Australian unions notch major win after first ‘same job, same pay’ contested hearing

The Mining and Energy Union and the Australian Manufacturing Workers’ Union, on behalf of labour hire workers at three BHP Coal (BHP) worksites, successfully brought an application in front of a full bench of the FWC (102-page / 1.47MB PDF) that resulted in a regulated labour hire arrangement order (RLHAO) for the labour hire workers to be paid the same rate as workers directly employed by BHP to perform the same type of work at the sites.

Once effective, and subject to any potential judicial review, the orders will result in significant wage increases for labour hire workers at the mines, with one employer estimating an average increase of about 36% during the proceedings.

It is the first ‘same job, same pay’ order issued after a contested hearing since the provisions were introduced into law by the federal government in 2023. The decision follows the first RLHAO issued by the FWC that resulted in annual pay increases for 324 labour hire workers at Batchfire’s Callide mine in 2024, which was an important step in interpreting the new legislation.

As we highlighted previously, RLHAOs would likely affect employers who have enterprise agreements and regularly use labour hire. This latest decision is another blow to the labour hire industry during a time of heightened political and economic volatility, a potential further increase to labour cost for employers and a major win for unions.

The unions sought RLHAOs against four employers providing labour to one host, BHP Coal, that would require all the employers to pay their employees working at the mines the same pay rates as those paid to direct employees of BHP doing the same kind of work at the mines.

Two of the employers were companies within the BHP group, OS Production and OS Maintenance, while the other two, Workpac and Chandler Macleod, were external to the group. The internal employers opposed the union applications on the basis they were providing a service to BHP, rather than supplying labour to it, while the external employers opposed the applications on the basis it would not be fair and reasonable to make the orders sought by the unions.

The Albanese government amended the Fair Work Act 2009 (Cth) in 2023, adding to it that the FWC must make RLHAOs if:

• an employer supplies one or more employees to perform work for a ‘regulated host’;
• a covered employment instrument that applies to the regulated host would apply to the employees if the regulated host employed them to perform work of that kind; and
• the regulated host is not a small business employer.

The FWC must not make a RLHAO unless satisfied the performance of work is not for the provision of a service rather than the supply of labour, or if satisfied it is not fair and reasonable in all the circumstances to do so. RLHAOs are not intended to apply to contracting arrangements for specialised services such as catering or cleaning.

In determining whether the work performed is for the provision of a service rather than the supply of labour the “core question”, according to the FWC, is whether the performance of work by the regulated employees is properly characterised as being for the provision of an identifiable and discrete service to the regulated host, which is distinct from the supply of the labour of the workers to work in or as part of the business of the regulated host.

In finding the work performed at the mines by the employees of the internal employers was not for the provision of a service rather than the supply of labour, the FWC paid particular attention to:

• that the employers are part of the BHP corporate group;
• that the employers and their employees are subject to BHP policies, systems and processes;
• that the price paid to the employers was largely determined by their labour costs, similar to what would be the case for a labour hire provider;
• that the host, more than the employers, determined the mining and maintenance plans as well as timing, priority and nature of the work performed;
• that while the employers do some supervision, the host requires the work to be done in line with detailed, highly prescriptive requirements and undertakes monitoring, intervention and direction of the employees through various systems;
• that the employees use the same plant, equipment and systems provided by the host to do their work as used by direct employees;
• that the skilled work done by employees is largely the same done by direct employees, and
• that many of the matters relied on by the internal employers in support of their argument they are providing a service also apply to the supply of labour provided by the external employers.  

The external employers, Workpac and Chandler Macleod, did not argue they provide a service rather than the supply of labour. Instead, they argued RLHAOs should not be made for them because it was not fair and reasonable in all the circumstances to do so.

Both external employers argued that the FWC must give enterprise-level collective bargaining priority when considering making orders, given that at least some of the regulated employees have their own enterprise agreement that risked being replaced by an imposed RLHAO.

The FWC rejected that submission, finding the enterprise agreements do not need to be given unconstrained priority. Rather, the FWC, in deciding if it is fair and reasonable to make an order, must consider all relevant circumstances.

The external employers also argued the financial impact on them of the orders sought by the unions meant it was not fair and reasonable to make them. The FWC also rejected that argument, finding a lack of evidence to support the employers’ claims.

Accordingly, the FWC decided RLHAOs would be made for each of the unions’ applications. However, it agreed to defer making the orders for a short period to give the employers and host an opportunity to be heard on the question of the timing of the orders.

Implications for labour hire providers

Subject to any potential judicial review, the decision has major implications for host organisations using external contractors, including labour hire.

Users of contractor services face significant uncertainty over whether a contractor is providing a service or simply supplying labour. As the decision makes clear, the criteria the FWC must consider when deciding that point are not absolute or clear cut. The Fair Work Act provides a scale or spectrum against which the actions of the employer and host are measured. For example, the employer’s “involvement” in matters relating to the performance of work may exist – as it did in this case – but can be judged by the FWC to be less than that of the host, and therefore count as a negative instead of a positive when considering whether a service is being provided. Similarly, the “extent” to which, in practice, the employer directs, supervises or controls employees in performing the work may be judged less than that of the host.

The application of these criteria create uncertainty for hosts, leaving them more vulnerable to potential claims by unions and the risk of litigation. That situation could hamper business planning and investment decisions, resulting in damage to business confidence or productivity.

Hosts will also need to check their contracts to see if they might be liable for any increased labour costs resulting from RLHAOs, while contractors and employers face similar uncertainties. Labour hire providers also face significant increases in labour costs and a potential fall in demand for their services.

Labour hire workers and the unions seeking RLHAOs on their behalf are winners, at least in the short term, although whether that remains the case in the medium to long term remains to be seen. Arguably, decisions which increase labour costs may create incentives for businesses to pursue labour-saving technology, such as AI, robotics and automation.

Co-written by Andrew Herlinger of Pinsent Masons.