IR bill could smash economy

Article by Steve Knott courtesy of the West Australian.

Premier Roger Cook was right to urge the Prime Minister to carefully consider the damage his extreme industrial relations changes could have on WA’s resources industry.

Until recently, debate over the Anthony Albanese’s Closing Loopholes legislation has largely ignored a factor that could smash the economy.

Unless this is clarified, resources and energy operations could shut. Thousands of workers could be out of a job.

That’s because under the Bill, in its current form, a range of specialist contracting services that form the lifeblood of Australia’s resources industry can be wrongly defined as labour hire and captured in complex same, job same pay regulation.

These contracting arrangements are critical to operating and maintaining the resources and energy projects that, via exports and tax receipts, enabled the Federal Government to deliver its $22 billion Budget surplus in 2023, the first in 15 years.

They include contract mining and petroleum production services, maintenance service contractors, shutdown service providers and facilities management providers. Many of them are based here in WA.

Such businesses take up a highly specialised niche within the resources and energy sector and range from small and medium enterprises through to some of the largest companies in the world.

In fact, several of the resources industry’s key service contracting companies operate in dozens of countries, have more than half a million employees globally and tens of thousands in Australia.

They are sophisticated workforces that move across our States and international markets, delivering the same specialist services here as they do in other resource nations competing with Australia for job-creating investment capital.

The major difference between service contractors and traditional labour hire counterparts involves the scope of delivery. In a labour hire arrangement, a worker is employed by the labour hire company but works under the guidance and supervision of the host or client enterprise (for example a mining project), usually alongside direct-hired employees to supplement a site’s permanent workforce.

In a typical service contracting model, the client utilises the specialist skills and expertise of a contracting company to deliver a defined breadth of work for commercial outcomes.

For example, in contract mining services, firms carry out mining operations as third parties on a fee or contract basis. Typically they bring their own entire work teams, supervisors, managers and equipment — drill rigs, dump trucks, excavators, drag lines and other plant that can be worth hundreds of thousands of dollars apiece.

It is also common for projects in mining and energy to outsource the ongoing maintenance of their assets to specialist engineering and maintenance firms.

Those firms also provide the specialist experience in planning, managing and executing high-pressure shutdown projects — planned outages of entire or substantial sections of a project for large-scale maintenance works, upgrades and refurbishing.

Specialist facilities management companies deliver full-scale services for remote accommodation villages, such as cooking, cleaning, grounds and building maintenance and waste management.

While it is common for enterprise agreements of specialist contracting companies and their clients to have some overlap in broad occupation classifications, their employees are very distinct from one another and are never doing the “same job”.

They are most certainly not being used as a “loophole” to circumvent the client or host’s enterprise agreement rates.

And they must not be disrupted, let alone destroyed, as part of the enormously wide reach of the Government’s same job, same pay laws within its Closing Loopholes Bill.

In June, the Australian Resources & Energy Employer Association led a delegation of member contractors to Canberra to consult with Employment and Workplace Relations Minister Tony Burke and department officials on this critical issue.

The Government was very open to AREEA’s proposed “multi-factor test” that would ensure the Fair Work Commission can distinguish between labour hire and service contracting.

Key checkpoints include the level of autonomy of contracting employees; who is providing supervision, direction and control over delivery of work; whether contracting employees are using the host or client’s equipment or machinery; and the level of autonomy over work compared to that of the client’s workforce.

While the Government has gone part way to making this distinction in the Closing Loopholes Bill, the proposed process is completely unworkable.

Service contractors can and will be pulled into complicated applications and would then bear the onus of proof to convince the FWC that they are not labour hire. Even then, there would be nothing preventing the FWC from considering it “fair and reasonable” to subject them to complex same job, same pay orders anyway, at the wishes of unions. The Government also believes the FWC should be able to drag service contractors into the employment arrangements of their clients based upon whether the client could, should or may in the future, employ those workers directly.

Frankly, it is ludicrous to think the FWC, with only one of its 50 members ever having run a substantial business, could be allowed to make assessments about future work plans that experienced business managers and board directors haven’t yet contemplated.

Mr Burke has been clear the Government does not intend to capture genuine service contractors in its messy proposed labour hire regulations.

AREEA urges the Prime Minister and the Workplace Relations Minister to fix the drafting and provide a clear exemption for service contractors from labour hire pay orders.

Anything less would not adequately protect the specialist and skills unique to resources and energy service contractors.

In its current form, far from creating fairness, Closing Loopholes threatens to devastate the suppliers who for so long have delivered the competitive, flexible and commercial services that keep the resources and energy industry strong.

Steve Knott AM is chief executive of the Australian Resources & Energy Employer Association