CHAPTER 5
Is the building and construction industry unique?
The need for a specialist regulator
5.1
The establishment of a unique regulatory framework for the building and
construction industry has been a point of contention ever since the Building
Industry Taskforce was established in 2002. The approach has been continued
through the creation of the Australian Building and Construction Commission and
subsequently through Fair Work Building and Construction.
5.2
The principle that the industry required industry specific regulation
was first promoted by Justice Cole in his report of the Royal Commission into the
Building and Construction Industry:
These findings demonstrate an industry which departs from the
standards of commercial and industrial conduct exhibited in the rest of the
Australian economy. They mark the industry as singular. They indicate an urgent
need for structural and cultural reform.[1]
5.3
Supporters of the legislation cited the Cole Royal Commission as
evidence that the industry had exceptional problems that could only be dealt
with if a specialist regulator was in force to address the unique nature of the
conduct that Justice Cole described. Business SA submitted that the Cole Royal
Commission had found breaches of various forms of regulation, state and federal
law to the extent that they represented a cultural and structural problem in
the industry:
The Cole Royal Commission went on to summarise the unique
structural and cultural problems of the industry, as follows:
“At the heart of the findings is lawlessness. It is exhibited
in many ways. There are breaches of the criminal law. There are breaches of
laws of general application to all Australians where the sanction is a penalty
rather than possible imprisonment. There are breaches of many provisions of the
Workplace Relations Act 1996 (C’wth). The unsatisfactory record in respect of
occupational health and safety indicates breaches of the various State acts
addressing that matter. There is disregard of or breach of the revenue
statutes, both Commonwealth and State.[2]
5.4
Independent Economics, in the report commissioned by Master Builders
Australia, were persuaded by the emphasis on the commercial grounds for the
creation of a specialist regulator:
The Cole Royal Commission concluded that these problems
occurred because the unique structure of the building and construction industry
meant that head contractors had an “unwillingness and incapacity ... to respond
to unlawful industrial conduct causing them loss”. Commercial pressures meant
that contractors would concede to union demands rather than become involved in
long disputes. Consequently, the Cole Royal Commission concluded that the
conditions in the Australian building and construction industry were unlike
those in other industries.[3]
5.5
However these grounds were specifically addressed by Justice Wilcox in
his 2009 report. Justice Wilcox considered whether the building and
construction industry was uniquely vulnerable to industrial action, and the
commercial impact that that may have:
‘....it is necessary to remember there are many other
industries in which industrial action may cause great loss to an employer, and
even the national economy, and/or considerable public inconvenience. One has
only to think of the major export industries, most components of the transport
industry, the gas and electricity industries, the telecommunication industry
and emergency services such as police, ambulances and hospitals. There is no
less need to regulate industrial action in those industries than in the
building and construction industry...’[4]
5.6
The Australian Council for Trade Unions (ACTU) were similarly of the
view that there was insufficient grounds for treating the industry as
unique:
[W]e believe there is no case that has been made for special
and discriminatory laws to apply to the building industry and laws to target
building workers and their unions, in particular. We say that there is nothing
specific or unusual or unique about the building industry that requires
Australia to have, in essence, an entirely different industrial relations
regime for one industry.[5]
5.7
The New South Wales Council of Civil Liberties held similar views on
the need for an industry to be singled out for special attention on the basis
that allegations of improper conduct have been made. They suggest that a
number of other industries could be treated as unique if the criteria is that
crimes or misconduct have been reported by participants in that industry:
I do not think it is appropriate to set up an industry
specific body. The comments that have been made, allegations that have been
raised and evidence that has been produced in the past about corruption are not
unique to the building and construction industry. There are other industries
like the tattooing industry, the security industry, and there are dozens and
dozens of industries, where from time to time there are individuals who are
successfully prosecuted for engaging in corrupt conduct, for committing crimes.
As Senator Cameron says, the finance industry is not immune to that also. The
real question is what really is unique about the building and construction
industry that would suggest that that is different to the dozens of other
industries where from time to time individuals are investigated and
successfully prosecuted?[6]
5.8
However Independent Economics was not satisfied with the retention of a
specialist regulator in the legislation that replaced the ABCC. They maintain
that the powers have to be the same to address the purported problems in the
industry:
However, because it does not have the strong building
industry-specific legislation and powers that were held by the Taskforce and
ABCC, the simple existence of a building industry-specific regulator is
unlikely to be able to contribute much to workplace practices in the industry.[7]
Criminal Activity in the Building and Construction Industry
5.9
The issue of endemic lawlessness, first raised by the Cole Royal
Commission, was one that raised a number of issues throughout the inquiry to
justify the re-establishment of the ABCC. The Prime Minister, while responding
to allegations aired by the ABC's 7.30 Report, leaving the impression
that the ABCC would have a role in tackling corruption and lawlessness in the
industry:
What today's revelations demonstrate is the absolute pressing
need for the reestablishment of the Australian Building and Construction
Commission with full power, full authority, full funding...The commission should
have full authority to ensure that the law is upheld. Full authority to ensure
that the law is upheld in an industry which has been long marked by lawlessness.[8]
5.10
The Minister for Education and Leader of the House introduced the Bill
and justified the need for the ABCC to be re-established in his second reading
speech by citing the findings of the Cole Royal Commission:
It found consistent evidence that building sites and
construction projects in Australia were hotbeds of intimidation, lawlessness, thuggery
and violence.[9]
5.11
Master Builders Australia explicitly link alleged reports of criminal
activity, namely corruption, with the need to re-establish the ABCC:
The matter that I would like to go to by way of opening remarks is that the restoration of the ABCC is about
changing the culture in the industry. The Cole Royal Commission into the Building and Construction Industry found that the building and construction industry is characterised by widespread disregard for the law. Media
reports of alleged corruption and criminality in the building and construction industry cannot be ignored in the current context. In that regard, those media allegations have brought home to the community the sheer scope and extent of the toxic culture of the industry.[10]
5.12
The ACTU, along with many other submitters, was deeply concerned about
the suggestion by the Prime Minister and other ministers, that the ABCC can
address criminality in the construction industry. The ACTU point out that the
ABCC does not have any powers to deal with criminal activity:
The first is that we say there has been a deliberately
misleading campaign in public debate to conflate this proposal and these arrangements about industrial law with broader allegations concerning unlawful behaviour. The reality is that this bill does not deal with criminal offences in the building industry. The only criminal penalties that would be established by this bill are associated
with
a failure to give evidence under the coercive powers. That is, they are on a par with contempt related
offences. The public campaign is deeply misleading because it suggests that if there are allegations—for example of fraud or violence—which we have unreservedly condemned on a range of occasions, they would not in any case be dealt with by
the
ABCC; they are and would remain properly
the
remit of the ordinary criminal law
of the
land
and the relevant police authorities, not an industrial inspectorate.[11]
5.13
The CFMEU was also highly critical of what it sees as an orchestrated
and deliberate political campaign to promote the return of the ABCC as the
solution to criminality in the industry:
The present Prime Minister Mr. Abbott, The Employment Minister
Mr. Abetz and
even a previous Prime Minister Mr. Howard, have all publicly
referred to these reports in support of the return of the ABCC. Each would know full well, particularly given their legal qualifications, that the ABCC and the legislation under
which it would
operate, have no
role
whatsoever
in the
‘policing’ of
criminal
behaviour in the industry.[12]
5.14
Policing authorities that appeared before the committee clarified the
scope of their operations in relation to criminality in the construction
industry or anywhere else:
We usually, no matter what the
industry, if we get referrals of criminal activity, investigate those. But in most cases we do not have a role in
relation to proactively entering industry and looking for issues. We tend to have a more responsive model, where allegations will be referred to police.[13]
5.15
The scale of criminal activity in the industry was illustrated when
Victoria Police responded to questions on the number of referrals it received
from the ABCC in the entire time the ABCC was in existence. In the period from
2005 to 2012 Victoria Police received 15 referrals. Since the ABCC has been
abolished the force has received four referrals from Fair Work from Fair Work
Building and Construction. Of these 19 referrals there has been one conviction
in the state that has recently been the focus of corruption allegations in the
industry.[14]
These allegations led to the Prime Minister saying there was a 'pressing need'
for the ABCC to be re-established 'to ensure that the law is upheld in an
industry which has been long marked by lawlessness.'[15]
5.16
The Australian Crime Commission also gave evidence that there was
nothing unique about the building and construction industry that would make it
particularly susceptible to the involvement of organised criminality:
I think it would be fair to say that organised crime will gravitate to any sector, any industry
where it believes it can generate profitability through its involvement. They will do so in many different ways, including through criminal acts and exploiting a lack of regulation or a lack of law. But their main motivation is profitability. So the first point I would make is that there is no sector that they would not focus on...We
find them present in the sector we are discussing this evening and in other
sectors as well.[16]
5.17
Victoria Police supported the view that other industries attracted
elements of criminal activity:
In answer to that broader question, the other industries
where we see that activity occurring include the security industry, the liquor
industry, both the legal and the illegal sex industry and, more recently, in
heavy haulage to a significant degree. The answer to the second part of your
question is no, it is not restricted to the building sector.[17]
5.18
The committee heard from other witnesses who concurred with the evidence
from the policing authorities that allegations of criminal actions and
corruption are raised in other industries and there was no evidence to support
singling out the building and construction industry:
Corruption and crime are not a problem that is unique to the
building and construction industry. There are many other industries where these
sorts of allegations are raised all the time—in particular, the security
industry and the finance industry, amongst countless others. Really I do not
think the case has been made out that the construction industry is so unique
that it requires a body like this with extraordinary powers.[18]
5.19
Submitters from the unions re-iterated their stance that they are
opposed to all elements of criminal activity and that these should be
addressed. The PTEU stated that they were not objecting to the
re-establishment of the ABCC on the grounds that the regulator may expose
something in the industry, but because it was bad policy:
The PTEU is a force for good in modern Australian society. We are transparent and condemn corruption. Our union has subjected itself to forensic audit and has implemented
a range of measures to ensure we function with the upmost probity. We have nothing to fear from the re-establishment of the ABCC, but oppose it as it represents bad and
discriminatory public policy.[19]
5.20
The CFMEU also stressed that if every sector of the workforce across the
economy had the same level of scrutiny and the same emphasis on litigating
against regulatory non-compliance then a similar number of cases would be brought
to the fore:
If any other sector of the community had a regulator imposed and funded to the degree that the building and construction unions, particularly the CFMEU, do—for example, if the corporate
sector or a section of the corporate sector had a regulator this focused and funded and ideologically committed to litigation—I think you
would see a lot of litigation and court cases in those particular sectors too. We have itemised some issues of
corporate malfeasance
in our submission.[20]
Insolvency and bad debt
5.21
The committee heard evidence from the policing authorities that
discussed the debt collection industry and how there is 'heavy involvement' of
outlaw motorcycle gangs and organised crime in that industry. As discussed
above by the Australian Crime Commission, organised crime is attracted to any
sector where it can generate profit and with the levels of unrecovered debt
through insolvencies in the sector, the construction is a prime focus of those
engaged in organised criminality.
5.22
The level of insolvency in the industry is a major problem as was
illustrated by figures collated by ASIC in 2010-11. ASIC found that of the 8
054 initial external administrators reports lodged in the 2010-11 financial
year 1 862 (23 per cent) of these related to companies in the construction
sector.[21]
This had risen to 2,245 reports or 24.3 per cent in 2012-13.[22]
The estimated amount of money lost by creditors in the construction industry in
2010-11 was $2.4 billion.[23]
Committee View
5.23
The evidence to support the claims that criminality in the building and
construction industry is 'endemic', or that the industry is a 'hotbed of
lawlessness', simply does not exist. The figures pertaining to referrals from
the ABCC to the police show clearly that criminal behaviour is relatively rare,
and certainly no more prevalent in the building and construction industry than
anywhere else. Despite the political discourse around this issue, and the vast
amounts of funding that has been provided for Royal Commissions and the ABCC
litigation, there is no evidence to support the argument that this industry
should be subject to any stricter enforcement powers that any other industry.
5.24
The huge sum of money lost underpins an extensive debt collection
industry that, as the evidence from policing authorities shows, attracts
organised criminality. If there is any organised criminality in the industry it
is more likely that it would stem from debt collection activities than from
industrial action.
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