Earlier this month, the Federal Court in Western Australia dismissed an application made by the Fair Work Ombudsman, alleging contravention of the Fair Work Act 2009 (Cth) (Fair Work Act) by several foreign and Australian-based corporations involved in the employment of four Filipino workers at an hourly rate of less than AUD3. The Filipino workers were contracted as painters on drilling rigs off the North West coast in Australia's Exclusive Economic Zone (EEZ), beyond the 12 nautical mile territorial limit.

In Fair Work Ombudsman v Pocomwell Limited[1], Justice Barker held the employment of the Filipino workers was outside the scope of the Fair Work Act and its regulations.

Justice Barker held that the applicable provisions of the Fair Work Act can extend to foreign nationals engaged through contracts of employment (governed by laws outside of Australia) with foreign companies which have no connection with Australia if the drilling rig is a 'fixed platform' or a 'majority Australian-crewed ship'. Justice Barker did not find the drilling rigs to fall within either of these definitions and the respondents were therefore not ordered to back pay the Filipino workers in accordance with Australian rates, nor were they penalised under the Fair Work Act.

The court's ruling clarifies the Fair Work Act in respect of its application to foreign workers in Australia's EEZ. Employers of foreign workers in Australia's EEZ should pay heed to the decision and be mindful of the obligations and standards they may be required to meet under Australian employment laws.

Background

Four Filipino workers were employed as painters on board submersible/semi-submersible drilling rigs (also registered as ships) in Australia's EEZ between July 2009 and March 2011. The painters were hired to work 12 hour days for a 28 day period at the rate of US$900, followed by a further 28 day non-working period paid at the same rate. Averaged across the two-month cycle, the rate per hour worked was US$5.36. Viewed, however, solely on the basis of the working period, the hourly rate was a mere US$2.68. For the purposes of judgment, the US dollar was held to be at about parity with the Australian dollar. If the Fair Work Act applied, the painters would be entitled to be paid AUD14.31 per hour.

Each painter was employed by Pocomwell Limited, a company incorporated in Hong Kong. The terms of their contracts of employment were agreed in the Philippines and governed by the law of the Philippines.

Survey Spec Pty Ltd, an Australian company, hired the painters from Pocomwell through agent Supply Oilfield and Marine Services Inc (SOMS), incorporated in the Philippines. The drill rig operator (Operator) (not a party to the proceedings) then hired each painter from Survey Spec at a daily rate of approximately AUD300. Survey Spec was hiring out the painters to the Operator at a rate more than nine times greater than the monthly payments made to the painters by Pocomwell.

Issues

Based on the parties' submissions, the following issues were considered by Justice Barker:

1. Does section 33(1)(b) of the Fair Work Act (relating to 'fixed platforms') apply to the employment of the Filipino painters in light of international law?

2. Does reg 1.15E of the Fair Work Regulations 2009 (Cth) (Regulations) (relating to a 'majority Australian-crewed ship') operate in respect of the employment of the Filipino painters in light of international law? Or alternatively, is reg 1.15E ultra vires the Fair Work Act?

3. If 33(1)(b) applies, was each drilling rig a 'fixed platform' at all material times?

4. If 33(1)(b) has no application, and reg 1.15E is held to operate and extend the Fair Work Act to each rig, was each rig a 'majority Australian-crewed ship' at all material times?

5. If each rig is found to be either a 'fixed platform' or a 'majority Australian-crewed ship', is the first respondent covered by the Hydrocarbons Industry (Upstream) Award 2010 (Award)?

6. If the first respondent is found to have contravened the Fair Work Act, were the other respondents knowingly involved in the contravention?

Does the Fair Work Act apply? Do its Regulations apply?

Justice Barker accepted the Ombudsman's submissions that:

• section 33(1)(b) of the Fair Work Act is intended to apply notwithstanding any principle of international law. In other words, the provision applies to any fixed platforms in Australia's EEZ
• reg 1.15E of the Regulations extends the Fair Work Act to majority Australian-crewed, but foreign flagged, ships while they are in the EEZ.

His Honour then considered the relevant articles of the United Nations Convention on the Law of the Sea and held that a coastal state's sovereign rights do include the right to regulate working conditions on board a foreign flagged vessel engaged in the exploration and exploitation of the natural resources in its EEZ.  In light of this, reg 1.15E was held not to be ultra vires the Fair Work Act.

Are the Drilling Rigs 'Fixed Platforms'?

The classification of the drilling rigs as 'fixed platforms' pursuant to section 33(1)(b) of the Fair Work Act, hinged upon the meaning of 'permanently attached to the sea-bed'. The Ombudsman contended that the critical issue was whether the rigs were attached to the seabed, and that, despite the rigs being able to move from one place to another, they still fell within the definition of 'fixed platform'. This submission was not accepted and Justice Barker held that 'fixed platform', as defined by section 33(1)(b) of the Fair Work Act, does not include submersibles or semi-submersibles such as the drilling rigs in question.

Are the Drilling Rigs 'Majority Australian-Crewed Ships'?

It then became necessary to consider whether the rigs were 'majority Australian-crewed ships' under reg 1.15E of the Regulations. The meaning of the word 'crew' in reg 1.15E was open for determination, as it is not defined in section 12 of the Fair Work Act.

The Ombudsman took the approach that the 'crew' on each rig comprised of the people mentioned in the crew list, provided to the Ombudsman by the Operator for the purposes of the application. The respondents argued that 'crew' should include all persons employed or engaged in any capacity on board the ship, and not be limited to the crew employed directly by the Operator. Justice Barker agreed with the respondents and found that, in the context of the expression 'majority Australian-crewed ship', the word 'crew' includes all those working on board the ship.

The Ombudsman failed to prove that, at all material times, a majority of the crew were Australian residents on board each rig.

In light of these findings, the Fair Work Act was held not to cover the employment of the Filipino workers.

Does the Award Cover Pocomwell?

In their submissions, the respondents argued that Pocomwell, being a foreign company with no connection to Australia, was not covered by the Award in respect of its activities in the EEZ. Survey Spec submitted that the relevant words of clause 4.1 of the Award, being 'employers throughout Australia', should be construed to only include the geographical area of Australia, and not the EEZ. In contrast, Justice Barker held that the Award covered all those places which the Fair Work Act extended to, including the EEZ.

If the Filipino workers had been afforded the protection of the Fair Work Act, Pocomwell would have therefore been held liable for underpayments to them.

Were the Other Respondents Knowingly Involved?

The final issue was dealt with by Justice Barker as an aside, and considered the accessorial liability of SOMS, Survey Spec and its director in the event that the rigs had constituted either 'fixed platforms' or 'majority Australian-crewed ships' under the Fair Work Act. For there to have been known involvement attracting primary liability, the respondents must have been aware of the elements of the relevant contravention. Justice Barker accepted the Ombudsman's submissions that the elements of the contravention comprised:

• whether or not the minimum wage required to be paid under the Award was in fact paid to each painter
• whether or not each respondent was aware of the amount proposed to be paid to the painters. 

As there was no doubt that the respondents were aware of these elements, his Honour held that, if he had found the rigs to be either 'fixed platforms' or 'majority Australian-crewed ships', then SOMS, Survey Spec and its director would have been knowingly involved in the contravention.

Conclusion

This ruling may affect foreign and Australian companies or individuals directly or indirectly involved in the hiring of workers on board drilling rigs or ships in Australia's EEZ.

Those whose interests are affected should carefully consider their potential obligations under the Fair Work Act and its Regulations, which may hinge upon whether the:

• drilling rig is permanently attached to the seabed
• operator of a foreign ship:
  • is a resident of Australia
  • has its principal place of business in Australia, or
  • is incorporated in Australia.
• majority of the crew are residents of Australia.

[1] (No 2) [2013] FCA 1139.