Griffin Coal – The end of the Never Never, is it the death knell for traditional union approaches to bargaining?


If we are to take WA AMWU President Steve McCartney’s view of the FWC decision in Griffin Coal seriously, then the FWC in terminating the enterprise agreement, has not only lost the plot, but has also abrogated its responsibility to maintain the ‘status quo’ in bargaining between employers and unions. McCartney, a renowned hardhead, described the FWC decision, which has seen coal mine workers take home pay reduced by 43%, as “an outrageous attack on…workers and their families”.

Taken at face value, a year long process that will result in Griffin Coal miners about to be paid under the Black Coal Award, (Award) rather than The Griffin Coal (Maintenance) Collective Agreement 2012, McCartney’s comments may be right.  How after all could a workforce, which has not worked under the Award since the Keating era, now find that their next pay check comes courtesy of the Award rather than the time honoured enterprise bargaining agreement process?

Oh if it were so, in fact, far from being a ‘rogue decision’, a closer examination of the issues in play would indicate that the Commission was left with little option when applying the ‘public interest test’. Some will question how a 43% reduction in take home pay is in the public interest and is there precedent for such a move?  To the chagrin of the AMWU and the union movement the short answer is yes, all of which leads us to ask where to next?

So just how did we get to this point?

The value of precedent: Aurizon

In April 2015, in a Full Bench decision Aurizon Operations Limited: Aurizon Network Pty Ltd; Australian Eastern Railroad Pty Ltd [2015] FWCFB 540, rejected the status quo belief that it was inappropriate to terminate an enterprise agreement during bargaining.  In September 2015, this Full Bench decision was confirmed by the Full Court of the Federal Court who dismissed an application by various unions, seeking to overthrow the decision.

In Aurizon, the Full Bench held that the correct interpretation of section 226 of the Act (the ‘public interest test’) is that it should be construed in a manner that is consistent with the language and purpose of the provision by reference to the language of the Act as a whole.  In rejecting the previous status quo precedent reasoning of Tahnmoor Coal [2010] FWA 6468, the Full Bench debunked the notion that the statute somehow placed a higher value on good faith bargaining as a means of achieving productivity than any other means.   Accordingly one should not terminate an existing agreement, as to do so would shift the balance of bargaining power to the advantage of one party (ie the employer, who is seeking to terminate the agreement).

The Full bench in outlining the correct interpretation of section 226 put forward the following propositions:

    • there is nothing inherently inconsistent between the termination of an enterprise agreement that has passed its nominal expiry date and the continuation of collective bargaining in good faith.  Indeed termination of an existing agreement that is no longer delivering productivity benefits, might better support the goal of greater productivity outcomes through bargaining for a new agreement;
    • while the termination of agreements clearly disturbs the bargaining process, this step is not in and of itself contrary to the objects of the Act;
    • unions and employees still have available to them “the full arsenal of tools under the Act to assert legitimate industrial pressure;”
    • the Act sets out safety net terms and conditions which provide the benchmark for whether an agreement passes the statutory “Better Off Overall Test”

In trying to determine just how important this decision is, it is clear that both the FWC and the federal court unambiguously outlined the principles which are to apply when the Commission is considering an application to terminate an Agreement.

Griffin Coal – Background

Griffin Coal’s operations in south west WA (Collie) have been under inordinate financial pressure for many years. By some estimate the operation has not made a profit for almost a decade and the long-term depressed price for coal has only made matters considerable worse, with the company losing money on every single ton of coal produced.  Given the small tonnage of thermal coal produced each year (2.26 million tonnes), and labour costs exceeding 43%, deep structural change was necessary if the operation was to be in any way viable.

It was with this background front and centre, that Griffin and the AMWU were engaged in long term bargaining in an attempt to renew the existing Griffin Coal (Maintenance) Collective Agreement 2012 (Agreement).  The parties had been in active discussions for over 12 months with twenty four meetings being held between March 2015 and February 2016. So whilst there is little doubt that both parties wanted to find agreement, neither were prepared to move away from their starting points.

Unsurprisingly after a long period of fruitless negotiation, the AMWU made an application for a Protected Action Bargaining Order (PABO) on 26 November 2015. The order was granted on 7 December 2015, with AMWU members voting to approve protected action on 11 January 2016.  Thereafter Griffin were notified that from 19 January, the industrial action was to commence and continue indefinitely.

As can be expected in these matters, following an application to the Commission from Griffin to stop the industrial action, numerous conferences facilitated by the Commission were held between the parties, in an attempt to reach an agreement on a replacement agreement.

Despite all of this effort the negotiations came to nought.

The difficulty here was Griffin as a loss making enterprise, needed to make fundamental structural changes to its operation in order to return the mine to viability, including;

  • Reducing employee entitlements;
  • Changing the roster;
  • Reduction in superannuation, redundancy and other entrenched  entitlements
  • Use of contractors.

The union for its part clearly took a different view. The union model of enterprise bargaining is never about agreeing to reduced supposedly ‘hard won entitlements’.

The ‘Public Interest test’ again in the firing line

As in Aurizon, the decision to terminate the Agreement is intimately linked with Commissioner Cloghan’s interpretation of the public interest, as outlined in section 226 of the Act.

The Act requires that FWA must terminate the agreement if:

  • it is contrary to the public interest;
  • it is appropriate, taking into account all the circumstances including the views of the employer, employees, and the AMWU and;
  • the likely effects on the employer, employees and the AMWU should the agreement be terminated.

In reviewing the testimony of several employees, the Commission noted:

  • the current employee superannuation entitlement of 13.5% and the company’s need to reduce it to 9.5%.
  • the view that a decision to terminate the Agreement would give Griffin “an enormous and unfair advantage in negotiating a new agreement”.
  • the uniform view of employees that a return to the Award would be far less favourable.

The union, in opposing termination of the Agreement pointed to:

  • the substantial reduction in pay and conditions of its members if forced back to the Award;
  • there being no guarantees by Griffin that it would mitigate the impact of employees returning to the Award; and
  • in these circumstances the possible replacement of permanent employees by contractors.

For its part Griffin’s strategy to press ahead with the application to terminate was motivated exclusively by the need to create efficiencies, improve productivity, reduce operational costs and to remove restraints created by legacy entitlements domicile in the Agreement and its predecessors.

The decision to terminate the Agreement

In applying the ‘Public Interest test’ and terminating the Agreement, Commissioner Cloghan somewhat tellingly, notes that despite a year’s hard bargaining, no agreement was forthcoming nor was it likely in the short term.  He goes further in stating that ‘no unprofitable, inefficient, inflexible business remains in existence as some sort of societal right’.

Whilst acknowledging that this decision will result in reduced conditions of employment, he makes the strong point that this outcome is foreseen in the scheme of the Act and the public interest ought not only be viewed within the narrow prism of the parties only.

Conclusion

In their subsequent appeal, the AMWU relied on a number of grounds of appeal including:

  • the Commissioner’s failure to apply the Public Interest test correctly;
  • insufficient weight being given to the views of employees;
  • the Commissioner’s error in concluding that the termination would lead to productivity benefits;
  • the manifest injustice of the decision at first instance, given the extreme hardship it would visit on the employees.

In its decision [2016] FWCFB 4620, a full Bench of the Commission confirmed the decision at first instance. The ramifications of this decision will be felt in every sector across the economy.  Employers currently operating loss making operations, will draw succour and courage in its dealings with difficult unions.  Unions, need to tread carefully as the age-old approach to negotiation of agreements has under certain circumstances been shown not to work. That said, each case will be judged on its own merits and I suggest only those applications that resemble the Griffin matrix will be successful.

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

This paper was updated on 30/05/2017