Friday 2 September 2005

Offshore Employers Challenge Tribunal Decision

Industry hopes that issues can be resolved in discussions

Companies in the UK offshore oil and gas sector today lodged an appeal against the recent ruling by the employment tribunal that the UKs Working Time Regulations cover all areas offshore up to the continental shelf. The companies are members of a number of trade associations including the OCA, COTA, and IADC.

Eight different grounds of appeal have been cited by the companies legal representatives, including the argument that the working time regulations which implement the European Working Time Directive in the UK do not apply to offshore work on the UK Continental Shelf.  The tribunals conclusion that it has the authority to hear tribunal cases on annual leave entitlement is therefore incorrect.

Having taken some time to examine the tribunal decision, we have had clear legal advice that there are very good grounds on which to base an appeal, commented Offshore Contractors Association (OCA) Chief Executive Bill Murray.

The associations acknowledged that the tribunal had not been helped in its decision by European legislation which is confusing and open to interpretation, and UK regulations that were unclear, a factor that the tribunal criticised. This has led to a lack of definition of important points and made clarity on the issue of how employment law operates in the offshore oil and gas industry extremely problematic.

The recent ruling would allow pending claims by offshore workers for an additional four weeks paid holiday entitlement to be heard.  If successful, which the companies will contest, it could have a serious impact on the industrys future.

In addition however there are issues raised by a European Court of Justice decision in a case called Jaeger which could be even more damaging to the industry.  Part of the claim from the Jaeger case is that all time spent offshore should be classified as working time, even when workers are off shift or asleep. 

While the industry does not accept this argument, if found to be correct, it would mean that offshore work patterns would have to change to approximately one week on followed by three weeks off to keep within the law.  Not only would this be economically unviable but it would also require a further 20,000 workers to service offshore rotations in an environment where skills are already in short supply.  That in turn would hasten the demise of almost all of the UK offshore oil and gas industry.  This issue alone shows why the claims being made are so important to the industry as a whole.

It is no exaggeration to say that we are facing a defining moment in the future of our industry in the UK, said UK Offshore Operators Association (UKOOA) Director Chris Allen. As we have previously stated, if the claims for annual leave succeed we are looking at direct costs of those additional paid holidays to workers of about £200 million annually.

This would put us at a severe disadvantage against other world oil provinces competing for investment, a situation that would be exacerbated by the need to recruit hundreds of additional staff to cover for holidays at a time when we are also facing high demand for labour.

Even more fundamental are the Trade Union claims that the Jaeger judgement should apply offshore.  Were this position to be confirmed by a Tribunal, offshore workers would be restricted to working about 8 days a month.  The number of additional staff required to allow for this simply do not exist, so large parts of North Sea production would have to cease and the industry would move into rapid decline.

The associations stressed that they still feel there is room for constructive dialogue between all industry stakeholders and that they remain willing to work with trade unions and Government to provide the necessary definitions to reach a satisfactory conclusion for all sides.

Mr Murray said:  It is our fervent hope that in early discussions with government and the trade unions we will be able to achieve certainty as to the application of the Working Time Directive offshore, and the removal of the threat that the Jaeger judgement poses to our industry.

The six trade associations involved are the COTA (Catering Offshore Trade Association), IADC (International Association of Drilling Contractors), IMCA (International Marine Contractors Association), OCA, UKOOA and WSCA (Well Services Contractors Association).

 

Ends                                                                                        

Notes to editors

1.      The Industry believes that the Working Time Directive was intended to be applicable to all offshore areas in Europe, including the UK Continental Shelf (UKCS).  However, the unions legal challenge revealed a potential flaw in the Regulations which implement the Directive into UK law.  This suggested that the Regulations appeared only to apply to Great Britain and offshore to the12 mile territorial limit.  As raised by the Tribunal Chairman at a hearing on 16 May, it was essential that this question of jurisdiction was addressed and resolved before the more substantive issue of whether the offshore workforce was entitled to an additional four weeks paid holiday could be examined.

On 26 July, the Tribunal Chairman ruled that the Regulations covered all areas offshore within the UKCS and not just to the 12 mile territorial limit.  It is this ruling that the UK offshore oil and gas industry will now challenge. The unions legal representatives had argued that the Regulations covered all offshore work, wherever in the world it was carried out. Some of the claims were made for those working outside the UKCS.

2.      On the issue of paid leave, the industry believes that it already complies with the Working Time Directive and that the typical two weeks-on, two weeks-off rota system worked offshore comfortably accommodates the minimum four weeks annual leave required

The purpose of the Working Time Directive is to set decent minimum standards for working time and it requires that no employee should work more than 48 weeks per year at an average of 48 hours per week, i.e. a maximum of 2,304 hours per year. 

A worker on a North Sea platform typically works a two week on, two week off rota, giving working hours of some 1,900 - 2,000 per year, well within the maximum allowed by the Directive.

The Directive also requires a minimum of four weeks paid leave (hence the 48 weeks mentioned above).  It does not require an additional four weeks leave over and above the period of almost 26 weeks spent onshore. The Directive does also require rest breaks to be taken either during the working day or as compensatory rest later.  Again, this legal minimum requirement is comfortably met by our industry which typically provides almost 26 weeks of field break, within which there is ample time for the necessary amount of compensatory rest required under the WTD and the required four weeks annual leave. 

However, as with the minimum wage, a number of North Sea employers have negotiated more generous terms and conditions with their staff.

3.      A requirement to provide the offshore workforce with an additional four weeks annual leave on top of the typical 26 weeks field break could cost the industry up to £200 million a year in direct offshore labour costs.  This takes no account of the knock-on effects involved in sourcing and scheduling extra workers, if they exist, the inefficiencies of operating with a different crew, or the deferral or incompletion of work where there are insufficient people of the right skills.  Such effects are likely to multiply the direct labour costs substantially.

4.   The  effects of the Jaeger decision, if it applied to the offshore industry, would be to make the 24 hours of a day offshore all working time, whether any work was carried out or not.  If all time is considered to be working time, the maximum a worker would be able to spend offshore is likely to be eight days, followed by 20 days absence for compensatory leave.  That has serious implications. It would require the recruitment of about 20,000 extra employees which is not possible.

5.  Against that background, the industry has no option other than to defend the claims being made against it.

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