03 May 2016Speech to the AIG Conference

Good afternoon, Ladies and Gentlemen, and thank you to AIG for the opportunity to speak.

There are five things I would like to touch on this afternoon.

Firstly, it’s a reflection on my part from the four agencies that I’ve served with – as I often say, before coming to the building and construction industry, I left that tranquil world of organised crime – that’s the Interim Building Industry Taskforce; the Building Industry Taskforce; the ABCC; then I left for a while and came back in October 2013 to head the current agency Fair Work Building and Construction (FWBC).

I believe there’s been a lot of hype about this legislation and I don’t really want to talk about the proposed bill, being the restoration of the ABCC, or the Building Code 2014. But for those ice dealers, I do apologise, I have to reveal that you do not have more rights than a building worker.

I’ll talk about my experience of trends over time (again it’ll be a bit of a trip down memory lane), the state of the industry, what we’re focusing on and what we’re confronting and how we’re planning for the future.

So, I would like to start with an overview of the construction sector and the history behind the industry regulators that I’ve served with.

The importance of the industry cannot be understated. It is a major driver of the national economy with approximately $814 billion in current or planned projects. It generates jobs for more than a million people. This means that one in ten working Australians rely on the construction industry for employment. This figure is more significant now than ever before with the downturn in the mining sector. It means in fact that building and construction is now Australia’s third largest industry behind financial services and banking and the mining sector.

Clearly the building and construction industry is crucial, but why you may ask does it have to have its own dedicated industry regulator?  Unfortunately, the industry stands out in that it supports extraordinarily high levels of unlawful conduct in the workplace. Successive reviews and commissions of inquiry have established this as a fact. Please let me repeat, this is not confined to one report or a stand-alone inquiry. No less than five different inquiries, dating back to 1982, have found that the construction industry is plagued by examples of intimidation, thuggery, bullying and harassment.

Significantly, the Cole Royal Commission which tabled its report in 2003 found the construction industry to be characterised by a widespread disregard for the law. Commissioner Cole, a former New South Wales Supreme Court judge, highlighted the need for urgent structural and cultural reform to achieve increased productivity. He noted the important flow-on effects that productivity in this sector has for the wider community. And I quote his Honour:

“These findings demonstrate an industry which departs from the standards of commercial and industrial conduct exhibited in the rest of the Australian Economy. They indicate an urgent need for structural and cultural reform”

That report was tabled in early 2003 and I was tasked with the establishment of what was an Interim Building Industry Taskforce but the government of the day had full intentions for the establishment of an ABCC. So it’s very much groundhog day for me, or déjà vu, being in this vacuum where I am at the moment.

To address these issues a key recommendation of the Cole Royal Commission was to establish a specialist industry regulator. Following the Cole Royal Commission, or just before the report was tabled, was the establishment of the Interim Building Industry Taskforce. There was then a Building Industry Taskforce, and eventually the Australian Building and Construction Commission (ABCC) came into being in October 2005.

In 2008, the then Rudd Government engaged Justice Murray Wilcox QC to conduct a review of the industry and the legislation that would give effect to the ABCC. Again, Justice Wilcox recognised the need for the building and construction industry to be monitored by a specialist stand-alone regulator, and in 2012 Fair Work Building and Construction (FWBC) replaced the then ABCC. I was appointed and returned to the agency in October 2013.

More recently, people would be aware of the existence of the Heydon Royal Commission was again asked to look into activity on Australia’s building and construction sites as part of its inquiry into Trade Union Corruption and Governance. His Honour found the industry continued to exhibit systemic corruption and unlawful conduct including physical violence, threats, intimidation, and abuse of right of entry provisions. Commissioner Heydon made recommendations again for an industry specific regulator with increased powers to address this type of behaviour.

As a result of these inquiries and reviews, the industry regulators that I have been associated with have taken a number of forms going back to the Interim Building Industry Taskforce some 14 years ago. As you can see from the timeline on the screen behind me, the industry regulator has operated under four different names, has had three different pieces of legislation and has had three different versions of the Building Code.

Much has been said about the effectiveness of various forms this regulator over this period, and the impact it has had on the industry.

Having been involved in all of those agencies, I have sometimes found the commentary to be sometimes accurate, but often misleading and occasionally frustrating, particularly when some of the comments have portrayed these agencies to be anti-safety or somehow complicit in workplace accidents.

I will now take the opportunity to discuss some of the myths put forward in relation to the industry regulator.

Let me be clear from the outset, safety is extremely vital in the construction industry. Without proper safety procedures and precautions, then the lives of construction workers would be at risk and this is obviously totally unacceptable. Any accident and any fatality in any workplace is a tragic event. As a nation, we should collectively be aiming at a target of zero workplace fatalities, just as we are aiming towards a zero road-toll.

Clearly safety is a topic of fundamental importance to the building and construction industry. The magnitude of the topic can draw out powerful emotions that can drive real and positive change in the industry. Unfortunately, however, these emotions can also be exploited by some for industrial agendas. This malpractice is not just disrespectful to the workers in the industry, but to all people connected with the industry.

Over recent weeks there have been numerous claims regarding FWBC and its predecessor agencies’ impact on safety in the construction industry. Some people have publicly claimed that fatalities in the industry rose during the time in which the ABCC was operating. Others have claimed that FWBC has been actively preventing unions from addressing safety issues on building sites.

Both of these claims are utterly false. The fatality rate in the construction industry was 3.56 fatalities per 100,000 workers in 2005, the year the ABCC was established. Whilst there have been some fluctuations from year to year, the trend saw the rate fall throughout the time of the ABCC to 3.05 deaths per 100,000 workers in 2012, the year the ABCC was abolished. The rate has continued to fall under FWBC and is now 2.98 fatalities per 100,000 workers.

But obviously this figure is still too high. In fact, building and construction ranks fifth amongst all industries, behind agriculture, mining, fisheries and forestry. Anything above zero to my mind is too high. Nobody wants to see another person lose their life in the workplace. This is why I am particularly frustrated by false claims that my investigators have been instructing contractors to prevent union officials from addressing safety on worksites.

These claims, ladies and gentlemen, are totally false. FWBC does not prevent union officials from accessing construction sites to address safety concerns.

The Fair Work Act 2009 is very clear on the rights and responsibilities of all building industry participants when it comes to right-of-entry in the construction sector. These, and other provisions, have stood in place through successive governments. My agency simply provides information to all building industry participants as to what their rights and responsibilities are when it comes to complying with right-of-entry provisions. Under the Fair Work Act, the process for obtaining access to a building site to address safety is very clear. All we ask is that all parties obey the law.

We never restrict lawful access to construction sites and we never will. In fact, if we were to receive any reports alleging a contractor has impeded lawful right-of-entry, then we would investigate those claims and if there is evidence to support the claim then we would obviously take action against that particular contractor.

There have also been a number of misleading claims made about how FWBC, or me in particular, exercise my powers to conduct compulsory examinations and the rights of those who we seek to interview as witnesses. I would like to take this opportunity to once again set the record straight:

  • if you are called as a witness to attend a compulsory examination, you do have the right to bring a lawyer or legal representative;

  • you can choose your own legal representative;

  • FWBC will reimburse any reasonable costs incurred by you as a result of attending a compulsory examination, including legal costs;

  • there are no restrictions preventing you from telling anyone about your examination;

  • moreover, any evidence obtained through an examination cannot be used against the person being examined – hence, from my experience it’s absolutely pointless that anyone suspected of breaking the law be brought into an examination, because the very fact is their evidence cannot be used against them. The bulk of people who are brought before us are those who fear reprisal were it known that they had cooperated;

  • other regulators such as ASIC, ACCC and the Tax Office also have compulsory powers, the only difference being FWBC’s powers have greater safeguards.

Since taking over in October 2013 I have conducted a total of 28 examinations.

I also take exception to the claim that the agency targets workers. It is alleged we haul them in off the street in the dead of night and force them to answer questions. Particularly degrading is the claim we pull in minors into these so-called “star chambers”. People are not hauled in off the street. In fact people are served with notices to attend a compulsory examination with 14 days to comply.

The vast majority of people who we call or have called as witnesses in compulsory examinations are employers or management. In my experience, compulsory examinations are a necessary investigative tool due to the state of the industry. People are invariably frightened of reprisal if they were to provide information to us on a voluntary basis. In these circumstances, our compulsory powers are vital in obtaining evidence that is crucial to progressing an investigation. I should also point out that there have been numerous instances when investigations have been discontinued as a result of evidence obtained through compulsory examinations.

Looking at that chart, to say that we target workers: employees are some four out of 28. One union official has been called in, and a government official – an officer involved in Worksafe or an equivalent body, that was prevented from cooperating with my agency at the behest of that state government.

The impact of the industry regulator on productivity has been the subject of many media reports of late. The Australian Bureau of Statistics releases quarterly data on the days lost to industrial action in each industry; so it should be reasonably straightforward to see what the trends have been over time and under the various regulators I have been involved in.

The red line on the graph behind me shows the number of industrial disputes in the construction industry over time according to the ABS. As you can see, prior to the establishment of the ABCC, the number of industrial disputes was higher and subject to more variation in terms of significant spikes.

Yet there have been numerous claims in the media that industrial disputes increased under the ABCC. In fact, a number of parties have gone so far as to suggest that workplace disputes tripled under the ABCC. However, if you look closely, you can see that they are based on questionable mathematics.

Let me illustrate. To support their wild allegation that disputes increased under the ABCC, the claimants have added the quarterly rates and used the cumulative figure to try to support its claim. This is akin to suggesting that at 4 different points on a freeway, the rate of speed for a vehicle was recorded at 100 Km/Hr at each point, but as a result, according to the claimants’ methodology, the total speed for that journey would be 400 Km/Hr!

Obviously this methodology is not even close to being an accurate way to calculate the rate of days lost. The truth of the matter is that productivity in the construction industry is influenced by a range of factors. There is no single lever that acts as the sole driver of productivity. The best we can do is look at trends and observe what has happened in the industry over time.

This graph shows how the rate of days lost to industrial action in the construction industry compares to other sectors prior to the ABCC, under the ABCC and then under FWBC. As you can see, the rate of days lost in the construction industry per 1,000 employees was nearly five times higher in the construction industry than in other industries. When the ABCC was operational, the rate of days lost in the construction sector still remained higher than other industries, but decreased significantly. The final comparison shows that under FWBC, the ABCC’s successor, the rate of days lost in the construction sector has again returned to a much higher level than that which is experienced in the broader Australian economy, and in fact is increasing.

These trends match FWBC’s recent experience in monitoring and enforcing compliance with workplace laws in the construction industry. As I will soon demonstrate, the regulator’s experience indicates that there is increasing non-compliance with workplace laws in the sector.

Before I move on to discuss the trends over time, it is important to clarify what I call FWBC’s Core Business.

  • Coercion: When someone tries to unduly influence someone else into exercising or not exercising a workplace right
  • Freedom of Association: All members of the construction industry, particularly workers should be free to make their own decision about joining a union or industry association, such as the AIG. Freedom of association must be protected in the industry
  • Unlawful Industrial Action: The Fair Work Act 2009 is very clear on the rules relating to going on strike. FWBC is responsible for enforcing those rules
  • Right of Entry: There are also clear rights and responsibilities for site occupiers and union officials when it comes to providing or gaining access to a construction site. Again, it is my agency’s responsibility to make sure the rules are followed and the law is upheld
  • Building Code 2013 (not the Building Code 2014): The Building Code is the Australian Government’s set of guidelines for contractors. The Building Code requires contractors to abide by these guidelines if they want to be eligible to tender for projects funded or partially funded by the Commonwealth.

Now when FWBC replaced the ABCC as the industry regulator, the number of suspected contraventions under investigation immediately increased. To ensure that we are not comparing apples with oranges, I have only included data on ‘core business’ contraventions, that is breaches of the law connected with coercion, freedom of association, unlawful industrial action and right-of-entry.

Not surprisingly, you’ll see from this next chart that the number of new court matters or prosecutions has also increased steadily following the establishment of FWBC in place of the ABCC. The reason for the lag compared is due to the time it takes to complete an investigation and compile a brief of evidence before filing a matter in the various courts.

I would like to emphasise that my agency does not discriminate in who it takes to court. When we investigate a complaint and detect a breach of the Fair Work Act we compile a brief of evidence and we file it through the court system. At the moment we have a total of 60 matters currently before the courts around Australia.

The bulk of our court matters involve, I’m afraid to say, the CFMEU and its officials. Of our 60 court cases, 52 of them involve the CFMEU. We have more than 100 individual CFMEU officers before the court for more than 1,100 alleged breaches of the Fair Work Act. The CFMEU claims that these statistics indicate a bias against the union, an accusation that I totally and utterly refute.

We have six employers before the court in a total of seven court cases. Disturbingly for AIG members, the number of employers that we are investigating and putting before the court is increasing. What we are finding with many of these cases is that the allegations put forward relate to a head contractor discriminating against or taking adverse action against sub-contractors who do not have CFMEU agreements. Sub-contractors are often small to medium enterprises, and invariably family owned. Under the Fair Work Act it is unlawful for any business to be shut out of the industry because of the agreements that they enter into with their workers. All workers and employers should have the right to vote to accept enterprise agreements that suit them. Disturbingly, we have seen a number of new cases where it is alleged that sub-contractors have had their work cancelled, or shut out of the industry entirely because head contractors take adverse action against those whom the CFMEU does not approve of. This type of behaviour has the potential to put those workers out of a job and force family businesses to shut down.

While the increase in allegations against employers is disturbing, unlawful conduct committed by the CFMEU continues to make up the bulk of my agency’s work. I stress that FWBC can only prosecute the contraventions when we have the requisite evidence and it is in the public interest. The fact that the CFMEU makes up most of those prosecutions simply reflects the CFMEU’s willingness to ignore the law. This is not my observation ladies and gentlemen I might add, but the increasing number of observations of our Federal Court Judges who have repeatedly denounced the recidivist nature of the CFMEU. In fact, late last year, when presiding over a penalty hearing relating to a matter where the CFMEU unlawfully targeted a subcontractor in Melbourne, his Honour Justice Jessup posed the question:

“Has there ever been a worse recidivist in the history of the common law?”

In an earlier case involving a CFMEU official challenging a site representative to a physical confrontation in Western Australia, his Honour Judge John Gilmour stated, and I quote:

“There is a history over a number of years of contraventions of industrial laws by CFMEU officials for whom the CFMEU is responsible.”

Furthermore, Justice Tracey made the following comments late last year when penalising the CFMEU for its conduct at a wind farm in country Victoria:

“Not for the first time the CFMEU sought to impose its will by means of threats and coercion against employers. Its approach was one of entitlement: it was free, despite legal constraint, to deploy its considerable resources in order to achieve its industrial objectives.”

I could go on with example after example of recent, relevant Federal Court judgements, and keep you here for hours on end. However, the point I am making is that these allegations of bias against the CFMEU are simply nonsense. As the judiciary has pointed out, the CFMEU is a habitual recidivist when it comes to industrial law in this country. The fact that they are massively over-represented in court matters launched by the industry regulator should therefore come as no surprise. Until the union leadership decides to change its approach to industrial relations, this misrepresentation will be expected to continue into the future.

Given the trends we’ve observed over recent times and the current state of the Industry, I’ll finally discuss FWBC’s focus going forward.

I’m proud to boast we have an extremely high success rate in our court cases. In fact, our overall success rate in court stands at more than 92% going back to the Interim Building Industry Taskforce days, and of late was 100% until last Friday. We’ve lost one case since October 2013, which I might add was on a technicality. More than 60% of the penalties which have been imposed in matters initiated by the agency have been imposed on the CFMEU.

Clearly the agency is efficient in getting matters to court and winning its court battles but when you consider the comments from the judiciary and the clear trend of increasing numbers of court matters, you have to come to the only conclusion that we have not as an agency been effective in changing the culture of the building and construction industry. Our success in the courts is having little, if any, deterrent effect on this type of behaviour with unlawful conduct certainly not improving since the time of the Cole Royal Commission in my experience.

I give you a recent example where a CFMEU official by the name of Scott Vink entered a Brisbane construction site, purportedly for safety reasons. Yet once on site Mr Vink proceeded to force workers out of the site sheds, threw their belongings on the ground, took their lunches from the fridge and threw them outside, and then padlocked the sheds shut. The sheds were put in place by the company for the use of all workers but Mr Vink had decided that only union members should be allowed to use these facilities. The Judge presiding over this case described Mr Vink’s actions as “sheer thuggery” and stated that his actions were for no other purpose than "to intimidate the employees and to reinforce to others at the building site, the notion that non-union membership is not going to be tolerated."

Mr Vink and the CFMEU received near maximum penalties for this appalling behaviour, but did they display any contrition?  Sadly, they did not.

In fact, the very next day Mr Vink defended his actions through the Gold Coast Bulletin, by claiming he was the victim of a political witch hunt, adding that he was not concerned by the court outcome at all.

Regrettably, the penalties imposed by the courts are seen as a tolerable cost of business for the CFMEU. Numerous Federal Court Judges have highlighted the lack of impact that the penalties have had in terms of challenging the behaviour of the union. Justice Jessup went so far as to question the point of having a law if the penalty for breaking it had no impact on behaviour.

“If a contravention of a law is visited with penal outcomes which demonstrably inadequate to achieve the purpose of the law, it might as well not be a law at all…”

The CFMEU’s dismissive attitude toward the law and lack of respect for our industrial relations system is regrettably something that FWBC grapples with on a daily basis. That said, I give you an absolute pledge that the agency will continue to operate to the full extent that we can to see the rule of law prevail in the construction industry yet I regret to say that from my experience that unlawful conduct continues to be rife and I cannot see the situation improving in the current environment.

Thank you very much, ladies and gentlemen.

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