14 Oct 2010

Suspending protected industrial action causing significant harm to a third party

by Saul Harben, Matthew Kelleher

Suspension of protected industrial action affecting a third party will only be ordered in exceptional circumstances where the harm is out of the ordinary.

The Full Bench of Fair Work Australia in CFMEU v Woodside Burrup Pty Ltd [2010] FWAFB 6021 recently quashed a decision suspending a period of protected industrial action.

The protected industrial action was being taken by 12 employees of Mammoet Australia Pty Ltd, who contracted to Woodside to carry out heavy moving operations at the construction of the on-shore component of Woodside's $9 billion Pluto project in north-west Western Australia. Bargaining for a new enterprise agreement was commenced by the employees shortly after the nominal expiry date of the Mammoet Australia Pty Ltd Pluto Project Greenfields Agreement 2008.

After bargaining was unsuccessful in not producing an agreement, an order was made for a protected action ballot, which was declared approving protected action. After the commencement of a second 28-day episode of protected industrial action in late June 2010, Woodside and two contractors affected by the delay in Mammoet's works made an application under section 426 of the Fair Work Act 2009 for an order suspending the protected industrial action as affected third parties. At first instance, McCarthy DP suspended the protected action for a period of three months.

Significant harm

FWA must suspend protected industrial action if satisfied "that the protected industrial action is threatening to cause significant harm to any person other than a bargaining representative… or an employee who will be covered by the agreement" (section 426(3) of the Act).

The decision identifies that the threshold for satisfying the test of "significant harm" is extremely high. The ability to suspend a period of such action will not be triggered where the industrial action is merely causing the third party an inconvenience.

Employees have a right to take protected industrial action in support of a proposed enterprise agreement and in order to suspend a period of such action, the harm to the third party would need to be significant and more than merely suffering of a loss, inconvenience or delay.

Suspension only in "very rare cases"

FWA observed that effective industrial action will almost always cause harm to an employer that will frequently adversely affect a third party and as such, "significant harm" must be beyond the sort of loss, inconvenience or delay commonly caused by industrial action.

Unless the harm is out of the ordinary, which is likely to be in vary rare cases, FWA will not be inclined to suspend the protected industrial action.

FWA expressed the view that even the substantial losses that Woodside was exposed to as a result of losses caused by delay (amounting to millions of dollars a day) were not "significant" in the relevant sense when considered in the context of the project as a whole (including its enormous size) to warrant suspension of protected industrial action, unless the delays on account of the action became "very protracted."

Reputation, mitigation and length of any suspension

Further magnifying the high threshold required for a third party to satisfy "significant harm," FWA did not think that reputational loss suffered by the relevant third parties would be great, and in any case, not enough to constitute "significant harm."

Despite finding that there was no "significant harm," FWA said that even if it had found that such harm existed:

  • Woodside would have had to demonstrate that there were no alternative measures that it could have taken to mitigate the effect of the protected industrial action; and
  • the effect of any suspension can only be long enough to provide temporary respite from the effects of the action, and not have the effect of terminating it.

Conclusion and implications of decision

In the first real test of FWA's power to suspend protected industrial action under the Act, it is clear that the bar has been set very high.

Companies, particularly those which sub-contract components of their works, should not be prepared to sit back while enterprise agreements covering employees of its sub-contracting companies near expiry, under a misapprehension that any protected industrial action arising out of unsuccessful bargaining will be promptly suspended by FWA.

This case highlights the importance of ensuring that construction management companies focus their attention on ensuring that bargaining exercises are conducted in a manner that promotes an effective outcome, thus reducing the possibility of employees taking protected industrial action that has the potential to impact on the third party.

Unless the protected industrial action falls into the rarest of cases, it is unlikely to cause harm significant enough to suspend.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.