Australia: Emerging issues for the Australian resources and energy sector in 2018

WHO SHOULD READ THIS

  • All resource and energy companies and contractors operating or developing projects in Australia.

THINGS YOU NEED TO KNOW

  • This article highlights the legislative and policy developments over the past 12 months which will significantly affect the Australian resources and energy industry going forward, with a specific focus on the resource rich states in Australia.

WHAT YOU NEED TO DO

  • Start looking now at the impacts these emerging issues could have on current or proposed projects.

A range of legislative and policy reforms were introduced over the past 12 months which may significantly impact on Australia's resources and energy sector during 2018. This publication identifies a number of emerging issues where we expect to see further policy development this year.

INDUSTRY TRENDS

Over the past two years the Australian resource and energy sectors have experienced growth and an increase in mergers and acquisitions (M&A) activity. This trend is generally attributed to increased commodity prices and changes in the long-term strategic direction of many companies that were traditionally heavily invested in the coal sector. Over the last year we have seen many of the large international mining houses including Rio Tinto and Wesfarmers engage in significant divestment of their Australian projects to further their investment and diversify into other industries and minerals. This trend has seen a substantial increase in M&A transactions in the resources industry and has created opportunities for companies which have historically had a smaller presence in the sector. Various offshore private equity funds continue to be very active in the M&A space.

This shift in industry players as well as other factors has resulted in an increase in single asset acquisitions and the use of alternative transaction structures. Different purchase price mechanisms are being used, such as royalty arrangements and vendor support for rehabilitation bond requirements. Infrastructure sharing arrangements have also been adopted to make use of latent capacity and to take advantage of increasing efficiencies in ways that have not previously been utilised. Factors influencing these structuring decisions include industrial relations concerns that have the potential to cause reputational damage, a desire to release capital that would previously have been tied up in infrastructure and taxation implications.

2017 also saw a significant increase in investment in the renewable energy sector, with numerous new projects both proposed and commenced. Although Queensland appears to be epicentre for this new investment, particularly in the large scale PV solar space, other states like South Australia have benefited from significant state assisted battery investment.

This wave of new investment has been predominantly led by international investors seeking to capitalise on Australia's rapidly developing renewables sector and the Renewable Energy Target scheme which will be closed to new entrants from 2020.

WORK HEALTH & SAFETY AND INDUSTRIAL RELATIONS

Labour hire reforms in Queensland – Similar reforms in South Australia and Victoria

In 2017, the Queensland Government passed the Labour Hire Licensing Act 2017 (Qld) (Labour Hire Licensing Act) which was Australia's first licensing system for the labour hire industry and which commenced on 16 April 2018. The Queensland labour licensing legislation has since been followed by the introduction of similar legislation in South Australia.

The Labour Hire Licensing Act provides that:

  • a person who wants to provide 'labour hire services' will need a licence to do so. This licence will need to be renewed annually
  • labour hire services' is broadly defined to mean supplying to another person a worker to do work. Examples of labour hire services providers include contractors who supply workers to a farmer or fruit growers to pick produce. It could also capture an employer which seconds an employee to another business, and
  • a person will provide labour hire services regardless of:
    • whether or not the worker is an employee of the provider
    • whether or not a contract exists between the worker and provider
    • whether the worker is supplied to another person directly or indirectly, and
    • whether the work done is under the control of the provider.

Regulations prescribe classes of individuals who are not considered to be 'workers' for the purposes of the Act. Importantly, these are:

  • an employee:
    • whose annual rate of earnings exceeds the high income threshold under the Fair Work Act 2009 (Cth) (currently $142,000 base remuneration per annum), and
    • who is not covered by either a state award, a modern award or an enterprise agreement
  • an executive officer (usually a sole director) of a corporation who is the only employee supplied to perform work
  • an in-house employee of a provider who is supplied on a temporary basis on one or more occasions. An in-house employee is defined as an employee who is engaged on a regular and systematic basis with a reasonable expectation of continued employment, and where they primarily perform work for the provider other than as a labour hire worker, and
  • an individual who is provided to another person who is part of a group of entities that carry on a business collectively as one recognisable business (the group company exception).

This means that businesses which only engage individuals who fall within these exemptions will not be providers of labour hire services and therefore will not need to obtain a licence.

Prohibited conduct and offences

The following actions are prohibited under the Labour Hire Licensing Act and attract the following penalties:

  • providing labour hire services without a licence will attract a maximum penalty of $378,450 for a corporation
  • entering into an arrangement with a labour hire provider who does not have a licence is prohibited will attract a maximum penalty of $378,450 for a corporation, and
  • entering into an 'avoidance arrangement' will attract a maximum penalty of $378,450 for a corporation.

Applications, renewals and cancellations

Matters to consider when making an application for a licence or seeking renewal of a licence include:

  • the applicant must be a fit and proper person, which will include consideration of:
    • the person's character, for example, the person's honesty, integrity and professionalism
    • whether the person has a history of compliance with 'relevant laws' (those which impose obligations on the person in relation to workers, such as record keeping obligations) and is able to demonstrate an ability to comply with such laws
    • whether the person has previously held a licence that has been cancelled or suspended, or had conditions imposed
    • whether the person has been convicted of an offence against a relevant law or another law that affects their suitability to provide labour hire services
    • whether the individual has been insolvent or a corporation has been placed into administration, receivership or liquidation while the person was an executive officer of the corporation
    • whether the person has been disqualified from managing corporations under the Corporations Act 2001 (Cth) (Corporations Act), and
    • whether the person is under the control of, or substantially influenced by, another person considered not to be a fit and proper person to supply labour hire services.
  • if the licence applicant is a corporation, each individual concerned with the management of the corporation (this is broader than just directors) must be a 'fit and proper person' and the corporation must be financially viable
  • licences have a maximum one year term and can be granted subject to conditions
  • a licence may be suspended or cancelled. If a licence is proposed to be cancelled, the licensee must be issued with a show cause notice to allow a written response prior to cancellation in specified circumstances, and
  • if an individual has their licence cancelled, they may not apply for a licence for two years after the cancellation. If a corporation (or any of its related bodies corporate) has had its licence cancelled, it cannot apply for a licence unless, because of a genuine sale, the shareholding and control of the corporation has completely changed.

Reporting and inspections

Under the Labour Hire Licensing Act, the licensee must comply with extensive reporting requirements, including reporting on the arrangements between the licensee and workers, the locations and accommodation of workers, and any disciplinary action or enforcement action taken against the licensee by the regulatory body.

Inspectors will have broad powers to enter a labour hire provider's workplace and will have a wide array of powers once at the premises, including searching the premises, taking equipment to the premises and removing things or documents from the premises.

What this means for the industry

The introduction of labour hire regulation in Queensland will create significant new regulatory hurdles and potential penalties for labour hire employers that operate in the State. Businesses which engage unlicensed providers will also be exposed to significant penalties. All operators must make an application for a licence by 15 June 2018.

Other jurisdictions

South Australia has enacted its own labour hire legislation and a bill is currently before the Victorian Parliament. The schemes are very similar in their scope and application to the Queensland legislation.

Fly-in-fly-out reforms

The Strong and Sustainable Resource Communities Act 2017 (Qld) (FIFO Act) was assented to on 31 August 2017. The FIFO Act includes:

  • prohibitions affecting Queensland resources projects that utilise 100 per cent fly-in, fly-out (FIFO) workers
  • anti-discrimination provisions aimed at protecting workers in regional communities, and
  • strong powers for the Coordinator-General to administer the Act and ensure compliance.

Importantly, there is now a requirement that recruitment of workers must occur from the hierarchy of priority areas, as provided for in the workforce management considerations section of the Social Impact Assessment (SIA). The hierarchy that appears in the FIFO Act requires recruitment of workers from local and regional communities, and then from workers who will live in regional communities. The FIFO Act applies to all current and future 'large resource projects' within 125 km of a nearby community.

Also under the FIFO Act, the Coordinator-General can require the owner of a large resources project to prepare an operational workforce management plan (OWMP) if satisfied that the owner has contravened the 100 per cent FIFO prohibition. The Coordinator-General can make a guideline for OWMPs, which is to be published on the Department's website.

In practice, the 61 'large resource projects' which are currently on foot in Queensland should be able to satisfy the "no 100% FIFO" rule. While the prohibition was applied unexpectedly to all existing 'large resource projects', the Coordinator-General is not expected to make inquiries of current projects, but the mining unions can be expected to 'police' these new requirements. The Construction, Forestry, Maritime, Mining and Energy Union can be expected to closely scrutinise the use of FIFO workforces at a number of Queensland mine sites. The mining unions can also be expected to support workers who claim that they were discriminated against if unsuccessful in securing a position at a mine.

Accordingly, industry operators affected by this change will need to consider the best approach for fatigue management for shift workers driving from regional communities, an issue which was the subject of Coronial Inquest findings handed down on 23 February 2011.

Steps for managing potential anti-discrimination claims will also need to be considered. Relevantly, a discrimination claim may be made against the owner or principal contractor for the project where a person alleges that they were not offered work because they were a resident of a nearby community, or that their employment was ended because they were, or became, a resident of a nearby regional community and chose to travel to the project other than as a FIFO worker. In such claims it will be presumed that the alleged discrimination occurred, unless the owner or principal contractor proves otherwise. Complaints that cannot be resolved by conciliation can be referred to the Queensland Industrial Relations Commission for determination.

Given the strong stance taken by unions supporting these changes, it can be expected that these provisions are likely to be tested. As such, putting in place processes to ensure that decisions made about these matters do not breach these new requirements, and are properly evidenced in case challenged, will be important.

Overhaul of working visa regime

The Department of Home Affairs was established in December 2017, and is responsible for the management of immigration to Australia. There have been changes to many Australian working visas over the last 12 months, most notably:

  • the Temporary Work (Skilled) visa (subclass 457) (457 visa) was abolished in March 2018, and is now closed to new applicants
  • the Temporary Skill Shortage visa (subclass 482) (TSS visa) came into effect in March 2018. Employers should note that:
    • Standard Business registration now lasts for 5 years (even for start-ups and overseas businesses)
    • occupations on the list of eligible skilled occupations are being updated every 6 months
    • occupations are either on the STSOL (TSS visa will be granted for 2 years) or the MTSSL (TSS visa will be granted for 4 years)
    • visa applicants are required to have worked in their nominated field or a related field for at least two years prior to applying for the visa
    • there are limitations on applying for a TSS visa in the STSOL stream from within Australia
    • costs have substantially increased – STSOL application charges start from AUD 1150 and MTSSL application charges start from AUD2400
    • legislation is currently before Parliament to introduce a mandatory levy payable by employers to the Skilling Australia Fund (which will replace Training Benchmarks), and
    • changes to Labour Market Testing requirements are also likely to be made in 2018.
  • there have been some changes to permanent residency visas, most notably:
    • reduction in age for all streams of the Employer Nomination Scheme (subclass 186) and Regional Skilled Migration Scheme (subclass 187), requiring all visa applicants to be under 45 years at time of application (unless one of the very limited exemptions apply)
    • residency period to transition from the 457 or TSS visas is now 3 years (formerly 2 years)
    • at least 3 years' work experience is required, and
    • for the Direct Entry stream, generally a skills assessment will also be required.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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This article is part of a series: Click Emerging issues for the Australian resources and energy sector in 2018: Part 2 for the next article.
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