Industrial Relations Commission of New South Wales CITATION : Lend Lease Hotel Intercontinental (Stage 1) Project Award and Another [2003] NSWIRComm 314 APPLICANT Bovis Lend Lease/Labor Council of New South Wales PARTIES : RESPONDENTS Labor Council of New South Wales Construction, Forestry, Mining and Energy Union (New South Wales Branch) Barclay Mowlem Construction Limited FILE NUMBER: IRC 3881 and 3896 of 2003 CORAM: Walton J Vice-President CATCHWORDS : Awards - Building and Construction Industry - Consent - Statutory Requirements - Wage Fixing Principles - Jurisdiction - Contractor Clauses - Awards made. LEGISLATION CITED : Industrial Relations Act 1996 A v The Commission of Children and Young People (No.4) (2000) 104 IR 131 Adelaide Women's Community Health Centre Inc. and ors v Australian Liquor, Hospitality and Miscellaneous Workers' Union (unreported, McIntyre VP, Marsh SDP and Frawley C, Print L4865, 24 March 1994) Adelaide Women's Community Health Centre Inc. and ors v Australian Liquor, Hospitality and Miscellaneous Workers' Union (unreported, O'Connor P, McBean SDP and Bryant DP, Print M9948 14 March 1996) Australian Higher Education Industrial Association v Federated Miscellaneous Workers' Union (unreported, Munro J, Watson DP and Redman C Print M8770, 30 January 1996) Campbells Cash and Carry Pty Limited v National Union of Workers, New South Wales Branch (No.2) (2001) 53 NSWLR 393 CASES CITED : R v Commonwealth Industrial Court Judges, ex parte Cocks (1968) 121 CLR 313 Re: National Transport Operations Pty Limited Certified Agreement 2002 (unreported, Harrison SDP, Duncan SDP and Richards C, 22 June 2003) State Wage Case 2003 [2003] NSWIRComm 174 The Queen v Industrial Commission of South Australia, ex parte Master Builders Association of South Australia Incorporated (1981) 26 SASR 535 The Queen v Moore and others, ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 471 Western Australian Government Railways Commission v Australian Municipal, Administrative, Clerical and Services Union (unreported, Hancock SDP, Bryant DP and O'Commor C, Print P0976, 27 May 1997) HEARING DATES: 08/18/2003 DATE OF JUDGMENT: 09/26/2003 APPLICANT in IRC03/3881 Ms A DeBoos Bovis Lend Lease Pty Ltd RESPONDENTS in IRC03/3881 Mr A Hatcher of counsel Mr C Staff Jones Staff & Co Ms N Carl Labor Council of New South Wales Ms R Mallia Construction, Forestry, Mining and Energy Union (New South Wales Branch) LEGAL REPRESENTATIVES: APPLICANT in IRC03/3896 Mr A Hatcher of counsel Mr C Staff Jones Staff & Co Ms N Carl Labor Council of New South Wales RESPONDENTS in IRC03/3896 Mr E Slattery Barclay Mowlem Construction Limited Ms R Mallia Construction, Forestry, Mining and Energy Union (New South Wales Branch) JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Walton J, Vice-President 26 September 2003 Matter No. IRC 3881 of 2003 LEND LEASE HOTEL INTERCONTINENTAL (STAGE 1) PROJECT AWARD Application by Bovis Lend Lease Pty Ltd for a new award Matter No. IRC 3896 of 2003 LABOR COUNCIL OF NEW SOUTH WALES AND BARCLAY MOWLEM CONSTRUCTION LIMITED PROJECT AWARD - CITY QUARTER STAGE 3 CAMPERDOWN NSW Application by Labor Council of New South Wales for a new award REASONS FOR DECISION 1 By applications filed on 15 July 2003, the Labor Council of New South Wales and Bovis Lend Lease Pty Ltd sought the making of two building and construction industry project awards which were respectively entitled Labor Council of New South Wales & Barclay Mowlem Construction Limited Project Award - City Quarter Stage 3: Camperdown NSW Project Award and Lend Lease Hilton Intercontinental (Stage 1) Project Award ("the awards"). Both applicants were granted leave to amend their applications (the final form of which were provided to the Commission on respectively 18 and 28 August 2003) and the matters were joined in order to consider a common issue which arose in the applications as to whether the Commission may as a matter of jurisdiction make an award provision which required that the principal employer for each project stipulate certain conditions in its contracts with subcontractors for performance of work at the project ("the contractor clauses"). 2 The matters concerned projects which involved: 1. The development of apartments at 2-5 Pyrmont Bridge Road, Camperdown, and; 2. The refurbishment of the Intercontinental Hotel at Bridge Street, Sydney. 3 The applications proceeded with the consent of all parties on 18 August 2003. After the receipt of evidence in support of the applications and substantial written and oral submissions by Mr A Hatcher of counsel for the Labor Council of New South Wales and submissions in support from Ms A DeBoos for Bovis Lend Lease Pty Ltd, the Commission granted the amended applications. In doing so the the Commission determined that it had jurisdiction to make the contractor clauses and that as a matter of discretion it should do so. On that occasion, the Commission gave short reasons for decision but indicated that supplementary reasons may be provided in due course. By these reasons, the Commission provides those supplementary reasons. 4 Both matters concern major building construction projects. For example, the project being undertaken by Barclay Mowlem Construction Limited has an estimated construction cost for the project of $41 millions (excluding GST) and is expected to extend over 55 weeks. Each project is a complex building undertaking that is of the kind which has historically involved difficult industrial relations issues, often capable of generating substantial industrial disputation at such workplaces. 5 The proposed awards are in a form now well familiar to the Commission in relation to major building and construction projects. The provisions of those awards are intended to produce an optimal climate for the undertaking of the project which involves the maximisation of efficiency and productivity combined with fair and safe workplace conditions. Such awards typically provide clauses concerning productivity initiatives, dispute resolution, occupational health and safety and basic workplace conditions and standards. From submissions received in this matter and within the knowledge of the Commission, these objectives have by and large been met in projects which have been the subject of these modern building and construction project awards. A more detailed overview of that history would no doubt be available as a matter of evidence and may in due course be a desirable accompaniment to further applications of this kind. 6 The awards met the requirements of the Industrial Relations Act 1996 and the wage fixing principles as enunciated in the State Wage Case 2003 [2003] NSWIRComm 174. In the light of the present experience, the provisions of these instruments are wholly desirable as a matter of industrial merit. 7 The contractor clauses each appeared in clause 4 of the awards which was entitled "Application of the Awards". In the application concerning Barclay Mowlem Construction Limited, the clause in question was in the following terms: 4.2 Where Barclay Mowlem Construction Limited engages sub-contractor/s to carry out works on the project, it shall make it a condition of any contract that it enters into with its sub-contractor/s that they will not employ or otherwise engage persons on wages and conditions, which are less favourable than those set out in this project award. 8 In the application by Bovis Lend Lease Pty Ltd, the clause was in the following terms: (b) Where Bovis Lend Lease engages a sub-contractor(s), it shall make it a condition of any contract that it enters into with its sub-contractor(s) that they will not employ or otherwise engage persons on wages and conditions, which are less favourable than those set out in this Award. 9 The Commission raised with the parties to the proceedings whether these provisions could be awarded as a matter of jurisdiction. The parties further addressed on whether the Commission should award such provisions in the exercise of its discretion. 10 The evidence revealed that Barclay Mowlem Construction Limited and Bovis Lend Lease Pty Ltd were each appointed as head contractor or the 'principal' charged with the successful "construction management" of the project. Both of the corporations directly engaged building and construction employees as well as sub-contractors to carry out that work. Both the directly employed persons and employees of the sub-contractors are caught by the provisions of the awards. 11 The parties led evidence as to the provisions. Mr John Robertson, the Secretary of Labor Council of New South Wales gave evidence as to the nature of this and similar projects as follows: 6. Over the last five years a greater number of Project agreements negotiated through the Labor Council have come before the Commission in the form of Project Awards. 7. Project agreements/awards have historically provided both unions and employers with greater industrial relations certainty, particularly on larger building and construction projects, generally above $10 million dollars in value. 8. On these projects most builders use a combination of direct labour and subcontract companies. It is my experience that the majority of building and construction workers on any one project are employed by subcontract companies. 9. Each of the companies which come onto a project usually have their own industrial instruments in place, e.g. they are bound by various building and construction awards or have their own enterprise agreement. 10. Project awards/agreements are designed to ensure that the myriad of industrial arrangements do not in themselves make the process of construction dysfunctional with different standards, practices and management techniques causing disharmony and also affecting the control that the principal contractor has in meeting clearly set out timeframes, milestones, budgets, contractual and legal obligations. ……… 14. In order to achieve these standards it is my understanding that most builders will insist in their Contract Tender that it is an obligation or condition of contract with the subcontractor that the subcontractor will at least provide their employees with the minimum standards set out in the Project Award. 15. The "sub-clause" which is subject to inquiry by the Commission is an essential element in ensuring that the Principal Contractor who is party to the Project Awards ensures this process occurs. 16. Whilst the Labor Council accepts the integrity of individual enterprise agreements, there does need to be a mechanism, which also ensures the integrity of Project Awards. The clause in question ensures all subcontractors are aware and tendering on a level playing field having regard for the minimum standards set in the Project Award. 12 Andrew Ferguson, the Secretary of the Construction, Forestry, Mining, Energy Union (New South Wales Branch) gave evidence as to the nature of the engagement of subcontractors on such projects as follows: 3. Construction on most projects is undertaken by a myriad of sub-contractors from all sectors of the industry. Many of these sub-contractors will be engaged by the principal contractor, however, a major feature of the industry is pyramid sub-contracting, where sub-contractors contract/sub/let work to other sub-contractors. The arrangements on site can therefore be very complex with various levels of sub-contracting, involving significant numbers of employer and employees. 4. The fragmentary nature of construction sites makes managing industrial relations, project demarcation disputes, occupational health and safety, inclement weather procedures and compliance with statutory obligations by sub-contractors very complex. Project Awards are a mechanism to manage these types of issues on a site basis. The project awards, such as the Labor Council and Barclay Mowlem Construction Limited Project Awards are a mechanism by which the parties in a holistic way can manage these issues. It also provides benefits to employees on a site basis which improves productivity and morale on site. 13 Mr Slattery, the Employee Relations Manager of Barclay Mowlem Constructions Limited gave evidence as to the large number of contract services that are intended for the City Quarter Stage 3 Project in areas such as, 'electrical', 'gyprocking', 'door frames and hardware', 'hydraulic services', 'formwork', 'concreting' and 'scaffolding work'. 14 Ms Alice Mary DeBoos, the Employee Relations Counsel of Bovis Lend Lease Pty Limited gave the following evidence as to the subject provisions: 24. It is the experience of the Applicant that project awards provide some certainty as to project costs and delivery. As the minimum entitlements are agreed between the parties at the outset, projects are rarely disrupted by industrial action as a result of wages and conditions on the site. 25. As a result of this experience, the Applicant is able to use project awards as a marketing tool when tendering for construction work. It is the Applicant's belief that this provides a benefit for our clients in terms of time and cost on comparison to other major builders who do no use the project award framework. 26. One of the key elements in our project awards is the payment of a project productivity or milestone payment which applies to the entire workforce on the site. Rather than simply providing a site allowance as a matter of course, project awards allow the Applicant to seek certain productivity milestones in return for increased remuneration. The Applicant believes this increases the motivation of the workers on site and contributes to the completion of a successful project. 27. As a term in our tender conditions, subcontractors are required to allow for the payments in the project award. This means that the price they submit will be based upon the conditions outlined in the site specific project award. 28. Further, our Subcontract makes adherence to the project Award a contractual term, 29. While Clause 4 of the Application reflects this obligation, I believe that it is useful in restating the obligations on Subcontractors to comply. The project Award is a document which is more easily accessible than the Subcontract and is freely available on sites to remind subcontractors of their obligations. 15 As earlier noted Mr Hatcher made extensive submissions as to the question of jurisdiction of the Commission to grant the "contractor clauses". It was submitted as follows: 12.1 It is a provision about an industrial matter, in that it is about a matter or thing affecting or relating to work done or to be done in a project. That is, in relation to the projects in question, the clause's requirement with respect to the conditions upon which sub-contractors may be engaged is one which directly affects or relates to the terms under which work is done on the project by employees of such sub-contractors. 12.2 It is a "condition of employment" in the sense discussed R v Booth; Ex Parte ACOA , in that the requirement it contains is a circumstance affecting the employment of employees of the head contractor, in that by ensuring that sub-contractors cannot engage employees on less favourable wages and conditions, it assists to preserve the integrity of their award conditions and prevents them being "undercut" in relation to those conditions. 13. Alternatively, the Contractor Clause may be regarded as being incidental and necessary to the other provisions of the awards which regulate the conditions of employment of the employers and employees directly bound by it, in that it seeks to avoid the award being rendered nugatory or ineffective by employers contracting out work on the project to sub-contractors who are not bound by the award. The Commission's express statutory powers carry with it, by implication, such other powers as are incidental and necessary for the effective exercise of its express statutory powers: see Hill v Department of Education (1998) 85 IR 201; Four Sons v Limsiripothong (2000) 98 IR 1; A v Commissioner for Children and Young People (No.4) (2000) 104 IR 131. 16 He also submitted that the contract clauses were appropriate having regard to the following desirable objectives: · To provide a minimum standard of entitlements which is common to all employers and employees on a project; · To avoid disputation on projects resulting from differentials in entitlements; · To ensure that the myriad of industrial arrangements which the range of employers on a project may otherwise have do not cause disharmony or constitute an impediment to the efficient completion of the projects; · To enhance the ability of the principal contractor on a project to ensure that timeframes, budgets, and contractual and other legal obligations are met; and · To provide for industrial certainty over the project. 17 Whilst the Commission has not had the benefit of a contradictor in these proceedings, it considers that, at the least, there is jurisdiction to grant the contractor clauses by virtue of an implied power arising from the particular conferral of power on the Commission under s10 of the Act; see the decision of Wright J President in A v The Commission of Children and Young People (No.4) (2000) 104 IR 131 at [33] - [39]. It should be noted, in that respect, that the expression "conditions of employment" in s10 of the Act is defined in the Dictionary to the Act as including, in its meaning, "any provisions about an industrial matter". Upon the evidence in this matter, that implication is available, in my view, having regard to the obiter dicta of the High Court in The Queen v Moore and others; ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 471 [at 473 (per Gibbs J) and 478 (per Jacobs J with whom Stephen J agreed)]. (See also the provision referred to in that decision at 474). 18 Mr Hatcher referred to a number of Full Bench decisions of the Australian Industrial Relations Commission which have considered similar provisions to the contractor clause (and whether the provisions are reasonably incidental to its exercise of power in that statutory context): Australian Higher Education Industrial Association v Federated Miscellaneous Workers' Union (unreported, Munro J, Watson DP and Redman C Print M8770, 30 January 1996); Adelaide Women's Community Health Centre Inc. and ors v Australian Liquor, Hospitality and Miscellaneous Workers' Union (unreported, McIntyre VP, Marsh SDP and Frawley C, Print L4865, 24 March 1994); Adelaide Women's Community Health Centre Inc. and Ors v Australian Liquor, Hospitality and Miscellaneous Workers' Union (unreported, O'Connor P, McBean SDP and Bryant DP, Print M9948, 14 March 1996) and Western Australian Government Railways Commission v Australian Municipal, Administrative, Clerical and Services Union (unreported, Hancock SDP, Bryant DP and O'Connor C, Print P0976, 27 May 1997). None of those decisions warrant any contrary conclusion. I also agree with Mr Hatcher's submission that the decision of the Full Bench of the Australian Industrial Relations Commission in Re: National Transport Operations Pty Limited Certified Agreement 2002 (unreported, Harrison SDP, Duncan SDP and Richards C, 22 June 2003) is distinguishable, upon the basis that the clause sought to be inserted in that enterprise agreement was in distinctly different terms to the contract clauses in this matter and raised squarely the issues giving rise to a successful challenge in the High Court to provisions concerning the regulation of contractors per se in R v Commonwealth Industrial Court Judges; ex parte Cocks (1968) 121 CLR 313. 19 By this conclusion, I do not exclude (but do not need to decide) that the contractor clauses may fall directly within the jurisdiction of the Commission to make an award under s10 of the Act. It appears to me that the subject provisions may fall within the definition of an industrial matters within s6(1) of the Act. Without considering exhaustively the various elements of the definition of industrial matters in s6 of the Act (and noting that s6(2) provides a list of the "examples" of industrial matters which are not confined by the general definition in s6(1): Campbells Cash and Carry Pty Limited v National Union of Workers, New South Wales Branch (No.2) (2001) 53 NSWLR 393) it would appear that the contractor clauses fall within the jurisdiction of the Commission in s10 because those clauses constitute a matter relating to work done or to be done in an industry or concern a matter which relates to an industrial matter (see The Queen v Industrial Commission of South Australia; ex parte Master Builders Association of South Australia Incorporated (1981) 26 SASR 535 at 537 - 539). 20 As to the exercise of discretion, it is unnecessary to determine whether, as was submitted by Mr Hatcher, the contractor clauses would provide a basis for regulating sub-contractors who were party to a federal industrial instrument. It is sufficient that the Commission considers that the contractor clauses are appropriate as a means of attaining or facilitating the objects of the projects awards as earlier discussed in this decision including the avoidance of multiple, complex, differential industrial arrangements which may have the potential to create industrial disputation at the workplace or impede the achievement of optimal productivity and efficiency on the project. 21 In the circumstances the Commission confirms the making of awards as follows: 1. An award which shall be known as the Labor Council of NSW & Barclay Mowlem Construction Limited - City Quarter Stage 3: Camperdown NSW Project Award (noting that this is a slight change to the title of the award in terms of the draft award filed by the Labor Council of NSW) in terms of the draft award provided by the Labor Council of NSW on 28 March 2003; and 2. An award which shall be known as the Lend Lease Hotel Intercontinental (Stage 1) Project Award in terms of the draft award provided by Bovis Lend Lease Pty Limited on 18 August 2003. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.