Bloomberg News

Rio Tinto Loses Bid to Challenge Australian Labor Ruling

February 21, 2012

(Updates with union comment in 14th paragraph.)

Feb. 10 (Bloomberg) -- Rio Tinto Group lost a bid to keep using non-unionized workers in Western Australia’s Pilbara region, a decision a lawyer for the world’s third-biggest mining company said could affect other companies.

The High Court of Australia today rejected the miner’s request for a full hearing as it attempted to overturn last year’s appeal court ruling that invalidated its agreements with railway workers and could give unions more leverage to represent other employees.

John West, Rio Tinto’s lawyer, said failure to overturn the appeal court decision would affect about 3,000 workers who have contracts with BHP Billiton Ltd. and HWE Mining. “Their agreements have evaporated,” West said. “All someone has to do now is sue.”

Rio Tinto’s attempt to stem the influence of unions at its mines is part of a bigger battle in Australia between labor, pressing to entrench workers’ bargaining rights, and business, which claims current laws stifle productivity. The government, which re-introduced worker safeguards in 2009, is reviewing legislation, with a three-member panel scheduled to issue a report by the end of May.

“Five years ago Australia was one of the cheapest places in the world for us to do business, today it’s one of the most expensive,” Rio Tinto’s Chief Executive Officer Tom Albanese said on a conference call yesterday. He said he’s concerned “about the declining levels of productivity” in Australia.

Seven-Year High

Days lost to strikes in Australia climbed to a seven-year high in the quarter ended in September as workers at port operator Asciano Ltd., BHP Billiton Ltd. and Qantas Airways Ltd. stepped up campaigns for greater job security, higher pay and improved benefits. The nation’s biggest carrier grounded all its planes in October to force an end to strikes and work slowdowns.

Rio Tinto said in November that it raised its iron ore expansion target to meet demand from China and plans to spend at least $14 billion on developing projects this year. On Feb. 8 the company said it and its partners approved a $3.4 billion expansion of its iron ore operations in Western Australia as part of a plan to boost output by more than 50 percent.

With a combined workforce in Pilbara of more than 20,000, Rio Tinto and BHP have avoided strikes by signing contracts with small groups of non-unionized workers in the region, even as a growing labor shortage has pushed salaries higher.

Shut Out

“The unions were pretty well shut out,” Brandon Ellem, an associate professor at the University of Sydney and author of “Hard Ground: Unions in the Pilbara,” said in a phone interview before today’s decision. The earlier Federal Appeal Court ruling, “will make it a lot easier,” for workers to organize, he said.

The High Court panel said Rio Tinto’s prospects of winning a reversal of the appeal court decision were insufficient to warrant a full hearing.

In the lawsuit at issue, Rio Tinto attempted to categorize a group of 10 railway workers hired on a specific date as a separate business unit, which would allow it to negotiate a contract with them. That contract then applied to all workers hired after the date.

20 Percent Turnover

The company employs 2,793 people in the rail division and with an annual turnover rate of about 20 percent the contract would affect an increasingly larger group of employees, according to the Construction, Forestry, Mining and Energy Union. Rio Tinto management unilaterally imposed the contract on the newly hired workers, said Alex Bukarica, the union’s lawyer.

“It was morally reprehensible what the company did,” he said in a phone interview before the hearing.

Rio Tinto tried to “dodge its obligation to recognize the rights of its workers to genuinely collectively bargain for future pay increases,” CFMEU Mining General Secretary Andrew Vickers said in a statement today.

“It’s been a long legal battle, but it’s been worth it,” he said.

The consequences of invalidating the agreement could be potentially “very serious” for Rio Tinto because the mining company may be liable for back pay to the workers, said Paul Brown, a partner at Baker & McKenzie in Sydney who advises on employment law.

Union Opportunity

Bukarica said a dismissal of Rio Tinto’s appeal would create an opportunity for organized labor to take over the bargaining for miners, truckers and construction workers.

The union has taken the view that it should be “heavily involved” in the Pilbara region, Bukarica said. It will be up to the employees to decide whether they want to join the union, he said.

“The unions are confident they’ll get” similar agreements at BHP invalidated as well, Ellem said.

Kelly Quirke, a Melbourne-based spokeswoman for BHP, declined to comment.

Just 159 of the almost 2,800 people Rio Tinto employed at its railroad at Pilbara were members of the CFMEU. Thousands of employees chose to join Rio Tinto under the terms and conditions of the non-union agreements, Greg Lilleyman, president of its Pilbara operations, said following the appeal court ruling last year.

Labor Disputes

The number of working days lost to labor disputes rose to 101,300 in the three months ended September, up from 66,200 in the June quarter according to government data. Statistics for the quarter ended in December will be released March. 8.

“This is not a case about ideology,” Brown said. “This is a very technical case about the wording of the statute” and how business units are defined under the law, with a final decision likely having little impact on labor relations.

The Business Council of Australia has said unions are “routinely” using the law to gain strategic advantage and has urged the government to legislate to block them from pushing to have contractors included in collective bargaining.

“The government believes the Fair Work Act is working well, but there is always room for improvement,” Bill Shorten, Minister of Workplace Relations, said in announcing the review in December.

Australia’s Labor Party-led government replaced previous laws with the act after coming to power in 2007, prohibiting workers from making individual deals with employers.

“The review represents an important opportunity to have an evidence-based discussion about the operation of the legislation,” he said.

--Editors: Douglas Wong, Edward Johnson

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net


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