Right of casuals to make enterprise agreements clarified - Contract of Employment

In January 2016, McDermott Australia Pty Ltd and its entirely casual workforce made a project-specific enterprise agreement. Approval of the agreement was successfully challenged by two unions, on the basis that a casual employee must be performing work at the time the vote occurs to be eligible to vote. However, this decision was overturned on appeal.

In this In Brief, we examine the decision of the Full Bench of the Fair Work Commission in McDermott Australia Pty Ltd v AWU & AMWU [2016] FWCFB 2222 (19 April 2016). ¹

BACKGROUND

McDermott Australia Pty Ltd is currently delivering an engineering, procurement, construction and installation solution for one of the largest subsea gas field developments in the world – INPEX's Ichthys LNG Project. The Ichthys Project is located approximately 220 kilometres offshore from Western Australia, and is currently ranked as one of the most significant oil and gas projects in the world.

In August 2015, the McDermott Australia Pty Ltd Western Australia and Northern Territory Offshore Construction Projects Agreement 2012-2015 passed its nominal expiry date.

On 15 December 2015, McDermott Australia Pty Ltd issued a notice of representational rights and began negotiating with its entirely casual workforce for a project-specific enterprise agreement for the Ichthys Project.

After an intense bargaining period, a vote was held on 6 and 7 January 2016 and a majority of the 36 casual employees supported the McDermott Australia Pty ltd Ichthys Project Offshore Construction Agreement 2016 (Ichthys Agreement).

McDermott applied to the Fair Work Commission (Commission) for approval of the Ichthys Project Agreement.

The Australian Workers' Union (AWU) and the Australian Manufacturing Workers' Union (AMWU) opposed the approval of the agreement on the basis that the Commission could not be satisfied that:

the employees genuinely agreed to the Ichthys Agreement; and
the application was not accompanied by a signed copy of the agreement because the signatory was not an authorised representative within the meaning of the Fair Work Act 2009 (Cth) (FW Act).

DECISION AT FIRST INSTANCE

On 3 February 2016, the Commission held a hearing to determine whether or not the Ichthys Agreement should be approved. During that hearing Lee C delivered his judgment and dismissed the application for approval of the Ichthys Agreement because he was not satisfied that it was made in accordance with section 182(1) of the FW Act.

On 25 February, Lee C provided his reasons for his decision.² The Commissioner applied the reasoning of Jessup J in National Tertiary Education Industry Union v Swinburne University of Technology [2015] FCAFC 98, and held that agreement could not be approved because the employees who were asked to vote on the Ichthys Agreement were not 'employed at the time' within the meaning of that phrase in section 181 of the FW Act.

Lee C found that the employees were casual employees in the "ordinary sense of being daily hire employees."³ Therefore, because none of those employees were actually engaged in work or being paid on 6 and 7 January 2016 (ie. the time of the vote), they were not employed at the time.

THE ISSUE – WHEN IS A CASUAL EMPLOYED?

McDermott is an offshore construction employer with a wholly casual workforce. In accordance with industry practice, McDermott has two full sets of employees to work on the Ichthys Project on a 21 days off, 21 days on roster cycle. Construction operates for 24 hours, therefore one set of employees works for three weeks in 12 hour rotations. These employees are then replaced by a second set of employees who perform the same roster while the first set of employees are on R&R.

At no time are all McDermott's employees performing work and being paid at the same time. Accordingly, McDermott sought clarity on the process for approval of the Ichthys Agreement by its casual workforce, and appealed Lee C's decision to the Full Bench of the Fair Work Commission.

THE APPEAL

The Full Bench, consisting of Vice President Catanzariti, Deputy President Bull and Commissioner Williams, allowed McDermott's appeal and approved the Ichthys Agreement.

The Full Bench found that Lee C had erred in his reading of the Swinburne⁴ decision and in his decision to narrowly focus on one upcoming campaign on the Ichthys Project:

The Commissioner was of the view that there was something wrong with the vote occurring while employees were not actually performing or being paid for performing work at the time of the vote. This in our view is incorrect; the status of the 36 casual employees at the time of the vote is a natural and expected phenomenon of being employed on a casual contract ... . In our view it would be inappropriate or counter intuitive to disenfranchise casual employees of a right to vote on an agreement that determines their wages and conditions on the basis that they were not rostered on to work on the day/s of the vote ... . There are obvious implications for voting manipulation adopting this approach.⁵

The Full Bench found that, unlike in Swinburne, McDermott had a legitimate and necessary reason for the 36 employees to be asked to vote on the Ichthys Agreement. In reaching this decision the Full Bench took into consideration the following factors:

The 36 employees had been offered ongoing casual work with McDermott on the Ichthys Project and were on McDermott's payroll.
All of the 36 employees had undertaken paid training specifically to perform work on the Ichthys Project.
Most of the 36 employees had already performed work for McDermott on other Ichthys Project campaigns offshore.
None of the 36 employees had resigned, had their employment terminated or had said they were unavailable to perform work on the Ichthys Project.

It was for these reasons that the Full Bench held that the appeal grounds must succeed, and Lee C had erred in finding that the Ichthys Agreement had not been genuinely agreed to.

The Full Bench also considered the issue of the signatory to the Agreement. The Full Bench held that a signatory does not have to be a voted representative of the employees, rather the natural and ordinary meaning of the words in regulation 2.06A(3) of the Fair Work Regulations 2009 (Cth) is that it is sufficient if the signatory is an employee in a class of employees who will be bound by the Agreement.⁶

A separate decision was issued in conjunction with the Full Bench decision, approving the Ichthys Agreement.

IMPORTANCE OF THE MCDERMOTT DECISION FOR EMPLOYERS

The McDermott decision provides some clarity to those employers who employ casual employees, while also highlighting the difficulties that can be faced during enterprise bargaining.

With that in mind, employers should carefully consider and assess the composition of their workforce at all stages during the enterprise bargaining period.

This includes the point when the notice of employee representational rights is issued to employees, and again at the start of the 7-day access period (when information is provided to employees prior to voting on an agreement).

Employers need to ensure that they have legitimately assessed which employees are 'employed at the time' and therefore are entitled to vote on the agreement.

Footnotes

¹ Corrs' Perth Workplace Relations Team acted for McDermott in the approval proceeding and the appeal .

² [2016] FWC 1113.

³[2016] FWC 1113 at [26].

⁴National Tertiary Education Industry Union v Swinburne University of Technology [2015] FCAFC 98 (17 July 2015).

⁵ [2016] FWCFB 2222 at [35] (footnote omitted).

⁶[2016] FWCFB 2222 at [41]-[57].

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