24 October 2012Address to the 2012 AMMA West Coast Conference

AMMA West Coast Conference 2012

Perth Convention Centre, Perth, WA

24 October 2012

Regulation in the building and construction industry

Then, now, and the future

[Check against delivery]

Leigh Johns

Chief Executive, Fair Work Building & Construction

I acknowledge the traditional owners of the land upon which this conference takes place; the Noongar people, their elders past and present.

I also acknowledge the continuing cultural importance and spiritual significance of the Perth region to the Indigenous people of the Perth community.

Introduction

Good morning. I am very pleased to be in Western Australia and I thank Steve Knott and the organising Committee for inviting me to speak at this AMMA West Coast conference.

As the great great grandson of a miner who came to Australia via Western Australia 1877 to try his luck, the West holds a special significance and allure for me.

That allure is also born out of the significant construction activity being undertaken in the West, which, from a workplace relations perspective, my agency, Fair Work Building and Construction, plays an essential regulatory role.

Our efforts in this regard were most recently on display when, last week, we filed a matter in the Federal Court here in Perth against Joe McDonald and the CFMEU alleging unlawful industrial action.

The proceedings relate to an unauthorised stop work meeting allegedly initiated by Mr McDonald at the Sino Iron ore Project at cape Preston, Karratha on 21 February 2012.

Eighty-seven workers from three different companies are said to have attended the meeting at the start of their rostered shift.

We allege that the majority of the workers then walked off the site after Mr McDonald told them they would lose four hours pay for attending an unauthorised meeting during work hours.

We further allege Mr McDonald told workers they might as well "take the day off".

Well these are exactly the sort of matters, that my agency, Fair Work Building and Construction, is committed to taking to court. Every day, every hour lost to unlawful industrial action is lost productivity that our nation can't afford to lose.

It's useful to examine the intersection of law, regulation and the actions of the players, when we talk about culture change in the building and construction industry.

And so today I will specifically address the facts of how FWBC enforces the law, and delivers services.

In this regard, be certain that, FWBC is ready and willing to stand with you, AMMA members, shoulder to shoulder, to build the capacity of the building and construction industry to be the best it can be, both productive and fair, for the benefit of not only those in the industry, but all Australians.

At FWBC we aim to give people the tools they need to observe the law, and when the law is not observed, we enforce it.

Arriving at the Fair Work (Building Industry) Act

Before we get onto the subject of how we have changed so far, and what I believe needs to change from here on in, it is important to look at where we've come from.

On 1 June this year, Fair Work Building & Construction was born. But we are not the first agency to have regulated the building and construction industry.

As you are aware, our predecessor agency was set up by the Howard Government in 2005, largely in response to the findings of the Cole Royal Commission.

The Honourable Terrence Cole RFD QC found widespread problems across the building and construction industries. He recommended an independent body should be established to enforce compliance with industrial, civil and criminal laws.

That last recommendation in relation to criminal laws was never enacted.

All but one of the 23 volumes of the Cole Report sit on my bookshelf in my Sydney office and from time to time I have cause to return to them. I would encourage you to do so.

Sometimes this is a joyous read because of how far we have come since then. Sometimes it is a depressing read when it reflects what still needs to occur in 2012.

The Cole Report has also provided me with the evidentiary basis for my decision to increasing the regulatory scope of the predecessor agency through the enforcement of wages and entitlements for building and construction workers and our work in relation to sham contractors.

I did it because Cole said we should. Unlike others who refer back to Cole I don't do it by cherry picking only those recommendations which suit me.

At the request of the Rudd Government in June 2008, the Honourable Justice Murray Wilcox QC - a former Australian Federal Court Judge and Chief Justice of the Industrial Relations Court of Australia - was appointed to research and report on the creation of a new regulator (thought at the time, likely, to be a Specialist Division of Fair Work Australia).

Mr Wilcox delivered his findings to the Government on 31 March 2009.

If you haven't read his report in full, I would also encourage you to read it.

He provided eight recommendations and his report created the foundations for where the FWBC finds itself today - an independent industry workplace regulator, but not one that is a part of Fair Work Australia or the Fair Work Ombudsman.

Fair Work Building and Construction, is the new, well resourced, separate, stand alone, specialist regulator of workplace laws in the building and construction industry. When we officially came into being on 1 June, it was by no means an overnight metamorphosis. Since October 2010 the ABCC had been a full service regulator focussed on initiatives that deliver the highest public value.

When I commenced as ABC Commissioner on 11 October, 2010, I elected not only to adopt Cole's recommendations in relation to the work of the agency but to also voluntarily adopt a number of the recommendations made by Mr Wilcox, in so far as it was possible administratively.

Since 1 June this year we have implored ourselves to build upon the legacy of agencies past and at the same time recast ourselves as a regulator suited to the present needs of our industry.

That is who we are - and how we got here.

Myths versus facts

I believe strongly in transparency and constructive criticism. I also believe in self-fulfilling prophecy.

It is for these reasons I find it incredibly frustrating that prominent industry figures and journalists have attacked FWBC when the suggestions they serve up as facts, are in fact, myths.

I have no problem copping criticism where it is warranted, but perpetuating myths as facts only serves to undermine FWBC and its important work.

And so, I would like to take this opportunity to address some of those untruths.

As I have done in the Australian Financial Review today I will, in particular, focus on criticisms levelled by the Australian Industry Group chief executive Innes Willox.

Innes, is a good man and a top operator who does an excellent job for his members. But he does invite being singled out when, having sought to address these matters with him privately, his organisation has recently repeated the unfair criticism in a submission to the Victorian Government's inquiry into compliance in the Victorian building and construction industry.

It is also worth singling out Innes because, his criticisms seem to get to the crux of many of the issues that commentators and journalists seem to raise about us. However, Innes has had the decency to do it without name calling.

In a column for The Australian newspaper on 4 September, 2012, Mr Willox said, and I quote: "By all accounts the ABCC's replacement, Fair Work Building and Construction, has diverted much of its resources away from dealing with unlawful industrial action, coercion and similar unacceptable and unlawful conduct".

This is incorrect.

FWBC has six regulatory priorities:

1. Unprotected industrial action

2. Coercion

3. Freedom of association

4. Right of entry

5. Wages and entitlements

6. Sham contracting

In the past year while recovering ,368 (2012/13 FY) on behalf of employees FWBC has investigated:

  • 12 per cent more UIA matters than in the past year
  • 26 per cent more coercion matters than in the past year
  • 47 per cent more matters overall than in the previous year and 54 per cent more matters than in the year before that.

The factual conclusion is that FWBC is investigating more unlawful industrial action and coercion matters than in the past - not less.

At the same time we are investigating a wider range of other matters - we can walk and chew gum at the same time.

Mr Willox also wrote: "Underpayment claims by employees are important, of course, but the Fair Work Ombudsman is best placed to deal with these claims, not FWBC".

Not only is this not correct, it is also inconsistent with the findings of Royal Commissioner Cole.

Since we started pursuing wages and entitlements claims we have recovered more than $1.2 million for underpaid building and construction workers. I'm incredibly proud of this achievement.

FWBC's efforts in relation to underpaid building and construction workers have been more successful than when the FWO did this work for building and construction workers. This is not to say FWO was bad. On the contrary they did a great job. But what it does underscore is the advantages of industry specific regulation. Building and construction workers know now where to go to get assistance.

Moving from the reasoned, but incorrect arguments of the Ai Group in recent weeks.

FWBC has been accused of "lacking intellectual energy", of being a "neutered construction watchdog", "emasculated", a "shadow of our former selves", and 'completely ineffective".

It has been suggested that we are not "on the spot without delay", don't act "quickly and decisively" and are not "highly visible".

One commentator called us "a complete joke" and how could I forget being labelled the "homeopathic Building Inspectorate" and "anaemic".

There is nothing homeopathic about a $590,000 penalty handed down in the Lend Lease matter in Queensland this week. There is nothing homeopathic about recovering more than $100,000 in compensation for subbies adversely affected by the same unlawful conduct.

It's good old litigation medicine and we intend to continue to prescribe it.

This type of name calling apparently passes for journalism and informed commentary in this country.

And so, having relayed to you the accusations, let me present you with the facts.

FWBC is a highly visible regulator. Since 1 June 2012, Fair Work Building Industry Inspectors have conducted more than 889 site visits.

We conduct them all over Australia. I myself have toured sites in the Pilbara, Gladstone and Darwin. FWBC's Chief of Field Operations, Michael Campbell, personally undertook observations on site during the Grocon dispute.

No site or dispute too big, too small or too remote.

According to the most recent quarterly survey of FWBC clients 85% say FWBC promptly identified and responded to their issue.

FWBC responds to all contacts within 24 hours.

We are not only visible - on site from day one of disputes - and on many other sites as a matter of course, but we act.

Visibility only works if the rhetoric is backed up. FWBC backs it up.

Eighty-two per cent of all investigations are now conducted in 90 days or less.

Objectively assessed this betters the KPI performance of the ABCC.

FWBC is exceeding an internal KPI to get matters into court within 12 months of the complaint. Objectively assessed this betters the KPI performance of the ABCC which regularly took more than 12 months. Of the 22 matters FWBC currently has in court, 54% of them relate to allegations of unlawful industrial action.

The commentator who called FWBC "a complete joke" finished the sentence with "and everyone knows it".

Evidence suggests otherwise.

A stakeholder engagement report from August this year showed that 62 per cent of stakeholders were willing to engage with FWBC compared with 40 per cent for the ABCC.

Further, only 13 per cent of stakeholders were not willing to engage with us, compared with 31 per cent for our predecessor. We are aiming to increase this gap.

We are excited by this cultural shift and are working hard to engage more people - employers, employees and sub-contractors.

A particularly relevant case where we engaged with workers in the industry is the case of FWBC v CFMEU, six of its officials as well as the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and one if its officials.

It related to unlawful action taken by the CFMEU .and CEPU and officials at the Gold Coast University Hospital and Brisbane Supreme Court & District Law Court projects in 2011.

Following the action in early 2011, FWBC made a public call for companies that had suffered loss due to the strikes.

I know what you're thinking - 'who wants to cooperate with the regulator?' And that is a valid question.

We understand the acute sensitivities involved in people coming forward and that's why all of our investigations are done carefully and quietly, away from the media‟s spotlight.

In this case, we had 14 sub contractors come to us who were considerably out of pocket.

After a discrete, in-depth investigation, we recovered a total of $101,930 for 10 of the workers. This was equal to 95 per cent of their losses.

The real kicker of this story – and I‟m disappointed to say it – is that four men missed out. Not because we didn‟t do our job, but because they pulled out. They got scared and sold out for a peppercorn deal. $100 each to be exact.

If they had held out and cooperated with us – their industry regulator – they would likely have recouped nearly all of their losses instead of going home with barely enough to drown their sorrows at the pub.

I tell you this story for two reasons.

First, it demonstrates how off the mark people are when they call us “ineffective”, “lacking intellectual energy” and a “joke”.

But more importantly it highlights that we would rather do our job quietly, protect the interests of the parties involved and do it right, than do it in a rush for the sake of a quick headline.

I can understand why people in the industry, including yourselves, may not make the connection between what we do and how it can affect you, because much of our work happens very quietly.

This is why I can forgive your chief executive Steve Knott for referring to FWBC as “Fair Work‟s neutered construction watchdog – all bark, no bite” in a media release issued on 31 August 2012.

It‟s okay, despite being trained as a lawyer I do have a sense of humour.

Mr Knott called us a toothless tiger and insinuated our predecessor was a tiger with a full set of sharpened teeth.

Perhaps that‟s why he invited me to speak here today – he thought I wouldn‟t bite.

It's not so much about not biting, but knowing when to do so.

In the case of the Gold Coast University Hospital and Brisbane courts projects we didn‟t bark during our investigation. We didn‟t bark to the media or yap at the heels of any parties in the industry who didn‟t need to know what was being worked on. We investigated, and then we bit.

Just as we worked with the sub contractors in this case, we are here to work with you and your members when you need us.

As an impartial regulator we work wherever we are needed. For example in the Gold Coast/Brisbane case we are also conducting an audit into the union‟s allegation that contractors are not receiving their proper entitlements.

What I can assure you is this: whether you are an employer, employee or sub-contractor, where wrong has been done, we will work to put it right. And we will work with the representatives of those groups. Employer associations and unions. Each are co-producers of the public value being delivered by FWBC whether it's working with AMMA to build the capacity of its members to understand their rights and obligations or whether it is working with the CFMEU to rid this industry of the scourge of sham contracting.

Another matter we have just bitten on is the Grocon dispute.

On Friday 5 of this month, we commenced proceedings against the CFMEU and 10 of its officials and members for alleged breaches of the Fair Work Act in relation to a dispute with Grocon which made national news and shut down parts of Melbourne‟s CBD.

We are seeking civil penalties as well as compensation for Grocon and other parties who may have suffered loss.

Because the matter is currently before the courts I have to be careful what I say. The last thing I want to do is unravel the many hundreds of hours of work my hard working inspectors and in-house legal team has put in to get the matter to court.

A dispute of such a large scale – which lasted some three weeks – necessitated a particularly detailed and complex investigation. It took an incredible effort to get a matter as complex as this into court in less than seven weeks.

It took the ABCC six months to file a Statement of Claim in the Westgate matter.

I am immensely proud of how quickly my inspectors and legal team have worked to get this matter to court.

While industry leaders and journalists were criticising us and our handling of the matter my team was working around the clock, remaining focussed on the important task at hand.

Again, these criticisms were not based on fact.

Much of the negative commentary I have referred to was made in relation to the Grocon matter and our handling of it.

Let me be clear.

There was no legal jurisdiction for FWBC to int2ervene in the Grocon Supreme Court case. And here is the critical point: despite what many believe, nor would the ABCC have had legal jurisdiction to do so.

Neither the former specialist regulator for the industry, nor the former legislation, would have allowed a federal government inspectorate dealing with civil offences to disassemble the blockade.

Prematurely commencing concurrent proceedings in the Federal Court under the Fair Work Act would have damaged our investigation. The statutory powers afforded by the Fair Work Act, like issuing notices to produce documents, cannot be used once a matter has been filed with the court. Not having those powers available would have seriously impacted the quality and likely success of our litigation activity.

Since filing in the Grocon matter we have been criticised from another quarter. The National Secretary of the CFMEU, Dave Noonan, has questioned the utility of the national regulator commencing its action when Grocon has its in the Supreme Court. He has called the FWBC action “corporate welfare for millionaires”.

It is not. In the absence of any Government implementing recommendation 209 of the Royal Commissioner Cole, there is a role for the national regulatory to attempt to even up the imbalance that is caused by the “clash of short-term focus with the longer-term objectives [which] usually results in those with the short-term focus surrendering to those with the longer-term objectives”.

In the Westgate matter, the ABCC spent $1.872m recovering $1.475m in penalties and costs for the Commonwealth. Those adversely affected by the dispute received nothing. To my mind there is something unjust about that.

Therefore, I'm determined to purse penalties, but FWBC is also focussed on compensation as a more effective remedy for victims of unlawful behaviour rather than penalties which flow to the Commonwealth.

For everyone‟s memory Recommendation 209 provided that legislation should provide

  1. for the establishment of a panel of expert assessors with appropriate experience whose role will be to assess the victim‟s loss quickly, justly and cheaply;
  2. appropriate powers for the assessors;
  3. that if an assessor accepts the accuracy of the victim‟s assessment, he or she will certify to that effect. If the assessor does not agree then he or she will determine an alternative figure. Short reasons should be provided with the certificate;
  4. that an assessor‟s loss certificate be prima facie evidence of the quantum of the loss in any proceedings where it has been determined that the statutory proscription has been breached by identified persons. The certificate would not prevent a respondent from challenging the quantum, but if it did not do so, it would be open to the Court exercising jurisdiction to act on the certificate.

Rather than focus on restoring the penalty regime that existed in the BCII Act, AMMA would serve its members‟ interest better by advocating for and achieving the implementation of Recommendation 209.

Let's share the heavy lifting

But cultural change can't be affected by the lone actions of the regulator. That's why recent actions taken by Grocon in Victoria and Abigroup in Queensland is important.

I understand the commercial pressures that operators in this industry face, but at the same time I have witnessed a certain „head in the sand‟ mentality when it comes to addressing systemic industrial issues.

Wedge-driving industrial organising tactics largely flourish where head contractors put their heads in the sand and fail to put structures in place that deal with the root causes of disputation.

In this respect the head contractors of this country could learn a thing or two about solidarity from the union movement.

Where were the other head contractors when Grocon was being blockaded?

They failed to take any action.

When workers left other work-sites to participate in the Grocon protest, what action did the other head contractors and employers take? Did they pursue legal remedies? Did they publically denounce the blockade?

Other head contractors on Melbourne projects could also have voiced their condemnation of the blockade.

While unions and their representatives drew (a physical) line by their blockade, other head contractors failed to enter the fray and by their failure, relinquished an opportunity to draw their own line. Despite their inevitable understanding that if it‟s Grocon this time, it could all too easily be them next time; they chose to stay mum.

The long-term plan for offsetting these disputes must be taken up by industry. As the regulator we were able to be at our most effective because Grocon was proactive and did a lot of hard work themselves.

Short term union deals undermine positive culture change

A number of employers have told me – “we did a deal, the union is going to look after us.”

Now I know the modern building and construction economy is ruthless. Companies are up against small margins, time pressures, tenderers undercut each other, risk is moved around on a contract or project basis. Publically-listed companies obviously want to avoid write-downs. Reputation, shareholder confidence and risk are interlocking entities.

So I appreciate that “buying” industrial harmony must seem appealing.

But the thing is, the path of least resistance becomes crooked over time. When the union fails to “look after them” head contractors seek to pass the buck to the regulator.

The industry gets the union it deserves. If head contractors repeatedly forgo their own long-term interests for „wink and a nod‟ arrangements with officials on each of their sites, the culture of the industry will not change.

Agreeing to pattern agreements, which contain no clauses to advance productivity, is not the type of leadership that many head contractors should be demonstrating.

Industrial harmony can‟t be bought – it must be made. While head contractors reward behaviours that contribute to a divisive industry culture, the culture will not change.

Conclusion

FWBC shares a lot of common ground with AMMA and its members. We all want to see good workplace relations practices in place that allow projects to be delivered on time, on budget, with no disruption. We all want to see confident investment and stable growth. We want fair and productive building and construction workplaces.

I believe that by keeping the lines of communication open and working together, we can achieve greater productivity and more harmonious workplaces, which is what I really care about and I suspect you do to.

FWBC and industry both have work to do. It is important for industry to back the new regulator and to work with it as it did with the ABCC. Together FWBC and industry can be co-producers of much public value.