Case Number: TUR1/258/2003

Case Number: TUR1/282/(2003)

27^th August 2003

CENTRAL ARBITRATION COMMITTEE

TRADE UNION AND LABOUR RELATIONS (CONSOLIDATION) ACT 1992

SCHEDULE A1 - COLLECTIVE BARGAINING: RECOGNITION

DECISION ON WHETHER PARAGRAPH 35 OF THE SCHEDULE APPLIES TO THE APPLICATION

The Parties:

Offshore Industry Liaison Committee (OILC)

and

Wood Group Engineering (North Sea) Limited

INTRODUCTION

1. OILC (the Union) submitted an application to the CAC dated 3^rd July 2003 that it should be recognised for collective bargaining by Wood Group Engineering (North Sea) Limited (the Company) for a bargaining unit composed of the core employees employed on the four platforms (Alpha, Bravo, Charlie and Delta) of the Brent Oil and Gas Field, excepting those on staff contracts. The CAC gave both Parties notice of receipt of the application on 7^th July 2003. The Company submitted a response to the CAC on 11^th July 2003 which was copied to the Union.

2. In accordance with section 263 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“the Act”), the CAC Chairman established a Panel to deal with the case. The Panel consisted of Professor Kenny Miller, Deputy Chairman, and, as Members, Mr Sandy Morrison and Mr Bill Speirs. The Case Manager appointed to support the Panel was Mr Scott Spencer.

3. The Panel is required by the Act to decide whether the Union’s application to the CAC is valid within the terms of paragraphs 5 to 8; is made in accordance with paragraphs 11 or 12; is admissible within the terms of paragraphs 33 to 42 of Schedule A1 to the Act; and should therefore be accepted.

4. In its response to the CAC, the Company submitted that the Union’s application was inadmissible on the grounds that there was an existing collective agreement in force covering the workers in the Union’s proposed bargaining unit. The Company stated that the existence of this collective agreement rendered the Union’s application under Schedule A1 inadmissible in accordance with paragraph 35 of the Schedule.

5. The Parties were invited to attend a hearing and make written submissions on the validity and admissibility provisions of the Schedule and, specifically, on paragraph 35 of the Schedule. Both Parties supplied and exchanged written submissions in advance of the hearing. The hearing was held on 18^th August 2003. The names of those who attended the hearing on behalf of the Parties are listed below at Appendix A.

ISSUE IN DISPUTE

6. According to paragraph 35 of Schedule A1, an application to the CAC made under paragraph 11 (as this Union’s application was) is not admissible if the CAC is satisfied that there is already in force a collective agreement under which a union is recognised as entitled to conduct collective bargaining on behalf of any workers falling within the bargaining unit proposed by the union. A collective agreement is defined by section 178 of the Act as any agreement or arrangement made by or on behalf of a trade union and an employer relating to matters such as terms and conditions of employment and the machinery of negotiation. The overall question for determination is whether in the circumstances of this case paragraph 35 renders the Union’s application inadmissible. The relevant legislative provisions are listed in Appendix B. The Union contended that there was not in force a collective agreement which barred its application from being accepted by the CAC. The Company contended that there was in force an agreement which rendered the Union’s application inadmissible under paragraph 35 of Schedule A1.

SUMMARY OF THE TRADE UNION’S MAIN SUBMISSIONS

7. The Union stated that the central issue for the CAC was whether it was satisfied that there was in force a collective agreement which recognised the AEEU and GMB as entitled to conduct collective bargaining in relation to pay, hours and holidays on behalf of the core workers in the proposed bargaining unit. The Union submitted that there was not in force such an agreement. It acknowledged that there was a Partnership Agreement between the Offshore Contractors Association and AEEU and GMB. However, the Union's central point was that this agreement did not determine the terms and conditions of Wood Group core workers on oil platforms on the Brent field. The Union added that there was no specific recognition agreement between the Company and AEEU/GMB and nothing in the terms of the agreement between OCA and AEEU/GMB that specifically conferred recognition to the AEEU/GMB in respect of Wood Group Engineering (North Sea) Limited.

8. In reference to the Partnership Agreement the Union explained that this agreement recognized the AEEU/GMB as being entitled to conduct collective bargaining with OCA. However, there was no mechanism by which the fruits of the Partnership Agreement could be enjoyed by core workers employed by the Company. The Union explained that the Company may impose any package of remuneration upon its workers so long as the package was not less in overall value than the rates in Appendix D of the Partnership Agreement, which are set each year by the OCA and the Unions.

9. The Union stated that this agreement was, what may be termed a base line agreement and that it sets the minimum standards. The Union submitted that there was no way, in which it or the bargaining processes that take place to decide the ‘minimum rate’, can be said to actually be determinative of any workers’ pay; their pay could be anything above the minimum rates. The Union added that if workers' pay was already substantially above the minimum rates, any negotiations aimed at agreeing an increase in those minimum rates would be irrelevant to them. The Union pointed out that in relation to hours the Partnership Agreement is equally undeterminative. It explained that the work cycle was to be left to the individual employer. The Union explained that this told the employee nothing: his/her number of days offshore may be more or less than 14 days. Additionally, the actual time offshore is to be set by the individual employer and the Partnership Agreement was not therefore determinative of hours.

10. The Union stated that the Partnership Agreement in relation to holidays was equally undeterminative and that the Agreement was not even reflected in the core workers’ terms and conditions. The Union explained that further examination of the terms and conditions of the core workers demonstrated that they had very little resemblance to the terms of the Partnership Agreement and that this was certainly so in relation to remuneration. The Union contended that the rates of pay that are set out in the Partnership Agreement were a complete irrelevancy to the core workers. The Union added that this was demonstrated by the fact that Appendix D of the Partnership Agreement, which set out the OCA hourly rates, was not to be found in the Terms and Conditions of Employment or in the Offshore Handbook. The Union explained that the Handbook did not form part of the terms and conditions of the core workers but even if it did, the OCA rates were intentionally excluded from it and so would not apply to the core workers.

11. The Union stated that the OCA rates were not in the Handbook, because, in fact, the way in which the core workers were paid demonstrated no resemblance to the OCA system of rates. The Union pointed out that this was simply because the Agreement set out hourly rates and the core workers had annual salaries. In addition the agreement set out a whole system of allowances which were not paid to Brent core workers (e.g. night shift allowance, overtime, Christmas working allowance, Guarantee Payments and Safety and Training Course Payments). The Union stated that this made it very difficult to calculate how the two systems could be reconciled and that when an attempt was made, it could be seen that there was in fact no or very little correlation between the OCA rates and the salaries of the Brent core workers.

12. In relation to core workers’ hours and holiday, these have been set for some time and have never been the subject of collective bargaining between OCA, Wood Group Engineering and the AEEU or GMB. The Union stated the Partnership Agreement terms regarding working cycles were vague and allowed an employer to impose any work cycle that it wished. The Union explained that although core workers’ holiday allowance corresponded with the Partnership Agreement, the way in which that holiday entitlement was to be taken and paid did not necessarily correlate. The Union submitted that it was beyond question that the terms and conditions in the contracts of the core workers were not, and had never been, determined by anything within the Partnership Agreement. The Union added that it was also clear that the Partnership Agreement was not even expressly incorporated into the core workers terms and conditions. In the Terms and Conditions of Employment and the acceptance statement, there was no reference to the Partnership Agreement nor any collective agreement.

13. The Union explained that the Handbook provided by the Company had a section entitled Remuneration but there was nothing substantive about remuneration actually in it. The Union stated that in any event this Handbook was simply provided to staff. The Union pointed out that there was no reference to it in the Terms and Conditions of Employment and there was also no indication that the core workers had accepted these to be terms and conditions of employment. In addition the covering letter sent with the Handbook did not ask for the workers’ agreement to it. The Union stated the reality was that in fact there was nothing relating to remuneration that could be incorporated from the Partnership Agreement into the core workers’ terms and conditions.

14. The Union stated that the usual situation would be that, on top of a base line agreement such as the Partnership Agreement, there would be further negotiations between a member of an employers’ association and the signatory unions at local or national level in which pay and conditions were determined. The Union added that the clear fact of this case was that negotiations did not happen outside of the OCA agreement. The Union stated that the Company had not entered into any negotiations outwith the forum of the OCA and that there were no local negotiations as of June 2003. The Union pointed out that the Partnership Agreement did not set the terms and conditions of the core workers’ because it was a base-line agreement and that the approach of the Company demonstrated that there was no collective agreement or bargaining process that determined the terms and conditions of the core workers. The Union stated that no negotiation between the Company and the Unions had taken place to determine the terms and conditions of the employees of the Brent Platforms and that pay increases were simply imposed by the Company.

15. The Union stated that the only other evidence so far provided by the Company of negotiations with AEEU/GMB that related to pay was a memo dated 13^th February 2001. The Union pointed out that if this was the only meeting regarding terms and conditions since 2001, then it could not be said that there was any collective bargaining process currently in place. The Union explained that the memo was not evidence of any collective bargaining and that it was simply evidence that the increase in core workers’ salary which the Company imposed each year was in line with the increase in the minimum hourly OCA rates. The Union recognised that the Company was likely to argue that the remuneration of core workers was determined by the Partnership Agreement because the pay increase the Company imposes each year will be in line with the increase in hourly rates. The Union believed that such an argument ignored the wording of paragraph 35(1) of Schedule A1 that collective bargaining must take place on behalf of the core workers. The Union stated that the unilateral selection by an employer of a percentage figure established by itself or by a third party cannot be said to be the product of collective bargaining on behalf of the workers to whom it was applied. The Union contended that the process of conversion undertaken by the Company which translated an hourly rate of pay into an annualised figure had not been agreed with the trade union; nor was it found in any contractual document. Indeed, core workers had never seen the conversion calculation method until the CAC application. In this sense the increase in salary paid to core workers was merely a unilateral exercise performed without regard to union or employee.

16. The Union stated that any negotiations between OCA and AEEU/GMB in which the minimum hourly rates and allowances are fixed, are not conducted on the salaried core workers’ behalf. It added that the Partnership Agreement was clear and that these were minimum hourly rates. The Union submitted that given that there was no negotiation at a local level and given that the terms and conditions on pay, hours and holidays of the core employees of the Company bear no or very little relation to the pay, hours and holiday terms set by the multi-employer collective bargaining, any collective bargaining that takes place at the multi-employer level cannot be said to be on their behalf.

SUMMARY OF THE COMPANY’S MAIN SUBMISSIONS

17. The Company contended that the Union’s application was inadmissible in terms of paragraph 35 of the Schedule A1. The Company explained that Wood Group Engineering (North Sea) Limited are members of the Offshore Contractors Association (OCA) and that OCA had entered into a Partnership Agreement with the AEEU and the GMB. The Company stated that the Partnership Agreement was a collective agreement as defined in Section 178 of the Trade Union and Labour Relations (Consolidation) Act 1992. The Company stated that it had issued a formal instruction to negotiate to OCA in April 2000 and that in terms of that instruction the Company authorized the OCA to renegotiate the terms of the original Partnership Agreement that was entered into on 5^th November 1998. The Company added that the Partnership Agreement was subject to annual review and that the review was conducted on behalf of the Company by the OCA. The Company explained that the formal instruction to the OCA confirmed that:

‘That the provisions of the Agreement relating to remuneration, working hours and holiday entitlement shall be implemented in respect of those employees engaged by (Wood Group Engineering) who fall within the scope of the Agreement’.

18. The Company stated the arrangements made between WGE and AEEU and GMB qualified as a collective agreement under section 178 of the Act. In addition to the arrangements constituted by the Partnership Agreement the Company engaged, where appropriate, in complementary collective bargaining with the recognised Union’s. The Company explained that on 2^nd June 2003 the Regional Officer of the AEEU wrote to the Company requesting amongst other things the opportunity to discuss a review of the basic rate of pay and the implementation of a consultative forum. In addition, the Company stated that those matters and others were discussed at a meeting between the Company and the Union’s on 19^th June 2003.

19. The Company stated that under the collective agreement the AEEU and GMB were recognised to conduct collective bargaining on behalf of the majority, if not all, workers falling within the relevant bargaining unit as defined in paragraph 35(6) of the Schedule. The Company made reference to the Company’s handbook which included a statement of Terms and Conditions of Employment and stated that the statement made specific reference to the Partnership Agreement and Trade Union Representation.

20. The Company explained that the rates of pay for all offshore workers including those working on the Brent Field had been directly linked with minimum rates which had been negotiated between the OCA and the AEEU and GMB. It added that in some cases the Company paid in excess of the negotiated minimum rates but whenever an increase in the minimum rates was agreed, the rates paid by the Wood Group to their workers would be increased in line with any increase in the nationally negotiated minimum rates. The Company stated that each year there was an annual round of wage negotiations between the OCA and the AEEU and GMB and that as a result of the national negotiations conducted between these Parties, increased national minimum rates were determined. The Union would then consult their membership on the terms of the agreement prior to final agreement. The Company made the point that national negotiations would not necessarily result in a percentage increase against all elements of basic pay and the other allowances and that some allowances may not be increased at all. The Company added that because of this a conversion exercise was necessary to provide the correct increase in the annualized Company rate in line with any increase in the national minimum rates negotiated between the OCA and the AEEU and GMB. The Company produced evidence which showed the conversion calculations for the years 2002 and 2003.

21. The Company stated that in 2002 the increase in the OCA rate for Technicians increased following negotiations with the AEEU and GMB to £13.47 and that this equated to an increase in the Wood Group Engineering rate of 3%. The Company stated that in 2003 the OCA rate was increased following collective negotiation to £13.98 and that this equated to an increase in the annualized Wood Group Engineering rate of 3.19% which was rounded up to 3.20%.

22. The Company stated that in addition to negotiating increased rates of pay the AEEU and GMB also negotiated an extended field break of 21 days per annum. It added that this came into effect under the OCA partnership terms in 2001/2002 and was incorporated into the contracts of employment for all Wood Group Engineering offshore employees at the same time. The Company submitted a sample of a letter intimating these changes and which expressly stated that they resulted from OCA negotiations. The Company stated that the most recent example of the operation of this increase mechanism followed on negotiations between the OCA and the AEEU and GMB, which culminated in agreement in May 2003 and that negotiations between the Parties had taken place over the previous 6 month period. In addition, meetings took place in Aberdeen, Glasgow and Manchester. The Company explained that as a result of these negotiations, increases to the national minimum rates were agreed in May and it was part of the agreement that the increase would be backdated to 1^stApril 2003.

23. The Company stated that immediately after agreement with the Unions the OCA notified the member companies and the Personnel Manager at Wood Group Engineering calculated the resulting increase in the Company’s rates. It added that the calculations were made available to the AEEU and GMB. The Company made the point that this was for two purposes, firstly so that they could check that the calculation was accurate and secondly so that they could if required, explain the increases to their members. The Company stated that it was on that basis that it could confirm that all Wood Group Engineering employees working offshore up to and including chargehands (the first line of supervision) were directly linked with rates negotiated between the OCA and the AEEU and GMB.

24. The Company stated that on occasion there could be a variation to the terms and conditions of employment by reason of local circumstances and that a current example of this was to be found with employees working on the BP Schiehallion Project. It added that this required welders and technicians to work as abseillers and that it had been agreed following negotiation with the partner Unions that it would be appropriate that the workers be paid at the higher abseiller rate for the course of that project. The Company explained that when intimating increases in rates of pay, the Company will write to all its workers and provide an updated contract of employment. It pointed out that until the production of the Offshore Handbook in 2002 the structure of the contracts involved a statement of terms specific to the particular employee with terms having general application contained in appendices attached at the end of the contract. The Company stated that to reduce the administrative burden involved with that approach the appendices were replaced in 2002 with the Offshore Handbook.

25. The Company stated that the Partnership Agreement was a viable agreement between the Parties and that collective bargaining conducted between the Parties to the agreement was genuine and in no sense a sham. The Company explained that as stated in the introduction to the original Partnership Agreement the OCA, AEEU and GMB and their predecessors had a long history of working together in the offshore industry beginning in the 1970’s. The Company pointed out that the Partnership Agreement remained a vibrant and effective means of collective bargaining. The Company supplied evidence of the notes of collective bargaining meetings, which took place on 15^th January and 4^th February 2002. The Company stated that in addition to the conduct of collective bargaining, the AEEU and GMB represented workers in formal grievance and disciplinary procedures and in respect of operational issues, such as proposed redundancies. In addition under the auspices of the Partnership Agreement an Annual Partnership Safety Seminar was promoted. The Company explained that the existing arrangements for collective bargaining constituted a settled and effective bargaining practice and the partner Unions also viewed the arrangements as robust and a satisfactory means of conducting collective consultation.

CONSIDERATIONS

26. The Panel’s task under paragraph 35 is to decide whether there is already in force a collective agreement under which a union(s) is recognised as entitled to conduct collective bargaining on behalf of any of the workers falling within the Union’s proposed bargaining unit. In applying the test set out in paragraph 35, the Panel is mindful of the definition of collective agreement and collective bargaining to be found in the Trade Union and Labour Relations (Consolidation) Act 1992, s. 178. This definition makes it clear that collective bargaining means negotiations relating to or connected with a range of issues including terms and conditions of employment, matters of discipline, facilities of officials of trade unions and machinery for negotiation or consultation. The Panel’s decision has been taken after a full and detailed consideration of the views of both Parties as expressed in their written submissions and amplified atthe hearing. 27. Inthe hearing.

27. Wood Group Engineering (North Sea) Limited are members of the Offshore Contractors Association (OCA) and there is no doubt that OCA had entered into a Partnership Agreement with the AEEU and the GMB. This was not disputed between the Parties. The Panel is persuaded that the Partnership Agreement is a collective agreement as defined in section 178 of the Trade Union and Labour Relations (Consolidation) Act 1992.

28. The next question is to decide whether this agreement is in force. On this issue, it is clear and not disputed by the Parties that OCA and the Unions do enter into meaningful negotiations over terms and conditions of employment on an annual basis. It is also important to discover whether or not AEEU and GMB are entitled to conduct collective bargaining for workers employed by Wood Group Engineering. The terms of the Partnership Agreement make it clear that AEEU and GMB are recognised for the purposes of collective bargaining as entitled to negotiate for the terms and conditions of workers employed by members of the OCA. Wood Group Engineering is a member of the OCA and has a representative on the OCA bargaining team. The Panel has concluded, therefore, that collective bargaining has taken place between the Parties to the Partnership Agreement and this agreement is currently in force.

29. The final and remaining issue concerns the question whether or not the negotiations are conducted on behalf of the core workers employed by Wood Group Engineering. The rates of pay for all offshore workers including those working on the Brent Field had been directly linked with minimum rates which had been negotiated between the OCA and the AEEU and GMB. It has also been established from the evidence available that the rates paid by the Company to their workers are raised in line with any increase in the nationally negotiated minimum rates by the application of a conversion factor. Ultimately the issue for the Panel is to decide whether or not core workers receive the improvements in terms and conditions which are delivered through the Partnership Agreement.

30. It is the view of the Panel that the Company does deliver to its workers the improvements in terms and conditions set out in the Partnership Agreement. The Panel accepts that it is the policy of the Company to change the terms and conditions of its workers on an annual basis in a way which reflects the changes to the Partnership Agreement negotiated by the OCA and the Unions. In the case of pay it does this by converting the hourly increase set out in the Partnership Agreement into one which recognises the annualised nature of the remuneration paid to core workers. The Panel noted that after agreement with the Unions the OCA notified its member companies such as Wood Group and the Company would then calculate the resulting increase in the rates of pay for core workers. It is evident that the calculations are made available to the AEEU and GMB Unions. From the evidence it is clear that the partner Unions are satisfied that this calculation is carried out effectively. Other terms are changed in a way which is broadly in line with the Partnership Agreement. Accordingly, the Panel is satisfied that AEEU and GMB do bargain in behalf of core workers employed by Wood Group Engineering.

31. The Panel has also noted that in addition to the conduct of collective bargaining, the Company applies disciplinary and grievance rules which are taken from the Partnership Agreement and involve both AEEU and GMB and consults with representatives of the AEEU and GMB as recognised trade unions over proposed redundancies. Officials of both Unions are also entitled to visit Wood Group Engineering core workers in the Brent field to explain changes in terms. These are all forms of employer/union interaction which are recognised as matters constituting collective bargaining in the Trade Union and Labour Relations (Consolidation) Act 1992, s.178.

DECISION

32. The Panel is satisfied that there is, for the purposes of paragraph 35 of Schedule A1, a collective agreement under which a union is recognised as entitled to conduct collective bargaining on behalf of any workers falling within the Union’s proposed bargaining unit. Accordingly, paragraph 35 does render the Union’s application inadmissible.

Professor Kenny Miller

Mr Sandy Morrison

Mr Bill Speirs

27^th August 2003

APPENDIX A

Names of those who attended the 18^th August 2003 hearing:

For the Trade Union

Mr John Hendy QC

Mr Robert Moretto

Mr Jake Molloy

Mr James McDonald

For the Company

Mr Peter Sharp

Mr Paul Atkinson

APPENDIX B

The relevant legislative provisions

Paragraph 35 of Schedule A1 to the Trade Union and Labour Relations (Consolidation) Act 1992 provides:

(35) (1) An application under paragraph 11 or 12 is not admissible if the CAC is satisfied that there is already in force a collective agreement under which a union is (or unions are) recognised as entitled to conduct collective bargaining on behalf of any workers falling within the relevant bargaining unit.

(2) But sub-paragraph 1 does not apply to an application under paragraph 11 or 12 if-

(a) the union (or unions) making the application under paragraph 11 and 12 are the same, and

(b) the matters in respect of which the union is (or unions are) entitled to conduct collective bargaining do not include pay, hours or holidays…

(6) The relevant bargaining unit is

(a) the proposed bargaining unit, where the application is under paragraph 11(2)…

The definitions of collective agreement and of collective bargaining are to be found in section 178 of the Act:

(1) In this Act “collective agreement” means any agreement or arrangement made by or on behalf of one or more trade unions and one or more employers or employers’ associations and relating to one or more of the matters specified below; and “collective bargaining” means negotiations relating to or connected with one or more of those matters.

(2) The matters referred to above are:

(a) terms and conditions of employment, or the physical conditions in which any workers are required to work;

(b) engagement or non-engagement, or termination or suspension of employment or the duties of employment, of one or more workers;

(d) matters of discipline;

(e) a worker’s membership or non-membership of a trade union;

(f) facilities of officials of trade unions;

(g) machinery for negotiation or consultation, and other procedures, relating to any of the above matters, including the recognition by employers or employers’ associations of the right of a trade union to represent workers in such negotiation or consultation or in the carrying out of such procedures.

(3) In this Act, “recognition”, in relation to a trade union, means the recognition of the union by an employer, or two or more associated employers, to any extent, for the purpose of collective bargaining; and “recognised” and other related expressions shall be construed accordingly.