Acas clears employers at Lindsey oil refinery

London - Total, Jacobs Engineering and IREM did not break EU law and acted in accordance with collective agreement in the recruitment of overseas workers for the construction of a desulphurisation unit at the Lindsey oil refinery, the Acas report into the recent dispute at the site has found. The employment relations service, however, added that the dispute highlight issues with the introduction of foreign workers within labour relations system in the UK.

‘Whilst the report shows no evidence of the law being broken there is a source of tension around the Posted Workers Directive and its application to construction work and the UK’s industrial relations system,” said Acas chief executive John Taylor.

Accordin to Acas, the complexity produced by the interrelation of EU law, national agreements and supplementary local collective agreements is a potential source of confusion and dispute. It recommened a review by the relevant parties of the interrelationship between national and local collective agreements to aid transparency and reduce the potential for misunderstandings and conflict.

“An enhanced role for the NAECI independent auditor in both the tendering and project monitoring processes, if this could be agreed, would, we believe, play an important part in helping to overcome some of the difficulties that this dispute has raised,” said the Acas report.

Last week saw an end to the dispute over the recruitment of people from outside the UK at Lindsey Oil Refinery. A return to work followed workers’ acceptance of proposals by Total and main contractor Jacobs Engineering to employ around 100 extra, UK-based workers on a £200-million project to build a new HDS (hydrodesulphurisation) unit at the facility.

With a capacity of 10,000 kilotonnes per annum (ktpa), the Lindsey Oil Refinery is Total’s main refinery in the UK, where the group is also a leading oil and gas producer. The 1,000 ktpa HDS-3 unit is one of two new units being built at the Lindsey Oil Refinery - the other being a hydrogen production unit (SMR - steam methane reformer) for the desulphurisation process.

The project to build the HDS unit was launched in 2007 and is due for startup this year. It will increase Total’s production of ultra low sulphur diesel, for which demand is growing steadily, and will substantially increase the refinery’s capacity to process less expensive sour crudes.

The main contract for the construction of the HDS-3 unit was awarded 14 months ago to Jacobs Engineering, which subsequently subcontracted much of the work to other engineering firms, according to a Total spokesman, Jacobs, he said, took back work from one subcontractor late last year, prior to awarding a 300-job contract to Italian firm IREM. He declined to identify the subcontractor involved or the reasons for the reallocation of work. 

Total has confirmed that Jacobs had directly and indirectly recruited between 600 and 1000 workers on the project. It has also stated that: “To meet additional works requirements, Jacobs carried out a tender process to which five UK and two European contractors responded. The contract was subsequently awarded to IREM, an Italian-based contractor, with a permanent skilled workforce, which it directly employs.”

Reports from the union side suggest that Shaw Group UK was awarded one of the contracts on the HDS-3 project, for which it started recruiting in February 2008. The work, they claim,  was due for completion this month but is still only about half complete due to factors including late civils, delays with materials arriving on site and management issues.

Towards the end of last year, two thirds of the project was taken away from Shaw Group and awarded it to IREM, a source claimed. This, he said, meant redundancies among  much of the UK workforce recruited to do the contruction work on the ‘inner battery limits’ of the HDS-3 project, with their work going to IREM’s mainly Italian workers who had not even been mobilised.

“When EU contractors win UK work they only employ there own nationals mainly because of languge and cultural differences, so barring UK workers,” said one former worker at the Lindsey site. This, he believes, was the main driver behind the walkouts both at the Lindsey refinery and at other sites across the UK.

Among the other sites affected, Grangemouth oil refinery was hit by a walkout by up to 800 BP and INEOS workers, while up to 600 demonstrators gathered outside chemical and steel plants on Teesside in support of the Lindsey workers. Another 50 workers downed tools in protest at Aberthaw Power Station in South Wales. (See also Comment)

The eventual peace deal at the Lindsey refinery followed days of talks between ACAS, senior union representatives, Jacobs and Total. An extra 102 workers are to be employed in new positions and work alongside oversea contract workers and the permanent workforce, said the employers. There will be no redundancies as a result of this announcement, they added in a press statement.

“We look forward to working with the contractors on the £200m expansion project (HDS-3) that will help to secure the future of the refinery and local employment for many years to come,” said Total. “We would like to highlight again that we have not, and will not, discriminate against British companies and British workers.”

Indeed, Total insists that it mainly employs local labour at the Lindsey refinery: backing this up with figures for 2008 showing that 96% of the 267 contract companies working at the refinery were UK or UK-registered companies.

In an earlier statement, Total said it recognised the concerns of [UK] contractors but stressed: ” We have a fair, competitive and rigorous tender process. We will continue to put contracts out to tender in the future and we are confident we will award further contracts to UK companies.”

The company added that the investment in the new HDS-3 unit will help to secure the long-term future of the refinery, which currently has around 500 full-time employees.

“On this one specific occasion, IREM was selected, through a fair and competitive tender process, as the most appropriate company to complete this work. We will continue to put contracts out to tender in the future and we are confident we will award further contracts to UK companies. The HDS3 unit is separate to the main refinery, and as such, this action has not affected the normal operation of the refinery,” the company added.

“All IREM staff will be paid at the UK nationally agreed levels for the engineering construction industry under the same terms and conditions as agreed with the unions for the existing contractor workforce,” Total further emphasised.

For the unions, Unite joint general secretary, Derek Simpson, said Lindsey is part of a much wider problem that will not readily go away. The issue, he said, is not workers from other European countries working in the UK or foreign contractors winning contracts in the UK, but that employers are excluding UK workers from even applying for work on these contracts.

“The flexible labour market is a one way street that only benefits the employers. We have seen the backlash as the recession bites. The government must act to level the playing field for UK workers,” said Simpson. “No European worker should be barred from applying for a British job and absolutely no British worker should be barred from applying for a British job.”

Unite wants an investigation into the practices of contractors and subcontactors in the engineering and construction industry. This, it said, should be followed by action from the government to ensure that companies applying for contracts on public infrastructure projects, sign up to agreements that commit them to fair access for UK labour.

The union also wants to overturn European legal precedents which, it claims, allow employers to undercut wages and conditions. A European Court of Justice precedent gives employers a license for ‘social dumping’ and prevents unions from taking action to prevent the erosion of UK workers’ pay and condition, said Unite.