EBA challenge by Leighton’s John Holland Group: What leaders need to know

John Holland Group, a division of Leighton Holdings, struck an enterprise agreement last year for the employees working on a new $1.2 billion children’s hospital in Perth.

But the agreement was struck with just three staff, and John Holland applied for it to cover all the employees who would later work on the project, and indeed, “all employees performing building or civil construction work on a regional basis (that being in this case Western Australia) except for any employees on site-specific project arrangements.”

A lot of folk. Simon Dewberry, a partner at law firm Allens says none of the John Holland Group’s 7,500 existing staff would have been affected; it was all those employed in the future on the children’s hospital and other projects.

The agreement, initially approved, was overturned by the full bench of Fair Work Australia after a challenge from the Construction Forestry Mining and Energy Union (CFMEU). Primarily, the bench considered that the three staff who made the agreement were not representative of those ultimately affected and it would leave future staff at a disadvantage.

“… we consider that the group of employees covered by the Agreement is not geographically, operationally or organisationally distinct,” FWA wrote in its decision. “We also consider that the operation of the Agreement, as made with the three employees, would undermine collective bargaining by other employees in a manner not compatible with the objects of Part 2-4, and that the exclusion provision in the clause is contrary to the purpose and policy of the Act.”

In other words, a lot of future employees of John Holland would be affected and, while they could attempt to change the agreement, they would not be able to take protected industrial action in support of any changes.

John Holland is planning to appeal against the FWA decision, according to The Australian Financial Review.

Uncertainty

The ruling leaves some uncertainties for employers, says Dewberry. “The decision creates a difficulty in the way the full bench found against John Holland. The grounds of the finding create a risk: where you create an agreement like John Holland’s, based on this reasoning, the agreement would fail the relevant tests.”

The case is a complicated one for employers.

Every enterprise agreement covers future workers; what is at issue in this case is the number of future workers relative to the number who made the agreement. Says Dewberry: “The tipping point is the small number of employees. That is one of the points the full bench made, but I think it is the key issue in the case.”

Risk

John Holland was trying to legitimately reduce risk by getting an agreement in place early on the project. Most employers prefer to make agreements with the staff directly rather than an agreement with the union, in this case the Construction Forestry, Mining and Energy Union (LeadingCompany contacted the CFMEU for comment, but did not receive a response in time for publication). Agreements can be made between employers and unions before any staff are employed, but only when the employer is establishing a new business.

While not commenting directly on John Holland’s approach to the EBA, Dewberry says negotiating agreements early on is standard practice. “You want to make an agreement with employees at a point in time when you have a small number. That is sensible to mitigate the risk. As long as you don’t have an agreement you are exposed to risk and the owner of project is not going to be happy to have no agreement.”

Initially, the agreement was approved, but when it was challenge by the CFMEU, the full bench found that three was too few relative to the scope of the agreement.

This leaves a degree of uncertainty for employers about how many staff is enough to make an agreement with and is likely to lead to projects being started before agreements are reached. “You will have to be very careful about making an agreement with small number of employees with application to larger number of employees, before you have ‘manned up’ as the expression goes,” says Dewberry. “If you then you ‘man up’ and start employing the bulk of workforce, you don’t’ get the benefit of bargaining with fewer staff.”

Carve-outs

John Holland’s effort to carve out everyone already on existing agreements with it was, in principle, to the benefit of its existing employees. And it is standard practice in the construction and resources sector where employers might have to offer especially high wages and strong conditions to attract staff to unpopular projects, such as those in very remote locations.

While it’s apparent the issue concerning the bench was that of representation, the wording of the decision leaves some confusion about making agreements that share other elements with that of the John Holland agreement, such as carving staff out of existing agreements. “Employers need to take some care about other aspects, like carving out, but I think those issues are not as acute a risk. When the bench is analysing those other issues, [and using] the language about how many employees are involved, and that tells me it was representation that was the issue.”