DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Australian Manufacturing Workers’ Union
v
SC Hydro Pty Ltd
(C2021/6194)

Appeal against reasons for decision [2021] FWC 5110 of Deputy President Colman at Melbourne on 19 August 2021 in matter number AG2021/5801 and AG2021/5818.

Introduction and factual background

[1] On 19 August 2021, Deputy President Colman issued decisions approving the SC Hydro Pty Ltd – AWU Tunnel and Associated Works Greenfields Agreement 2021-20251 (Tunnel Agreement) and the S C Hydro Pty Ltd AWU and CFMMEU Surface Works Greenfield Agreement 2021 – 20252 (Surface Works Agreement). Both agreements were approved, over the opposition of the Australian Manufacturing Workers’ Union (AMWU), on the basis of the Deputy President’s conclusion that they were single-enterprise greenfield agreements within the meaning of s 172(2)(b) of the Fair Work Act 2009 (FW Act). The Deputy President gave his reasons for this conclusion in a separate “decision” published on 19 August 20213 (reasons for decision). The AMWU has lodged an appeal against the reasons for decision in which it contends that the Deputy President’s conclusion in this respect was in error, and in which it also contends that errors of fact were made in reaching this conclusion. Permission is required for the AMWU’s appeal under s 604 of the FW Act.

[2] Section 172(2)(b) provides for the making of single-enterprise greenfields agreement in the following terms:

(2)  An employer, or 2 or more employers that are single interest employers, may make an enterprise agreement (a single-enterprise agreement):

. . .

(b)  with one or more relevant employee organisations if:

(i) the agreement relates to a genuine new enterprise that the employer or employers are establishing or propose to establish; and

(ii) the employer or employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

[3] Section 12 defines “relevant employee organisation”, in relation to a greenfields agreement, to mean an employee organisation that is entitled to represent the industrial interests of one or more of the employees who will be covered by the agreement, in relation to work to be performed under the agreement. The Tunnel Agreement was made between SC Hydro Pty Ltd (SC Hydro), as the prospective employer, and the Australian Workers’ Union (AWU). The Surface Works Agreement was made between SC Hydro, the AWU and the Construction, Forestry, Mining, Maritime and Energy Union (CFMMEU). There is no dispute that each of the AWU and the CFMMEU was a “relevant employee organisation” with respect to the agreement that was made with it.

[4] An “enterprise” for the purpose of s 172(2)(b)(i) is defined, in s 12, to mean “a business, activity, project or undertaking”. The principal issue determined at first instance and issue raised by the appeal is whether the agreements relate to a “genuine new enterprise” that SC Hydro is establishing or is proposing to establish. There is no issue in relation to s 172(2)(b)(ii) that SC Hydro had not employed anyone necessary for the normal conduct of the enterprise who would be covered by the agreements.

[5] There is no real contest about the facts of the matter, although there is an issue about the proper inferences to be drawn from those facts. The agreements relate to the Snowy 2.0 Pumped Hydro Electric Upgrade Scheme, a project to expand the Snowy Mountains Hydro-Electric Scheme by the addition of renewable energy generation and storage capacity (project). The successful tenderer for the construction of the project was Future Generation Joint Venture (FGJV), an unincorporated joint venture consisting of Webuild S.p.A. (WeBuild), Clough Projects Australia Pty Ltd (Clough) and the Lane Construction Corporation which was established in 2018. The FGJV, as an unincorporated entity, does not itself employ anybody and utilises various personnel employed by WeBuild or Clough. The FGJV commenced work on the construction project in about August 2020, using a combination of construction contractors and labour hire businesses. Work that had been undertaken by this means at the time of the hearing before the Deputy President included preparatory works and some tunnel boring work.

[6] SC Hydro was established by WeBuild and Clough for the purpose of supplying “blue collar” labour to the FGJV. It was registered as a company on 15 April 2020, and WeBuild and Clough both have equal shares in its ownership. SC Hydro has two directors appointed by WeBuild and Clough and, on 20 August 2020, the directors appointed persons employed by WeBuild or Clough as bargaining representatives for SC Hydro for the purpose of bargaining for enterprise agreements to cover the workforce which it was intended that SC Hydro employ. On the same day, the FGJV made a Service Agreement with SC Hydro for the supply of labour by SC Hydro to the FGJV. Bargaining commenced with the AWU in about August 2020, and apparently somewhat later with the CFMMEU. In February 2021 the AMWU sought to become involved in bargaining with SC Hydro, but was unsuccessful. The Tunnel Agreement was made on 18 June 2021, and the Surface Works Agreement was made on 22 June 2021. Applications for the approval of the agreements were made shortly thereafter. SC Hydro is currently in the process of recruiting labour for the purpose of providing services to the FGJV pursuant to the Service Agreement but at the time of the hearing before the Deputy President, had not yet employed anyone.

Reasons for decision

[7] In his reasons for decision, the Deputy President said that he was satisfied that the relevant enterprise to which the agreements relate is a genuine new labour hire enterprise that will supply building and construction labour to the FGJV for the purpose of completing the project works. 4 In reaching that conclusion, the Deputy President found that SC Hydro was establishing its own labour hire enterprise consistent with its corporate purpose to provide labour to the project, and noted that it was not alleged nor was it the case that either the SC Hydro company or the Service Agreement was a sham. The Deputy President also said that it did not matter that the work of its employees will be the same as that currently being undertaken by employees of other contractors and labour hire companies,5 and found that SC Hydro was not a recipient, acquiror or assignee of any business or enterprise currently being conducted by those contractors or labour hire companies.6

[8] The Deputy President also accepted evidence given by Mr Keith Ritchie, an employee of Clough who worked as the industrial relations manager for the FGJV and acted as bargaining representative for the FGJV in respect of the agreements, to the effect that work done to date had been performed by a “patchwork” of contractors and labour hire providers which have performed largely preliminary work whereas, under the agreements, SC Hydro’s new enterprise will deploy its workforce to perform tunnelling and associated civil and surface works, and will be a substantial, albeit not the sole, provider of labour to the project. The Deputy President found that “the work that will be performed by employees of SC Hydro, taken as a whole, will have a different character to that which has been carried out by contractors to date, at least insofar as it will be broader in scope than that undertaken by any single contractor to date.” 7 The Deputy President also rejected the AMWU’s submission that there was no meaningful basis to draw a distinction between preparatory works and the main project works, and that the project was fundamentally a construction project that had well and truly commenced, on the basis that relevant new enterprise was not the project but rather the new labour hire enterprise. This, he said, rendered the issue of whether the project works can be divided into preliminary works and main project works of little relevance.8

[9] The Deputy President rejected the AMWU’s contention that there was some arrangement or understanding whereby employees of the existing contractors would be converted to employees of SC Hydro on the basis that this was not supported by the evidence and was inconsistent with the evidence of Mr Ritchie, which he accepted.9 He also rejected a submission advanced by the AMWU to the effect that the corporate relationship between SC Hydro and the FGJV was indicative of an absence of genuineness in the new enterprise, in that SC Hydro was controlled by two of the three FGJV partners, the engagement under the Service Agreement was on a “cost-only” basis involving no profit to SC Hydro, the company serves no apparent purpose except to provide labour for the project and will under its constitution be wound up at the completion of the project.10 The Deputy President said, in relation to this submission:

“[40] It is not clear to me why the AMWU considers it unlikely that SC Hydro is a labour hire company like any other, or why it is suspicious about the corporate structure in this case. The relationship between the parties seems unexceptional to me. It is perfectly normal for related entities to contract with one another. Under its service agreement with the FGJV, SC Hydro is to provide specified services to the FGJV partners. It is responsible for the ‘recruitment, employment and management’ of employees and to deliver the prescribed services. It assumes obligations and gives warranties as to the suitability of the employees who will be provided to work on the project. The service agreement contains mechanisms for the acquisition of services by request and purchase order, and for the payment of fees. SC Hydro must hold relevant insurances. All of these are consistent with a genuine agreement between a labour hire company and a client. Further, the use of a special purpose entity to operate a new enterprise is a very ordinary circumstance. Such entities commonly make greenfields agreements. The AMWU submitted that SC Hydro had not explained the reason for its incorporation, but no explanation is required. It is also unsurprising that an entity might be wound up when its purpose has been achieved and the relevant project has been completed. I would not draw the conclusion, as the AMWU does, that the services agreement is a cost-only agreement generating no profit for SC Hydro. The schedule to the agreement refers to the fee including costs for the provision, recruitment and engagement of personnel as well as their employment. But it would not matter that SC Hydro did not generate profit. Not-for-profit enterprises can make greenfields agreements.

[41] The AMWU submitted that it would not have been possible for SC Hydro to make the Agreement without the project operators being involved. The contention appears to be that the company was created by others. But any new company must be established by someone. It cannot spontaneously materialise. The AMWU submitted that the reality of the situation was that SC Hydro is a vehicle established by the FGJV to change the way in which it engages labour. But even if this characterisation were correct at some level of abstraction, there is no basis to conclude that a change of this kind would be preclusive of the establishment of a new enterprise. Nor is there any substance to the AMWU’s alternative contention that SC Hydro’s enterprise is the same as that of the FGJV parties, for they too have different and distinct businesses.”

[10] Finally, the Deputy President rejected the AMWU’s submission that if the agreements were approved, “it would mean that any employer could set up a new corporate vehicle and make a greenfields agreement, without any reference to its existing workforce or employees’ representatives” on the basis that this was not what had occurred in the present matter and that neither SC Hydro nor the FGJV partners had a pre-existing workforce. 11

AMWU’s submissions

[11] The AMWU submitted that s 172(2)(b) of the FW Act presents a jurisdictional fact, in that if an agreement does not fall within its remit, it cannot be said to have been “made” under s 172 and there is no valid application before the Commission. In respect of a 172(2)(b)(i), it was submitted that in order for an enterprise to be genuinely new, it is not sufficient for there simply to be a new employing entity if the relevant enterprise nevertheless exists already; the enterprise must be “new to the world”. The AMWU submitted that the Deputy President’s finding that the agreements related to a genuine new labour hire enterprise rested on acceptance of the proposition that SC Hydro is simply another labour hire supplier which can be viewed at arms-length for the FGJV. By this approach, it was submitted, the Deputy President asked the wrong question since the activity to which the agreements related is the supply of particular labour to the FGJV on the project. This was not new, since work on the project is well underway and the activity was already being conducted by the existing contractors and labour hire companies.

[12] In any event, the AMWU submitted, to treat SC Hydro as merely another labour hire supplier was absurd, given that:

•  SC Hydro is controlled by 2 of the 3 parties to FGJV, representing 90% of the partnership interests;

•  the engagement is on a cost-only basis and involves no profit being generated by SC Hydro;

•  SC Hydro serves no purpose but to provide labour for the project, and is intended to be wound up at its completion;

•  there is no other sign of independent life from SC Hydro: it speaks entirely through officers of the FGJV; and

•  the making of the agreements by SC Hydro was, it appears, in furtherance of FGJV’s stated workforce management plan of doing so to cover “the employment of direct hire craft personnel”.

[13] The AMWU submitted that, in substance, SC Hydro is a vehicle for the FGJV to employ persons on an existing enterprise, being the Snowy 2.0 project. That was the enterprise to which the agreements related and, at the time the agreements were made, it was firmly underway.

[14] The AMWU also contended that the Deputy President had made two errors of fact in paragraph [36] of his reasons for decision:

(1) That the work performed to date at the time the agreements were made could be characterised as “preparatory work”. The uncontested evidence was that tunnelling work had commenced, and Mr Ritchie gave evidence that the work which had been done would continue to be performed over the life of the project.

(2) That the work to be carried out under the agreements would have a different character to that which had been carried out by the contractors to date. Again, Mr Ritchie had given evidence that the work which would be performed under the agreements was identical to the work already being done, and would continue through the life of the project. Further, there was no evidentiary basis for the Deputy President’s conclusion that the scope of work would be broader, noting that SC Hydro anticipated, but was not guaranteed, a particular volume of work, and was at pains to characterise itself as but one labour hire company among many.

[15] In its notice of appeal, the AMWU submitted that permission to appeal should be granted on the following grounds:

(1) The decision raises novel issues of general public importance and application, namely the correct construction of s.172(2)(b)(i), and it is in the public interest that appellate guidance be provided.

(2) The decision is attended with sufficient doubt to warrant its reconsideration and substantial injustice may result if permission is refused.

Consideration – permission to appeal

[16] We note at the outset that the AMWU has not appealed the operative decisions approving the agreements, but rather the separately-published reasons for the Deputy President’s conclusion that the agreements were single-enterprise greenfields agreements within the meaning of s 172(2)(b) of the FW Act. This raises a question about the competence of the appeal under s 604, which requires the subject matter of an appeal to be a “decision”. However, given the conclusions we have otherwise reached in this matter, and that the difficulty in this respect could probably in any event have been cured by an appropriate amendment to the notice of appeal, it is not necessary for us to pursue this issue further.

[17] We do not consider that it would be in the public interest to grant permission to appeal such as to require us to grant permission under s 604(2), nor do we consider that there are discretionary grounds, for three reasons.

[18] First, we do not consider that the decision is attended with sufficient doubt to warrant appellate reconsideration. The constitution of SC Hydro, the terms of the Service Agreement and the evidence of Mr Ritchie and Mr Michael Borlase, the former Group Employee and Industrial Relations Manager of Clough, make unambiguously clear the nature of the business enterprise which SC Hydro was proposing to establish at the time the agreements were made, namely the provision of “blue collar” labour to the FGJV to constitute the core workforce for the construction of the Snowy 2.0 project to its completion. That business enterprise is genuinely “new”: SC Hydro has not engaged in this business activity before, nor has the FGJV or any of its constituent partners, and the business so described has not been acquired, assigned or otherwise transferred from any of the construction contractors or labour hire providers who have to this point performed work on the project, or from anyone else. The agreements plainly relate to this new business enterprise.

[19] The AMWU’s main contention in its appeal is that, in order to be a “genuine new enterprise” for the purpose of s 172(2)(b), the enterprise must be “new to the world”, not just to the employing entity, and that SC Hydro’s enterprise does not satisfy this criterion because its employees will do the same work as that currently being done by employees of the various construction contractors and labour hire companies engaged on the project. This contention is to be rejected for the reasons stated by the Deputy President. Assuming, in the AMWU’s favour, that the enterprise is required to be “new” in the sense for which it contends, there is no existing business conducting an enterprise of the nature of that to be conducted by SC Hydro. A number of specialist construction contractors and labour hire companies (referred to in paragraph [36] of the reasons for decision), which trade in the construction industry generally, have been engaged to work on the project, but there is no evidence to sustain the proposition that any of these entities conduct the business enterprise to be conducted by SC Hydro, as we have characterised it. They are distinct businesses in their own right which will continue to trade notwithstanding the establishment of the business of SC Hydro.

[20] That some future employees of SC Hydro may perform work of the same nature as that which is currently performed by employees of the current construction contractors or labour hire companies engaged on the project is not determinative of whether SC Hydro’s enterprise is “new”, and the errors of fact which the AMWU contends that the Deputy President made are therefore not relevant to the ultimate outcome. In any event, we consider that there was no error on the part of the Deputy President in finding that the work to be done by SC Hydro’s future workforce will have a “different character” and be “broader in scope” than that performed to date. Mr Ritchie gave uncontradicted evidence that the work to be performed by the SC Hydro workforce will primarily be the main project works, to the extent that this is covered by the classifications in the agreements, and will include the tunnelling work and associated civil works, including:

•  excavation of the tunnels and caverns by mechanical or other means;

•  installation of temporary and permanent tunnel supports and lining;

•  provision of tunnel excavation ancillary services;

•  the installation and maintenance of the spoil conveyor system; and

•  construction, maintenance and operation of a water treatment and grouting plant associated with tunnelling activities.

[21] Work of this scope has not been performed by any single existing construction contractor or labour hire contractor and, in respect of the tunnelling work, only a small amount of boring in preparation for the excavation of tunnels had been done at the time of the primary hearing.

[22] The AMWU spent much of its time in written and oral submissions attempting to demonstrate, by reference to the matters set out in paragraph [12] above, that SC Hydro was not a labour hire business in any usual sense and therefore that the Deputy President incorrectly characterised its enterprise. However, although the AMWU’s specific factual propositions set out in paragraph [12] above may broadly be accepted, we do not consider that they are demonstrative of any error in the Deputy President’s conclusion that SC Hydro’s enterprise is genuinely new. Indeed, those propositions are all supportive of the characterisation of SC Hydro’s business enterprise as having as its sole purpose the provision of labour to the FGJV for the purpose of the project works and demonstrate the unique and “new” character of that enterprise.

[23] Second, the AMWU contended that permission to appeal should be granted because “substantial injustice” would result if permission to appeal was refused. However, it never explained what that injustice was. There is no suggestion in the AMWU’s appeal submissions that the agreements are any way deficient in terms of the rates of pay or conditions for which they provide or that, if the AMWU had some future opportunity to negotiate an agreement covering any of SC Hydro’s employees, it would be in a position to obtain a more beneficial outcome in respect of those whose industrial interests it is entitled to represent. Nor do the agreements restrict the capacity of the AMWU to represent any members it might have in SC Hydro’s future workforce. The AMWU’s main grievance seems to be that it was excluded from the bargaining for the agreements but, since it contends that there was no proper basis to bargain for greenfields agreements in the first place, that cannot justify the grant of permission to appeal.

[24] Third, we do not consider that the appeal raises “novel issues of general public importance and application”, as contended for in support of the grant of permission to appeal. The matter simply turns on its own facts. The AMWU’s in terrorem prediction or “grim spectre conjured up” 12 that an employer may in future establish a subsidiary corporate entity as a new “labour hire” enterprise in order to make a greenfields agreement, and then transfer the employment of its existing workforce to that entity, simply bears no relationship to the facts of this case or the Deputy President’s reasoning. It therefore does not arise for consideration in this appeal.

Conclusion

[25] For the reasons stated, permission to appeal is refused.

VICE PRESIDENT

Appearances:

C Howell of Counsel on behalf of the AMWU.
F Parry QC with A Pollock of Counsel on behalf of SC Hydro Pty Ltd.
A Sage on behalf of the AWU.
R Mallia on behalf of the CFMMEU.

Hearing details:

2021.
Sydney and Brisbane (via video-link):
October 6.

Printed by authority of the Commonwealth Government Printer

<PR734852>

 1   [2021] FWCA 5100

 2   [2021] FWCA 4675

 3   [2021] FWC 5110

 4   Ibid at [32]

 5   Ibid at [33]

 6   Ibid at [34]

 7   Ibid at [36]

 8   Ibid at [37]

 9   Ibid at [38]

 10   Ibid at [39]

 11   Ibid at [42]

 12  1. See Wainohu v New South Wales [2011] HCA 24, 243 CLR 181 at [151] per Heydon J