Third party harm stops protected industrial action

The facts

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 had an Employer Greenfields Agreement (EGA) with a term limited to 12 months which expired in September 2009. It was originally expected that work would be completed within 12 months, however due to delays to the project schedule, the work was not completed within the term of the EGA. This placed Woodside in the unattractive position of being potentially subject to protected industrial action by a critical contractor at a time when there were 4,500 employees working on the 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 Fair Work Act 2009 (Cth) (FW Act) in January 2010. The Construction, Forestry, Mining and Energy Union (CFMEU) was acting as bargaining agent for the employees.

On 20 April 2010, the results of a protected industrial action ballot were declared and shortly after, protected industrial action commenced:

• a 28-day stoppage of work commencing on 28 April 2010
• Mammoet responded and locked out for a period 14 days commencing on 26 May 2010
• a 14-day stoppage of work commencing on 10 June 2010, and
• a 28-day stoppage of work commencing on 23 June 2010.

At the time of the applications to FWA, Mammoet had approximately 4–6 weeks of work left on the project.

Mammoet itself had recently unsuccessfully applied for a cooling off period to suspend the protected industrial action.¹

The applications

Both Woodside, the project owner and Kentz E&C, who was contracted to perform electrical and instrumental works on the project, applied to FWA for orders suspending the protected industrial action on the basis that the industrial action was causing significant harm to third parties.

Woodside and Kentz argued that the protected industrial action was threatening to cause significant harm to third parties to the bargaining as:

• the industrial action was preventing Kentz and other contractors from complying with their contractual obligations
• the project was being delayed which would lead to delays in production and loss of revenue
• the delays to the project were harming the reputations of parties involved with the project
• contractors had been allocating their workforces alternative duties on the project site but that this was leading to high inefficiency levels
• contractors would have to consider demobilising parts of their workforces if the protected action continued, and
• contractors were exposed to liquidated damages under their contracts with Woodside.

The decision

Deputy President McCarthy issued an order on 30 June 2010 that the protected industrial action be suspended for a period of three months.²

On 2 July 2010, Deputy President McCarthy issued reasons for his decision.³ 

The key issue in the case was whether the protected industrial action was threatening to cause significant harm to a third party. In determining whether Woodside or Kentz were being threatened with significant harm, Deputy President McCarthy considered the evidence in light of the Macquarie Dictionary definition of significant being ‘of importance or of consequence’ and the Explanatory Memorandum to the Fair Work Bill 2008 which states in respect of section 426 that:

The purpose of this clause is to provide FWA with a means to address significantly serious impacts that industrial action is having on the welfare of third parties. It allows for a respite from industrial action which is causing them significant harm. The harm to the third party would need to be significant, that is a more serious nature than merely suffering of a loss, inconvenience or delay. Therefore, it is anticipated that FWA would suspend industrial action on this basis only in very rare cases.

The Deputy President considered that the ongoing protected industrial action threatened Woodside and Kentz with significant harm as:

• the project work involves interdependencies between contractors and that the necessity of contractors’ work being conducted sequentially lead to significant impacts
• the rescheduling of works and lack of efficient ulitisation of labour goes far beyond being an inconvenience, and
• the extent of the impact of the industrial action on Woodside’s and Kentz’s ability to fulfil contractual obligations was substantial and likely to result in significant economic losses.

Section 426 also requires that FWA be satisfied the decision is not contrary to the public interest. His Honour concluded that the extent and significance of the harm threatened to be caused to the third parties meant it was not contrary to the public interest.⁴

Implications

The decision is the first of its kind under the FW Act which deals with the impact of industrial action on third parties. While there were some cases decided under the equivalent provision of the Workplace Relations Act 1996 (Cth),⁵ this decision provides guidance as to the test that will be applied in assessing whether an order to suspend protected industrial action on the basis of the threat of a significant harm to third parties.

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

• the threatened financial and practical impact of the industrial action going forward on their business
• the duration and nature of the industrial action
• the threatened impact on third party employees who will not be party to the proposed enterprise agreement
• the likely impact on the provision of goods and services to third parties and in turn whether this is impacting the ability of the third party to comply with its contractual obligations, and
• any likely chain reaction in these effects on other third parties.

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

Endnotes

1. Mammoet Australia Pty Ltd v Construction, Forestry, Mining and Energy Union 2010 FWA 4389 
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. The full decision will be available from the Fair Work Australia website shortly 
5. See Australian Education Union v Department of Education and Training, Northern Territory Government [2008] AIRCFB 826

More information

For information regarding possible implications for your business, contact a member of the Employee Relations team.