The evidence
14 OS employs production employees to operate mobile machinery, such as shovels, excavators, loaders and trucks. OS supplies its employees to a number of BHP operations in Australia, including BMA's operation at the Daunia Mine. OS commenced at the Daunia Mine in April 2019.
15 There are four "crews" or "roster panels" at the Daunia Mine - known as A, B, C and D Crews. OS' employees work on B Crew or D Crew. The employees on A Crew and C Crew are a mixture of employees of BMA and labour hire companies.
16 In December 2019, OS had about 168 production employees at the Daunia Mine, with 84 on each of B Crew and D Crew. The employees were rostered to work on a seven days on/seven days off roster, with rotating day and night shifts. Those on day shift would work from 6.00 am to 6.30 pm and those on night shift would work from 6.00 pm to 6.30 am. A Crew and C Crew would work on those weeks when B Crew and D Crew were off roster.
17 Since much of the parties' submissions was concerned with the relationship between OS and BHP, it is necessary to consider the structure of the business known as "BHP" or "BHP Group". That business consists of two "top level" entities - BHP Group Ltd in Australia and BHP Group Plc in the United Kingdom. The two entities share one Board of Directors and senior management team, and are managed as a single business.
18 OS was registered on 17 May 2018. BHP Group Ltd is the ultimate holding company of OS. BHP Group Ltd is also the sole shareholder in BHP Metcoal Holdings Pty Ltd.
19 BM Alliance Coal Operations Pty Ltd (BMA) operates the Daunia Mine. BMA is a vehicle for a joint venture between BHP Metcoal Holdings Pty Ltd and Mitsubishi Development Pty Ltd, which each own half of BMA's shares.
20 OS contracted with BMA to provide production services to BMA pursuant to an agreement entitled "Framework Production Services Contract" (the Contract) dated 30 November 2018.
21 The Contract, in brief summary, contains clauses to the following effect:
(1) Cl 3.3 provides that BMA may request services by giving OS a Site Work Package and that OS must perform its obligations under a Site Work Package issued by BMA.
(2) Cl 3.3 also provides that, prior to issuing any Site Work Package, BMA must invite OS to submit a proposal. The proposal may be accepted or rejected by BMA.
(3) Cl 5.1 provides that OS must perform the services described in the Site Work Package in accordance with the Contract and achieve the applicable Performance Requirement, which is defined to mean "Target Utilisation and Target Production Rate", for a piece of equipment as set out in the Monthly Mine Plan.
(4) Cl 8.1 provides that BMA will provide OS with a Monthly Mine Plan, which will specify the Performance Requirement, including the Target Utilisation Rate and the Target Production Rate for each piece of equipment.
(5) Cl 10.1 provides that if OS's performance of the services is such that the overall weighted average Target Utilisation Rate or Target Production Rate is not met, there may be consequences. The consequences depend on the extent of the shortfall, but may include OS having to submit and comply with a recovery plan, or mobilise additional equipment and personnel at OS's cost; or BMA engaging other contractors, or ending the contract immediately.
22 BMA issued a Site Work Package on 30 November 2018 for OS to provide production services. Under the Site Work Package:
(1) OS is required to operate specified mining equipment at the Daunia Mine.
(2) Appendix A specifies 72 units of mobile mining equipment including shovels, excavators, loaders and trucks.
(3) Appendix C states that OS will provide a specified number of appropriately skilled production personnel to safely and productively operate each piece of equipment.
(4) Appendix G sets out the amounts to be paid to OS for the services.
(5) Appendix I sets out the Performance Requirements, namely Target Utilisation and Target Production Rates, and the Performance Cap. OS cannot be required to exceed the Performance Cap.
(6) The Target Utilisation Rates are expressed as a certain percentage use per month for each piece of equipment, and the Target Production Rates are expressed as Bank Cubic Metres (BCM) per hour, representing the amount of earth to be moved per hour.
23 On 29 November 2018, the day before the Contract was entered and the Site Work Package was issued, OS had put forward a business case called the "Engagement Approval Request" to BMA. I infer that the business case was the "proposal" referred to in cl 3.3 of the Contract. Stephen Cole, who is a director of OS and employed in the role of "General Manager Production", was responsible for checking that the Target Utilisation and Target Production Rates proposed by OS were achievable.
24 Mr Cole's evidence principally focuses upon the reasons why the utilisation and production targets put forward in the Engagement Approval Request were calculated on the basis of OS providing services 24 hours a day, 365 days a year; and why it was necessary for OS to require its employees to work on public holidays, including Christmas Day and Boxing Day.
25 Mr Cole deposes that in the Engagement Approval Request, the utilisation targets for each piece of equipment were calculated by starting with 8,760 calendar hours (24 hours per day x 365 days per year) as the total period of time within which OS was able to operate the equipment; deducting a number of hours based on assumptions of events that would prevent the operation of the equipment (taking into account previous average performance at the Daunia Mine, particularly weather delays); and then setting performance caps for each piece of equipment.
26 Mr Cole deposes that each month BMA prepares a Monthly Mine Plan (also known as a Short Range Forecast) which sets out the Target Utilisation and Target Production rates for the upcoming month. BMA determines the targets based upon OS' annual Performance Cap, adjusted for key variables such as weather, crew communications and available equipment. OS provides some input into the process, but that input is not always accepted, and it is ultimately up to BMA to set the monthly Target Utilisation and Target Production Rates.
27 Mr Cole deposes that OS provided a commitment to BMA that it would provide production services at the Daunia Mine 24 hours a day, 365 days a year. As a result of that commitment, OS expected employees to work on Christmas Day and Boxing Day unless authorised to be absent from work. If the employees rostered did not work on Christmas Day and Boxing Day, the total calendar hours in which OS was able to operate machinery would be reduced by 48 hours. Mr Cole deposes that this would place OS at risk of not meeting its Target Utilisation and Target Production Rates if OS failed to recover this lost utilisation and production in the following months, and at risk of BMA exercising its contractual rights, including to terminate the contract.
28 OS provides mine site production services to the BHP Group across both coal and iron ore assets. Mr Cole's evidence is that OS competes against third party providers and if it is not a more commercially attractive choice, it will not be awarded contracts. He deposes that there have been instances where OS has not been engaged as the service provider for a site or asset because it was not the most competitive option in the market.
29 Mr Cole's evidence is that the more days OS is able to operate on a site, the higher the efficiency rate and the higher the production volume. He deposes that OS' operational requirement to work 24 hours/365 days is necessary to make OS more competitive, as it contributes to OS' BCM costs being lower than those of external third-party service providers. If OS is not operating on a particular day, it does not move the volumes of materials necessary to expose coal. However, OS' operating costs continue to accrue regardless of whether or not its employees are present on the site. OS' cost per BCM increases unless it is operating every day. Mr Cole also deposes that not operating 365 days a year carries opportunity costs because the client is not receiving the production volume that leads to revenue generation. Further, the client may be unable to capitalise on a sudden uplift in commodity prices because of lower production volumes on a particular day.
30 Mr Cole states that there are ancillary costs associated with logistics, travel and accommodation if OS does not operate 365 days a year. For example, if the employees do not work on Christmas Day and Boxing Day and those days fall mid-roster cycle, OS would need to organise extra buses to transport employees between the mine site and Mackay and subsidise more charter flights in and out of Mackay.
31 Mr Cole deposes that there are two possible alternatives to OS operating 365 days a year, which would achieve the same movement of production volume. The first would be to add more fleet and equipment by purchase or hire to "make up" for the lost days of work. However, this would add significant capital costs to the scope of the work. The alternative is to budget for and run a higher performance base throughout the year. However, there is no guarantee that a higher performance target is achievable and, based on assumptions already factored in (such as wet weather or maintenance of equipment), there is a risk to the viability to OS if it proposes unrealistic targets and does not deliver those targets. Mr Cole considers that the most viable and certain option is to operate the existing fleet and equipment for 365 days a year.
32 Mr Cole deposes that, in his view, an increased BCM cost due to not operating 365 days a year would have at least significantly undermined OS' viability to be chosen for the scope of work at Daunia Mine. He makes this assessment, in part, because other third party service operators in the mining sector offer to provide services for 365 days a year.
33 Ana-Lisa Rodrigues Baptista is employed by OS as "Manager Production". Her evidence is that, as part of the recruitment process, persons seeking employment with OS are required to attend an engagement centre. Ms Baptista attended a number of recruitment processes. She would inform the potential employees that OS would expect them to work on public holidays if they were rostered to work on those days; and that their annual salary built in compensation for working on public holidays. She states that potential employees would occasionally get a bit disgruntled because they would not be receiving separate penalty payments over and above their annual salary for working on public holidays. In response, she would say that OS operated 24 hours a day, 365 days a year, so that its rosters covered public holidays, and that compensation for public holiday work was built into their annual salary.
34 Ms Baptista also states that all new starters are required to attend an induction session prior to commencing work. She ran a number of those sessions after commencing her employment in July 2019. OS has a standard induction PowerPoint presentation which was shown during the induction sessions. The PowerPoint includes the following:
[OS's] employees are rostered to work 24/7 365 days a year. This includes all public Holidays including Christmas and New Years [sic]. You may find this different than your host site (like many of your conditions).
35 Ms Baptista's practice was to say words to the same effect at each induction she ran.
36 Ms Baptista deposes that in August 2019 she became aware that a lot of employees were starting to put in leave applications for Christmas Day and Boxing Day. The Site Work Package sets out a total leave allocation, being the maximum number of people which OS considers can be away on one day without having an adverse impact on OS' ability to achieve its production and other targets. The Site Work Package provides for a maximum of seven employees per roster panel to be absent on planned leave at any one time and a contingency allocation of one employee per roster panel to be on unplanned leave at any one time. However, it is not uncommon to have more than one employee per crew absent on unplanned leave. Accordingly, Ms Baptista applies leave allocation numbers to allow more room for contingencies such that a maximum of six employees per crew may be absent on planned leave and there is a contingency allocation of two employees per crew to be absent on unplanned leave at any one time.
37 In about August 2019, Ms Baptista informed Brad Hyvonen, OS' "Superintendent Production", that OS could only approve six employees per crew to be absent from work on Christmas Day and Boxing Day. As more than six employees per roster panel had applied for leave on those dates, they discussed how they could decide who would be permitted to be absent from work.
38 Mr Hyvonen deposes that OS uses a standard form of employment contract which provides that the employees will be required to work on public holidays if rostered to do so. He also states that, upon commencing employment, the employees are sent OS' Employee Handbook. They are also provided with a laminated roster card which displays a yearly calendar with the days or nights on which they are rostered to work across the year shaded in. For 2019, Christmas Day and Boxing Day were shaded in for all OS' production employees.
39 Mr Hyvonen deposes that, during 2019, OS' employees (other than those on leave) worked on 19 April 2019 (Good Friday), 20 April (the day after Good Friday), 21 April (Easter Sunday), 22 April (Easter Monday), and 6 May (Labour Day). Mr Hyvonen does not recall any employees raising any concerns about working on those public holidays.
40 Between 21 and 27 August 2019, Mr Hyvonen attended meetings with B Crew and D Crew. He told the employees that OS could only accommodate six employees from each roster panel being absent from work on Christmas Day and Boxing Day and that otherwise it was expected that the employees rostered to work on those days would attend work. He said that OS would probably draw names out of a hat to decide who would have those days off. He said that if the employees had any concerns, they should raise this with their supervisor. He also said that the employees' annual salaries included compensation for working on Christmas Day and Boxing Day and that there would be no additional compensation for working on those days.
41 On 4 September 2019, Mr Hyvonen attended a meeting with B Crew. He displayed a PowerPoint presentation which contained the following words, which he read to the employees:
For Christmas and Boxing day this year, 6 people will be allowed to be away per crew.
As some employees already have approval to be absent on Christmas and Boxing day, there are 2 remaining spots left in B crew and 5 remaining spots left in D Crew.
To determine who is allowed to be away per crew, names will be pulled out in front of crew by 24/09/19. We believe this is the fairest approach.
Expressions of interest are to be submitted to your supervisor by 20/09/19.
In future years, people will be chosen by expressions of interest and picked in front of the crew, around July.
People will not be able to have XMAS off again for 2 yrs.
If you have any concerns, please raise these with your supervisor.
42 Later that day, Mr Hyvonen attended a meeting with D Crew and displayed the same PowerPoint presentation and said the same words.
43 Mr Hyvonen states that some employees raised concerns about not receiving separate, extra remuneration for working on the two public holidays.
44 In September 2019, Ms Baptista made a decision, given that more than six employees per roster panel had applied for leave, that OS would not plan for any unplanned leave on Christmas Day and Boxing Day and would instead allow eight employees per crew to be absent on those days.
45 On 10 September 2019, a drawing of names of the employees who would be permitted to take leave on Christmas Day and Boxing Day was conducted for the employees in D Crew. On 24 September 2019, a similar draw was conducted for the employees in B Crew.
46 On about 15 November 2019, BMA released the Monthly Mine Plan for December 2019. The Target Utilisation and Target Production Rates set were lower than usual because wet weather was expected in December 2019. Ms Baptista identified that as an opportunity to increase the leave allocation for 25 and 26 December 2019 by not "hot seating" all of the equipment (that is, not having an employee starting a shift using a piece of equipment that had just been used during the previous shift). She asked Glen Scott, the new "Superintendent Production", to inform employees that they could raise any special circumstances with their supervisor as OS could accommodate some more employees being absent on those dates.
47 Mr Scott deposes that he prepared a PowerPoint slide to be shown to employees at pre-start meetings on 13 and 14 December 2019. The PowerPoint stated:
Over the upcoming Festive Season, employees are expected to continue to work in accordance with their shift roster (including on the Christmas and Boxing Day public holidays), unless annual or long service leave has been requested and approved.
If you have special circumstances or need to take time off during the Festive Season, we encourage you to raise this with your line leader for consideration by Operations Services.
48 The PowerPoint was read to the employees by William Martin, a "Supervisor Production" who had replaced Mr Hyvonen.
49 Mr Scott received a number of leave requests on the basis of special circumstances. Approximately nine requests were granted. The reasons given for seeking leave were principally concerned with family responsibilities towards sick or elderly relatives. The requests of others who did not provide reasons for their leave requests or simply stated that they wanted to be at home with their families were not granted. Mr Scott is not aware of any employee who raised special personal circumstances and did not have their leave request approved.
50 Ms Baptista deposes that on Christmas Day and Boxing Day, 36 employees did not attend work without prior approval to be absent from work. This was in addition to the 25 employees whose absence from work had been authorised. As a result, the overall performance fell below the performance targets stipulated in the Monthly Mine Plan.
51 Ms Baptista deposes that to address the underperformance, OS recruited 12 additional employees to work at the Daunia Mine and started hot seating eight diggers in January 2020. It took steps to manage absenteeism rates (the steps are not specified). OS' performance was able to be made up and any further commercial implications were averted.
52 The Union relies upon the evidence of Stephen Toomey, an employee of OS at the Daunia Mine. He deposes that, prior to commencing employment with OS, Christmas Day and Boxing Day were generally non-working days across the industry. Mines would be shut and workers would not be rostered to work on those days.
53 Mr Toomey received a letter of offer from OS for a position as "Operator Production" commencing on 3 April 2019, which he accepted on the same day. The letter enclosed an "Employment Agreement Summary" which contained the terms and conditions that would apply to his employment if he accepted the offer. It also enclosed an "Indicative Total Reward Summary", which set out elements of the "reward offering".
54 The Indicative Total Reward Summary specified an Annual Salary and a Nightshift Allowance, which together provided the "Total Fixed Cash Reward". The document contained a note stating:
Your Annual Salary includes compensation for all hours you are required to work and remunerates you for all requirements of your position.
55 The Employment Agreement Summary stated that the Annual Salary was paid in satisfaction of provisions of the Award including, "any other loadings, penalties or allowances payable under that Award". The document stated that:
Accordingly, you will not be paid any special rates or allowances for working particular times or under particular conditions unless otherwise agreed in writing.
56 In the Employment Agreement Summary beside the heading "Public Holidays" was the entry:
Please note that in accordance with your roster type, you may be required to work on public holidays and payment for this expectation has been incorporated into your existing remuneration.
57 An email dated 26 March 2019 from OS to Mr Toomey confirmed that OS' Employee Handbook had been provided to him. The Handbook stated in cl 2.7:
Employees who work a continuous shift roster and/or are FIFO are required to work on a public holiday if it falls on an ordinary rostered day as they are compensated in their salary for working public holidays.
58 Mr Toomey states that he was told at a meeting in September 2019 that the employees would be working on Christmas Day and Boxing Day and that requests for leave over the Christmas period were not being accepted so they should not bother making a request (it may be noted that Mr Hyvonen denies that he used such words). Mr Toomey deposes that they were also told that six people would be able to take time off and who they were would be worked out later. He states that this was the first time he became aware of the requirement to work on Christmas Day and Boxing Day.
59 Mr Toomey states that he wanted to spend Christmas with his mother as she had recently become wheelchair-bound and as this would be her first Christmas without his father. He understood that any request would be rejected and therefore did not put in a request to have Christmas Day and Boxing Day off. Mr Toomey did put his name in for the draw, but was not chosen. He worked on Christmas Day and Boxing Day.
60 Mr Toomey states that for Christmas Day and Boxing Day 2020, things were done differently and employees were told that whoever wanted time off could put in a leave request and that anyone who was available to work would form part of the skeleton crew.
61 Mr Toomey deposes that he does not recall the requirement to work on Christmas Day or Boxing Day being mentioned at the Engagement Centre he attended. He states that he did not initially receive a roster card, but obtained a copy from a friend who was working the same roster. He does not recall seeing the PowerPoint slide referred to by Mr Martin on about 14 December 2019.
62 Marc McDonald is employed at the Daunia Mine as a "Production Operator" in D Crew. In about February 2019, the employees were addressed by the General Manager of Daunia Mine and advised that OS would be a new team within BHP and that it was intended to have labour hire employees changed over to work for BHP in permanent positions. In April 2019, Mr McDonald received a letter of offer of employment with OS, but rejected that offer. On 27 August 2019, he received a further offer of employment and decided to accept the offer. The offer was in relevantly the same terms as that provided to Mr Toomey. Upon commencing work with OS, Mr McDonald attended an induction. He was then required to wear a BHP shirt.
63 Mr McDonald recalls being told in October 2019 that his crew was required to work over Christmas that year, but that six of the employees would have time off. He states that a number of co-workers were disappointed about this. Later, the employees were told that the six people who would be allowed to have Christmas Day and Boxing Day off would be decided by pulling names out of a hat. Mr McDonald did not put his name in the draw. He deposes that at Christmas 2020, the position was different, and the employees were told that OS would consider any requests to have Christmas and Boxing Day off.
64 Mr Adam Hammett is employed by BMA at the Daunia Mine in the position of "Operator/Maintainer". He states that the production employees are BMA employees, employees of external contractors, or OS employees. Employees of OS wear a BHP shirt.
65 The Union relies upon the affidavits of Stephen Smyth, a Union Branch President and Peter Colly, a research director for the Union, but it is unnecessary to describe the content of their affidavits.
66 I accept the evidence of the witnesses called by OS. In my view, their evidence was reliable and accurate and was not significantly disturbed by cross-examination.
67 Where the evidence of Mr Toomey and Mr McDonald conflicts with the evidence of the witnesses called by OS, I prefer the evidence of the latter. The evidence of Mr Toomey and Mr McDonald concerning what they were told or made aware of about working on Christmas Day and Boxing Day, and when, was generally inconsistent with the contemporary documents produced by OS. In my opinion, the evidence of those who made decisions and presented information concerning the requirement to work on Christmas Day and Boxing Day is more reliable than the recollections of Mr Toomey and Mr McDonald.
68 Mr Toomey and Mr McDonald also gave some evidence concerning production at the Daunia Mine. That evidence seems to be based upon their impressions rather than upon records. I prefer the evidence of the witnesses called by OS to the extent that there is conflict.