30 October 2012Address to the IRSV Annual Conference 2012

IRSV Annual Convention 2012

Melbourne

26 October 2012

Conflict in the building and construction industry: a time for change

[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 Wurundjeri people, of the Kulin nation, their elders past and present.

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

Introduction

Good morning. It is a pleasure to be at this hallowed ground. I thank IRSV President Natasha Boehm and the organising committee for inviting me to speak today and for providing a New South Welshman with a rare opportunity to wear his MCC members' tie.

The hot topic you are exploring today is "Conflict or co-operation? Life under the Fair Work Act 2009." Surprisingly, only one day has been set aside for that exploration.

There have been a number of high profile industrial disputes in the past 12 months that have made front page news – and in the process been catapulted onto the breakfast tables and into the living rooms of millions of Australians.

The scale of the Qantas dispute was so huge it seems most people know someone who was affected by the fleet’s grounding; if they weren’t impacted themselves.

Of course the most scandalous aspect of the shut-down was that it occurred on Derby Day. Although flagging in the final stages of this Group 1 classic, the Kiwi's "Sangster" hung on to prevail in a rough and ready affair with interference a plenty towards the back of the field. But the interference on the track was nothing in comparison to the inference caused to interstate race-goers by Alan Joyce.

You bump into a range of people on Derby Day and I happened to be talking to a lawyer (who shall remain nameless) who was somewhat close to the Qantas action. When they learned that we were planning to fly back to Sydney on Qantas, it was recommended we stop calling my depleting TAB phone account and call Virgin Airlines instead.

It was the best tip we had all day.

There has been another industrial dispute which has got just as much coverage as the Qantas grounding and which involves my agency – Fair Work Building & Construction – as the national independent regulator of workplace laws in the building and construction industry.

I am, of course, talking about the Grocon dispute.

The events which largely unfolded just a couple of kilometres from here were outrageous and appalled all right thinking people. At three weeks, the length of the dispute was one thing, but seeing images on television screens and newspapers of riot police and parts of Melbourne's CBD closed down was very confronting.

The lost productivity as a result of both the Grocon and Qantas disputes should concern all Australians and, as such, they have generated much debate, including a debate about whether the prevailing IR laws have been a source for the conflict or assisted in their resolution.

Events such as these keep industrial relations and workplace laws on the national agenda. I would much prefer they didn’t happen, not because my agency is not willing or able to do the work they create (we have clearly demonstrated that we are), but because the work they disrupt is significant.

While industrial disputes like this are happening, we need to continue talking about how they can best be prevented and, when they do occur, treated/resolved expeditiously.

As well as generating debate, the Grocon dispute saw a focus on FWBC and what we can and can’t do under the Fair Work Act.

This was been exacerbated for my agency because of its official transformation in June this year from the Office of the Australian Building Construction Commissioner to who we are now – Fair Work Building and Construction, or as we call ourselves, FWBC.

The facts about FWBC

On Wednesday I delivered a speech at AMMA’s West Coast conference, outlining and rebutting the many myths about FWBC which have been broadcast inaccurately as facts. I don’t propose to repeat that speech here today, but I do note that Innes Willox in a letter to the editor in the Australian Financial Review today indicated that it was not his intention to criticise FWBC and he graciously acknowledged the good work that we have been doing.

I will though, touch very briefly on what we do, and how we compare with our predecessor agency.

FWBC has six regulatory priorities:

  • Unprotected industrial action;
  • Coercion;
  • Freedom of association;
  • Right of entry;
  • Wages and entitlements; and
  • Sham contracting.

In the past year, while recovering $721,368 (2012/12 FY) on behalf of employees, FWBC has also investigated:

  • 12 per cent more UIA matters than in thepast year;
  • 26 per cent more coercion matters than in the past year; and
  • 47 per cent more matters overall than in the previous year.

It is an impressive work rate. With a reduced budget, we are doing more. We are, on any objective measure, more productive.

Since we started pursuing wages and entitlements claims we have recovered more than $1.2million for underpaid building and construction workers. I’m incredibly proud of this achievement. It underscores the correctness of the decision to take up the recommendation of the Cole Royal Commission that the (then) ABCC should do this work.

FWBC is a highly visible regulator. Since 1 June 2012, Fair Work Building Industry Inspectors have conducted more than 890 site visits.

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

Our inspectors started investigating the Grocon dispute (and attended on site) on 17 August 2012 – the same day Grocon alerted us to the situation.

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

According to the most recent quarterly survey of FWBC clients 85 per cent say FWBC promptly identified and responded to their issue. FWBC responds to all contacts within 24 hours.

We also take stakeholder engagement seriously. The net willingness to engage with the national regulator has increased from 9% (when we were the ABCC), to 49% (now that we are FWBC).

As an independent regulator, it is critical we engage with all of our stakeholders. That includes employers, employees and their representatives. For this reason, while a 40% improvement is significant we plan to work even harder to lift external engagement levels.

It requires a mature relationship. As such we might be working with the CFMEU on Monday, co-designing and producing programs to rid the industry of sham contracting and yet, commencing proceedings against them on Tuesday in respect of unprotected industrial action. That is the nature of an independent regulator.

Grocon

It was actually a Friday that we filed against the CFMEU and 10 of its officials in relation to the Grocon dispute. Friday 5 October 2012. Just three weeks ago and only 7 weeks after the dispute commenced.

We are alleging breaches of the Fair Work Act specifically in relation to coercion.

We are seeking civil penalties as well as compensation for Grocon and other parties who may have suffered loss, including sub-contractors.

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 so expeditiously.

A dispute of such a large scale 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. For good reason then I am immensely proud of how quickly my inspectors and legal team have worked to get this matter to court.

As I said earlier, there has been much talk – a lot of it incorrect, about what we could and couldn’t do in relation to this conflict under the Fair Work Act.

Let me be clear.

There was no legal jurisdiction for FWBC to intervene in Grocon's 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 capacity to investigate this matter. 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.

When news broke that we had filed in the Grocon matter, the CFMEU’s National Secretary Dave Noonan questioned the utility of the national regulator commencing its action when Grocon already had a claim in the Supreme Court. Mr Noonan called FWBC’s action “corporate welfare for millionaires”.

It is not.

In the absence of any Government implementing recommendation 209 of the Cole Royal Commission, there is a role for the national regulator to attempt to even up the imbalance that is caused by, what Cole described as, 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 $1.872 million recovering $1.475 million 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, while I remain determined to pursue penalties, FWBC is also focussed on compensation as a more effective remedy for victims of unlawful behaviour (something that penalties which flow to the Commonwealth are not).

Revisiting Cole

A moment ago I mentioned Royal Commissioner Cole. You will all be aware that the Howard Government set up the ABCC in 2005, largely in response to the Cole Royal Commission. Royal Commissioner the Honourable Terence Cole RFD QC found widespread problems across the building and construction industries.

Royal Commissioner Cole recommended an independent body should be established to enforce compliance in the industry. The ABCC was created and FWBC replaced that agency on 1 June this year.

What seems to have been forgotten is that Royal Commissioner Cole recommended more than the establishment of the ABCC. In fact he recommended four structural reforms and four cultural reforms.

Out of the eight recommendations, only one of them concerned the institutional arrangements that ought to govern regulation of workplace laws in the building and construction industry.

That was structural reform number four recommending the establishment of an independent body – and that is us, Fair Work Building and Construction.

For me, there has been too much focus on that one recommendation rather than the other seven. It feels as though we have focused eighty per cent of our energy on one eighth of Cole’s recommendations.

Too much emphasis has been placed on what the regulator should look like and what it can do.

Take for example structural reform number one: ensure that bargaining is conducted at the enterprise level.

It is important to keep in mind that Cole made these recommendations in 2002. At that time he said bargaining wasn’t taking place at an enterprise level and that pattern bargaining was wide spread.

Ten years on, that hasn’t changed.

It was a structural problem back then and it remains a structural problem now.

Understandably it is one endorsed by the conduct of unions (it's in their members' interests to do so). However, more curiously, it is also endorsed by the conduct of employer associations (like both NECA and the MBA here in the Victoria) and some of this nation's leading construction contracting organisations.

Those on the employer side would like pattern bargaining prohibited - so as, it seems, to save them from themselves - but the most effective way would be for the nation's leading construction contracting organisations not to agree to them.

This is the message Fair Work Act review panel member Dr John Edwards delivered at AMMA’s West Coast Conference on Wednesday.

Dr Edwards summed it up perfectly: “If you don’t want to do it, you don’t agree to it, and you fight it out.”

The best way to avoid pattern agreements and the restrictive practices they contain, is don’t agree to them.

It really is for the industry to give life to Cole’s first structural change. It has nothing to do with institutional arrangements.

The second structural change recommended by Cole was for “mechanisms [to be put] in place so that any participant in the industry causing loss to other participants as a result of unlawful industrial action is held responsible for that loss”.

To achieve this, Cole said, there needed to be the establishment of a quick, cheap, mechanism for determining loss caused by unlawful industrial action. That is what led to recommendation 209 in the Final Report of the Royal Commissioner.

For everyone’s memory Recommendation 209 provided that legislation should provide:

  • 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;
  • Appropriate powers for the assessors;
  • 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;
  • 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.

Recommendation 209 was not enacted in the BCII Act, which was purported to be the legislative embodiment of Royal Commissioner Cole's recommendations.

Despite this, maybe there is some merit in revisiting the recommendation and giving it serious reconsideration in light of recent experiences (including the Grocon dispute).

Without its enactment we are left with the complete opposite of what was recommended. We are left with a "drawn out and expensive mechanism for determining loss caused by unlawful industrial action."

If people want to enforce their rights, especially head contractors, they have to do what Grocon has done. They have to go off to the Supreme Court. They have to engage Herbert Smith Freehills, or the like, and spend many millions of dollars to enforce their legal rights. It’s not surprising that head contractors often baulk at doing so, because it is not only an incredibly financial investment, it takes time, energy and resources.

Royal Commissioner Cole had a simple suggestion for a mechanism to address this issue.

It's possible that the aftermath of the Grocon dispute (i.e. continuing proceedings in the Supreme Court by Grocon and FWBC's proceedings in the Federal Court) would have been very different if that mechanism had been available.

As a tax payer and the also as the head of an FMA Agency (like in the Westgate matter), I am concerned about how much FWBC will have to spend in order to see our case through to the end.

While I have no doubt about the public interest in us pursuing our claim, it is more than likely that (just as in Westgate) our legal costs will outweigh the penalties flowing back to the Commonwealth (although not the compensation to flow to Grocon).

On the other side of the ledger, the CFMEU will end up spending possibly just as much of its members’ money defending these multiple proceedings.

Wouldn’t it be better if we had a “quick, cheap, mechanism” for determining loss as Cole suggested?

Royal Commissioner Cole identified these very issues 10 years ago. Take a look at what he wrote back in 2002. Nothing has changed in terms of the problems, and little has been done to move towards a solution.

Just as Royal Commissioner Cole did, I appreciate that a large part of the problem is juggling the conflicting short and long-term objectives of those in the industry.

It is a fine and difficult balance.

He said, and I quote:

“The short-term project driven profitably focus means that surrender to demands is the better immediate economic alternative to long drawn out conflict. It means that quick fix solutions driven by commercial expedience supplant insistence on legal rights, adherence to ethical and legal norms and the pursuit of legal remedies.”

This is precisely one of the reasons he declared, 10 years ago, “the findings demonstrate an urgent need for structural and cultural reform”.

Unlike the usual choice made by major construction companies, Grocon made a decision to forgo its short term goals and go down the often long and costly path of taking the matter to court.

Encouraging debate

In reminding you of Royal Commissioner Cole's recommendations and, in particular, Recommendation 209, I am not advocating for legislative change. I have never seen that as my role.

In fact, most recently the Victorian Government asked me to make a submission to the inquiry, commissioned by the Premier, into compliance in the Victorian building and construction industry. I declined.

As I said in a letter to the Construction Code Compliance Unit’s Director Mr Nigel Hadgkiss, FWBC regulates federal workplace relations laws in the building and construction industry through education, advice and compliance activities.

We enforce the laws legislated by the Australian Parliament and monitor compliance with the Australian Government’s Implementation Guidelines for the National Code of Practice for the Construction Industry.

We are not a policy agency.

Consistent with our proper role as an impartial regulator, under my leadership, FWBC and its predecessor agency has not made submissions to a range of inquiries and reviews, including, most recently, the evaluation of the Fair Work legislation.

Nor did I participate in the review of the BCII Act.

What I hope to do today, by drawing peoples' attention back to Cole, is to challenge the industry to consider where there is room for improvement that will lead to greater productivity.

In the context of what I have discussed today, I’m inviting the industry to consider what might be a better mechanism than the “slug it out in the courts” approach. Royal Commissioner Cole’s recommendation may not be the final answer, but it is certainly a good starting point for a debate.

Conclusion

While it undoubtedly attracted the most media attention, the dispute is not the only one FWBC has monitored or investigated in recent times. There are many disputes which never make the news. But most of them would benefit from a ‘quick, cheap mechanism for determining loss caused by unlawful industrial action’.

Of course it is my aim to significantly reduce the number of disputes through stakeholder engagement and education. But I’m also a realist. Disputes will continue. What we must ensure is that the industry is well equipped to deal with them so that we can balance conflicting short-term needs with long-term goals and enhance productivity in the process. Not just for the benefit of those in the industry, but for all Australians.