Address to Australian Industry Group, Personnel and Industrial Relations Conference
Canberra, 3 May 2011
I acknowledge, and pay my respects to, the traditional and original custodians of the land on which this conference is taking place, the Ngunnawal people, their elders past and present.
I acknowledge their continuing connection with and contribution to country and their unique role in the life of the ACT and the surrounding region.
I extend my respect to other aboriginal people here today.
Introduction
Good morning; and thank you for the invitation to speak with you.
The ABCC has always enjoyed a very constructive working relationship with the Ai Group and its members.
As a peak industry association in Australia which, along with its affiliates, represents the interests of more than 60,000 businesses in an expanding range of sectors including, relevantly to me, construction, the Ai Group plays an important and constructive role in promoting the viewpoints and interests of Australian industry in respect of competitive and sustainable industries, skills development, productive and flexible workplace relations, infrastructure development and innovation.
Under the leadership of Heather Ridout and, in the WR and IR policy areas, Peter Nolan and Stephen Smith respectively, the Ai Group continues to be one of the pre-eminent voices of industry in this country.
In that regard the Ai Group is a vital co-producer of the public value that my agency returns to the Australian community and I look forward to our ongoing working relationship.
My address this morning is in two parts.
First, I will update you on some of the activities the ABCC has focussed on since I took up my appointment in October 2010.
Secondly, I will take the opportunity to speak to you about dispute resolution, productivity and bargaining in the building and construction industry (B&C industry).
Please note that, as the CEO of an independent statutory agency, the views I express today are my own and do not necessarily reflect Government policy.
Part 1 – The activities of the ABCC
The National Context
In a national context it is clear that maintaining a high functioning, harmonious building and construction industry is not just in the interests of industry participants, but is in the interest of all Australians.
Australia's B&C industry accounts for 7.5% of GDP and employs almost 1 million of our fellow Australians.
Recent Construction Indexes show activity in the engineering construction sector expanding. This growth will likely continue as more infrastructure is required to support the resource and mining sectors.
Noting this National context, the work of the ABCC is not just about workplace relations compliance for compliance sake; rather the work of my agency and that of my hard working staff is intimately connected with the building of this nation and future prosperity of this country.
An industry specific regulator
However, from time to time questions are raised about the need for the continuing existence of the ABCC or the government's policy which is to retain a separate stand alone regulator of workplace relations in the B&C industry to be known as the Office of the Fair Work Building Industry Inspectorate
What is it about the B&C industry that makes it so special? Why is it that workers in one industry are treated differently?
The simple answer is that it is an industry or, more accurately, sectors of it, in which the players behave differently.
But, that need not necessarily be the case.
If, instead of departing from the standards of commercial and industrial conduct exhibited in the rest of the Australian economy, rogue elements in the B&C industry behaved in the same way as other industries, then maybe, separate regulation would not be necessary.
But that is not presently the case. Rather, there is a continuing need for structural and cultural reform.
I'm often asked “why is there more unlawful and inappropriate conduct and practices occurring in the building and construction industry?”
As Royal Commissioner Cole explained “the answer is complex, but can be simply stated.”
To paraphrase him,
The unlawful and inappropriate practices occur because of a clash between the short term project profitability focus of the providers of capital, clients, head contractors and subcontractors on the one hand, and the long term aspirations of [labour].
It is, as Cole correctly described it, “an industry like no other”.
The environmental factors which result in the cultural features of the B&C industry, and which were documented, in particularly, in Volume 11 of the Final Report of the Royal Commission, are as relevant now, as they were then.
As such barriers to participation like breaches of freedom of association laws, coercion, mandated industrial arrangements and other anti-competitive practices continue to occur and need to be eliminated.
An active regulator
But the significant structural change that has occurred since Cole is that there is no longer a weakness in the mechanisms for enforcing laws of general application, especially workplace laws and the civil law for recovery of loss caused by unlawful action.
Now there is a body, namely the ABCC, which is committed to ensuring that the B&C industry operates within the law and it is as busy today, indeed busier, than it has ever been; expanding its regulatory work and geographic reach in an effort to increase the public value it delivers.
A large part of our work involves maintaining a visible presence on construction sites through site visits and educational visits by both National Code Officers and ABC Inspectors.
In fact, in my capacity as ABC Inspector Johns, I too have been visiting building sites to better understand our day-to-day on-site regulatory work. In this regard, we are evaluating the effectiveness of those engagements and are reviewing our on-site protocols, in addition to considering new approaches to education and industry support (of which I will say more later).
Nationally, we currently have:
- 71 active investigations;
- 36 matters being assessed by our internal legal department; and
- 32 matters before the courts.
The majority of the matters under investigation and with our legal department relate to alleged breaches in Victoria (44%) and Queensland (42%). The court matters principally relate to matters in Victoria (66%) and Western Australia (25%).
Since October 2010 I have authorised the commencement of more civil penalty proceedings than the average in the corresponding period of the previous three years. We have kept our foot on the regulatory accelerator; however, the scope of the subject matters being litigated has expanded.
We have also expanded our capacity to assist B&C industry participants by making sure our office locations allow us to act swiftly when regulatory intervention is required.
The ABCC has offices in all state capitals, but had no presence in the Territories. Consequently, I recently opened an office in Canberra and I will soon be opening an office in Darwin.
Although the 'strong cop on the beat' metaphor has become somewhat hackneyed, it is the case that there will now be more “cops”, on more building and construction “beats.”
Indeed we are looking to expand further. Noting that seven out of Australia's ten largest advance mineral and petroleum projects, worth around $125.6 billion, are under construction or about to be constructed in the Pilbara, Barrow Island and the Burrup Peninsula, subject to the successful conclusion of a current recruitment round, we hope to improve our service offering in the Pilbara in Western Australia.
A transparent regulator
As the ABC Commissioner and a labour regulator with a unique position in the Australian workplace relations environment, I am accountable for upholding the important principles of impartiality, accessibility and procedural fairness.
To this end, since I became ABC Commissioner I have attended to several governance issues to make our operations more transparent and engender accountability across the agency in our service of the B&C industry participants.
Last November I published an ABCC Litigation Policy6 that sets out the considerations that are factored in when determining whether a proceeding should be commenced.
At the beginning of February I published on our website further Guidance Notes which clearly outline the processes the ABCC follows in relation to:
- investigative processes; and
- written undertakings as an alternative to litigation.
It is important that the B&C industry is given practical information about how the ABCC performs its functions.
Additional Guidance Notes are being developed in relation to:
- Right of Entry;
- Witness and stakeholder management;
- ABCC site visits; and
- National Code processes.
I welcome suggestions for future Guidance Notes which would assist our stakeholders in the B&C industry.
I have also revamped the internal processes in respect of section 52 compulsory examinations in that I have
- formalised, through the ABCC‟s internal procedures, the criteria recommended by the Hon. Mr Wilcox QC before a decision to issue a section 52 notice will be made;
- decided to adopt the recommendation of the Hon. Mr Wilcox QC to reimburse s.52 examinees the reasonable cost of travel, accommodation and other associated expenses (including, in appropriate cases, lost wages) caused by their attendance under a s.52 Notice.
Later today I will meet with the Office of the Commonwealth Ombudsman to discuss his oversight of our use of this serious power to establish a process whereby I write to the Commonwealth Ombudsman on each occasion after the exercise of s.52 and the conduct of a compulsory examination to invite the Commonwealth Ombudsman to conduct an own motion investigation of my actions in relation to the use of s.52. As ABC Commissioner I am not afraid to let the light shine on what is an often misunderstood power and rare our exercise of it as a last resort.
Finally, on the subject of transparency, over the weekend the ABCC published an Agency Plan which describes how we propose to implement and administer the new Information Publication Scheme that requires Australian Government agencies to publish a broad range of information on their websites. Accordingly, you can expect to see more information made public about our operations in the near future.
A full service regulator
In addition the ABCC has moved to become a full-service regulator, taking responsibility for regulating compliance with wages and entitlements matters in the B&C industry under the Fair Work Act 2009 (FW Act).
On taking up my appointment I announced that, consistent with the recommendation of Royal Commissioner Cole, the ABCC,
“will assist building and construction workers in the regulated community to recover under-payments when they seek our assistance.”
Royal Commissioner Cole concluded that there is a significant role for the ABCC to play in connection with the non-payment of employee entitlements.
It is also consistent with our obligations under the 1947 International Labour Organisation Labour (ILO) Inspection Convention (No. 87), in particular Article 3 which provides that,
The functions of the system of labour inspection shall be: to secure the enforcement of the legal provisions relating to conditions of work and the protection of workers while engaged in their work, such as provisions relating to hours, wages, ... and other connected matters, in so far as such provisions are enforceable by labour inspectors...
Who would have thought that fulfilling the promise of Cole and abiding by long standing ILO convention obligations would be considered 'trendy'.
It is fair to say that there has been a modest start to our wages and entitlements practice. The ABCC has received 32 wage and entitlement enquiries within its jurisdiction to the end of March 2011. In respect of the 15 matters which have been resolved 6 have resulted in recoveries of nearing $12,000 (or an average of $2,000 each). Two other matters have been referred to the ABCC internal legal department to be considered for litigation.
While these outcomes may appear to be small wins, our commitment to protecting the Australian tradition of a fair day‟s pay for a fair day‟s work is making a difference to the lives of the workers the victims of these claims.
It demonstrates clearly my determination that the ABCC meet its duty to be a full service regulator of the building and construction industry.
An educating & enabling regulator
While treating breaches of workplace laws through investigations and litigation is a vital and ongoing part of our work, ideally, as a regulator, I would rather breaches not occur.
Accordingly, consistent with our functions under the Building and Construction Industry Improvement Act 2005 (BCII Act), we are updating and improving the advice and assistance we make available to B&C industry participants to enable them to better comply with workplace laws.
Our inspectors incorporate education into many aspects of their daily work. They provide fact sheets, referrals, advice, attend trade-shows, give presentations, answer questions and direct people to online tools and resources.
Providing B&C industry participants with a clear understanding of what is required of them to be fully compliant with workplace laws, means they are more likely to comply. This reduces the number of complaints received by the ABCC and allows us to focus our compliance activities on the investigations related to the most serious contraventions.
We will be reviewing the ABCC's activities associated with fulfilling our educative function to make sure that we are providing our B&C industry with the most valuable and practical services.
This will involve a two-way conversation and all of you here today involved in the B&C industry are encouraged to participate.
We want to hear from you, our stakeholders and clients, about the kinds of services, tools and advice you need to implement good workplace relations procedures at an enterprise level.
Part 2 – Productivity, disputes and bargaining
Productivity in the Building and Construction Industry
Everyone in this room understands the meaning of 'productivity'. We understand it to be the ratio of what is produced to what is required to produce it; the quantity and quality of outputs to inputs.
Genuine productivity requires considered growth and good governance. There has been some public concern expressed about the importance of sensibly managing expansion in the resources sector.
Since 2004 mining investment has increased fivefold. The $43 billion Gorgon project alone is worth the same as two year‟s output from agriculture. In mining areas there are significant pressures on infrastructure – roads, ports and rails. The ABCC is essential in supporting the delivery of these infrastructure projects on time and on budget.
Investor confidence will be influenced by our domestic capacity to create lawful project sites where workers are paid correctly, unlawful strikes are eradicated and contracting arrangements are sturdy and reliable.
Effective labour regulation also plays a key role in encouraging participation within the sector. If the workplace relations settings are good, we will be able to create an industry that school-leavers want to join, where opportunities are abundant and training is prioritised.
By 2015 the resources sector will face a potential shortfall of 36,000 tradespeople. Not all of these will be building trades, but many will be dependent on building trades vacancies being filled.
A productive, well-regulated B&C industry is good for workers and their families, as well as head-contractors and sub-contractors.
Indeed, the productivity dividend will also flow through the supply chain and to the many other industries which depend upon what those in the B&C industry build and construct.
Productivity and participation create more jobs, more job security, more training and higher wages, greater efficiencies and higher profits.
Industrial disputation in the building and construction industry
Disputation has been a feature in some pockets of the B&C industry, and it is a feature that destabilises production. Lost working days that arise from disputation impact right through the supply-chain.
Nationally, recent figures are encouraging. Disputation in the B&C industry is the lowest it has been since June 2008.
December quarter ABS data shows there were 4 working days lost per 1000 employees in the construction sector this quarter, down from 12.5 the quarter before and even higher levels throughout 2010.
In March last year disputation rose to 17.2 days per thousand employees. This was in large part because significant industrial action at the Pluto LNG project, involving prolonged strikes attended by more than a thousand workers, had a major bearing on those figures. The ABCC has two active prosecutions relating to these stoppages.
I do not have to tell you the negative impact that flows from giving insufficient regard to managing and resolving disputes on major projects.
The ABCC plays a clear role in this regard. We investigate contraventions and seek the imposition of penalties on those that engage in unlawful industrial action; we can also seek injunctive relief when it's in the public interest to do so.
The BCII Act gives the ABC Commissioner the power to intervene in proceedings in both Fair Work Australia (FWA) and the Courts taken by Head Contractors and others seeking to stop industrial action. This has happened on many occasions, most recently I authorised interventions in both Victoria in FWA and in Queensland in the Federal Court of Australia.
But importantly, we can assist in the prevention of industrial disputes by giving B&C industry participants advice about dispute resolution options, before an issue escalates into a full-blown gridlock.
A focus on dispute resolution
Cultural reform in the B&C industry requires the participants to change their behaviour and default settings. What is clear to me is that there are multiple parties within the B&C industry that are invested in the old 'us and them' dichotomy.
The B&C industry is exceptionally competitive, dominated by a lowest price wins mentality and often operating on extremely low margins. These pressures mean negotiations in the B&C industry are often characterised by conflict.
I am not going to stand here and naively pretend that dispute resolution in the B&C industry is or can be painless. But I am here to remind you that, under the FW Act, blatantly ignoring dispute resolution clauses constitutes a contravention of the law and non-observers of dispute resolution clauses can expect that the ABCC will investigate and, in appropriate cases, litigate those matters.
It is reasonably common in the B&C industry for dispute resolution procedures to be left in the back of a dusty drawer somewhere, and for conflict to quickly escalate to industrial action.
The ABCC has run 42 cases where the main allegation has been unlawful industrial action and, on review, I was hard pressed to find one case where a genuine attempt had been made to follow dispute resolution procedures.
When clauses are devised and included in agreements they should be practical and meaningful. In the first instance, the parties to the dispute should try to resolve any workplace disputes at the workplace level. When real attempts have been made and this fails, then B&C industry participants need a dispute resolution clause that has been agreed by the parties and provides real options for resolution.
As employers it is in your interest to seek to avoid disputes, but when they occur to follow dispute resolution practices. Employers sustain good relationships with their employees by dealing with workplace issues at the earliest and most localised stage to avoid escalating disputation and lost productivity.
Enterprise bargaining in the building and construction industry
This brings me to enterprise bargaining.
Enterprise bargaining has been a feature of working life in the Australian B&C industry for at least the last two decades.
The latest statistics on bargaining under the Fair Work Act show more than 2.3 million Australian employees are now covered by enterprise agreements. Construction, as well as Manufacturing and Retail account for more than half of the current active agreements.
However, two years into the operation of the FW Act, there remains an onus on parties to continue to develop their good faith bargain skill sets and commitment to productivity.
As the guidance provided by case law builds and experience with the operation of different provisions increases, more sophisticated bargaining approaches are transpiring. The ABCC‟s role is to support parties in cultivating their capacity to bargain well.
It is understandable that unions want to deliver members the best wages and conditions possible, and employers expect jobs to be built to a quality standard on time and at a realistic cost. These reasonable objectives do not have to be incompatible. As I have said previously, outcomes that encourage industry productivity pay dividends for both employers and employees.
It is a lazy fall-back position to maintain that the history and culture of the B&C industry prevents win-win bargaining outcomes or outcomes that advance productivity.
The role of the ABCC
The ABCC has an important regulatory role in overseeing bargaining in the B&C industry. Project delays, cost overruns and work-stoppages that have the potential to arise as a result of bargaining disputes can all be offset if parties have the tools and support offered by an active regulator. We have a range of activities planned this year to assist the B&C industry to bargain in good faith.
The ABCC will publish a Practical Guide to Good Faith Bargaining in the Building and Construction Industry that will offer tools for bargaining at the enterprise-level.
The Guide will include examples from case law and a „how to‟ guide on seeking bargaining orders. It will also explain the role of the ABCC in ensuring that unlawful industrial action does not occur and how we go about enforcing compliance with bargaining orders.
The ABCC can make submissions in relation to applications for bargaining orders if a bargaining representative has initiated such proceedings. It is mandatory for parties to comply with the good faith bargaining requirements of the FW Act, but in order to enforce this requirement the affected party must apply for bargaining orders.
In making submissions on bargaining matters I will give consideration to the public interest as well as the possibility of non-compliance with the Fair Work Act and the ongoing impact that it may have on future agreement making in the B&C industry.
I am particularly interested to explore the scope of what it means to:
- respond to proposals made by other bargaining representatives; and
- give genuine consideration to the proposals (e.g. in respect of productivity) of other bargaining representatives; and
- give reasons for the bargaining representative‟s response to those proposals (e.g. in respect of productivity).
The ABCC can also intervene in proceeding and make submissions before Fair Work Australia where an agreement comes before it for approval. This is recently what we did in the ADJ Contracting Pty Ltd in respect of which a decision was handed down by SDP Acton in Fair Work Australia last Thursday.
In deciding to intervene the ABCC reviewed the proposed agreement and identified a number of provisions that, we considered, may have been objectionable, prohibited or otherwise unlawful. Our concern was to bring a greater measure of certainty to such matters knowing that, as a practical matter, employers don‟t usually carry around a copy of the Fair Work Act in their back pocket and can easily identify which terms in agreements do or do not have operative effect.
I won't go to the ABCC's submissions which were clearly arguable, but dismissed on this occasion. Nonetheless, the decision does provide a greater measure of clarity than existed before our intervention on the interpretation of important matters like adverse action, objectionable terms and provision for union entry in agreements.
Accordingly, you can expect that the ABCC will continue to seek clarity on the operation of bargaining laws through making submissions or intervening in relevant cases.
Other actions the ABCC takes to enforce compliance with bargaining provisions include initiating our own court proceedings when contraventions arise as a result of bargaining disputes. This might particularly be the case if industrial action is taken in pursuit of a pattern bargain and what would otherwise be lawful industrial action is rendered unlawful.
The BCII Act prevents coercion to make, vary, terminate or extend an enterprise agreement. The ABCC will enforce the letter of the law when it comes to unlawful coercion.
If industrial action occurs during bargaining that is not protected action, the ABCC can seek injunctive relief and pursue the imposition of penalties under s.38 of the BCII Act.
Conclusion
Thank you for having me here this morning to speak about some of the key activities the ABCC has been pursuing since I commenced as ABC Commissioner.
The health of Australia's B&C industry is an indicator as to the overall prosperity and vitality of our broader economy.
The ABCC will continue to support the B&C industry by providing education and regulatory services that facilitate harmonious workplace relations and allow projects to be delivered on time, on budget, with minimal disruption. Effective labour regulation plays a key role in fostering investor confidence and promoting stable growth.
As ABC Commissioner I am driven by the objective to bring about fair and productive building and construction work. Productive in the sense that we will continue to work toward eliminating unlawful industrial action and barriers to participation like breaches of freedom of association, coercion or mandated industrial arrangements; and fair in the sense that we will promote harmonious, equitable practices on sites that tackle tough issues like sham contracting and underpayment of building workers.
We want to allow the B&C industry to get on with doing what it does best – that is, building and constructing this nation.