Cole report: NSW summary

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Cole report: NSW summary

Royal Commissioner, Terence Cole, has denounced the NSW construction industry and has said there is an urgent need for reform and cultural change in the industry.

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Royal Commissioner, Terence Cole, has denounced the NSW construction industry and has said there is an urgent need for reform and cultural change in the industry.
 
The Commissioner said: ‘The rule of law and respect for legal obligations has been replaced in the building and construction industry in NSW, by commercial expediency and the application of and submission to industrial pressure. That culture pervades projects in the Sydney CBD and major projects in metropolitan Sydney and the regions.‘
 
Major findings
 
The major findings for NSW are summarised as follows:
 
‘In the building and construction industry in NSW, there is:
a) widespread disregard of, or breach of, the enterprise bargaining provisions of the Federal Workplace Relations Act 1996;
 
(b) widespread disregard of, or breach of, the freedom of association provisions of the Federal Workplace Relations Act 1996;
 
(c) widespread departure from proper standards of OHS;
 
(d) widespread requirement by head contractors for sub-contractors to have union-endorsed enterprise bargaining agreements (EBAs) before being permitted to commence work on major projects, especially in the Sydney CBD;
 
(e) widespread requirement for employees of sub-contractors to become members of unions in association with their employer obtaining a union-endorsed EBA;
 
(f) widespread disregard of the terms of EBAs once entered into;
 
(g) widespread application of, and surrender to, industrial pressure;
 
(h) widespread use of OHS as an industrial tool;
 
(i) widespread coercion in relation to the making of payments by contractors to unions or at the direction of unions;
 
(j) widespread use of notices which purport to have a statutory basis and authority, but in truth have nothing of the sort;
 
(k) widespread abuse of rights of entry;
 
(l) unlawful strikes, and threats of unlawful strikes;
 
(m) threatening and intimidatory conduct;
 
(n) underpayment of employees’ entitlements;
 
(o) disregard of contractual obligations; and
 
(p) disregard of the rule of law.’
Inappropriate conduct
 
The Commissioner also identified a number of categories of conduct which he regarded as inappropriate. 
 
He considered such conduct to be illegal in some circumstances but not others, or not at present illegal but is recommending that is should be made illegal or at least discouraged. 
 
A long list of inappropriate conduct which is common in the NSW construction industry is included in the NSW State Overview in Volume 12 of the report.
 
Problems facing NSW
 
The Commission grouped the problems arising in NSW under a number of major headings:
  • Disregard for the law and legal obligations
  • Unprotected industrial action
  • Freedom of bargaining
  • Freedom of association
  • OHS
  • Other national issues
  • Entry to premises
  • Wage record inspections and audits
  • Wage claims and allegations of underpayment of entitlements
  • Inappropriate payments and demands
  • Adherence to agreements
  • Failure of regulation
  • Attempts to regulate the industry
  • Other forms of intimidation
The main points relating to these are noted below.
 
Disregard for the law and legal obligations
 
The replacement of rule of law and respect for legal obligations by commercial expediency and use of industrial pressure, ‘survives in large part due to a symbiotic relationship between the major head contractors and the principal union with coverage in the industry, namely the CFMEU’.
 
Commercial considerations cause head contractors to give in to CFMEU muscle and the union ‘routinely threatens or orchestrates industrial disruption as a first response to any form of industrial dispute’.
 
The Commission found that the CFMEU has failed to abide by the Deed of Adherence that it would abide by the rule of law. This Deed was signed in 1994 in order to avert deregistration proceedings against it and the Building Workers' Industrial. Included in this is lack of adherence to the rulings of the AIRC.
 
The Commission considers that:
  • an environment must be created in which the rule of law prevails over commercial expediency and industrial pressure;
  • there must be incentives for participants in the industry to comply with the law and enforce their legal rights;
  • there must be consequences and penalties for participants in the industry who do not comply with the law; and
  • the law must be enforced without fear or favour.
Unprotected industrial action
 
Unprotected industrial action - stop work meetings and localised stoppages, pickets, secondary boycotts and the imposition of state-wide or national strikes - commonly occurs or is threatened in the building and construction industry in NSW
 
It is the principal tool employed by the CFMEU in NSW to achieve industrial objectives and is often followed by claims for, and the payment of, strike pay in contravention of s187AA and 187AB of the Federal Workplace Relations Act 1996.
 
Freedom of bargaining
 
The CFMEU in NSW uses a number of strategies to achieve its aim of ensuring that all contractors become parties to union-endorsed EBAs, which conform to a pattern (pattern bargaining). 
 
Most of these are backed by the implicit threat of industrial action if contractors do not comply. Head contractors in NSW usually submit to union demands or complicity comply with the CFMEU’s objectives, including pressuring sub-contractors. 
 
Evidence to the Commission put the additional costs to enterprises entering into CFMEU-endorsed EBAs as typically between 10 and 20%.
 
Commissioner Cole considers that the freedom of bargaining objectives in the Federal Workplace Relations Act 1996,are largely not being achieved in the building and construction industry in NSW.
 
Freedom of association
 
Despite the freedom of association provisions in the Act, in many cases in NSW these rights are not being respected. 
 
‘No ticket no start’ policies operate wherever possible and ‘closed shops’ also continue. The Commission considers that on the evidence, ‘freedom of association is under sustained attack in metropolitan Sydney and to a lesser but nonetheless significant extent in regional centres of NSW’.
 
Site inductions, ostensibly for safety purposes, are frequently corrupted in NSW, often at the expense of the right to freedom of association: major head contractors in employ union site delegates, and delegate to them the authority to conduct site inductions. Such union site delegates refuse to induct workers who are not members of the union, or refuse to induct the employees of contractors who have not entered into union endorsed EBAs.
 
The Commission considers the penalties applying to breach of freedom of association provisions to be inadequate and frequently unenforced.
 
Occupational health and safety
 
The Commission finds that head contractors and subcontractors often fail to adhere to safety standards in NSW.
 
Frequently this is because there is no visible WorkCover NSW presence - the evidence is that WorkCover NSW is under-resourced and reactive, with no inspectors available to carry out spot safety checks.
 
Commissioner Cole states that it is too easy for contractors to avoid their obligations in relation to OHS, but also too easy for union officials to manufacture or exaggerate safety issues. 
 
For example, the CFMEU issues safety rectification notices which purport to be official safety notices – the Commissioner considers that ‘The issue of notices relating to workplace safety is properly a function of a statutory authority, not a union’.
 
Evidence before the Commission was that in a number of cases safety inspections and the issue of these notices only occurred after contractors had rejected demands or requests that they sign CFMEU endorsed EBAs or have their employees join the union.
 
Safety issues have also been ‘exaggerated, manufactured or absurd’, for example shutting entire sites over minor matters or matters affecting only part of the site, or threatening to find safety issues which would close down a site if demands were not met.
 
Union organisers have also directed contractors on safety issues at sites where there were no union members employed by a contractor, or where no complaints had been made by employees.
 
Other national issues
 
From other sittings of the Commission, a number of further issues of national importance which had bearing on issues from NSW, were identified, including:
  • an absence of security of payments for contractors;
  • widespread underpayment of workers’ entitlements;
  • non-payment of workers’ compensation contributions;
  • sham subcontracting;
  • ‘phoenix’ companies;
  • tax evasion; and
  • the use of illegal immigrant labour.
Entry to premises
‘CFMEU officials and organisers in NSW often disregard statutory entry and inspection requirements. Disregard of the law in this respect, is facilitated by the different requirements of the various pieces of legislation which confer conditional rights of entry and inspection on union officials in NSW.
 
'Prior notice is rarely given by union organisers or officials of their intention to enter premises and when challenged, they generally assert a right to enter premises without notice under the OHS legislation. ‘Thus OHS concerns are often a pretext used by CFMEU organisers in pursuit of industrial matters, such as wage issues, EBA negotiations, site allowances or union membership.’
The Commission considers there is an urgent need to reform the law in relation to entry to premises by representatives of unions in NSW.
 
Wage record inspections and audits
 
Contractors are required by the CFMEU, in NSW, to undergo an audit conducted by Construction Accreditation Services Pty Ltd (CAS) as a condition of obtaining a CFMEU endorsed EBA. CAS is not at arms length from the CFMEU. The cost is born by the contractor.
 
The CFMEU has effectively attempted to sub-contract its special rights to inspect wage records to a third party, which seeks to charge employers for the privilege.
 
Wage claims and allegations of underpayment of entitlements
 
Making exaggerated, false or unsubstantiated wage claims is a major source of industrial unrest in NSW.
 
Evidence before the Commission established that ‘the CFMEU in NSW retains a substantial amount of monies received in relation to wage claims in the form of outstanding union dues, donations to the CFMEU’s ‘Fighting Fund’ or simply amounts retained in the union's general account’.
 
Inappropriate payments and demands
 
Union officials demand that contractors make inappropriate payments with an express or implied promise that the payment will secure industrial peace, or by an express or implied threat that refusal to pay will lead to industrial disruption. 
 
This extends to the CFMEU in NSW sometimes imposing ‘fines’ or ‘penalties’ or insisting on ‘donations’ being made as a means of punishing contractors for behaviour of which it disapproves.
 
Section 127 of the Industrial Relations Act 1996 (NSW)
 
Evidence before the Commission was of ‘contractors making payments on the pretext that s127 of the Industrial Relations Act 1996 (NSW)applied in circumstances where the section had no possible application. The CFMEU usually demanded payment by serving a notice, purportedly under s127, and threatening industrial action, including secondary boycotts, or making derogatory statements about the financial viability or general conduct of the subcontractor to the head contractor.’
 
Adherence to agreements
 
Major contractors and the CMFEU ignore the dispute resolution clauses in EBAs and project agreements, which require work to continue while attempts to resolve disputes are underway.
 
‘No extra claims’ clauses in EBAs are also widely disregarded in NSW.
 
Failure of regulation
 
Investigations by the Office of the Employment Advocate (OEA) are often hampered by the actions of the CFMEU. The union in NSW has a policy of not co-operating with investigations of the OEA and will try and ensure any investigations are met with minimal co-operation.
 
Attempts to regulate the industry
 
Evidence shows that labour-hire in building and construction in NSW is substantially controlled by the CFMEU.
 
Other forms of intimidation
 
Evidence of intimidation by union officials using totally unacceptable behaviour, including sexual harassment, threats of physical harm, assault, perjury and trial by media was also heard before the Commission. 
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