Industrial action suspension overturned by FWA Full Bench

Background

In our 2 July 2010 Employee Relations Alert we informed you about the first decision of Fair Work Australia (FWA) suspending protected industrial action due to third party harm under section 426 of the Fair Work Act 2009 (Cth) (FW Act).¹

Mammoet Australia Pty Ltd (Mammoet) was engaged by Woodside Burrup Pty Ltd (Woodside) to perform heavy lift and provide transportation services on the Pluto construction project. Mammoet commenced bargaining with a group of 12 of its employees who were engaged as crane drivers and forklift drivers for an Enterprise Agreement (Agreement) under the FW Act in January 2010. The Construction, Forestry, Mining and Energy Union (CFMEU) was acting as bargaining representative for the employees.

Following a period of over six weeks’ industrial action, Woodside and Kentz E&C Pty Ltd (Kentz) applied to FWA under section 426 for an order to suspend the protected industrial action.

On 30 June 2010, Deputy President McCarthy issued an order that the protected industrial action be suspended for a period of three months.² His Honour then issued reasons for his decision on 2 July 2010.³

Appeal by the CFMEU

On 20 July 2010, the CFMEU appealed against the decision and order of Deputy President McCarthy, claiming:

• there was insufficient evidence to satisfy FWA that industrial action was threatening to cause significant harm to a third party
• the bar for proving ‘significant harm’ had been set too low, and
• the period of the suspension amounted to a termination of protected industrial action.

Full Bench decision

The Full Bench, consisting of Vice President Lawler, Deputy President Ives and Commissioner Roe, considered that Deputy President McCarthy’s decision did not give effect to the intention of section 426, nor the objects of the FW Act. The Full Bench considered that the intent of section 426 was that protected industrial action would only be suspended in ‘exceptional circumstances’.⁴

In considering the impact of a suspension in circumstances where Mammoet employees only had 6–8 weeks’ work left on the project, the Full Bench placed significant reliance on the fact that a three-month suspension would likely terminate the ability of Mammoet employees to take protected industrial action. The Full Bench pointed out that where protected industrial action was terminated under sections 423, 424 or 431, rather than suspended under section 426, FWA was obliged to arbitrate the remaining matters in issue between the parties and that:

a workplace determination represents a benefit that accrues to employees when the ‘right’ to take industrial action is removed⁵

The Full Bench decided that it was an important consideration that this type of benefit is unavailable when protected industrial action is suspended on the basis of significant harm to a third party.

The Full Bench also considered the objects of the FW Act, particularly section 3(f):

(f) achieving productivity and fairness through an emphasis on enterprise-level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action.

Further, in consideration of the ‘right’ to take protected industrial action, the Full Bench considered Australia’s obligations under the International Labour Organisation Conventions relating to the right of employees to bargain collectively. The Full Bench found that these objects, together with the ambiguity inherent in the phrase ‘significant harm’, enlivened the entitlement to have regard to the Explanatory Memorandum under the Acts Interpretation Act 1901 (Cth).⁶

Following an examination of the Explanatory Memorandum, the Full Bench observed that:

effective industrial action will almost always cause harm to the employer’s business which, in turn, will frequently adversely affect third parties

This led the Full Bench to consider that the power under section 426 was intended to be used only in exceptional circumstances. The Full Bench considered that ‘significant harm’ must be construed to mean:

harm that has an importance or is of such consequence that it is harm above and beyond the sort of loss, inconvenience or delay that is commonly a consequence of industrial action

and further that:

It will not, of itself, be sufficient that the harm, viewed in isolation, can be characterised as ‘substantial’…Unless the harm is out of the ordinary then suspension would [be] contrary to the legislative intention.

On a review of the evidence at first instance and further evidence filed by the parties to the Appeal, the Full Bench did not consider that the industrial action of Mammoet employees was threatening to cause ‘significant harm’ to either Woodside or Kentz.

Issues of particular importance to the Full Bench included that:

• the remaining scheduled works of Mammoet could be undertaken by other contractors should Mammoet employees recommence industrial action⁷
• the harm complained of by Kentz and Woodside was the sort of harm likely to be complained of in any situation where industrial action affected the critical path of a major construction project⁸
• the identity of who would ultimately bear the costs of delays was unclear⁹, and
• Woodside was an unusual ‘third party’ due to its contractual relationship with the employer of the employees taking action.¹⁰

The Full Bench also noted that even if the ‘significant harm’ threshold had been met, the Full Bench would have sought to explore measures available to Woodside to mitigate the effect of the protected industrial action.

Implications

The decision substantially raises the bar set by Deputy President McCarthy at first instance. This decision provides guidance as to the tests that will be applied by FWA in assessing whether to order the suspension of protected industrial action on the basis of the threat of significant harm to third parties.

If a third party is being impacted by protected industrial action, it is necessary to consider:

• whether the threatened impact of the industrial action is ‘out of the ordinary’ or ‘rare’ or gives rise to ‘exceptional circumstances’
• the ability of the third party to mitigate any threatened harm
• the impact of the suspension on the ‘right’ of employees to take industrial action
• the status of negotiations, and
• the quantum of the threats to the third party’s business against the value of claims being pursued by employees.

The decision of the Full Bench limits the circumstances in which section 426 can be relied on by third parties when affected by protected industrial action. Third parties may need to look to other strategies and contingency planning in the event that protracted industrial action has the potential to affect their operations. 

The decision is of particular significance to construction projects as it suggests that this type of dispute affecting critical path is commonplace on large construction projects and will not meet the ‘significant harm to a third party’ test to justify suspension of protected industrial action.¹¹

This article was written by Russell Allen, Partner and Drew Pearson, Senior Associate, Perth. Drew Pearson appeared in the proceedings for Kentz.

Endnotes

1. Employee Relations Alert 2 July 2010, ‘Third party harm stops protected industrial action’ 
2. The Mammoet Australia Pty Ltd Pluto Project Suspension Order 30 June 2010 is available from Fair Work Australia 
3. Woodside Burrup Pty Ltd & Kentz E & C Pty Ltd v Construction, Forestry, Mining and Energy Union [2010] FWA 4880 
4. CFMEU v Woodside Burrup Pty Ltd and Kentz E&C Pty Ltd [2010] FWAFB 6021 
5. See the decision at [31] 
6. Section 15AB(1)(b)(i), referred to at [38] 
7. See the decision at [54] 
8. See the decision at [55] 
9. See the decision at [56] 
10. See the decision at [57]–[59]
11. It has been reported that crane and forklift drivers employed by Mammoet have since reached an agreement with their employer. Whilst the terms of the agreement have not been reported, the CFMEU has ‘withdrawn the threat of further industrial action’.

More information

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