Australia: A fine line: FWC rejects proposed greenfields agreements for West Gate Tunnel project

In the recent decision in Applications by CPB Contractors Pty Limited & John Holland Pty Ltd,1 the Fair Work Commission (FWC) considered whether greenfields agreements could be entered into for a major Victorian infrastructure project.

The decision examines the fine line between an employer undertaking preparatory steps in the course of establishing a new enterprise, and conducting an established enterprise, for purposes of eligibility to enter into greenfields agreements under the Fair Work Act 2009 (Cth) (FW Act).

BACKGROUND

The West Gate Tunnel Project, due for completion in 2022 and currently one of the largest infrastructure projects in Australia, will provide Victorians with an upgraded West Gate Freeway, an alternative to the West Gate Bridge, and overall greater access to the Port of Melbourne (the Project).

Undertaken by the Victorian Government and Transurban, the Project is presently at its 'design and construct' phase, and is to be completed by the successful tenderer and joint venture partners, CPB Contractors Pty Ltd (CPB) and John Holland Pty Ltd (John Holland) (collectively, the Joint Venture).

Since its appointment, the Joint Venture has been seeking to negotiate and enter into greenfields agreements with relevant unions. Applications were made to the FWC in late 2018 for approval of agreements between the Joint Venture and the Australian Workers Union and the Construction, Forestry, Maritime, Mining and Energy Union. These unions, along with the Communications, Electrical and Plumbing Union, opposed approval of the agreements.

THE LEGAL FRAMEWORK

The FW Act allows for the making of greenfields agreements by an employer or employers that are single interest employers (single-enterprise agreement), with one or more relevant employee organisations.

The agreement must relate to a genuine new enterprise that the employer or employers are establishing or propose to establish, and the employer or employers must not have employed any persons necessary for the normal conduct of that enterprise that will be covered by the agreement.2 Two or more employers are single interest employers if they are engaged in a joint venture or common enterprise,3 and a genuine new enterprise includes a genuine new business, activity, project or undertaking.4

Under amendments to the FW Act enacted in 2015, an employer that is a bargaining representative for a proposed greenfields agreement may give written notice to each employee organisation that is a bargaining representative for the agreement and state that the period of six months, beginning on a specified day, is the notified negotiation period for the agreement.5 The specified day must be a day later than the last day on which the employer gave such notice to any employee organisation.6 These amendments were introduced to address concerns from employers, especially in the resources sector, that some unions were holding out for a deal only on their terms in greenfields agreement negotiations.7

A greenfields agreement is made either:

  • when it has been signed by each employer and relevant employee organisation(s) that it is expressed to cover;8 or
  • as between the relevant employer or employers with each of the employee organisations that were bargaining representatives for the agreement, when an application is made to the Commission for approval of the agreement.9

The latter situation, opened up by the 2015 amendments and previously untested, requires there to be:

  • no signed agreement as between the employer and employee organisations;
  • a notified negotiation period for the agreement to have ended;
  • the employer(s) to have given the employee organisations a reasonable opportunity to sign the agreement; and
  • the employer(s) to have made an application to the FWC for approval of the agreement.10

To approve the proposed greenfields agreement, the FWC must be satisfied that:

  • the relevant employee organisations are entitled to represent the majority of the employees to be covered by the agreement, in relation to the work to be performed under the agreement, and it is in the public interest to approve the agreement;11 and
  • on an overall basis, the agreement provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work.12

THE APPLICATIONS BY CPB AND JOHN HOLLAND

Following its successful tender, the Joint Venture provided written notification to the relevant unions of a notified negotiation period in relation to a Tunnelling Agreement and a Civil Surface Works Agreement. Whilst subsequent negotiations took place, the Joint Venture scheduled works it considered preparatory to the establishment of its new enterprise including site establishment, foundation works and services relocation. During this period, the Joint Venture also executed a Design and Construct subcontract (the Contract), to provide the design and construction works for the Project.

Bargaining meetings and negotiations with the unions failed, leading the Joint Venture to give fresh notice of a negotiation period in respect of both Agreements. There were further attempts to reach agreement whilst the Joint Venture continued with works, including the appointment of a panel of approved labour providers and mobilising workers through a labour hire company for a particular zone of the Project.

On 9 November 2018, upon the expiration of the second 6 month notified negotiation period and being unable to reach agreement with the relevant unions, the Joint Venture applied to the FWC for approval of the Tunnelling Agreement and the Civil Surface Works Agreement. The unions opposed the approval of the Agreements primarily on the basis that they did not relate to a genuine new enterprise of the Joint Venture.

THE DECISION

Gostencnik DP agreed that neither Agreement related to a genuine new enterprise that the Joint Venture was establishing, or proposing to establish, and consequently the FWC did not have jurisdiction to approve the Agreements. Rather, as at the date the Agreements were made (in this case, 9 November 2018), the new enterprise had already been established.

The Commission confirmed that its jurisdiction depended upon establishing, on the balance of probabilities and in light of all of the evidence, that a greenfields agreement relates to a genuine new enterprise the employer is establishing or proposing to establish, and the employer has not employed any persons necessary for the normal conduct of that enterprise, that will be covered by the agreement.13 The FWC's focus is on the objective character and nature of the enterprise to which the proposed greenfields agreement will apply, and its novelty when compared to the employer's business,14 to be determined at the time the agreement is made.15

Gostencnik DP was satisfied that the entities comprising the Joint Venture were single interest employers and that its business was an 'enterprise' within the meaning of the FW Act.16 Despite reliance by the unions upon works completed prior to the Joint Venture being awarded the tender by the entities comprising it, the relevant enterprise for the Commission's consideration was the package of works for which the Joint Venture was successful tenderer and for which the Contract was executed,17 being the design and construction of the tunnels, freeway upgrade, bridges and elevated roadways and other works pursuant to the Contract.18

Whilst in this case the execution of the Contract was considered the start of the genuine new enterprise,19 the Commission recognised this might not always be the case where a contract is conditional or does not include items that require immediate performance.20

The Commission agreed with the Joint Venture that there are critical distinctions between three stages of work performed by a genuine new enterprise, being:

  1. Initial planning work prior to the establishment of the genuine new enterprise ('proposing to establish' that enterprise).
  2. Preliminary or preparatory work ('establishing' a genuine new enterprise).
  3. The substantive work of the enterprise after it is established (at which point it can no longer be considered a genuine new enterprise).21

The ultimate task for the Commission was to assess whether the activities of the Joint Venture since the execution of the Contract, and relevantly at 9 November 2018, were preparatory works done in establishing the new enterprise or (in contrast) works of an established enterprise.22 The FWC identified the true purpose of the Joint Venture to be delivering the works required pursuant to the Contract in exchange for commercial reward.23 Whilst the Commission did not accept the unions' submission that any greenfields agreements should have been in place 'long before the first shovel was turned',24 it similarly rejected the Joint Venture's contention that it was still establishing a genuine new enterprise by completing preliminary and preparatory work.25

The Commission found that in a commercial context there will be a point in time where the actual activity intended to be performed for commercial reward will commence, and at that time, the enterprise is established.26 In relation to the Joint Venture, that point had been reached and construction had 'well and truly' commenced.27

Progress reports prepared by the Joint Venture supported this conclusion and confirmed that, as at the date approval of the Agreements was sought:

  • it had completed significant piling work
  • it had claimed payment for executed works in an amount exceeding $800 million;
  • 20% of the time estimated for completion had elapsed; and
  • the total head count of those working on the Project was 1,643.28

Gostencnik DP concluded that, as a jurisdictional requirement for approval of the Agreements was not satisfied (the existence of a genuine new enterprise), the Agreements could not be approved.

IMPLICATIONS FOR EMPLOYERS

This decision highlights that employers preparing for the commencement of a new business, activity, project or undertaking need to carefully consider the timing of negotiations with relevant employee organisations, in light of any actual or likely contractual obligations they may have to complete work and meet project deadlines.

Additional consideration should be given to the nature of activities able to be completed (without commencing the actual work or business of the new enterprise) whilst attempting to negotiate an enterprise agreement – especially where agreement is unlikely and it will be necessary to invoke the statutory six-month negotiating period before making an application to the Commission for approval of the agreement.

More broadly, the unions involved in this case have used it to argue that the rules for greenfields bargaining introduced by the 2015 amendments were simply intended to advance employers' interests, and that the Joint Venture sought to use the amendments to force an ultimatum on the unions and keep them out of the West Gate Tunnel project.29

However, it should be noted that the option made available to employers by the 2015 amendments – to initiate the six-month negotiating period, then (if no deal is reached) apply to the FWC for approval of their proposed agreement – has been little-utilised in practice.

A review of these new provisions in late 2017 supported the retention of a mechanism to resolve protracted greenfields bargaining disputes, but recommended that the six-month negotiating period should be reduced to three months:

... the six-month period is too long to be a satisfactory circuit breaker. This concern is exacerbated when the period before a notification and the period after an application to the Fair Work Commission to approve an agreement are taken into account. It represents an unreasonable period of uncertainty which has the real potential to stop or disrupt a major resource development proposal from proceeding or to severely disrupt and delay these projects or businesses that wish to participate in them.30

The Federal Government has not yet acted to implement the review's recommendations. In the pre-election context, the union concerns expressed above are likely to feed into the ACTU's wider 'change the rules' narrative. Unions can be expected to push Labor to take steps to change the greenfields bargaining framework. The ALP has not specifically addressed this issue in its policy pronouncements to date.

Overall, it is worth keeping in mind the review report's endorsement of the continued need for effective and efficient greenfields bargaining processes:

The information available to the review confirmed the significance of greenfields agreement making in the infrastructure construction sector and particularly where joint ventures were formed for specific projects. In these areas, greenfields agreements are commonly sought to allow a project to commence and conclude on a stable and secure basis.31

Footnotes

1 [2019] FWC 1122 (21 February 2019).

2 FW Act ss 172(2)(b), 172(4).

3 Ibid s 172(5).

4 Ibid ss 12, 172(2).

5 Ibid s 178B(1).

6 Ibid s 178B(2).

7 See e.g. the Report of the 2012 Fair Work Act Review.

8 FW Act s 182(3).

9 Ibid s 182(4).

10 Ibid.

11 Ibid s 187(5).

12 Ibis s 187(6).

13 [2019] FWC 1122 [48] citing National Union of Workers, New South Wales v HP Distribution Pty Ltd (2013) 210 FCR 250, 261 [34].

14 [2019] FWC 1122 [48] citing National Union of Workers, New South Wales v HP Distribution Pty Ltd (2013) 210 FCR 250, 261 [34] and Patrick Cargo Pty Ltd & Transport Workers' Union of Australia (2002) 115 IR 443, 446-447.

15 [2019] FWC 1122 [49].

16 Ibid [50].

17 Ibid [56].

18 Ibid [58].

19 Ibid.

20 Ibid [70].

21 Ibid [61]-[63].

22 Ibid [69].

23 Ibid [70].

24 Ibid [71].

25 Ibid [60], [75].

26 Ibid [78].

27 Ibid [86].

28 Ibid [87], [88].

29 'Major project to make first use of revised greenfields regime', Workplace Express, 17 December 2018; 'First bid for unilateral greenfields deal fails', Workplace Express, 22 February 2019.

30 Australian Government, Department of Jobs and Small Business, Greenfields Agreements Review (Matthew O'Callaghan, 27 November 2017), page 36. The Report is available at: https://docs.jobs.gov.au/system/files/doc/other/jsb18-0008_greenfields_agreements_review_b5_final_-_accessible.pdf

31 Ibid, page 18.

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.

Chambers Asia Pacific Awards 2016 Winner – Australia
Client Service Award
Employer of Choice for Gender Equality (WGEA)

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions