After deliberating for months over substantial evidence, the Fair Work Commission (FWC) last week issued its decision in relation to a major “same job same pay” test case – applications for orders made by the MEU and AMWU to cover three BHP coal mines in Queensland.

The Full Bench found the BHP-owned entities commonly known as “OS Production” and “OS Maintenance” supply labour rather than provide services to BM Alliance Coal Operations (BMA).

Thus, the FWC found it was not prevented from making the “Regulated Labour Hire Arrangements Orders” (RLHA Orders) sought by the MEU and AMWU, which means OS Maintenance and OS Production will soon be required, if the decision is not appealed, to pay their employees in accordance with the BHP Coal enterprise agreement.

The outcome is not unexpected given the trade union movement has long criticised the BHP-OS model and the Albanese Government was clear on its intentions to target those arrangements with its same job same pay laws.

This decision is also significant as it involves the first time an employer has sought to reply upon provisions in the laws that prevent the FWC from making RLHA Orders where the employer is providing a service to the “host” rather than supplying labour.

Service contractor exemption critical

Known as the “service contractor exemption”, these provisions were negotiated into the laws by AREEA when it became clear in late 2023 that the Albanese Government had enough support in the Senate to legislate their long-held policy.

The provisions that resulted from those negotiations provide a much clearer exemption for businesses that are providing services to clients than otherwise would have been legislated had AREEA not intervened in the final stages of the legislative process.

In its 102-page decision, the FWC Full Bench clearly acknowledges it could not make the RLHA Orders sought unless it was satisfied the arrangements were not or would not be for the provision of a service rather than the supply of labour.

Unique facts in BHP case

Thus, the decision reflects the Full Bench’s views on the unique facts surrounding the performance of work at the relevant BHP sites.

That is, evidence put forward by the union applicants that argues the OS entities supply labour rather than provide services to BMA was found to be more convincing than evidence put forward by BHP that the OS entities provided services, rather than supplied labour.

In making this determination, the Full Bench closely examined the various test factors including the level of involvement the OS entities have in the performance of the work at the BMA sites; how the work is supervised; the supply of equipment, plant and structures of work; whether the work could be considered specialist in nature; and other matters.

The Full Bench also made clear distinctions between the BHP-OS arrangement, where contractual terms centered on the supply of labour, and that of traditional contracting models that focus on production metrics and other commercial outcomes.

In contrast to traditional contracting, the Full Bench found there was little difference in the “substance” of the BHP-OS arrangements and those involving labour hire firms WorkPac and Chandler MacLeod, which the RLHA Orders will also cover.

It is, of course, open to the affected employers to appeal the FWC’s decision to the Federal Court should they believe jurisdictional or factual errors have been made.

AREEA intervention and further assistance

AREEA was an intervening party in this matter and firmly argued the intent of the provisions and the commitments made by the Government at the time of our negotiations that it did not intend for the same job same pay laws to cover traditional contracting arrangements.

We encourage members to express interest in receiving a more detailed breakdown of the decision, including how the FWC applied the service contractor provisions to the BHP-OS arrangements and found the arrangements fell under the “supply of labour”.

Since the new laws were legislated in 2023, AREEA’s specialist workplace advisory team has been assisting members to review and update contracting arrangements and understand risk and limit exposure.

The team is available to help members apply key principles and findings within the BHP case to your operations and contractual relationships: [email protected].

Advocating for change of the “same job same pay” laws

Any real prospect of having the same job same pay laws repealed or substantially watered down in the short term was erased by the re-election of the Albanese Government in May.

Notwithstanding this, AREEA has been very clear on its position that these laws are an unnecessary disruption to the contracting and employment models that contribute to the success and viability of the resources and energy industry.

To avoid risking operations and employment in our sector, amendments are needed to focus the laws only on arrangements where there is evidence labour hire is primarily being used to circumvent payment of another in-term enterprise agreement.

If the Government insists these laws are required, they should be far more confined in scope and the FWC should be prevented from making RLHA Orders unless the evidence proves labour hire is being used to undermine or undercut the client’s rates of pay.

Irrespective of the challenging political environment, AREEA will continue to advocate this point and ensure businesses supplying labour to clients via legitimate and lawful above-award arrangements can do so with certainty and confidence.

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Laws prevent orders covering genuine service contracting

• Comment by AREEA CEO Steve Knott

Those following this matter over the past several years would not be surprised that the FWC granted “same job same pay” orders covering BHP’s coal mines in Queensland.

The Albanese Government made no secret these laws were devised in part to target BHP’s coal workforce arrangements. This point was reaffirmed by then-Minister Tony Burke in his first reading speech of the Closing Loopholes Bill in 2023.

While the decision is important given it marks the first instance an employer has relied upon the “service contractor exemption” to defend an application, the facts of this matter are highly unique to BHP.

The two Operations Services (OS) entities at the centre of this matter are fully owned subsidiaries of BHP and contracted to BHP-majority owned sites to supplement on-site production and maintenance activities.

The FWC considered this background as relevant and also closely examined the nature of the contracts between BHP and the OS entities when making the determination the arrangements were for the supply of labour rather than the provision of a service.

The same job same pay laws are bad policy and an unnecessary disruption to the contracting and employment models that contribute to the success and viability of the resources and energy industry.

But the BHP decision further reinforces that traditional contracting businesses – especially those that supervise their own employees, provide them with equipment and are involved in the performance of their work – have a clear defence to RLHA Order applications.

Mining contractors, food, accommodation, cleaning and specialist services which can demonstrate they supervise their own employees, control the performance of their work and supply their own equipment will be well placed to keep their own workplace agreement arrangements.

Legislatively, the FWC can’t make such companies subject to labour hire provisions where it is clear the employing entity is providing a service as opposed to labour hire.

AREEA’s position is amendments are needed to ensure same job same pay is targeted at clear cases where there is evidence that labour hire is being used to undermine, undercut or avoid the payment of enterprise agreement wages.

For those who missed it, join AREEA Deputy CEO Tara Diamond and Director of Industry & Advocacy Tom Reid for a thorough analysis of the decision in a special Workforce Webinar.