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Full Bench upholds Peabody’s pay method for new rosters

A FULL Bench of the Fair Work Commission has upheld a decision supporting Peabody Energy Australia’s method for calculating pay for revised rosters at its Coppabella mine, undertaken in response to falling coal prices.

The Full Bench dismissed the CFMEU’s appeal of Deputy President Asbury’s October 13 decision, in which she found that “Peabody’s (payment) model was consistent with the terms of the Enterprise Agreement and with the intent of the parties as ascertained from the relevant objective background facts.”


This dispute did not relate to Peabody’s right to change roster patterns in response to operational challenges (in this case falling coal prices), which was established under clause 10.12 of the 2013 agreement, but rather over the employer’s methodology for calculating total fixed remuneration (comprised of base salary, superannuation and roster allowances i.e. overtime).

The CFMEU’s preferred payment model involves taking the number of hours worked per week (either 42 or 43.5 hours), multiplying that by 52 to provide a yearly number of hours, then dividing that figure by the Base Rate to come up with an hourly rate of pay.

However, Peabody instead preferred to revert to the 2010 Black Coal Mining Industry Award for calculating total fixed remuneration under the new roster. The employer’s method, which it had tested and validated by KPMG, is summarised by Deputy President Asbury as:

“As a result of the reduction in hours, Peabody has reduced TFR paid to employees according to a methodology by which it has assumed that the rate in the 2013 Agreement for non-rostered overtime is a double time rate and dividing it by two.”

In her original decision, DP Asbury found Peabody’s method was correct and in accordance with the Award. She rejected the CFMEU’s preferred method, noting it was “inconsistent” with the agreement and would “give rise to an unreasonable or unfair outcome for Peabody and the employees”.

Full Bench upholds Asbury decision:

The CFMEU appealed the decision, arguing that DP Asbury erred in finding the review of the Base Salary and Roster Allowance was consistent with the terms of the Enterprise Agreement; and that the Award was relevant in determining the appropriate review method.

The Full Bench – comprising Vice President Joe Catanzariti, Deputy President Lyndall Dean and Commissioner Tony Saunders – dismissed the union’s application, finding DP Asbury “did not err in any of the ways alleged by the CFMEU in the exercise of her broad arbitral function under the dispute settlement procedure in the enterprise agreement”.

While there was “no doubt” that Peabody considered the award provisions during its review, the company “did not apply the provisions of the award to determine a particular matter or entitlement by reference to the award”.

“Similarly, we are satisfied that it was appropriate for the deputy president to have regard to the award in the context of the (better off overall test) as part of the relevant objective background fact,” the Full Bench found.

The bench agreed with “Peabody’s contention that the Deputy President’s reasons for preferring Peabody’s model were not primarily based on notions of fairness. Rather, the Deputy President found that Peabody’s model was consistent with the terms of the Enterprise Agreement and with the intent of the parties as ascertained from the relevant objective background facts.”

Implications for employers:

The Full Bench’s backing of Peabody’s payment methods is a positive development for any resource employer attempting to restructure its rosters and labour costs in response to challenging market conditions.

Importantly, the employer in this case ensured its course of action was consistent with the relevant Award and was not in breach of any provisions of its current enterprise agreement.

Further, by taking its new payment method to a third party consulting firm for testing and validation prior to implementation, Peabody has demonstrated how a strategic approach can assist employers with achieving a positive outcome if workplace initiatives are challenged by unions in the Fair Work Commission.

AREEA’s specialist workplace relations consultants can assist you with any strategy development and/or advice relating to remuneration, rosters, overtime, entitlements and workplace change. Please contact one of AREEA’s via your local AREEA office.

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