreement. The only direct right that the CFMMEU has under the 2011 Agreement is any right it may have under the contractors clause to refuse to recognise particular contractors, albeit this right may be problematic. Other rights the CFMMEU has are incidental to the Union’s role in representing members and are not rights that accrue directly to the Union. The obligation not to pursue claims additional to the terms of the Agreement that the Union had under clause 5 ceased to have effect when the Agreement reached its nominal expiry date. Former employees have no direct rights or obligations under the 2011 Agreement other than a qualified right to return to employment under clause 18 of the Agreement. For reasons set out above, we consider that the only evidence about the circumstances of former employees is that of Mr Conkey which at best, establishes that Mr Conkey wishes to return to employment subject to the terms of the 2011 Agreement being maintained.
[171] The effect of the Agreement being terminated is somewhat speculative, but we are of the view that the following effects will or are likely to manifest. For reasons stated earlier, we consider that it is more likely that the mine will reopen if the 2011 Agreement is terminated than if it is not terminated. If the Mine reopens and the Company employs persons to operate the Mine, those persons will be eligible to be members of the CFMMEU regardless of whether the Agreement is terminated. If the Union is correct in relation to the rates necessary to attract experienced mine workers in the Illawarra, the Company will be required to pay those rates to meet the market. The CFMMEU will have the right to represent members under the consultation term and the dispute resolution term in the Award, which will apply in the absence of an enterprise agreement.
[172] If the Company seeks to negotiate an enterprise agreement on reopening the Mine, the CFMMEU will have the right to represent its members in the bargaining process and to advance the interests of members in negotiations with the Company. If the Company does not initiate bargaining the Union may seek to do so by way of a majority support determination. In the event that bargaining commences (and we think it likely that this will occur) the CFMMEU and employees will have at their disposal the “full arsenal of tools under the Act to exert legitimate industrial pressure” 82 on the Company to bargain and reach agreement.
[173] The termination of the Agreement will result in a situation where employees and the CFMMEU will not be bargaining from a position where the 2011 Agreement is in effect as a de facto starting point. However, the FW Act specifically provides that the base point for an enterprise agreement and the assessment of whether it passes the better off overall test, is the relevant modern award and the NES. The undertaking provided by the Company will result in any bargaining being conducted from a base that is above the Award rate in any event.
[174] While former employees will lose their qualified right to return to employment at the Mine, as a merit consideration this is likely to be at least partially offset by the fact that any former employees who wish to return may choose to make application for available positions. As we have previously stated, our view is that if the Agreement is not terminated, it is unlikely that there will be an opportunity for Mr Conkey or any other former employee to exercise their rights in this regard.
[175] It is also the case that any adverse effects of the termination of the 2011 Agreement will be partially offset by the undertaking the Company has provided to maintain hourly rates in excess of the Award for a 12 month period or until an new enterprise agreement is made. In our view this will provide a reasonable basis for any negotiations for a new agreement. While we accept that the CFMMEU is concerned to maintain industrial standards in the Illawarra region, we do not accept that the termination of the 2011 Agreement will adversely impact the ability of the Union to do so given the circumstances of this particular matter.
[176] In relation to the undertaking provided by the Company we accept that it has remedied past issues associated with failure to meet financial obligations and certain employee entitlements. These past issues should not in our view, weigh against the Company in our consideration of whether it is appropriate to accept the undertaking. Neither are those past issues relevant to whether it is appropriate to terminate the Agreement in all of the present circumstances.
Conclusion
[177] As would be clear from out consideration, there are a number of particular circumstances that have influenced our conclusions and determination of this matter. These include, amongst others, the fact that the 2011 Agreement was negotiated some time ago in a different context than would apply if the mine reopened; the fact that the 2011 Agreement has not been applied in practice now for some years and there are no employees currently covered by that instrument; there is no bargaining taking place and none is presently possible to address the changing circumstances; and the prospects of the mine reopening are increased with the termination of the Agreement.
[178] Pursuant to s. 226 of the FW Act we are satisfied that it is not contrary to the public interest to terminate the 2011 Agreement. We are also satisfied that on balance, it is appropriate to terminate the Agreement. The 2011 Agreement reached its nominal expiry date on 30 September 2015. If the Agreement is terminated, no employees are covered the Agreement and no consequences or adverse effects will flow to current employees. The CFMMEU will lose any right it may have under a clause of the 2011 Agreement to refuse to recognise enterprise agreements made by contractors who are engaged to provide employees to perform work at the Mine. The only effect that the relevant clause could have given there are no existing employees of the Company, is on future employees of contractors.
[179] The CFMMEU will have the right to represent future employees of the Company including in any future enterprise bargaining negotiations. Past employees will lose a qualified right to return to employment with the Company if the Mine reopens and their capacity to avail themselves of this right will be reduced in any event if the Agreement is not terminated on the basis that it is less likely that the Mine will reopen if the Agreement remains in effect.
[180] These matters do not outweigh the adverse impacts on the Company if the Agreement is not terminated. The capacity of the Company to obtain finance necessary to reopen the Mine will be reduced along with the likelihood that the Mine will reopen. The Company has established that the 2011 Agreement provides for terms and conditions of employment which will reduce its ability to operate with the cost-effectiveness and flexibility that will be required for the Mine to be viable in the context of the unique mining method that will be utilised. The Company is unable to bargain for any changes to these provisions or seek to vary them and it is less likely that the Mine will reopen while the 2011 Agreement remains in effect.
[181] In these circumstances, the likelihood that an enterprise agreement will be negotiated which meets the needs of both parties and achieves productivity and fairness, will be greater if the Agreement is terminated than if it is not having regard to the unsuccessful attempts to reach agreement in principle while the 2011 Agreement remains in effect. The termination of the Agreement will not reduce the guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards and the Black Coal Mining Industry Award 2010. The Company has also provided an undertaking to pay wage rates in excess of those in the Award for a 12 month period or until a further enterprise agreement is finalised. We accept that undertaking and will publish it with this Decision.
[182] On the basis of our findings and given the operation of the FW Act, we must terminate the 2011 Agreement. Given the extensive time frame over which proceedings relating to the application for termination of the 2011 Agreement have been conducted, and the absence of any immediate practical impact upon any operations and employees, we consider that it is appropriate to terminate the Agreement with immediate effect. An Order 83 terminating the Agreement with effect from 1 June 2021 will issue with this Decision.
DEPUTY PRESIDENT
Appearances:
GJ Hatcher SC and K Brotherson of Counsel for the Company.
A Walkaden for the CFMMEU.
Hearing details:
2021.
By Microsoft Teams.
26 February.
Printed by authority of the Commonwealth Government Printer
<AE889393 PR728790>
Annexure A
Undertaking to be provided by Wollongong Coal Limited following termination of the NRE No 1 Colliery Workplace Agreement 2011
1. Wollongong Coal Limited (Company) undertakes that, if the Fair Work Commission makes an order pursuant to section 226 of the Fair Work Act 2009 (Cth) (Act) terminating the NRE No 1 Colliery Workplace Agreement 2011 (Agreement), the Company will apply the terms set out below to any employees it may later employ at the Russell Vale Colliery who are covered by Schedule A of the Black Coal Mining Industry Award 2010 (Award).
Application of Undertaking
2. This undertaking is to supplement the minimum rates provided for in the Award.
Term of Undertaking
3. Unless extended in whole or in part at the complete discretion of the Company, these undertakings will cease to apply on the earliest of the following:
a. twelve months from the date an order is made by the Fair Work Commission under section 226 of the Act terminating the Agreement; or
b. the date on which an enterprise agreement is made by the Company and Employees.
Undertaking
4. At a minimum, and unless a higher amount is required under the terms of the Award as may apply from time to time, the Company undertakes to pay employees covered by Schedule A of the Award a basic weekly 35 hour rate of:
a. $1,148.00 (or a $32.80 ordinary hour rate) for employees employed in the Mineworker - Specialised classification in the Award;
b. $1,041.25 (or a $29.75 ordinary hour rate) for employees employed in the Mineworker - Advanced classification in the Award;
c. $992.95 (or a $28.37 ordinary hour rate) for Employees employed in the Mineworker classification in the Award;
d. $929.60 (or a $26.56 ordinary hour rate) for Employees employed in the Mineworker – Induction Level 1, Mineworker – Induction Level 2 and Mineworker – Training classifications in Schedule A of the Award.
5. Employees will be eligible to receive a bonus with the criteria to be set by the Company having regard to production, safety performance and behaviours.
1 [2019] FWCA 216.
2 [2019] FWCFB 3306.
3 [2020] FWC 1844.
4 Wollongong Coal Pty Ltd v CFMMEU [2020] FWCFB 3676.
5 Exhibit A1 – Witness Statement of Sanjay Sharma.
6 Exhibit A2 – Witness Statement of Wayne Kenneth Sly.
7 Exhibit R1 – Witness Statement of Robert Timbs.
8 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Aurizon Operations Ltd [2015] FCAFC 126 at [23] – [25].
9 Re Aurizon Operations Ltd (2015) 249 IR 55 at [126].
10 Construction, Forestry, Mining and Energy Union v AGL Loy Yang Pty Ltd T/a AGL Loy Yang[2017] FWCFB 1019 at [31].
11 Peabody Energy Australia PCI Mine Management Pty Ltd (2016) 260 IR255 at [18]; CFMEU v AGL Loy Yang Pty Ltd [2017] FWCFB 1019 at [29]; Gangell v Lobethal Abattoirs Pty Ltd T/A Thomas Foods International[2018] FWCFB 4244.
12 See Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 and Nestle Australia Ltd v Federal Commissioner of Taxation (1987) 16 FCR 167 at 184.
13 Re Kellog Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 at 40.
14 Re Sedgman Employment Services Pty Ltd Bowen Basin Front Line Employee Enterprise Agreement 2011 – 2014 [2016] FWCA 1595 at [53].
15 Minister for Aboriginal Affairs and Another v Peko-Wallsend Limited and Others (Peko-Wallsend) [1986] HCA 40; (1986) 162 CLR 24.
16 See Friends of Hinchinbrook Society Inc v Minister for Environment (No 3) (1997) 77 FCR 153; Australian Competition and Consumer Commission v Leelee Pty Ltd [1999] FCA 1121; Edwards v Giudice [1999] FCA 1836 and National Retail Association v Fair Work Commission [2014] FCAFC 118.
17 Nestle Australia Ltd v Deputy Federal Commissioner of Taxation: (1987) 16 FCR 167 at 184.
18 Re Aurizon Operations Ltd (2015) 249 IR 55 at [25] – [27], [169], [171] – [172].
19 “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as theAustralian Manufacturing Workers’ Union (AMWU) v Griffin Coal Mining Company Pty Ltd[2016] FWCFB 4620 at [75].
20 Ibid at [76] – [78].
21 Ibid.
22 Ibid at [33].
23 ERA v LHMU[2010] fWA 2434.
24 Exhibit 1 in proceedings before SDP Hamberger at Appeal Book page 92; Exhibit 2 in proceedings before SDP Hamberger at Appeal Book 248.
25 [2019] FWCFB 3306.
26 Transcript of Proceedings 26 February 2021 PN70.
27 Ibid PN88, 235 – 237.
28 Ibid PN96.
29 Ibid PN117.
30 Transcript of proceedings 10 October 218 at PN531 – 532 (Appeal Book 1178).
31 Ibid PN535 – 536 (Appeal Book 1178 - 1179).
32 Transcript of Proceedings 26 February 2021 PN192 – 196.
33 Statement 11 October 2019 (Appeal Book page 682).
34 Ibid at paragraph 18.
35 Transcript of Proceedings 26 February 2021 PN324 – 341.
36 Ibid PN343 – 345.
37 Ibid PN372 – 373.
38 Sharma Statement 9 August 2018 at Annexure SS1 (Appeal Book pages109 – 194). For the year ending 31 March 2018, the Company incurred a loss of AUD73,883,000, recorded net liabilities of 831,588,000 and had expected principal repayment on borrowings for the year ending 31 March 2019 of AUD50,462,000.
39 Timbs’ Statement dated 20 September 2018) at Annexure RT 7 (Appeal Book pages 582 – 587).
40 Exhibit A1 – 2021 Sharma Statement at [16]-[17].
41 Ibid at [38].
42 Sharma Statement 20 October 2014 AB page 248 at 250 paragraph 8(d).
43 Transcript of Proceedings 13 November 2019 PN277 Appeal Book page 1006.
44 Exhibit A1 – 2021 Sharma Statement at [32] – [34].
45 [2019] FWCA 216 at [64].
46 [2019] FWCFB 3306 at [22]
47 FW Act s 171(a); see also s3(f) and also the prohibition on pattern bargaining at s. 412.
48 Transcript of Proceedings 13 October 2018 PN1144 – 1173 Appeal Book page 1232 – 1235.
49 Statement of Mitch Jakeman 11 October 2019 Annexure MJ7 Appeal Book page 650 at 668.
50 Exhibit A1 – 2021 Sharma Statement at [70] and [75].
51 ibid [66].
52 ibid at [60] – [67].
53 Witness Statement of Dean Thomas Conkey made on 20 September 2018, Appeal Book page 254 paragraph 14.
54 Transcript of Proceedings 10 October 2018 at PN980.
55 Ibid at PN984.
56 Ibid at 997.
57 Transcript of Proceedings 26 February 2021 at PN464.
58 AG2018/2488 Transcript of Proceedings 28 January 2020 at PN42 – 44.
59 Transcript of Proceedings 28 January 2020 at PN1362 – 1372.
60 Transcript of proceedings 10 October 2018 PN1183 (Appeal Book page 1236).
61 Transcript of proceedings 10 October 2018 PN510 (Appeal Book page 1177).
62 Ibid PN504 – PN507 (Appeal Book page 1176).
63 Ibid PN511 – PN527 (Appeal Book pages 1176 - 1177).
64 Ibid PN531 (Appeal Book page 1178).
65 Transcript of proceedings 10 October 2018 PN537 (Appeal Book page 1179).
66 Paragraphs 16 – 63 of the Witness Statement of Robert Timbs dated 20 September 2018 (Exhibit 6) (hereafter the Timbs Statement) (AB, Tab 14, pages 364 - 377).10 PN940 – PN1203 (AB, Tab 36, pages 1214 - 1238).
67 Transcript of Proceedings 10 October 2018 PN940 – PN1203 (AB pages 1214 - 1238).
68 Aurizon op. cit. at [171].
69 Witness Statement of Robert Timbs 20 September 2018 Paragraphs 35 – 36 (AB page 369).
70 Wollongong Coal Pty Ltd v CFMMEU [2020] FWCFB 3676 at [95] – [98].
71 Transcript of proceedings 10 October 2018 PN1183.
72 Re Aurizon Operations Ltd [2015] FWCFB 540.
73 Transcript of Proceedings 10 October 2018 PN1150 Appeal Book 1233.
74 Ibid at PN1153 Appeal Book 1233.
75 Witness Statement of Peter Colley 18 September 2018 Appeal Book 257 at Paragraphs 7 – 8 (page 258).
76 WorkPac Coal Mining Agreement 2019 [2019] FWCA 4505 Appeal Book 116.
77 Transcript of proceedings 10 October 2018 PN1161 – 1165 at Appeal Book 1224.
78 [2009] AIRCFB 27.
79 [2017] FWCFB 1019.
80 Ibid at [40] – [41].
81 Ibid at [43].
82 Aurizon op. cit. at [160].
83 PR730385.
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