Highlights

BHP shares fell 2.2% to AUD 37.74 in early Tuesday trade following a legal setback.

The Fair Work Commission ruled BHP must comply with “same job, same pay” laws for 2,200 contractors.

The ruling could lead to AUD 66 million in pay increases and potentially cost BHP up to AUD 1.3 billion annually.

Shares in BHP Group Ltd (ASX:BHP) declined sharply on Tuesday morning following a ruling from the Fair Work Commission that could significantly increase the company’s wage bill. The mining giant’s share price dropped 2.2% to AUD 37.74, down from Monday’s closing price of AUD 38.60. In contrast, the S&P/ASX 200 Index was down 0.4% during the same trading window.

The selloff comes in the wake of a long-running industrial dispute. On Monday evening, the Fair Work Commission ruled in favour of the Mining and Energy Union, stating that BHP’s in-house labour hire arm, Operations Services, falls under the scope of the federal government’s new "same job, same pay" legislation.

The decision will affect approximately 2,200 contract workers across three of BHP’s coal mining operations in Queensland. Under the ruling, these workers are expected to receive wage increases of up to AUD 30,000 annually, with total wage gains projected at AUD 66 million, according to union estimates.

BHP had previously warned investors that the broader impact of the legislation could add as much as AUD 1.3 billion to its annual operating costs if applied across all its sites.

Commenting on the ruling, Mitch Hughes, president of the Mining and Energy Union in Queensland, said the decision represented a significant victory for workers. "BHP has fought our same job, same pay applications tooth and nail, trying to protect the wage-cutting employment model it pioneered. The community has spoken, and the courts have spoken," Hughes told The Australian Financial Review.

However, the response from the industry was mixed. Tania Constable, Chief Executive of the Minerals Council of Australia, expressed concern over the implications for the wider sector. “This is an incredibly disappointing decision that will directly threaten thousands of specialised contractors who play a vital role in mining operations across the country,” Constable said. She added that companies offering specialist services rather than general labour should not fall under the same legislative umbrella.

A BHP spokesperson acknowledged that the ruling would “have implications” for the company’s operations. He defended Operations Services, describing it as a provider of "compelling job opportunities and career pathways" for 3,700 employees and a contributor to operational productivity.