In a decision with potentially far-reaching implications, a major energy generator and retailer will be forced to pay portable long service leave for maintenance and repair workers who were effectively ruled part of the construction industry.

EnergyAustralia Yallourn sought declarations from the Supreme Court of Victoria that none of its maintenance workers were covered by the portable long service leave scheme established in the Construction Industry Long Service Leave Act 1997 (Vic) [the Act].

The defendant, CoInvest Limited – trading as LeavePlus – is the trustee of the Construction Industry Long Service Leave (LSL) Fund.

Justice Andrew Watson found EnergyAustralia did not fall under the LSL scheme’s carveout for workers carrying out maintenance or repairs of a “routine or minor nature”.

Under the Act, an eligible employer must pay LeavePlus a long service leave charge of 3 per cent of the ordinary pay of every worker.

Repair and maintenance work not ‘construction’

The Yallourn site covers 2,330 hectares, including a coal mine (operated by a contractor) supplying a power station which delivers around 22 per cent of Victoria’s electricity.

EnergyAustralia contended its repair and maintenance workers do “day to day maintenance” and “outage work” which is excluded from the definition of “construction work” and therefore disqualifies those workers from the LSL scheme.

Day-to-day Maintenance Work involved routine preventative maintenance (such as replacing gaskets or filters, recording data or undertaking inspections) and defect or corrective maintenance (such as replacing a motor or pump that has failed).

Outage Work was conducted while one or more of the four power station units was offline: for example, replacement of a large piece of equipment or other routine preventative or corrective maintenance work that cannot be done while the station is online.

The employer submitted the definition of “construction industry” under the LSL scheme rules referred to the industry of an employer rather than the occupation or work of employees; and that the “orthodox” approach to determining whether an employer is in an industry was to determine the “substantial character” of its enterprise – and EnergyAustralia’s substantial character was the generation of electricity.

EnergyAustralia insisted the maintenance or repair of its structures for the generation of electric power were integrated with and incidental to the activity of generating electricity.

Further, the enterprise did not charge external clients for services relating to the maintenance of or repairs to structures for the generation of electricity:

“(For all the above reasons) EnergyAustralia is not in the construction industry as defined by the (scheme’s) rules.”

Justice Watson disagreed, stating the substantial character test did not apply:

“I am not satisfied … it is appropriate to apply what EnergyAustralia describes as the ‘substantial character test’ in ascertaining whether it is engaged in the construction industry as defined.

“EnergyAustralia’s contention in this regard is derived from the use of that test in relation to the construction of various union rules and industrial instruments in an industrial context …

“In this case, my task is one of construing the terms of the (LSL scheme’s) rules”.

Finding that EnergyAustralia had put a “strained and unlikely construction” on its interpretation of the rules, Justice Watson said:

“Once it is accepted that EnergyAustralia’s enterprise can be in an industry of repair or maintenance of structures used to generate electricity without needing to be ‘substantially’ in that industry, it is difficult to see how the evidence in this case leads to any other conclusion.

“EnergyAustralia owns, operates and maintains a power station – that is its business.

“Its primary purpose … is the generation of electricity for sale.

“However, the evidence shows that in order to fulfill that primary purpose it has to devote very considerable resources to the maintenance and repair of the structures or works involved in the generation of that electricity.”

Olympics are not routine

Justice Watson could not be persuaded major outage work was routine just because it was planned and regular.

“The Olympics are planned and regular but they would not be described as a routine sporting event. Similarly here, the major outage work is of such a scale, involves such a degree of planning and appears to have such a standalone character that in my view it does not have the mundane character … which the compound phrase ‘routine or minor’ implies.

“Even if EnergyAustralia is not substantially in the construction industry, I would hold that at least those employees engaged in major outage work and integrity outage work were not engaged in repair or maintenance work of a routine or minor nature.”

He concluded that:

• EnergyAustralia is in the construction industry as that term is defined in the LSL scheme’s rules;
• The maintenance workers do not fall within the routine or minor maintenance carveout; and
• At least some of the work performed by the maintenance workers is of a kind for which a rate of pay was fixed by a prescribed award.

Implications for Employers

With EnergyAustralia likely to appeal, this case may have some way to go yet.

However, as it stands, the ruling clearly expands the scope of potential employer liability for LSL scheme payments in Victoria.

AREEA members engaging in work in Victoria – particularly those with employees undertaking work that could be argued to be in the “construction industry” for the purpose of the LSL scheme, are encouraged to get in touch for advice on your exposure.

For AREEA members with operations in other states and territories, it’s important that LSL schemes sit within the state/territory jurisdiction and therefore precedent set in Victoria may have limited application in other states, at least until similar test cases are run in other jurisdictions.

But at a high level, the outcome in this case will add to growing concerns that carveouts for previously excluded employees may become less reliable to defend or reduce an employers’ liabilities.

AREEA is closely monitoring a similar matter in Tasmania, involving a mining sector employer being pursued by TasBuild for contributions into the Tasmanian construction LSL scheme. The employer is defending that claim fiercely on the basis it is in the mining industry.

And, AREEA is also monitoring a significant case in Queensland whereby that state’s Coal Long Service Leave Board is pursuing a prominent drill and blast specialist employer for contributions on the basis its employees provide those drilling and blasting services at coal mines.

AREEA will keep members updated on the progress of these disputes and any further relevant matters that may arise.

These developments further highlight the risks that would arise from the Albanese Government’s plans to nationally harmonise portable LSL schemes, should it be re-elected for a second term.

Members who are concerned by the decision and require strategies or support should contact: [email protected].