Jurisdiction - Australia
News
Australia – Boat Not Rocked: No Australian Pay For Drilling Rig Employees In Australian EEZ.

13 November, 2013

 

Legal News & Analysis – Asia Pacific – Australia – Labour & Employment

 

Fair Work Ombudsman v Pocomwell Limited (No 2) [2013] FCA 1139

 

WHAT YOU NEED TO KNOW

 

  • The Federal Court has clarified a number of terms relevant to determining the geographical application of the Fair Work Act in Australia’s Exclusive Economic Zone (EEZ). Under the Fair Work Act:
 

– A “fixed platform” needs to be permanently attached to the sea-bed. It does not include Mobile Offshore Drilling Units that can be moved around from one well to another.
– There is no requirement for a “ship” to be self-propelled or self-navigated.
– When determining whether a ship is “majority Australian-crewed”, the word “crew” includes all those working aboard the vessel, but excluding the master, pilot or any other person “temporarily on board”.

 

  • The Federal Court also found that the application of the Fair Work Act to foreign flagged ships engaged in the exploration and exploitation of natural resources in Australia’s EEZ is not inconsistent with international law.
 

WHAT YOU NEED TO DO

 

  • Subject to a different outcome following any appeal or legislative change, employers should be mindful of the limits to the geographical application of the Fair Work Act when considering employee relations and industrial relations on board a resource installation situated in Australia’s EEZ.
 

The Federal Court has dismissed a Fair Work Ombudsman prosecution for underpayment of four foreign employees working on resource installations situated in the Australian EEZ, finding that the resource installations fell outside the geographical scope of the Fair Work Act.

 

Background

 

A Hong Kong registered company engaged the four foreign employees as painters. The painters were then hired through an Australian labour hire company and via the agency of a company incorporated in the Philippines to do work for the Australian operator of two drilling rigs situated in Australia’s EEZ.

 

The drilling rigs were registered as ships and flew the flags of China and Singapore respectively. The drilling rigs were “Mobile Offshore Drilling Units” capable of sailing or being towed from one well to another.


The FWO commenced proceedings against the Hong Kong employer, the Philippines labour hire company and the Australian labour hire company, alleging that the four foreign employees had been underpaid while performing work on the two drilling rigs.

 

Territorial Scope Of The Fair Work Act

 

The FWO considered that the Fair Work Act and the Hydrocarbons Industry (Upstream) Award 2010 applied to the four foreign employees while they were performing work on the drilling rigs in Australia’s EEZ. Generally, the Fair Work Act applies onshore and to the outer limits of the Territorial Sea of Australia (12 nautical miles).

 

Relevantly, the Fair Work Act and Regulations extend the geographical scope of the Fair Work Act to:

 

  • any fixed platform situated in the EEZ (s 33 of the Fair Work Act); and
  • a majority Australian-crewed ship in the EEZ (reg 1.15E of the Fair Work Regulations).
 

The FWO argued that the drilling rigs were fixed platforms or, in the alternative, majority Australian-crewed ships.

 

Fixed Platform

 

The Fair Work Act defines “fixed platform” as an artificial island, installation or structure permanently attached to the sea-bed for the purpose of exploration for, or exploitation of, resources or for other economic purposes.


There was no dispute that the drilling rigs were an installation or structure that could be attached to the sea-bed for the purpose of exploration of resources.


The employer and labour hire companies contended that s 33 of the Fair Work Act did not apply because:

 

  • the geographical application of the Fair Work Act to fixed platforms is inconsistent with international law; and
  • the drilling rigs were not permanently attached to the sea-bed.
 

No Room For International Law


The employer and labour hire companies argued that, when the Fair Work Act is read consistent with Australia’s international obligations, the Fair Work Act is not designed to apply to conduct such as that alleged against them. They claimed there is a presumption that domestic legislation (such as the Fair Work Act) should be construed so as to avoid a conflict with international law.


The Federal Court found that, on its face, s 33 effects a clear and express intention by the Australian Parliament that the Fair Work Act should apply to fixed platforms situated in the EEZ. In the absence of any ambiguity, the Federal Court found there was no room for international law to operate and cause s 33 to be read down.


Permanently Attached To The Sea-Bed


There was no dispute that each drilling rig was not attached to the sea-bed in a particular place from which it never left. Rather, the FWO argued that the expression “permanently attached to the sea-bed” should be qualified by the purpose of the attachment. The critical question then is whether the drilling rigs were (permanently) attached to the sea-bed for the purpose of exploration.


The employer and labour hire companies contended the drilling rigs were not fixed platforms, pointing out that they are able to be moved about from place to place. They submitted that the FWO’s interpretation of the phrase “permanently attached to the sea-bed” would deprive the word “permanently” of any effect.


The Federal Court referred to the origin of the definition of “fixed platform” in international law, where the phrase “fixed platform” (permanently attached structure) was defined relative to the word “ship” (any floating craft not permanently attached). This dichotomy was then adopted in Australian domestic law in the Crimes (Ships and Fixed Platforms) Act 1992 (Cth).


The Court decided that by using exactly the same definition, the Australian Parliament had intended to give the definition of “fixed platform” in the Fair Work Act the same limited meaning as in the Crimes (Ships and Fixed Platforms) Act 1922 (Cth).


As a consequence, the Court found that the definition of “fixed platform” does not include Mobile Offshore Drilling Units such as the drilling rigs in this case.

 

Majority Australian-Crewed Ship

 

A majority Australian-crewed ship means a ship (other than an Australian registered ship) of which:

 

  • the majority of the crew are residents of Australia; and
  • the operator is a resident of Australia, has its principal place of business in Australia or is incorporated in Australia.
 

There was no dispute that the operator of the drilling rigs was a company incorporated in Australia.


The employer and labour hire companies argued that reg 1.15E of the Fair Work Regulations did not apply because:

 

  • the geographical application of the Fair Work Act to majority Australian-crewed is inconsistent with international law; and
  • the majority of the crew were not residents of Australia.
 

No Inconsistency With International Law


The employer and labour hire company contended that the United Nations Convention on the Laws of the Sea (UNCLOS) states that:

 

  • the flag state has exclusive jurisdiction over ships sailing on the high seas; and
  • Australia’s law-making power as a coastal state is limited to laws about the management and exploitation of natural resources. They argued that this power does not include power to make laws about employment terms and conditions (including pay).
 

The Federal Court agreed with the FWO and interpreted Australia’s sovereign rights as a coastal state under UNCLOS to include the power to make laws with respect to labour relations on foreign flagged ships engaged in the exploration and exploitation of natural resources in Australia’s EEZ.


Ship Does Not Need To Be Self-Propelled Or Self-Navigated


The definition of “ship” in the Fair Work Act is very broad and includes a barge, lighter, hulk or other vessel. There was no authority in Australian law on the meaning of the word “ship” in the Fair Work Act.


The Federal Court has now clarified that there is no apparent requirement in the ordinary or extended statutory definition for a ship to be self-propelled or self-navigated. The term “ship” can thus include Mobile Offshore Drilling Units such as the drilling rigs, as in this case.


Crew


There is no definition of “crew” in the Fair Work Act and the term has not relevantly been considered by Australian courts.


The FWO argued that “crew” is limited to those persons listed on a list provided by the operator of the drilling rigs on subpoena by the FWO. The FWO reasoned that if anyone will know who the crew are, it is the operator of the drilling rig. In essence, this approach limited the “crew” to those employed by the operator.


The employer and labour hire companies argued that “crew” should be given a broad meaning, including any person on board of each of the drilling rigs, regardless of whether they were employed by the operator or not.


The Federal Court accepted that no narrow view of “crew” should be adopted and found that crew:

 

  • included persons ordinarily working on board; and
  • excluded the master, pilot and other persons temporarily on board who should not be considered part of the crew having regard to the facts in each case.
 

In this case, the FWO was not successful in establishing that a majority of that “crew” were residents of Australia.

 

Lessons For Employers

 

The application of Australian laws to offshore resource installations is complex, in part due to ambiguity in the meaning of certain terms used in the legislation.

 

In May 2012, the Federal Court handed down a decision that clarified the meaning of certain terms in the Migration Act (Allseas Construction v MIAC [2012] FCA 529). The effect of that case was that the vessels concerned were not operating inside Australia’s “migration zone” while installing offshore pipelines for the Gorgon and Jansz gas fields. Accordingly, they were not breaching any Australian laws by engaging non-citizens without 457 visas.


Now, the Federal Court has clarified a number of key terms used in the Fair Work Act relevant to determining whether or not the geographical scope of the Fair Work Act extends to certain resource installations in Australia’s EEZ.


Following the Allseas decision, the then Labor government was quick to amend the Migration Act to prevent workers employed on vessels assisting the construction of resource installations from falling outside the Migration Act. It remains to be seen what position the current Coalition government will take following the Pocomwell case.

 

Ashurst Logo

 

For further information, please contact:

 

Marie-Claire Foley, Partner, Ashurst
marie-claire.foley@ashurst.com


Glenn Geerts, Ashurst
glenn.geerts@ashurst.com

 

Ashurst Labour & Employment Practice Profile in Australia

 

Homegrown Labour & Employment Law Firms in Australia

 

Comments are closed.