Submission on Attorney-General's discussion paper on project life greenfields agreements

The MCA supports the proposal of the Attorney-General and Minister for Industrial Relations to encourage investment in new projects by extending the nominal expiry date of greenfields enterprise agreements to cover the life of major projects.

A greenfields agreement is a unique industrial instrument because it is established with no workforce on site. It is vital to providing investors with certainty about employment conditions and projected labour costs. Further, an employer who commenced a new project without having a greenfields agreement in place would be exposed to protected industrial action in support of a new agreement.

Under the Fair Work Act 2009, employers can only pursue greenfields agreements for genuinely new enterprises and they must negotiate with one or more trade unions who are able to represent the majority of employees to be covered by the agreement. All parties must sign the agreement before it can be submitted to the Fair Work Commission for approval.

An employer can unilaterally apply for the approval of a single-enterprise greenfield agreement where negotiations have proceeded without conclusion for at least six months. Such agreements are subject to existing approval tests under the Fair Work Act and an additional requirement that the agreement is consistent with the prevailing pay and conditions within that industry for equivalent work.

As with all enterprise agreements, the duration of greenfields agreements is limited to four years from the time of approval. The current duration of greenfields agreements is out of step with the realities of major project work in the resources sector, which can extend beyond four years. After a greenfields agreement has passed its nominal expiry date, industrial action may be taken. Consequently, employers may be subject to significant uncertainty and additional costs at a critical time of project construction, and be compelled to agree to uncompetitive wages and conditions in the replacement agreement to keep the project going.

One MCA member had a greenfields agreement expire six months before the completion of a major project in the Northern Territory. The company was exposed to the threat of industrial action because the unions involved wanted to change rosters. This project was completed using template major construction project lead-agreements.

In addition, the effective duration of greenfields agreements may be less than four years, owing to the gap between the approval of the agreement and the decision of investors or the parent company to progress the project.

When an Australian division of a global company makes the case for progressing a local project to its board, demonstrating the cost and continuity of labour supply (as embodied in the greenfields agreement) is crucial to defining that project’s risk relative to other projects in the company’s international portfolio or other investment opportunities under review. Accordingly, the clock can start running on a greenfields agreement well before the project is executed and construction has commenced, exacerbating the risk of uncertainty and disruption mid-project.

One MCA member entered into greenfields agreements with relevant unions in anticipation of proceeding with a $700 million minerals project in Queensland. Yet by the time the company was authorised and ready to execute the project, one year had already passed.

The resources sector has undertaken unprecedented investments over the past two decades, increasing the net capital stock more than threefold between 2000 and 2019. Over the same period, direct employment in the resources sector grew from around 80,000 to 240,000.

Yet the economic benefits that the mining industry delivers for all Australians are not guaranteed. The industry requires a constant flow of investment, both to sustain existing operations and to finance exploration and the development of new mines. Mining companies are competing for a limited pool of global capital to develop new projects in Australia. The MCA understands that mining finance is getting harder to obtain and that the take-up of greenfields agreements in the minerals industry is low, partly owing to the disproportionate power that unions wield in negotiations at critical phases.

All governments, whether federal, state or local, should be aiming at fewer and better regulations and better performance by regulators. The COAG Energy Council has committed to attracting investment in Australia’s resources sector and improving policies and regulations. Reforming greenfields agreements is a positive first step to improving the regulatory environment for mining in Australia.

Recommendations

  • The MCA supports the reform proposal of the Attorney-General and Minister for Industrial Relations to extend the allowable duration of a greenfields agreement from the current maximum of four years (from the time of approval by the Fair Work Commission) to a period that covers the life of the project.
  • The MCA submits that the government should not seek to prescribe a project lifespan, either in terms of years or the construction of certain pieces of infrastructure. Rather, the definition of project completion should be a compulsory matter for the parties to a greenfields agreement to negotiate. In the minerals industry, project completion generally means that a certain production target has been achieved, so that the life of the project extends into the operational phase.
  • As mining projects may last for many years, the MCA recommends that parties to a greenfields agreement be required to consider likely future conditions in the labour market and agree to a schedule of wage increases. This would avoid both cost blowouts for the proponent and negative real wages growth for workers.
  • The MCA recommends the Fair Work Commission (FWC) be provided with a more precise and balanced test for approving a single-enterprise greenfields agreement, as the breadth of the current test focuses attention at the top end of the payment range. The requirement that:

[T]he FWC must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are consistent with the prevailing pay and conditions within the relevant industry for equivalent work

should be amended to:

[T]he FWC must be satisfied that the agreement, considered on an overall basis, provides for pay and conditions that are at least at the level of similar work currently performed at another enterprise covered by an enterprise agreement.

  • To encourage greater take-up of greenfields agreements by minerals companies, the government should restore the previously available option of allowing an employer to make a greenfields agreement of 12 months’ duration without union involvement.

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