Lessons for major projects under the Fair Work Act

Pluto: A case study

Presented by Stuart Wood S.C.

HR Nicholls ConferenceTuesday 12 June 2012, Melbourne

The largest single project in Australia’s history:

Pluto Stage 1 gas development $14 bn1

1 Pipeline or Pipe Dream; BCA 7 June 2012, p12.

160 projects in pipeline > $1 bn

72 of these are already underway

$921 bn in pipeline

Pluto first mega-project under Fair

Work Act2

2 Pipeline or Pipe Dream; BCA 7 June 2012, p3, 12.

3 Pipeline or Pipe Dream, BCA 7 June 2012, p13.

Mega project pipeline3

The top 20 investment projects in the investment pipeline4

4 Deloitte Access Economics, Investment Monitor, background data, March 2012.

Right of Entry

Mammoet

Union Strike

Employee Strike

“Labor’s new system builds certainty and stability into our workplaces by ensuring that existing right of entry laws will be retained”5

“The laws that we have in Australia concerning union right of entry, if we’re elected to form the next government, will be identical to those which currently exist under this government…”6

5 K Rudd and J Gillard, Forward with Fairness: Policy Implementation Plan, ALP, Canberra, August 2007, p2.

6 Opposition Leader Kevin Rudd, Doorstop Interview, Perth, 26 October 2007.

Right of Entry

Julia Gillard: “I’m happy to do whatever you would like. If you’d like me to pledge to resign, sign a contract in blood, take a polygraph, bet my house on it, give you my mother as a hostage, whatever you’d like … we will be delivering our policy as we have outlined it.”7

7 Deputy Opposition Leader Julia Gillard, National Press Club Debate, 8 November 2007, in response to a journalist’s question as to whether she would be

willing to resign if Labor failed to deliver its promise to retain existing right of entry laws.

Right of Entry

Prior to the commencement of the Fair Work Act on 1 July 2009, there were no union rights of entry at the Pluto Project

From 1 July 2009 to 27 October 2009 the four major construction unions, eligible to cover workers – namely the CFMEU, CEPU, AMWU and the AWU – entered the site 217 times

Moreover by May 2010 that number had increased to 4508

8 AMMA Submission to the Fair Work Act Review Panel February 2012.

Right of Entry

Worsley Alumina’s plant in the South West of Western Australia9

9 BHP Billiton Submission to the Fair Work Act Review Panel February 2012.

Right of Entry

CFMEU v FWWP (Pluto) Joint Venture[2010] FWA 2341; 29 March 2010

Specify contractor

Discussions with more than one contractor

Discussions in lunch room

Standard of meeting areas

Proximity of management

Right of Entry

CFMEU v Mammoet Pty Ltd[2009] FWA 1945; 24 December 2009 (petition)

Mammoet Australia Pty Ltd v CFMEU[2010] FWA 4389; 14 June 2010 (suspension not granted)

Woodside Burrup Pty Ltd & Kentz E & C Pty Ltd v CFMEU[2010] FWA 4880; 2 July 2010 (suspension granted)

CFMEU v Woodside Burrup Pty Ltd & Kentz E & C Pty Ltd[2010] FWAFB 6021; 6 August 2010 (suspension appealed)

CFMEU v Mammoet Australia Pty Ltd[2011] FMCA 802; 20 October 2011 (removal of accommodation)

Mammoet

Chronology

18 September 2008 – Mammoet Australia Pty Ltd Pluto Project Greenfields Agreement 2008 – (Greenfields Agreement).

December 2008 – Heavy Lift and Transportation Contract between Woodside and Mammoet.

June 2009 – Mammoet make offer for replacement of Greenfields Agreement. Mammoet employees reject offer.

Mammoet

Chronology

13 July 2009 – CFMEU letter as bargaining agent to Mammoet notifying intention to make an enterprise agreement.

18 September 2009 – Nominal Expiry Date of the Greenfields Agreement.

24 December 2009 – Fair Work Australia makes Majority Support Determination.

Mammoet

Chronology

5 January 2010 – CFMEU makes application to FWA for a Protected Action Ballot on behalf of Mammoet’s crane and forklift operators.

22 March 2010 – Fair Work Australia makes Protected Action Ballot Order.

20 April 2010 – Australian Electoral Commission declares result of Protected Action Ballot.

Mammoet

Chronology

21 April 2010 – CFMEU give notice to Mammoet of protected industrial action in the form of a 28 day stoppage of work commencing on 28 April 2010 of Mammoet’s crane and forklift operators.

27 April 2010 - Meeting between Mammoet and Mammoet’s crane and forklift operator employees. Mammoet notify CFMEU and employees of employer response action in the form of a 28 day lockout commencing on 26 May 2010. Mammoet notify relevant employees of withdrawal of board and lodging.

Mammoet

Chronology

28 April 2010 – Mammoet’s crane and forklift operator employees commence 28 days protected industrial action. Mammoet withdraw board and lodging.

20 May 2010 – Mammoet apply to Fair Work Australia for a suspension of industrial action.

26 May 2010 – Mammoet commence lock out of employees.

Mammoet

Chronology

14 June 2010 – Mammoet’s suspension application fails.

24 June 2010 – Mammoet’s crane and forklift operator employees commence another 28 days protected industrial action.

2 July 2010 – Woodside’s suspension application succeeds.

6 August 2010 – Woodside’s suspension application fails on appeal.

Mammoet

Impact on Woodside

The Full Bench held that the threshold for satisfying "significant harm" must be "exceptional" and out of the ordinary, and an order would not be made where the industrial action is merely causing loss, inconvenience or delay

Mammoet

Impact on Woodside A delay in the commencement of the revenue stream

from LNG sales estimated to be in the order of millions of dollars per day

an increase in the number of days it would take to complete the project and consequent costs to Woodside of $3.5 million per day to run the project and site-based services

costs from the extension of time to contractors and associated delays

costs of additional resources brought in to finish the work within the allocated contract dates

Mammoet

Related developments

Minister for Tertiary Education, Skills, Jobs andWorkplace Relations (“the Qantas Case”) [2011] FWAFB 7444; 31 October 2011

JJ Richards & Sons Pty Ltd v Fair Work Australia[2012] FCAFC 53; 20 April 2012

Total Marine Services

Mammoet

Consequences

10

10 FWA Annual Report 2011, p10.

Mammoet

Protected action ballot orders

2006-07 2007-08 2008-09 2009-10 2010-11271 574 328 981 926

Consequences

There were 53 industrial disputes starting in the September 2011 quarter, up from 43 in June 2011

The total number of employees involved in disputes grew from 14,700 in June 2011 to 66,400 in September 2

The number of working days lost per thousand employees grew from 66.2 in June to 101.3 in September 2011

The number of working days lost per thousand employees in the 12 months to September 2011 was 214.4, up from 144.1 the year before 11

11 Industrial Disputes, Australia, September 2011, Catalogue no: 6321.0.55.001, published on 1 December 2011, ABS.

Mammoet

Hydrocarbons – Offshore construction

$100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00

$1,000.00 $1,100.00 $1,200.00 $1,300.00 $1,400.00 $1,500.00 $1,600.00 $1,700.00 $1,800.00 $1,900.00

$685.04

$916.14 $963.39

$1,008.87

$1,169.68 $1,243.84

$1,318.00

$1,482.00

$1,854.00

Casual Daily Rates of Pay

Casu

al D

aily

Rat

es

2002 MUA E

BA

2003 MUA E

BA

2004 MUA E

BA

2005 MUA E

BA

2006 MUA E

BA

2007 MUA E

BA

2008 MUA E

BA

2009

MUA E

BA

2010

MUA E

BA

2010

/201

1 MUA E

BA

Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 $-

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$1,414.50 $1,510.80

$1,582.80

$1,717.00

$1,838.90

$1,982.90

$2,098.90

$2,267.40

Full time, adult, ordinary time weekly earnings, mining

Earnings, full time, adult, ordinary earn-ings, mining

12 ABS, Average Weekly Earnings, Australia, Feb 2012, catalogue number 6302.0.

12

Australian construction cost premium relative to the US for certain project types13

13 Resources projects data by Independent Project Analysis; other data from Turner & Townsend, International Construction Costs Survey 2012.

Mammoet

Mammoet

Union Strike

Woodside v CFMEU [2011] FCA 949; 22 August 2011

Chronology 27 November 2009 – Workers informed at pre-start

meeting that ‘motelling’ was to be introduced.

27 November 2009 – CFMEU official Joe McDonald held a meeting outside front gate of accommodation village, calling a motion to reconvene at 8.00am on 30 November 2009 and sit on the grass if the motelling decision was not reversed.

Union Strike

Chronology

30 November 2009 – Mr McDonald held a further meeting outside the accommodation village. Several hundred employees attended the meeting.

Mr McDonald informed the meeting that the employees present needed to decide whether they would to go on a one, two, three or seven day strike. Mr McDonald called for a vote on a motion from the floor to take strike action for 48 hours.

Union Strike

Chronology

After a show of hands from those present, Mr McDonald said words to the effect of “so we go back to work on Thursday”.

1 December 2009 – approximately 1200 employees employed by contractors at the project failed to attend for work.

2 December 2009 – approximately 1340 employees employed by contractors at the project failed to attend for work.

Union Strike

Orders

1. The first respondent, whether by itself, its employeesor its agents or otherwise howsoever, and the second respondent, whether by himself or his agents or otherwise howsoever, be permanently restrained from:

(a) engaging in any industrial action; or(b) threatening, organising, counselling, encouraging, procuring, or otherwise being involved in any industrial action by any person;

Union Strike

on or in connection with any of: (c) the Pluto LNG Project;(d) the North West Shelf Project; and(e) the Browse LNG Project;

including construction and operations, and any futureexpansions of those projects.

2. The first respondent indemnify the applicant for 25% of

all liabilities, costs (including on an indemnity basis) andexpenses which the applicant may incur as a result of orin relation to any and all claims by contractors

Union Strike

against the applicant arising out of the industrial action at

the Pluto LNG Project on 1 and 2 December 2009 to amaximum of $500,000.

3. The first respondent pay the applicant within 14 days of this order $1,500,000 as compensation for damages suffered by the applicant as a result of the above contraventions and a contribution towards its costs of

and incidental to these proceedings.

Union Strike

Employee Strike

United Group Resources Pty Ltd v Calabro (No 7) [2012] FCA 432; 2 May 2012

Chronology

20 January 2010 - At approximately 6.00 pm, a mass meeting of project employees is held outside Gap Ridge Village.

22 January 2010 - At approximately 6.30 – 7.00 am, a mass meeting of UGL and Monadelphous employees is held

Employee Strike

Chronology

23 January 2010 - Almost all of the project employees employed by the applicants fail to attend for work as rostered. Fair Work Australia orders employees to return to work.

24 January 2010 - Day of rest – no employees required to work.

25 January 2010 - At approximately 6.20 am, a mass meeting of project employees is held in the visitors’ car park at the project site.

Employee Strike

Chronology

26 January 2010 – Australia Day public holiday.

27 January 2010 - At approximately 6.30 am, a meeting of employees from the project is held at the top car park at the project site. Urgent application to Federal Court of Australia (about 1400 employees sued – out of approx 3800).

28 January 2010 - Almost all of the project employees employed by the applicants fail to attend for work as rostered.

Employee Strike

Chronology

29 January 2010 - Almost all of the project employees employed by the applicants fail to attend for work as rostered.

30 January 2010 - At approximately 5.30 am, a mass meeting of project employees is held. Following the mass meeting at 5.30 am, and at various points throughout the morning, all of the project employees return to work as rostered.

Employee Strike

Orders

1. A suspended daily penalty of $1,300 be imposed oneach respondent in respect of each day he or she contravened s 38 of the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act) and s417 and s 421 of the Fair Work Act 2009 (Cth) (FW Act).

Employee Strike

2. A suspended daily penalty of $1,200 be imposed on each respondent in respect of each day he or she contravened s 38 of the BCII Act and s 421 of the FW Act.

3. A suspended daily penalty of $1,100 be imposed on each respondent in respect of each day he or she contravened s 38 of the BCII Act and s 417 of the FW Act.

4. A suspended daily penalty of $1,000 be imposed on each respondent in respect of each day he or she contravened s 38 of the BCII Act only.

Employee Strike

5. A suspended daily penalty of $300 for respondents 817 and 825 in respect of each day they contravened both s 417 and s 421 of the FW Act but not s 38 of the BCII Act.

6. The penalties specified in orders 1, 2, 3, 4 and 5 above become immediately payable by a respondent in the event that he or she is found by a court to have contravened the BCII Act or the FW Act in respect of any conduct by that respondent at any time within seven years from the date on which these orders are made.

Employee Strike

7. Each respondent be restrained for a period of seven years from the date of these orders from doing any of

the following whenever he or she is employed or otherwise engaged by any of the applicants:

(a) engaging in or being a party to or in any way associated with or otherwise involved in any industrial action in relation to building work on the Pluto LNG Project, the North West Shelf Project or the Browse LNG Project including construction and operations, and any future expansions of those projects (Projects).

Employee Strike

Right of Entry

Mammoet

Union Strike

Employee Strike

Conclusion

No other Agreement Options

Right of Entry Permitted Matters: ADJ

Union Agreements Only

Lawful Industrial Action

Give in wages & conditions

Give inDon’t give in

Hearts & minds?

Union behaves

!

•Union control•30-60% less productive•Construction Labour Costs 5.8% per year for next 10 years•40% cost premium resources projects•200% cost premium offshore oil & gas

Yes

Unlawful industrial action: e.g. Motelling dispute

No

GFB Quagmire

Yes

Lawful industrial action

No

JJ Richards Mammoet

Almost

AMMA proposal

Exceptional: MammoetLock out: Qantas

ARBITRATION

FW Act ReviewNo alternate workplace•Patrick•GFB

Baked!

14 Pipeline or Pipe Dream, BCA 7 June 2012, pp.13, 25.

14

WoodsideSubmission to the Fair Work Act Review PanelDave Sproule, General Manager Employee Relations17 February 2012

Pipeline or Pipe Dream, BCA 7 June 2012

Further Information