ATTACHMENT A - docs.employment.gov.au · Web viewSee for example: Submission to the Fair Work Act Review Panel by Dr Graham Smith (paragraph 16, page 4); Submission to the Fair

SUBMISSION TO THE FAIR WORK ACT REVIEW PANEL

Dave Sproule, General Manager Employee Relations

17 February 2012

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(electronic or otherwise) without the specific written consent of Woodside. All rights are reserved.

Submission to the Fair Work Act Review Panel [Insert confidentiality information]

Table of Contents

1. INTRODUCTION 3

1. ABOUT THE WOODSIDE GROUP 3

1.1 PEOPLE 4

1.2 MAJOR PROJECTS 4

1.3 DEVELOPMENTS 5

2. EXPERIENCE OF WORKPLACE RELATIONS UNDER THE ACT 5

2.1 BARGAINING - PLUTO LNG PROJECT 5

2.2 BARGAINING - KARRATHA GAS PLANT 7

2.3 RIGHT OF ENTRY - PLUTO LNG PROJECT 7

2.4 RIGHT OF ENTRY - KARRATHA GAS PLANT 8

2.5 UNPROTECTED INDUSTRIAL ACTION AT PLUTO 8

3. UNSATISFACTORY OUTCOMES IN INDUSTRIES IN WHICH WOODSIDE'S CONTRACTORS OPERATE 9

3.1 UNSUSTAINABLE WAGE CLAIMS 9

3.2 BARGAINING REPRESENTATIVES 10

4. ISSUES WITH THE ACT 10

4.1 AGREEMENT MAKING 10

4.2 CONTENT OF AGREEMENTS 11

4.3 RIGHT OF ENTRY 11

4.4 INDUSTRIAL ACTION 11

5. THE ACT IS NOT OPERATING IN ACCORDANCE WITH ITS OBJECT 12

6. SUGGESTED IMPROVEMENTS 12

6.1 EXPANDED AGREEMENT OPTIONS TO FACILITATE EFFECTIVE AGREEMENT MAKING 12

6.2 IMPROVED BARGAINING RULES 13

6.3 LIMITATION ON THE CONTENT OF AGREEMENTS 13

6.4 PROTECTED INDUSTRIAL ACTION 14

6.5 UNLAWFUL INDUSTRIAL ACTION 15

6.6 RIGHT OF ENTRY 15

6.7 UNION REPRESENTATION 15

DRIMS #7924668 Page 2 of 16 17 February 2012


7. CONCLUSION 16

1. INTRODUCTION

Woodside Energy Ltd (Woodside) welcomes the opportunity to make a submission to the Fair Work Act Review Panel, as we consider the effective operation of Australia's workplace relations system to be critical to the continuing viability and success of our business. The legislative framework governing workplace relations is a significant factor in Woodside's further investment decisions, and continued contribution to the Australian economy.

In this submission Woodside provides evidence of our own experience, and the experiences of Woodside's contractors, of the industrial relations framework under the Fair Work Act 2009 (Cth) (Act). Woodside identifies a number of unsatisfactory outcomes, which have arisen as a result of shortcomings of the Act and which demonstrate that the Act is not currently operating in accordance with its objects. Finally, Woodside suggests a number of ways in which the Act could be improved to address the identified problems, and better meet the object of the Act.

1. ABOUT THE WOODSIDE GROUP

Woodside is the largest operator of oil and gas production in Australia. We are also Australia’s largest independent dedicated oil and gas company. Throughout Woodside’s 57 year history, we have strived for excellence in our safety and environmental performance and we aim to ensure that wherever we operate, the community benefits from our presence.

Woodside produces around 700,000 barrels of oil equivalent each day from an extensive portfolio of facilities which we operate on behalf of some of the world’s major oil and gas companies. Our operated facilities include six liquefied natural gas (LNG) trains1, four offshore platforms2 and four oil floating production storage and offloading (FPSO)facilities. To build them today would cost more than US$80 billion.

We are the most active exploration company in the deepwater provinces of Australia, having participated in around 40% of Australia’s deepwater exploration wells. We have been operating our landmark Australian project, the North West Shelf Project, for more than 27 years and it remains one of the world’s premier LNG facilities. Woodside is one of the world’s largest non-government operators of LNG plants.

The natural gas we produce and market, helps meet the demand for cleaner energy from our customer countries, including Australia, Japan, China, Republic of Korea and other countries in the Asia Pacific region.

In 2012, Woodside will begin production from the Pluto LNG Project. At full capacity, it will add more than 100,000 barrels of oil equivalent a day to our operated production. We are seeking to expand the Pluto facilities and build new standalone projects including our Browse and Sunrise LNG developments.

Woodside’s contribution to the Australian economy is significant. In 2010 Woodside’s total expenditure was approximately US$4.5 billion. Of this amount, approximately 83% was spent in Australia on materials, goods and services purchased, employee payroll and training, and capital and exploration expenditure. In addition more than US$1.1 billion was paid in royalties, excise and taxes to governments, most of which was paid to the Australian Government.

Woodside also delivers broader societal benefits by employing people, paying wages, investing in the skills of its people, paying taxes to governments, purchasing goods and

1 Five LNG trains in operation and one in the commissioning phase. 2 Three platforms in operation and one in the commissioning phase.



services through its supply chain and producing products that satisfy the needs of its customers.

1.1 People

Woodside directly employs more than 3,800 employees in Australia. In addition, many thousands of employees are engaged by contractors in Woodside operations in Australia.

Woodside's workplace culture has developed from core principles of strong performance, care and respect, integrity and trust, initiative and accountability, creativity and enterprise, and working together.

Woodside has a history of innovative workplace arrangements, including the establishment of market leading terms and conditions for its employees, and utilisation of a wide range of industrial agreement making options under prevailing legislation, including some of the first enterprise flexible agreements under the Industrial Relations Act 1988 (Cth).

Woodside's approach to workplace relations is not driven by a particular ideology, but by finding practical solutions that benefit all stakeholders. Woodside has traditionally approached workplace relations with a view to working cooperatively with employees and their representatives. For example, Woodside has demonstrated a willingness to engage with unions to deliver continuity of operations and supply. Woodside is also a party to a number of industrial agreements, including agreements which involve union parties.

1.2 Major Projects

North West Shelf Project

Woodside is one of six participants in Australia's largest oil and gas resource development, the A$27 billion North West Shelf Project. The project is located in the Carnarvon Basin on Australia's North West Shelf. It currently accounts for approximately 40% of Australia's oil and gas production and generates revenue equivalent to approximately 1% of Australia's GDP.

Woodside operates the Karratha Gas Plant on behalf of the North West Shelf Venture. The Karratha Gas Plant is located 1,260km north of Perth, Western Australia. It consists of five LNG processing trains, two domestic gas trains, six condensate stabilisation units, three fractionation units and storage and loading facilities for LNG, liquefied petroleum gas and condensate.

The North West Shelf Project's offshore production facilities include the North Rankin A and Angel platforms, and the oil producing Okha FPSO facility. Hydrocarbons from the offshore production facilities are transported to the Karratha Gas Plant for processing via two subsea pipelines. Oil produced from the Cossack, Wanaea, Lambert and Hermes fields is processed offshore on the Okha facility.

Approximately 1,000 people are employed by Woodside or its contractors at the Karratha Gas Plant onshore operations, North West Shelf Venture offshore operations and at offices in Perth. In addition, approximately 450 mariners are employed on the North West Shelf Project's LNG shipping fleet.

Pluto LNG Project

The Pluto gas plant is located near Karratha, Western Australia. The project was approved for development in July 2007 and construction started in November 2007.

The first LNG cargo from Pluto is targeted for March 2012. Gas will be piped in a 180km trunkline to the onshore facility, located between the North West Shelf Project and Dampier Port on the Burrup Peninsula.

The offshore facilities at Pluto currently comprise an offshore platform which is connected to five subsea wells on the Pluto gas field. The onshore facility comprises the plant and



associated infrastructure, a single LNG processing train and storage and loading facilities, including two LNG tanks and a condensate export jetty.

The Pluto LNG Project involved approximately 15,000 workers during construction with a peak workforce of around 4500, and it is expected that approximately 300 workers will be employed by Woodside or its contractors during operations.

Australia Oil

Woodside’s oil fields (owned and/or operated) in the Exmouth Basin, North West Shelf and the Timor Sea produced 19.7 million barrels of oil in 2010 – about 27% of Woodside’s total production.

Woodside owns and operates four FPSO facilities and also holds a minority stake in the Mutineer-Exeter oil fields north of Dampier.

1.3 Developments

Woodside’s future developments include the expansion of the Pluto LNG Project, and two stand-alone LNG projects – Browse in Australia’s Kimberley region and Sunrise off the northern coast of Australia.

2. EXPERIENCE OF WORKPLACE RELATIONS UNDER THE ACT

Woodside has considerable direct experience of workplace relations processes and outcomes since the commencement of the Act. Woodside has not traditionally sought to rely on legislation dealing with employment related matters in setting our preferred approach to direct engagement of our people and our workplace relations generally. However, the legislative environment has the potential to significantly influence the possible outcomes.

In this submission, we seek to identify a number of workplace relations outcomes which Woodside considers to be unsatisfactory, and how, in our experience, the workplace relations framework under the Act has directly contributed to those outcomes.

2.1 Bargaining - Pluto LNG Project

The initial stages of construction work on the Pluto LNG Project were governed by the former Workplace Relations Act 1996 (Cth). In Woodside's view this significantly contributed to underlying structures that were consistent with generally stable workplace relations on the project. In particular, prior to the commencement of work on the project, contractors were generally able to establish a set of market leading terms and conditions of employment in secure industrial arrangements that covered the length of their work on the project, utilising the range of industrial instruments available under the former legislation, including employer greenfields agreements.

Woodside and its contractors were open to unions being involved in agreement making on the project. Attempts were made by contractor representatives to establish a highly competitive set of terms and conditions of employment for the project that could form the basis for negotiations between unions and individual contractors, however the relevant construction unions did not agree to the proposals. As such, some contractors were exposed to the agreement making regime under the Act, following the Act's commencement in 2009. This significantly impacted construction work on the Pluto LNG Project.

One such example was Mammoet Australia Pty Ltd, a contractor engaged by Woodside to carry out heavy lift and transportation operations and provide transportation and cranage services for the onshore component of the Pluto LNG Project. The work Mammoet was contracted to perform was crucial for the performance of work by most other contractors on the project, and for the completion of the project generally.

Mammoet had made an employer Greenfields Agreement under the former Workplace Relations Act 1996 (Cth) with a term limited to 12 months (to September 2009). The



Mammoet agreement was in terms consistent with market leading terms and conditions of employment set out in other industrial agreements applying to other contractors working on the project. Mammoet's work on the project was not completed within the 12 month period, and the CFMEU, acting as bargaining representative for a group of 12 of Mammoet's employees engaged as crane and forklift drivers, sought to bargain with Mammoet for a new agreement.

An outline of the conduct of bargaining and significant periods of disruptive industrial action is set out in reasons for decision issued by Fair Work Australia in Mammoet Australia Pty Ltd v Construction, Forestry, Mining and Energy Union [2010] FWA 4389, Woodside Burrup Pty Ltd & Kentz E & C Pty Ltd v Construction, Forestry, Mining and Energy Union [2010] FWA 4880, and CFMEU v Woodside and Kentz E&C Pty Ltd [2010] FWAFB 6021.

Ultimately, after approximately two months of industrial action and with the prospect of continuing industrial action, in circumstances where the CFMEU was seeking terms and conditions of employment significantly in advance of the terms and conditions of employment set out in industrial agreements applying to other contractors on the project, Woodside made an application to Fair Work Australia for orders suspending protected industrial action on the basis that third parties were being significantly harmed by the industrial action. At the time of the application, it was estimated that Mammoet had approximately four to six weeks of work left on the project.

Evidence before Fair Work Australia went to the following impact on Woodside which was either happening or threatened as a result of the industrial action:

(a) a delay in the commencement of the revenue stream from LNG sales estimated to be in the order of millions of dollars per day;

(b) 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;

(c) costs from the extension of time to contractors and associated delays; and

(d) costs of additional resources brought in to finish the work within the allocated contract dates.

Ultimately, Woodside's application was refused by Fair Work Australia (following an appeal by the CFMEU). The Full Bench, in overturning the decision of Deputy President McCarthy at first instance, found that the industrial action of Mammoet employees did not threaten to cause "significant harm" to 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.

It has been acknowledged that the test applied by Fair Work Australia to set the threshold for establishing "significant harm" for the purpose of obtaining a suspension of industrial action was too high.3 Woodside respectfully agrees. However, ultimately, there was no utility in seeking to appeal the Full Bench's decision. Mammoet reached an agreement with its employees shortly after the Full Bench's decision and industrial action ceased. That agreement was in terms consistent with the terms and conditions set out in industrial agreements applying to other contractors on the project, and not the premium conditions originally sought by the CFMEU.

Regardless of whether the decision is considered to be a correct application of the relevant provisions, the parameters of the Act permitted a finding that the evidence from the hearing at first instance before Fair Work Australia of the impact on Woodside, summarised above, was

3 See for example: Submission to the Fair Work Act Review Panel by Dr Graham Smith (paragraph 16, page 4); Submission to the Fair Work Act Review Panel by the Master Builders Australia (paragraph 12.10, page 62); AMMA Publication "Early employer experiences of early enterprise bargaining under the Fair Work Act, October 2010 (paragraph 8.93, page 42).



not sufficient to establish "significant harm". In Woodside’s view, this is at least in part because it is not clear under the Act that the mechanisms for making agreements (including good faith bargaining and protected industrial action) are secondary to the objective of facilitating effective agreement making with a view to setting terms and conditions and minimising the potential for industrial disputation.

This example represents clear evidence of an unsatisfactory outcome under the Act. Woodside respectfully submits that the possibility of similar outcomes under the current wording of the relevant provisions of the Act concerning the suspension and termination of protected industrial action should be addressed.

The Mammoet dispute also provides an illustration of the impact of a lack of agreement options under the Act, and in particular the need to have viable options for securing industrial agreements which cover an employer's work on a project.

2.2 Bargaining - Karratha Gas Plant

Since about October 2009, Woodside has been involved in bargaining for an enterprise agreement to apply to employees working at the Karratha Gas Plant. Certain issues alleged to have arisen recently are currently the subject of proceedings before Fair Work Australia, and Woodside does not intend to comment on those issues in this submission. However, Woodside's experience is that some earlier parts of the bargaining process under the Act were not efficient or effective:

The initiation of bargaining was unclear and complex. In particular, in circumstances where a union simply asserted that part of the workforce wished to make an agreement, it was difficult to ascertain, without formal proceedings, who was represented by the union and what proportion of the workforce genuinely wished to make a new agreement. The absence of a clear requirement under the legislation for an instrument of appointment of a bargaining representative and an objective means, such as a secret ballot, for establishing who wished to bargain, were significant barriers to efficient and effective initiation of bargaining.

Negotiations have been long and protracted. In particular, in common with many recent bargaining disputes in other industries, new claims for greater restrictions on matters not regulated by the existing industrial instrument, and which would generally be considered to be matters of management prerogative, are significant obstacles in bargaining. It is also not always clear which issues are pursued by bargaining representatives on behalf of the employees they purportedly represent and which issues are merely relevant to the interests of the bargaining representatives themselves. In Woodside's view, this experience has been facilitated by the Act provisions allowing expanded agreement content to be the subject of the bargaining process and the provisions in the Act concerning bargaining representatives.

2.3 Right of entry - Pluto LNG Project

Woodside engages the Foster Wheeler WorleyParsons Joint Venture (FWW) to manage construction work on the Pluto LNG Project. In the period immediately after the Act was introduced, FWW was inundated with union right of entry notices in respect of the Pluto LNG Project site. In the period between 1 July 2009 and 27 October 2009, FWW received 217 right of entry notices from the four main unions with coverage of workers at the Pluto LNG Project.4

FWW developed a comprehensive right of entry management protocol, in order to deal with the large number of right of entry requests in a way that was consistent with the safe and efficient management of the site. On 24 July 2009, the CFMEU filed an application with Fair Work Australia challenging the right of entry protocol implemented by FWW at the Pluto LNG Project site.5 The challenge was ultimately unsuccessful, but involved considerable cost and inconvenience.

4 CFMEU v Foster Wheeler Worley Parsons (Pluto) Joint Venture [2010] FWA 2341.



The increase in right of entry notices was a direct result of the provisions in the Act which allow union officials right of entry for discussions with workers merely where the relevant union is eligible to represent the workers, rather than where the relevant workers are covered by an industrial instrument to which the relevant union is a party. The proliferation of right of entry notices, and the need to implement a comprehensive process for managing the high number of right of entry notices from a wide variety of unions, which ultimately FWW had to defend in lengthy proceedings before Fair Work Australia, caused significant inconvenience and expense. It is evidence of the unsatisfactory operation of the right of entry provisions under the Act.

2.4 Right of Entry - Karratha Gas Plant

Transfield Worley is an integrated service contractor which, at the time of the introduction of the Act, was, and had been for a considerable period of time, engaged by Woodside to provide maintenance work at the Karratha Gas Plant.

CFMEU representatives sought to enter the Karratha Gas Plant to hold discussions with certain Transfield Worley employees on the basis that the CFMEU asserted coverage of particular employees of Transfield Worley. Whilst other unions had been active in representing workers on the site and were parties to industrial agreements applying to those workers on the site, the CFMEU had not previously been involved in representing workers on the site.

Woodside disputed the right of entry on the basis that Transfield Worley did not employ persons at the Karratha Gas Plant who were eligible to be members of the CFMEU on the basis asserted by the CFMEU. As such, Woodside's position was that the CFMEU was not eligible to represent the industrial interests of any of the relevant workers employed by Transfield Worley, and was not entitled to enter the site on this basis.

In September 2009, the CFMEU commenced proceedings in Fair Work Australia seeking orders that Woodside not refuse right of entry to CFMEU officials seeking to enter the Karratha Gas Plant to hold discussions with the relevant workers employed by Transfield Worley. Ultimately, very shortly before the listed hearing, the CFMEU withdrew the application, without explanation. However, Woodside's defence of the application, against a union that had not traditionally been involved in representing workers on the site, and in circumstances where the coverage asserted by the CFMEU under its rules was far from clear, involved considerable expense and inconvenience. In Woodside's view, this is further evidence of the unsatisfactory outcomes caused by the right of entry provisions under the Act.

In Woodside's experience, the changes introduced to the right of entry provisions under the Act, without proper explanation or justification, have significantly increased the scope of the provisions and contributed to competition amongst unions, disrupting longstanding arrangements for the representation of workers. Further, the provisions fundamentally rely on eligibility provisions in union rules, many of which are outdated, contradictory and confusing.

2.5 Unprotected industrial action at Pluto

In the period since the commencement of the Act, Woodside has experienced employees of contractors engaged on the Pluto LNG Project taking unprotected industrial action.

Woodside was able to obtain remedies against a union and union official in relation to particular unprotected industrial action by utilising the provisions of the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act).

November 2009 strike

In November 2009, construction contractors working on the Pluto LNG Project informed their employees that new accommodation arrangements known as “motelling” would apply from 4 January 2010. Representatives of the CFMEU met with employees in late November and

5 CFMEU v Foster Wheeler WorleyParsons (Pluto) Joint Venture [2010] FWA 2341.



encouraged the workers to strike if Woodside did not reverse the decision to implement motelling. The decision to introduce motelling was not reversed, and on 1 December 2009, approximately 1200 employees went on strike at the Pluto LNG Project.

Woodside brought proceedings in the Federal Court seeking pecuniary penalties against the CFMEU for engaging in unlawful industrial action in contravention of section 38 of the BCII Act.6 Justice Gilmour held that the CFMEU should be permanently restrained from taking industrial action at the Pluto LNG Project site. The CFMEU was ordered to pay Woodside $1.5m, including as compensation for damage suffered as a result of the unlawful industrial action, and 25% of all liabilities, costs and expenses in relation to any claims by contractors against Woodside (to a maximum of $500,000).

January 2010 strikes

On 22 January 2010, approximately 1400 contractor employees stopped work at the Pluto LNG Project site.

The contractors chose to apply to Fair Work Australia pursuant to section 418 of the Act to stop the industrial action and on 24 January 2010, Commissioner Cloghan made an interim order preventing industrial action from being taken from 24 January 2010 until 28 February 2010.7

Despite Fair Work Australia’s order, the employees continued to strike. On 27 January 2010, 13 contractors applied to the Federal Court for injunctions, penalties and compensation. It was necessary for the contractors to commence proceedings against individual workers. The Court granted an order restraining workers from taking industrial action.8 When the strike ended on 30 January 2010, over 1500 contractor employees had participated in strike action. The substantive penalty proceedings are not yet concluded.

The different outcomes achieved by Woodside pursuant to the BCII Act and the contractors under the Act illustrate the need to maintain the provisions under the BCII Act relating to unlawful industrial action. In its Federal Court proceedings, Woodside was able to obtain significant penalties and compensation, and also admissions concerning the liability of the union and the union official for their conduct, in reliance on particular provisions which are not replicated under the Act.9

The outcome in the case of the contractors also illustrates that, where unlawful industrial action occurs, a speedier conclusion must be achievable such that a return to work cannot be drawn out.

3. UNSATISFACTORY OUTCOMES IN INDUSTRIES IN WHICH WOODSIDE'S CONTRACTORS OPERATE

In addition to Woodside's direct experiences under the Act, Woodside has also been impacted by poor bargaining outcomes under the Act in industries in which Woodside's contractors operate.

3.1 Unsustainable wage claims

Key aspects of the agreement making regime under the Act, including the limited range of available agreement options, the relative ease with which protected action can be taken within the bargaining process and the difficulty associated with meeting the tests relating to stopping protected action, have combined with practical pressures in industries characterised by labour shortages, time critical work and a need for large capital investment, to create distortions in bargaining. Extravagant wage claims by unions have been conceded by employers with few

6 Woodside Burrup Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FCA 949.7 AGC Industries Pty Ltd and Others v AMWU and CEPU (2010) FWA 847.8 United Group Resources Pty Ltd v Calabro [2010] FCA 22.9 See in particular, s 49 BCCI Act (penalties) and s 69 BCCI Act (responsibility for conduct of members).



alternatives. Examples include vessel operations, offshore construction and most recently dredging. In Woodside's experience, the Act has allowed unions in these industries to take advantage of this environment during bargaining, by pursuing premium outcomes. In particular, this has occurred when employers seek to negotiate greenfields agreements for new project work, which in turn has led to excessive increases in wages and conditions with no foundation in improved productivity. This has a very significant cost impact on Woodside, as an end consumer of the services provided by these contractors on Woodside's projects.

An example of this is Woodside's North Rankin Redevelopment (NR2) at the North West Shelf. The project involves the recovery of the remaining low pressure gas from the North Rankin and Perseus gas fields by installing a second platform (North Rankin B) to connect to the existing North Rankin A project, and achieve a single integrated facility. The NR2 is an example of a project on which Woodside has faced significant increases in costs, based on new wage rates applying elsewhere in the industry, as negotiated by the maritime and offshore construction unions at other unrelated projects.

Examples of such cost increases are:

For offshore construction labour, the cost from the Pluto LNG Project in 2010 to the NR2 Project in 2012 involved an increase of 36%;

For marine labour, the cost from the Pluto LNG Project in 2010 to the NR2 Project in 2012 involved an increase of 37.4%; and

Recent dredging industry agreement settlements, depending on type of dredge and previous agreements, have resulted in 40% to 55% labour cost increases.

3.2 Bargaining representatives

In addition to Woodside's direct experience of difficulties around the commencement of bargaining and the identification of bargaining representatives under the Act, contractors in some industries have experienced difficulties with union officials seeking to represent workers in bargaining who are not eligible to be members of their union, purportedly on the basis that the union official is acting in his or her personal capacity. This is clearly a sham, leading to competition amongst unions, and providing an incentive for bargaining representatives to pursue extravagant and short term outcomes rather than outcomes consistent with improvements in productivity and long term relationships with the relevant employers. The MUA's attempts to represent remote operated vehicle operators in bargaining is one example.10

4. ISSUES WITH THE ACT

Woodside's experiences with the Act set out above, demonstrate in a real and practical way the effect of the legislation on Woodside's business and illustrate a number of shortcomings of the Act.

4.1 Agreement making

Woodside's experience is that there are real problems with agreement making in the industries and sectors in which it operates.

In particular, Woodside considers that the current bargaining framework does not promote the discussion and uptake of measures to improve workplace productivity.

Further, the Act has reduced the options available to employers in formal agreement making which, in the industries in which Woodside and its contractors operate, characterised by labour shortages, time critical work and large capital investments, leads to distortions in bargaining.

10 See Technip Oceania Pty Ltd v W. Tracey [2011] FWAFB 6551.


http://www.fwa.gov.au/decisionssigned/html/2011fwafb6551.htm


In particular, the difficulties associated with making greenfields agreements prior to the commencement of new projects have the potential to jeopardise Woodside's ability to achieve commercial certainty and security in relation to its projects.

It has been common practice for unions to insist on significantly improved wages and conditions in the context of negotiations for greenfields agreements to apply to new projects. Usually the union claims are not related to productivity and merely represent a demand for a premium and even super-premium wage outcomes.

Further, in relation to bargaining for enterprise agreements generally, the initiation of the bargaining process, including appointment of bargaining representatives, is confused and unclear. There is no clearly defined and logical sequence regarding various points in the process. The case of JJ Richards & Sons Pty Ltd v Transport Workers' Union [2011] FWAFB 3377 is a clear example.

4.2 Content of agreements

The Act provides for significantly expanded agreement content, which allows more issues to be introduced in bargaining, including claims relating to an employer's flexibility to manage its own workforce.

Woodside considers that removing the list of "prohibited content" and allowing a wider range of matters to be included in enterprise agreements and be the subject of protected action, has had a significant impact on bargaining and productivity. In particular, it has often led to a more complex, lengthy and protracted negotiation process, increasing the likelihood of disagreement, and potentially industrial disputation.

4.3 Right of entry

While Woodside recognises the role of unions in entering workplaces to meet with, and investigate breaches of legislation relating to members, the introduction of the Act precipitated a deluge of right of entry notices and union visits at the Pluto LNG Project site which had to be managed against a backdrop of managing the challenging logistics of a large and potentially hazardous workplace. Implementing systems and processes to manage those requests involved Woodside and FWW incurring significant expense and inconvenience.

4.4 Industrial Action

While Woodside recognises that industrial action may be appropriate for parties involved in a bargaining process in some circumstances, Woodside considers that employees are able to resort to protected industrial action more easily and quickly since the passage of the Act.

Further, stopping protected industrial action once it has commenced has, in Woodside's experience, proven very difficult.

The Act provides unions and employees with a right to take protected industrial action over a wider range of pursued content, and where action is "reasonably believed" to pertain to permitted matters.

Under the Act, employees can qualify as "genuinely trying to reach agreement" before bargaining has commenced.

Further, protected industrial action can be taken by unions and employees where extravagant claims are being pursued and negotiated outcomes have not yet been fully explored.

The Act does not provide an effective deterrent to unlawful industrial action, particularly in the construction industry, and it is necessary to maintain the greater



penalties11 and other provisions relating to the circumstances in which unions will be liable for the conduct of officials and members12 under the BCII Act.

5. THE ACT IS NOT OPERATING IN ACCORDANCE WITH ITS OBJECT

The purpose of the review is to carry out an assessment of the operation of the Fair Work legislation, and the extent to which its effects have been consistent with the objects set out in section 3 of the Act.

In its most fundamental sense, under section 3, the object of the Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by a range of more specific means.

Woodside submits that its experiences under the Act demonstrate that the provisions of the Act have directly contributed to a number of outcomes which are inconsistent with this object. In particular:

One of the means of achieving the object of the Act is to facilitate effective agreement making with a view to setting terms and conditions and minimising the potential for industrial disputation. In Woodside's experience the Act has not achieved this objective, but rather, has rendered agreement making an arduous process, and caused an escalation in industrial disputation and excessive outcomes in enterprise bargaining.

While one of the means of achieving the object of the Act is to enable fairness and representation at work, in Woodside's experience, there is an imbalance in the way the role of unions has been recognised under the Act. For example, under the current framework, union representatives are entitled to exercise rights of entry where employees are simply eligible to join the union, rather than there being any concept of the particular union being actively involved in representing the relevant employees.

6. SUGGESTED IMPROVEMENTS

The Review Panel has been asked to examine and report on areas where the evidence indicates that the operation of the Fair Work legislation could be improved consistent with the objects of the legislation.

Woodside submits that there are a number of ways in which the Act could be improved to address the problems identified above and better meet the object of the Act.

Woodside sets out below a number of specific changes to the Act, but in doing so, Woodside wishes to emphasise that the unsatisfactory outcomes Woodside has experienced are the result of the interaction of a number of different and sometimes subtle changes introduced under the Act, rather than specific technical issues that can be identified in individual provisions. A combination of solutions will be necessary to address the particular problems Woodside has identified above.

6.1 Expanded agreement options to facilitate effective agreement making

Alternative forms of agreement options should be introduced. For example:

An employer who is proposing to embark on a new business or undertaking should have the option of making a greenfields agreement with a relevant union with a term of at least three years that would be tested against the relevant modern award and the National Employment Standards (NES).

11 See s 49 of the BCCI Act.12 See s 69 of the BCCI Act.



An employer who is proposing to embark on a new construction project with an estimated start and finish date (for example the Pluto LNG Project) should have the option of making a greenfields agreement with a relevant union for the full duration of the project that would be tested against the relevant modern award and the NES. There should be the ability to extend the agreement where there are project extensions, subject to terms and conditions remaining current.

In either circumstance if negotiations for a greenfields agreement are unsuccessful, the employer should be entitled to apply to Fair Work Australia for approval of a set of terms and conditions of employment prior to the commencement of the project, business or undertaking.

Fair Work Australia must approve the set of terms and conditions of employment as an enterprise agreement provided the employer is able to demonstrate that it has genuinely tried to reach agreement with a relevant union (and not all unions with potential coverage) in accordance with the established tests and that the agreement is not significantly inconsistent with prevailing terms and conditions of employment offered in the market.

Industrial action must not be permitted during the term of the agreement however the existence of such a greenfields agreement should not preclude a new agreement being reached between an employer and its employees (represented by a union or unions if they wish) that will override the greenfields agreement.

Either of these options would allow employers to achieve commercial certainty and security regarding major project investments which, relevantly for Woodside may include for example, the expansion of the Pluto LNG Project and the Browse LNG Development.

In addition to specifically introducing additional provisions as suggested above concerning greenfields agreements, the Review Panel should give active consideration to ensuring that the Act provides at least the same options for making collective enterprise agreements as were available under the previous legislation.

6.2 Improved bargaining rules

There should be a logical sequence to bargaining, with clear and objective requirements concerning the determination of majority support, the scope of bargaining and the commencement of bargaining.

To the extent the concept of good faith bargaining is retained in the Act, it should continue to relate to procedural aspects of bargaining and not to parties’ substantive positions. Woodside makes further suggestions below concerning the substantive positions taken by parties and the ability to take protected industrial action.

6.3 Limitation on the content of agreements

The range of matters that can be included in industrial agreements should be limited.

Restrictions should be placed on provisions in enterprise agreements that do not pertain to the employment relationship.

Unions should not be entitled to seek the inclusion of terms in enterprise agreements that:

purport to regulate the terms and conditions to be observed by contractors, or limit an employer's right to engage contractors; or

deal with any matter that is already the subject of a comprehensive code of regulation under the Act (such as right of entry).



Restrictions should be introduced against content in enterprise agreements that fails to increase the productivity of an enterprise.

6.4 Protected industrial action

To ensure that the fundamental object of the Act concerning cooperative and productive workplace relations is met, there should be a higher threshold for commencing protected industrial action.

In particular, Fair Work Australia should be given powers to ensure that protected industrial action can only be taken:

as a genuine last resort in bargaining;

over provisions in an agreement that pertain to the employment relationship; and

after Fair Work Australia has had a reasonable opportunity to identify the outstanding matters in bargaining and conciliate in relation to those matters.

Whilst a higher threshold for commencing protected industrial action could support the retention of the current provisions in the Act concerning the suspension and termination of protected industrial action by the parties to bargaining, these provisions should give far greater regard to the potential for negative impact of protected industrial action on third parties.

Where third parties are affected by protected industrial action Fair Work Australia should, on its own motion or application by an affected third party:

Order a suspension of protected industrial action to allow a period of cooling off including having regard to any disproportion between the impact of the industrial action on the third party and the claims being pursued by (and the conduct of) the parties in bargaining; and

Suspend or terminate protected industrial action (under section 424 and section 426 of the Act) where protected industrial action is causing or has a real potential to cause a level of economic or other harm to the third party which is unacceptable having regard to the fundamental object of the Act to promote cooperative and productive workplace relations. The term "significant harm" does not appear to have facilitated achieving this. The exact form of the words – whether that is "substantial or significant harm" or “material harm” – is less important than appropriate drafting which embodies this concept.

Whatever matters may be the subject of bargaining (whether that range of matters is more restricted as Woodside has suggested, or remains as broad as the Act has introduced), the concept that protected action may be taken in relation to a claim where a party merely believes the matter can be included in an agreement is unhelpful. The procedures Woodside suggested above will assist in ensuring there is an objective assessment as to whether matters that might be the subject of protected action can be included in an agreement. If those procedures are not adopted, the “reasonably believed” test should be removed.

Regardless of the ultimate outcome in the litigation in the JJ Richards case, and whatever other amendments might be recommended by the Review Panel concerning bargaining processes, it should at least be clear under the Act that a majority support determination must be a prerequisite before a union or employees can take protected industrial action in situations where bargaining has not yet commenced.



6.5 Unlawful industrial action

There should be no tolerance for industrial action that is not protected industrial action under the Act. Employers and third parties should not have to seek an order from Fair Work Australia and wait to have that order breached, prior to obtaining an injunction from a Court in order to secure a return to work and, ultimately, penalties and compensation in relation to the conduct.

Further, penalties in these circumstances should be substantial, and unions should be liable for the conduct of officials and members, consistent with the provisions that currently operate under the BCII Act.

6.6 Right of entry

While Woodside recognises the role of union officials in entering workplaces to meet with members and investigate breaches of legislation in relation to members, Woodside considers that this right should be more appropriately balanced with the rights of the occupier of the site and any employer or other person on the site to go about their business on the site without undue inconvenience or interference, and in particular from unions not involved in representing members at the site.

Woodside supports union right of entry to hold discussions with members during breaks where the union is covered by an industrial agreement that applies to work being done by members on the site.

Noting this may impact on union members who wish to be represented in bargaining where there is no industrial agreement that applies to work on the site, Woodside proposes that, following commencement of bargaining or a majority support determination, an official of a union that has members on site who are bargaining should be allowed to enter the site to hold discussion with members during breaks.

6.7 Union representation

Woodside considers that the Act should be amended so that a union can bargain for employees only when appointed as a bargaining representative or agent, and not as a default representative as is currently the case. There should be a clear process for the employer to be given notification as to who each employee is represented by in bargaining.

A union or other person appointed as a bargaining representative should then be required to act consistently with being an agent for the employee or employees who have appointed them (and not as an independent party to the bargaining process).

Further, just as employers and other bargaining representatives cannot control employee bargaining representatives13, bargaining representatives should not be under the influence of unions that are not eligible to represent the industrial interests of the employees concerned. Officers and employees of a union should not be able to be appointed as bargaining representatives for employees who are not eligible to join that union by virtue of the work they do for the relevant employer.

13 See regulation 2.06 Fair Work Act Regulations 2009 (Cth).



7. CONCLUSION

Woodside respectfully requests the Panel to consider the evidence-based issues raised above, in making its recommendations following the Fair Work Act Review.

Without adjustment, the Act does not provide a framework that promotes economic prosperity or productivity improvement.

Woodside would welcome the opportunity to participate in any further consultations.


Documents

ATTACHMENT A - docs.employment.gov.au · Web viewSee for example: Submission to the Fair Work Act Review Panel by Dr Graham Smith (paragraph 16, page 4); Submission to the Fair