The Royal Commission into



The Royal Commission into The Building and Construction Industry

A Howard Government Attack on the Construction Industry

January 2003

“Many in governments throughout the world would be satisfied if they could establish commissions with prestigious names and the trappings of courts, staffed by persons selected by themselves but having no independence…., assisted by government-selected counsel who largely control the evidence presented by compulsory process, overriding the traditional protections of the accused and witnesses, and authorised to investigate persons selected by the government and to find them guilty of criminal offences. The trial and finding of guilt by political opponents and dissenters in such a way is a valuable instrument in the hands of governments who have little regard for human rights…

…If this can be done to the officers and members of the Federation today, it can be done by governments to political opponents in the future and no doubt will be.”

Victoria v. Australian Building and Construction Employees and Builders Labourer’ Federation (1982) 152 CLR, 110-112 per Murphy J.

Executive Summary

The establishment and operation of the Royal Commission

• The Cole Royal Commission was established in 2001 as part of a stated government strategy to weaken unions in the construction industry.

• The Commission has been conducted in a manner that has damaged the reputation of unions and their officers and members. Its findings will be used as political justification for legislative action against them.

• Hearings were disproportionately devoted to issues concerning the conduct of building industry unions, officials and members: 90.33% of hearing time was devoted to allegations adverse to unions. Just 3.3% of hearing time adversely affected employers.

• Witness evidence was biased against unions: counsel assisting the Royal Commission produced 663 statements from employers compared to just 36 statements from workers.

• In the first round of proceedings in Sydney not a single statement against an employer obtained by investigators was dealt with in public hearings, except where they were accused of having colluded with the CFMEU.

The Commission’s interim report in July 2002 listed 32 people and organisations against whom adverse findings might be found. Not one of these was an employer.

• Little or no attention was given to issues of tax avoidance, collusive tendering, use of strategic liquidations to avoid obligations to employees and to public revenue, failure to comply with occupational, health and safety standards or the illegal employment of immigrant labour to drive down wages and safety standards.

• The Cole Royal Commission cost taxpayers $60 million dollars, more than double the money allocated by the Howard Government to investigate the collapse of HIH, Australia’s biggest corporate failure.

• $700,000 was allocated for media relations, five times the amount for the HIH Royal Commission.

• Lawyers employed by the Commission were paid $19.1 million of taxpayers’ money.

The Royal Commission’s role and powers

• Contrary to public and media perception, Royal Commissions are not independent of government. They are not bound by the rules of evidence and their scope and resources are determined by the executive arm of government.

• The requirement in the terms of reference for the Royal Commissioner to recommend legislative and administrative changes links the Commission to the political process.

• Although the terms of reference were framed widely, the Commission chose to focus its public hearings almost exclusively on the role of unions. Industrial relations, rather than criminal activities such as fraud, violence and corruption, was the Commission’s main focus.

• The Commission’s terms of reference required it to investigate vague and subjective areas of “inappropriate” behaviour, regardless of lawfulness.

• The Commission used its significant resources to obtain and present extensive material that was contrary to union interests. Union witnesses had little time to consider and respond to this.

Construction industry issues ignored by the Cole Royal Commission

• Productivity in Australian construction is higher or equal to that in the US, Japan and Western Europe while labour costs are frequently lower

• The industry is recognised as dangerous with one building worker killed every week. Construction accounts for up to 15% of all workplace fatalities even though it employs only 5.9% of the total workforce. Lost time through workplace injury far exceeds that lost through industrial disputation.

• Despite that, the Commission publicly examined just one case of poor occupational health and safety standards by an employer, and declined to investigate significant breaches in other case studies.

• The industry suffers from a high level of tax avoidance. The ATO has submitted that the industry hides up to 40% of its income (reportedly $1 billion in unpaid tax, every year in NSW alone).

• Phoenix companies are widespread, denying workers their entitlements, forcing sub-contractors into liquidation and leaving debts unpaid to the ATO which is presently investigating 550 cases and has already collected more than $200 million in taxes and penalties.

• The Cole Royal Commission did not vigorously investigate evidence of employer non-compliance with legal obligations referred to it by unions.

• Strong union organisation has developed over decades to deal with the thousands of small employers who frequently flout their legal obligations. Breaking the ability of unions to do their job will lead to an unregulated, unsafe and insecure industry for all participants.

PREFACE

The ACTU has prepared this document on the eve of the release of the Report of the Royal Commission into the Building and Construction Industry (the Commission).

The document has been endorsed by unions with a significant membership in the industry.

The ACTU has taken this step because of clear indications that the Commission has operated as a mechanism for carrying out the Government’s ideologically-based policy in relation to unions in the building and construction industry.

As this document will demonstrate, the Commission was established as part of a Government strategy to weaken the role of unions in the industry. Unfortunately, and despite initial assurances to the contrary, the Commission has largely been conducted in a manner calculated to damage unjustifiably the reputation of unions and support legislative and administrative action against them.

The Commission’s public hearings have been disproportionately devoted to issues concerning the conduct of building industry unions, their officials and members. Little attention has been given to employer conduct, including the prevalence of tax avoidance, collusive tendering, use of corporate structures and strategic liquidations to avoid obligations to employees and to public revenue, failure to adhere to occupational health and safety (OHS) standards and the illegal and exploitative employment of immigrant labour.

This document is not a comprehensive review of the totality of the Commission’s proceedings, a massive task given its scale and resources.

However, the ACTU does believe that the examples cited here will provide the fair-minded observer with clear evidence of a biased and politicised process.

While not condoning illegal activity, the ACTU and its affiliated unions will steadfastly support the building and construction unions in asserting their right and responsibility to represent their members effectively.

The Establishment Of The Royal Commission

Following its election in March 1996, the Government has had the building and construction industry unions in its sights. The industry was one of four nominated as requiring special attention - the others were the waterfront, coal and meat industries. While the story of Government efforts to restrict union involvement in these industries is outside the scope of this document, they have been vigorous. The best known, of course, was the historic Patrick Stevedore dispute in the waterfront industry in 1998, but there have been equally virulent strategies pursued in the other nominated industries.

On 30 April 2001, Tony Abbott, who had succeeded Peter Reith as Minister for Workplace Relations three months earlier, wrote to the Employment Advocate, a former adviser to Mr Reith, requesting a report regarding behaviour in the building industry.

In his reply of 11 May 2001, the Advocate made a number of allegations against unions, including criminal activity, corruption and breaches of the Workplace Relations Act 1996. The allegations were of a general nature, and contained little in the way of concrete evidence.

Nevertheless, the report from the Employment Advocate provided the basis for the calling of a Royal Commission into the Building and Construction Industry. The Commission was announced by the Minister on 26 July, 2001, just over two months before the announcement of the 2001 federal election and at a time when the Government was still scrambling to bolster electoral support.

In his announcement, the Minister made it quite clear that unions were the primary, if not the only target of the Commission, linking it formally with the Government’s general strategy for “industrial reform” in a number of industries.

The Role Of Royal Commissions

There is a general public perception that a Royal Commission is a process which is separate and independent of government, similar in nature to that of the judiciary under our constitutional provision for separation of powers.

Although Royal Commissions are frequently headed by former or serving judicial personnel, hold their proceedings in court rooms, hear submissions from lawyers and examine and cross-examine witnesses, this does not make them independent of the political process.

It is not uncommon for Royal Commissions to be established simply to further the political strategy of a government. Although some Commissions established in these circumstances have carried out their tasks independently, to an extent that government objectives have not been met (eg Royal Commission into the Painters and Dockers Union) there is no legal basis for ensuring that this occurs.

Stephen Donaghue, one of the Counsel Assisting the Cole Royal Commission, makes this point[1] when he writes:

Notwithstanding popular perceptions to the contrary, Royal Commissions also have no true legal independence. They are appointed at the discretion of the executive and they can be dissolved in the same way at any time. Short of terminating a commission, the executive can influence Royal Commissions by truncating their terms of reference, thus limiting the scope of any inquiry. Hallett has pointed out that:

It is not clear that the executive would not have the right to direct how an inquiry should be conducted… After all, the person conducting the inquiry is, in reality, an agent of the executive.

The Commission is not a Court, is not bound by the rules of evidence and does not exercise judicial power under the Constitution. However, it is required to abide by the rules of natural justice, including procedural fairness. These rules require:

i) that persons who have adverse allegations made against them are given the opportunity to challenge those allegations if they may be used to make adverse findings;

ii) that evidence be put fairly and in a timely fashion to witnesses and persons who have adverse allegations made against them;

iii) that contrary and exculpatory evidence be gathered and presented to the Commission; and

iv) that persons against whom adverse findings may be made be given the right to make submissions on the evidence prior to any such findings being made.

A number of examples will be given to show that the Commission’s adherence to these rules has been less than exemplary. It is clear, in particular, that witnesses whose evidence rebutted allegations against unions or which was otherwise positive for unions were rigorously cross-examined or denied the opportunity to respond. This was in sharp contrast to the treatment of witnesses who made the allegations.

It is also clear that the Commission did little if anything to gather or present evidence supporting the role of unions or rebutting allegations against them. In all cases, where such evidence was brought before the Commission this was due to the efforts of the unions’ legal teams.

The Commission’s Terms Of Reference

The Commission’s terms of reference were determined by the Government. According to the Government’s formal announcement of the Royal Commission, the Commissioner himself was also consulted about the terms of reference. The terms were a follows:

We appoint you to be a Commissioner to inquire into and report on the following matters in relation to the building and construction industry:

a) the nature, extent and effect of any unlawful or otherwise inappropriate industrial or workplace practice or conduct, including, but not limited to:

i) any practice or conduct relating to the Workplace Relations Act 1996, occupational health and safety laws, or other laws relating to workplace relations; and

ii) fraud, corruption, collusion or anti-competitive behaviour, coercion, violence, or inappropriate payments, receipts or benefits; and

iii) dictating, limiting or interfering with decisions whether or not to employ or engage persons, or relating to the terms on which they be employed or engaged;

(b) the nature, extent and effect of any unlawful or otherwise inappropriate practice or conduct relating to :

i) failure to disclose or properly account for financial transactions undertaken by employee or employer organisations or their representatives or associates; or

ii) inappropriate management, use or operation of industry funds for training, long service leave, redundancy or superannuation;

(c) taking into account your findings in relation to the matters referred to in the preceding paragraphs and other relevant matters, any measures, including legislative and administrative changes, to improve practices or conduct in the building and construction industry or to deter unlawful or inappropriate practices or conduct in relation to that industry.

For the purpose of the inquiry, a reference to the building and construction industry does not include the building or construction of single dwelling houses, unless part of a multi-dwelling development.

There are three aspects of these terms of reference which are significant to the nature of the Commission’s proceedings.

First, they are broad. The terms are not limited to industrial relations matters but include investigation of “fraud, corruption, collusion or anti-competitive behaviour, coercion, violence, or inappropriate payments, receipts or benefits”, as well as occupational health and safety issues. The breadth of these terms was not reflected in the scope of the Commission’s actual proceedings. As will be seen, the scope of the Commission has been far more limited. In practice, the Commission’s work was strategically focussed on the conduct of unions.

Second, the Commission is required to investigate criminal behaviour, but also conduct that is “inappropriate”. The investigation of criminal conduct involves the assessment of facts against an objective and identifiable set of laws. By comparison, investigating “inappropriate” behaviour, which may be lawful, apprehends a subjective value judgment about appropriateness. This subjectivity in the context of an industrial relations system governed by extensive legislation unavoidably politicises the Commission’s functions.

Moreover, industrial relations has been one of the most highly politically contentious areas of public policy in recent years. It has been frequently subject to legislative change. During the hearings the Commission also elected to canvass such matters as freedom of association in the industry. In large measure, the subject matter of the Commission’s inquiry was and is, inherently political.

Third, the Royal Commissioner is obliged to give his views on what is “appropriate” for the industry. That will necessarily require a political assessment on the part of the Commissioner. In sharp distinction to the role played by judicial officers and the courts, he is then required to make recommendations on “legislative and administrative changes”. Thus the terms of reference themselves provide a clear link between the role of the Royal Commissioner and the work of elected parliamentarians.

Finally, and again in contrast with the role of ordinary courts, the Commission’s findings will not bring the matters it deals with to finality but will merely provide a basis for further Government action. This is because a Royal Commission does not decide matters in the judicial sense. The High Court has said that the findings of a Royal Commission have no legal consequences. Thus the findings of this Commission will be no more than a platform and a spur to further political action by the Government. In that sense, this Royal Commission, like others, is not “independent” of the political process.

The Cost Of The Commission

The Federal Government initially budgeted $7 million for the Commission, a figure quickly increased to $60 million. This is more than double the amount allocated to the Royal Commission investigating the HIH collapse ($29 million), Australia’s largest corporate failure.

The Royal Commissioner is paid $660,000 per year (as well as other generous Commonwealth Government benefits), making him the highest paid individual on the Commonwealth Government payroll. He earns twice the salary of the Prime Minister.

The Secretary to the Commission, Colin Thatcher, is paid $200,000 a year. Lawyers employed and engaged by the Commission collectively received $19.1 million.

$700,000 was allocated for the Commission's media relations, covering remuneration for a media liaison officer and his assistant. In comparison, the HIH Royal Commission designated $140,000 for media relations, a difference which highlights relative Federal Government priorities.

The Commission’s budget is:

• five times greater than the additional federal funding given to help the jobless find work in the 2001-2002 budget;

• just under the additional funding allocated to better treatment for rural and regional cancer patients over the next four years (see budget 2002-2003);

• over eight times the additional funding going to recognising and improving the capacity of people with disabilities (see budget 2002-2003); and

• more than half the additional funding given to identifying terrorist threats (see budget 2002-2003).

Industrial Relations In The Building And Construction Industry

The building and construction industry employs almost three quarters of a million workers, and contributes 5% of Australia’s GDP. The Commission estimated that about three quarters of the industry is within its scope, given the exclusion of single dwelling construction.[2]

Employment is concentrated in small firms, with 93.67% employing fewer than five employees and 5.71% employing between 5 and 20. However, a small number of larger firms account for 13.63% of employees.[3]

The large number of small employers in the industry presents a huge challenge to unions in relation to organising and bargaining. The system of sub-contracting used on large sites means that industry-wide pattern bargaining is used by all parties to provide certainty and security, as well as reducing transaction costs.

The proportion of the labour force classified as “employers” or “own account workers” is substantially higher in the construction industry than any other - almost twice the total workforce average for employers and almost three times for contractors.[4] In many cases, these contractors are in a dependent employer/employee-type relationship with their principals.

The industry is beset by a number of serious problems which affect industrial relations.

The industry is generally recognised as dangerous. One building worker is killed every week in Australia and, in 1999 alone, 475,000 working days were lost through injury, far more than through industrial action. Employers of those killed at work have been found guilty of negligence in criminal courts.

Construction accounts for 10-15% of all workplace fatalities, although construction employment is 5.9% of the total workforce.[5]

The industry also suffers from a high degree of tax evasion and failure to pay employee entitlements. Minister Abbott’s erroneous claim that “there is no evidence that tax evasion is more prevalent in this industry than others”[6]is comprehensively refuted by an Australian Tax Office submission to the Commission showing that the industry hides up to 40% of its income and is twice as likely to have outstanding tax debts as other Australian industries.[7] Bogus practices such as cheque cashing to pay for labour, false invoicing, use of bogus labour hire firms and high levels of cash transactions were, according to the submission, a feature of the industry. [8]

The ATO submitted that levels of non-compliance are “high and widespread”[9] amongst smaller industry operators. It has also been alleged in the NSW State Parliament that construction industry employers are avoiding $1 billion a year in tax.

Further, phoenix operations are commonplace in the building industry. This is the practice where a company folds, leaving unpaid debts to the Australian Taxation Office and/or workers, only to reappear as a different legal entity often with the same directors and doing the same work. This practice denies workers their entitlements, drives sub-contractors into liquidation and often deprives state and federal treasuries of taxation and workers compensation payments. The ATO submission identified this as a problem for the industry, saying it was “used to evade payment of tax liabilities through the deliberate and systematic liquidation of trading entities”.[10]

The ATO has dedicated 32 staff to a special Phoenix Project.[11] So far they have finalised 400 cases and have collected more than $200 million in taxes or penalties.[12] The Phoenix Project has another 150 cases pending.[13]

A good example of the type of conduct engaged in by some builders is contained in the evidence of Ferdinando Sanna of Betaform Construction, who came to the Commission claiming that the CFMEU was attempting to drive his company into liquidation because it did not employ union labour. In cross-examination, the Counsel for the CFMEU explored the structure of Mr Sanna’s operations:

Counsel: How many of these companies still exist?

FS: Basically, Sacon Building Australia and Sacon Building Construction got a bill of $800,000 owed to workers comp. It’s not that we weren’t paying our premiums, it’s the workers comp link - saying they’re all one company.

Counsel: Just tell me which ones exist, Sacon Constructions?

FS: Sacon Construction is in voluntary liquidation, me and my mother.

Counsel: Sanna Constructions?

FS: Sanna Constructions is still on the books, it’s still operating, but it’s there, the name is there, it could be operated any day, it can start tomorrow, if it wants, but it’s just there, we are not using it.

Counsel: Clarevale Enterprises?

FS: Clarevale Enterprises, we, as a labour force, I couldn’t make ends meet I had to send the company into liquidation.

Counsel: Voltrum?

FS: Voltrum, I wasn’t a director of that company. I was employed by that company. It was taking on the labour force, the same as taking on the labour force from Sacon Building, and also that went into liquidation, too.

Counsel: Sacom Building BC Pty Ltd?

FS: Sacon Building Construction.

Counsel: Is that in liquidation?

FS: Sacon Building Construction and Sacon Building Australia Pty Ltd, they had to go voluntarily in liquidation because the workers comp was hitting

Counsel: Haughtons Structural?

FS: Haughtons got nothing to do with us. My brother, he’s got his own business, he’s on his own. All these other companies, except Sungain and Betaform, is - Haughton Panels, that’s got nothing to do with us, that is me brother, he’s on his own, Haughton Constructions is on its own, and he’s on his own, it’s got nothing to do with me.[14]

Mr Sanna answered further questions about his conduct.

Had Mr Sanna reneged on an agreement for repayments to the ATO? “We were financially in trouble then, yes, but little does the union tell - the union only makes us look the bad one”.

Had Mr Sanna underpaid workers compensation premiums? “That is incorrect, because they done - at the end of the financial year with Betaform now, Betaform, with the year that just went past, owes $150,000, yes, it does but we we’ve got agreements with the workers comp for instalments and they are happy”.[15]

The building and construction industry is a tough industry. Unless workers are vigilant, they have a much higher likelihood than most workers of being injured or killed on the job, or of being cheated of their entitlements.

Workers in the industry have developed strong union organisation to deal with the thousands of small employers who frequently do not adhere to their legal obligations.

However, this does not mean that the needs of employers and their clients in the industry are not being met. In one of its own discussion papers, the Commission cited a number of international studies which have found that the productivity of the Australian construction industry is either higher or roughly equal to those of the US, Japan and Western Europe, while labour costs are frequently lower.[16]

Such conclusions are supported by other studies. The following points can be distilled from separate reports commissioned by the employer group, the Australian Constructors Association and undertaken by Access Economics and World Competitive Practices Pty Ltd.[17] and a second study commissioned by the CFMEU and undertaken by the Employment Studies Centre at the University of Newcastle:[18]

• The Australian commercial construction sector has undergone very significant change over the past decade which has greatly improved its performance. (University of Newcastle)

• Labour productivity in Australia is higher than in Germany, Japan, Sweden, the USA and is only slightly behind the UK (Access Economics and World Competitive Practices Pty Ltd)

• Performance levels in major building construction in Australia are now near those of world best practice. (University of Newcastle)

• Construction output prices (the relative price of completed buildings) is lower in Australia than Germany, Japan, Sweden, the USA and the UK. (Access Economics and World Competitive Practices Pty Ltd)

• Construction prices in Australia are low relative to other prices in the Australian economy. (Access Economics and World Competitive Practices Pty Ltd)

• Australian construction workers work longer hours than their counterparts in all OECD countries except for the USA. (Access Economics and World Competitive Practices Pty Ltd)

• Contrary to conservative dogma, union membership can often result in enhanced productivity. A US study found that productivity for unionised contractors compared to non-unionised was 30 per cent higher for commercial buildings. (University of Newcastle)

• Australia’s excellent productivity performance reflects: strong competition at all levels in the industry; flexible management structures and work organisation; a strong skill and technological base; strong international linkages; and flexible industry regulation. (Access Economics and World Competitive Practices Pty Ltd)

• Australia has followed a path of high productivity, high skills, long working hours, and high hourly wages. (Access Economics and World Competitive Practices Pty Ltd)

• The greatest impediments to an increase in productivity growth in the Australian construction industry is a falling level of employer investment in training and the proliferation of small under-capitalised businesses. (University of Newcastle)

The Australian construction industry is one of the most efficient and cost effective in the developed world. It is an industry that successfully combines high levels of unionisation with a strong international reputation for high productivity and a quality product.

While breaking the ability of the unions to do their job effectively might be in the short-term interests of some employers, and is seen by the Government as in its political interests, long-term it will lead to an unregulated, unsafe and insecure industry for all participants.

How The Commission Has Dealt With The Issues

It is indisputable that in its public hearings the Commission has dealt almost entirely with industrial relations issues, and in a way which cannot be seen as other than prejudicial to unions. An analysis of the transcript by the CFMEU found that there were 663 appearances at the Commission by employers or their representatives compared with only 36 appearances by workers.

The CFMEU also found that 90.33% of hearing time was spent examining issues which might be thought to reflect badly on unions, while only 3.3% of hearing time was spent on issues that showed employers in a poor light.

No time whatsoever was spent looking at the activities of the CFMEU or any other union which might have been expected to reflect positively on them.

This different treatment is illustrated by the fact that in the first round of Sydney hearings nearly all of the 110 statements gathered by Commission investigators made specific allegations of illegal or inappropriate activity against the CFMEU or its members. Not one statement levelled such an allegation against any employer, except where an employer was accused of having colluded with the CFMEU. Commission investigators chose not to interview or prepare a statement from a single CFMEU member in NSW, not even for the purposes of testing damaging allegations.

Aside from the allocation of resources, the Commission adopted a practice in relation to issues concerning employer misconduct, such as those referred to above, by issuing discussion papers, conducting seminars and inviting written submissions, rather than collecting and investigating allegations and testing these in public hearings.

Occupational health and safety

Almost every statement concerning illegal or inappropriate practices with regard to workplace safety alleged that unions use safety for industrial purposes. In only one case study examined by the Commission was the poor occupational health and safety record of an employer examined. This is clearly inadequate treatment of a crucial issue, particularly when viewed against the many case studies examining often trivial matters involving unions, their officials and members, such as swearing. Unions did not participate in the Commission’s OHS seminar because of concerns that such a process would not deal adequately or fairly with the issues and because it was not being conducted genuinely, given the Commissioner’s on-the-record statements.

The CityLink tunnel

An example of the inadequacy of the Commission’s treatment of OHS can be seen in the presentation of a case study conducted into the construction of the CityLink project by Transfield in Melbourne. In opening the presentation, Counsel Assisting the Commission, Richard Tracey QC, stated that the case study had focussed on matters relating to OHS issues faced by two electrical subcontractors[19].

The key OHS issue concerning CityLink was the death of Justin O’Connor, a worker on the site. Although Mr O’Connor’s death received a great deal of publicity, as did Transfield’s subsequent conviction for breaches of the OHS legislation,[20] none of the material compiled by the Commission’s investigators or examined by Counsel Assisting during the public hearing touched upon the death of this young man.

Nevertheless, an enormous volume of evidence was put before the Commission showing the poor working conditions at the tunnel. It was obvious that the employer had not met its obligation to provide a safe and healthy workplace.

Examples of serious OHS issues mentioned in Counsel Assisting’s submission included:

• A consultant’s report in October 1998 recommending improved procedures in some areas, particularly the tunnels.

• A manager employed by Transfield considering that the difficulty of the working conditions had been underestimated.

• The evidence, along with Counsel Assistant’s submissions, showed that Bill Sharp, the OHS delegate at Transfield, pursued safety issues on the site. This included:

• David Mier, the CEPU organiser and Mr Sharp being concerned about levels of dust, noise, fumes, flooding and darkness. These concerns were shared by the project manager.

• The manager of ABB (the electrical contractor) said that it could take Transfield up to a week to address issues relating to dust, dirt and noise.

• A number of complaints were made, including by Mr Sharp, that electrical equipment and leads were not tagged in accordance with OHS regulations. This had been acknowledged by Transfield, which wrote to site managers and safety co-ordinators asking for compliance.

• In December 1998 a WorkCover Inspector agreed with Mr Sharp’s concerns about switchboards.

• Although ABB criticised Mr Sharp for creating turmoil by turning off temporary power boards alleged to be substandard, it acknowledged that usually nine out of ten issues he raised were legitimate and correct.

• It was stated that Mr Sharp had cut some power cords when testing was overdue, leading to the testing being done.

• A safety audit conducted by ABB on 7 April 1999 noted a number of problems with the temporary boards. Instead of addressing the issues, Transfield argued that they met the required standards.

• On 2 March 1999, Transfield alleged that Mr Sharp deliberately damaged a set of stairs which he had said was unsafe. Mr Sharp said to ABB that the stairs had broken as he shook them to demonstrate that they were unsafe although employees had been instructed to use them. Another set of stairs had collapsed the previous day. After investigating the matter, ABB concluded that the stairway was poorly designed, and that other stairs should not be used.

Eventually Mr Sharp’s employment was terminated, on the request of Transfield, according to evidence of ABB and the CEPU. Although there is some evidence suggesting that Mr Sharp may have been terminated as a result of carrying out his responsibilities as an OHS delegate, a breach of section 54 of the Occupational Health and Safety Act 1985 (Vic), the allegations made by the CEPU and ABB were not put to Transfield by Counsel Assisting.

While no adverse finding was proposed to be made against Transfield, Counsel Assisting did propose adverse findings to be made against Mr Sharp.

Tasmania

Another example concerned the treatment of evidence of unsatisfactory health and safety standards presented in Tasmania by union solicitors. Photographs taken by unions were tendered showing a range of highly dangerous work practices, including: workers balanced precariously on simple planks three stories high with no fall protection, uncapped reinforcing bars at the entrance to a pre-school, electrical cables in high traffic and weather exposed areas, and “amenities” consisting of a hole in the ground for workers to use as a toilet.[21]

Evidence was also given of the inaction of the Tasmanian inspectorate and the absence of any pro-active steps to police OHS standards on building sites.

One of the more dramatic photographs showed a rubbish skip in a school playground. Children were playing in the background. The first photo showed broken floor tiles and other debris in the bin inadequately covered with black and orange plastic.

Mr White, an experienced organiser with the CFMEU, gave evidence[22] that he had received a call from one of the workers involved in removing the tiles, who was concerned that the material contained asbestos. Mr White attended, took photographs of the skip, and took a piece of the tiles for scientific testing.

Mr White tendered another photograph[23] taken 20 to 30 seconds after the first from a different angle. It showed that the material in the skip was in fact exposed and that broken tiles could be seen. Despite this, the Royal Commissioner said he could not reconcile the two photographs. Counsel Assisting sought a finding that Mr White’s evidence was “quite unsatisfactory”[24] and invited the Commission to find that the material in the bin had been moved about before the second photograph was taken.

The next day headlines appeared in the local newspapers condemning the dumping of asbestos near school children. Immediately after this Counsel Assisting called the employer accused of the dumping, who gave evidence that the company had obtained quantitative air sample tests showing no detectable asbestos. He also assured the Commission that the material in the bin was properly covered with plastic.[25] The speed with which the Commission notified and called this employer to rebut allegations against him is in stark contrast with the Commission’s reaction to allegations against unions, its officials and members throughout the hearings.

Mr White produced to the Commission the independent report of scientific experts, Enviroprotect Pty Ltd, which concluded that chrysotile asbestos was detected using the accepted qualitative test. Counsel Assisting responded by attacking the veracity of the testing by Enviroprotect. No notice of adverse evidence was given to that company. Instead, Counsel Assisting sought to mount a case that the request by the union for the material to be tested “as it is suspected of containing asbestos” should be found to have possibly “influenced the outcome of the testing”[26].

A finding was sought that there were “unanswered questions attending the collections of a sample by Mr White, his instructions to his counterpart at the CFMEU in Victoria, and the nature of the test undertaken by Enviroprotect Pty. Ltd.”[27], a clear implication of some form of conspiracy. The Commission then effectively sought a finding, with no scientific or expert basis, that airborne quantitative testing should be preferred to qualitative testing, and that the Commission should conclude on balance that the material did not contain asbestos.

The difference between qualitative and quantitative testing is simple. Qualitative means that the substance (asbestos) was detected. The quantitative test shows that a substance was not present at a particular time in the air at quantities high enough to be detected. Both tests are clearly correct: the tiles contained asbestos and it was present in tiles that were shattered and exposed. The air test shows that at the time it was taken, the air did not contain detectable levels of asbestos particles.

Counsel Assisting conducted a hostile examination of Mr White. However, Mr White’s actions could not be faulted. He reported the matter to the appropriate authorities and he had the material independently tested. He advised the employees of the potential exposure and registered the exposure in the event of future asbestosis.

Mr White vigorously denied Counsel Assisting’s suggestion that this action in investigating the asbestos was taken because the subcontractor did not have an EBA. He asked whether Counsel Assisting was suggesting that the union should ignore serious OHS issues where the employer did not have an agreement. Mr White strongly asserted that the existence of an EBA was an irrelevant consideration in the context of a potential exposure of workers and school children to asbestos.

No interest in the past…except for unions

The Royal Commissioner felt called upon to explain the different treatment of issues, particularly concerning OHS, and attempted to do so on 19 September 2002 when he said:

COMMISSIONER: ….. My second concern is with the future, it is not with the past. Criticisms have been levelled at this Commission that it has not investigated in the hearing room occupational health and safety incidents in the same manner as it has investigated other aspects of activity in the industry. That criticism is not soundly based. The public hearings of this Commission have exposed to the public gaze aspects of practices in the industry not previously publicly known. In contrast, occupational health and safety incidents are well known to the public and well documented in public documents.

Every death, every accident, every safety incident involving a worker on a construction site is addressed by at least one, and usually more, reports from competent authorities. The incidents are the subject of investigation and report by unions, by employers, by relevant WorkCover Authorities, by coroners and sometimes by the police. The incidents result in inquests, in prosecutions, in fines, in workers compensation claims, in civil actions for damages and, where appropriate, in reports to government recommending reform.

The causes of these incidents are well documented. We know the number of injuries that occur. We know their nature. We know the trends. We know the most dangerous aspects of the industry. We know the most frequent causes of injury. To revisit examples of matters already fully investigated would not improve our existing knowledge and, more importantly, would not improve future safety.[28]

This view of the past did not prevent the Commission examining a large number of case studies in Victoria, including CityLink, Federation Square, and the National Gallery, all of which had received considerable public attention prior to the Royal Commission, as well as coming before the Federal Court and the Australian Industrial Relations in public hearings.

The Commissioner has made it clear that he was focussing on the role of unions in OHS, and that he has adopted the view that they ought not to be involved. In the course of examination of a representative of the WorkCover Authority of NSW in relation to his co-operation with union officials in handling workplace OHS issues, the Commissioner said:

See, this raises a very deep problem, it seems to me. Occupational health and safety is absolutely critical. It ought to be administered by an arm of government, because only in that way can it be said to be independent either of the employer or the employee side of the equation. If the situation be, as it appears to be, that the employers are not adequately servicing their obligations on occupational health and safety and if government isn't providing the resources also to service the maintenance of occupational health and safety, there has been a void and that void has been filled by union organisers, who issue notices purporting to have some legislative basis, but which do not, and you then have a situation where occupational health and safety is addressed by people who have a vested interest. They have a vested interest in reporting those things which truly are occupational health and safety hazards, which should be reported, but there is evidence before me which indicates that not infrequently they raise matters which are not true occupational health and safety issues, and the occupational health and safety issues get mixed up with industrial issues. This all flows from two things: one, a failure by the employers to adequately comply with their obligations, and the failure by government to properly supervise.[29]

However the suggestion that unions be excluded from a role in occupational health and safety does not bear up to any real scrutiny. Counsel Assisting made the obvious point:

“Surely any worker has the right not to work in an unsafe situation, and everybody here would concede that, and I don’t think anybody here would argue that if a worker has that right, then that worker’s representative body has the right to ensure that work isn’t done in unsafe situations. They are logical positions and logical concessions, and once you make them, there must be some role for unions in workplace health and safety.”[30]

Sham sub-contracting

A number of union witnesses raised serious concerns about the practice of employing “sham sub-contractors”; that is, workers who are engaged as labour-only sub-contractors with a view to avoiding award and agreement obligations and reducing obligations for payroll tax, workers’ compensation premiums, and other costs.

This issue arose in the evidence in relation to a plumbing contractor, Tacoma Plumbing, which was a party to an enterprise agreement with the CEPU (Plumbing Division). Tacoma employed between 20 and 100 people in Queensland.

The principal behind Tacoma, David McLean, established a second corporation, Maloolaba Plumbing. The head contractor of the Nambour site, JM Kelly Pty. Ltd., asked Mr McLean to tender for the plumbing work on the Nambour Hospital project using non-EBA rates.

In order to comply with this request, Mr McLean determined to use the Maloolaba entity as the contractor. Maloolaba engaged workers as labour-only sub-contractors, claiming they were not employees but “self-employed” and did not have to be paid as employees.

Uncontested evidence was given to the effect that Mr McLean (the owner of Tacoma/Mooloolaba) required his labour-only sub-contractors to sign and back date a standard form HIA “sub-contractor” contract[31], a practice commonly referred to as pyramid sub-contracting. In addition, there was evidence to suggest that it was done for the purpose of avoiding legal and binding obligations to employees.

Finally, there was evidence that the workers engaged by Maloolaba at the Nambour Hospital site were in fact paid by Tacoma and were supplied pay slips by Tacoma. Indeed employment and registration of the apprentices was made through Tacoma[32] who also supplied all the equipment. Signage was even erected outside the premises with Tacoma’s name.

It was uncontested that the payment of a flat rate of $22.00 per hour was less than the total amount that would have been payable pursuant to the relevant safety net plumbing award[33]. There was uncontroverted evidence that there was underpayment of one plumber to the extent of several thousand dollars.[34] There was also evidence to suggest unlawful discrimination against the employees of Tacoma, in breach of s298K of the Act.

Despite nearly three weeks of evidence about the dispute, these issues were of no apparent interest to the Commission. Counsel Assisting chose not to cross-examine any of the employer witnesses involved in relation to these unlawful arrangements and ignored these matters in submissions. Rather than examining the real causes of the dispute, such as the poor working arrangements at Tacoma, the Commission spent a large amount of hearing time examining conduct on the picket line (such as swearing).

Counsel Assisting did not seek any adverse findings against Maloolaba, Tacoma, or JM Kelly on these issues, notwithstanding the uncontested evidence.

Pattern bargaining and collusive conduct

Although union involvement in pattern bargaining came under criticism in Tasmania, no investigation occurred into the actions of Kelvin Fisher from the Office of the Employment Advocate (OEA), who attended a meeting of the Master Plumbers’ Association, where he allegedly urged employers to “stick together” and refuse to enter into agreements with the union.

Although the evidence of CEPU organiser Tony Murphy about the actions of the OEA[35] was ignored, Counsel Assisting sought a finding that Mr Murphy had been involved in coercion in breach of the Act based on the following:

• Mr Murphy asking an employer to encourage his employees to join the union;

• Mr Murphy expressing a desire that some workers from each company (benefiting from the enterprise agreements) would join the union;

• Mr Murphy ringing an employer and asking whether his employees would join the union, and then asking permission to talk to them, then meeting and explaining the benefits of union membership; and

• Mr Murphy talking with employees during their breaks about union membership.[36]

Gathering Of Evidence

A number of cases demonstrate the bias in the evidence gathering process towards allegations of union misconduct or inappropriate behaviour.

Employer fraud ignored[37]

In a signed statement dated 9 May 2002, JR Rigging manager, John Chandler, alleged that Commission investigators brushed aside evidence of insurance fraud, stand-over tactics, falsified inspection records and major health and safety breaches because the CFMEU was not implicated.

Mr Chandler said he provided the Commission investigators with evidence of structural flaws in a sports complex which continues to endanger public safety but which failed to excite the interest of Commission investigators. At a December 2001 interview with two Commission investigators, Mr Chandler claims that he made a number of serious criminal allegations against a major building company. He alleged that fraud, threatening behaviour, conspiracy and collusion had occurred in an effort to suppress legitimate concerns over construction standards.

Mr Chandler stated that it was only when he mentioned unions that investigators became “extraordinarily interested”:

My overall impression was that the investigators were much more concerned with hearing anything about the union than they were with large scale cover-ups by a major construction company…

On 18 March the Commission informed Mr Chandler it would not be investigating his allegations and he would not be required to give evidence.

Pressure for inaccurate statutory declaration[38]

“John”, a western Sydney builder, who is reluctant to give his surname, claims he was presented by Commission investigators with an inaccurate statutory declaration.

John said he had been approached by two investigators and asked questions about his dealings with the CFMEU. He told the investigators about an unfair dismissal case involving the CFMEU in which he felt harshly done by. Three weeks later the investigators returned with a typed-up statutory declaration. The statement had, in his view, blown the issue out of all proportion and contained at least two falsehoods. These were:

• that the union had coerced him into contributing to its picnic fund; and

• that if a 36-hour week came into the industry his company would go under.

John refused to sign the statement.

Three weeks later, John received a subpoena to attend the Commission on 21 June. On arriving in Sydney, he was again presented with the inaccurate statutory declaration. Again he refused to sign. He told Counsel Assisting that the statutory declaration contained inaccuracies and that he had been threatened by investigators.

According to John, Counsel Assisting raised with John the issue of compulsory unionism. John said that his workers had never been forced to join the union. Counsel Assisting then excused him from giving evidence.

In John’s words “most people don’t know what’s right and wrong. I think a lot just sign the statements to try and get out of the whole thing”.

Problems of the Tasmanian industry ignored

Although the building and construction industry in Tasmania is characterised by cooperative industrial relations, with very little industrial action of any kind, the Commission’s investigations in that state were focussed on union bargaining practices, ignoring the key issues of lack of investment and loss of skilled workers to the mainland.

Efforts by industry participants to raise other issues were given scant attention by the Commission’s investigators.

For example, Adrian Cowie, the Secretary of the Master Plumbers’ Association (MPA), sent a letter to the Commission on 22 January 2002 setting out his concerns about the industry:

• the conduct of head contractors, including withholding payments, underpaying progress claims, and imposing oppressive conditions;

• concerns about tendering processes;

• lack of funds for growth, a lack of training, and the lack of career paths;

• lack of security of payment legislation; and

• legal difficulties in enforcing contracts cheaply and efficiently.

None of these issues were explored in Mr Cowie’s subsequent statement, presumably prepared with the assistance of Commission staff.[39]

Exploitation of immigrant labour

The CFMEU has frequently alleged that unscrupulous employers use illegal immigrants to drive down wages and safety standards, and to avoid workers’ compensation, tax and other liabilities. The Royal Commissioner has stated that the problem, “on the information available, to date, would appear to be insignificant”.

On the final day of Sydney hearings, the Department of Immigration raided a Waitara building site where 15 employees of Modem Drywall were arrested on suspicion of being in the country illegally.

Commission investigators did not, as far as we are aware, produce a single statement alleging the illegal or improper use of immigrant labour.

Union Appearance And Cross-Examination

The unions were never given general leave to appear in the Commission’s proceedings. This is because of the conditions imposed by the Commissioner on such leave at the beginning of public hearings. As with a number of other parties, the unions regarded those conditions as unnecessarily onerous. For those not granted general leave, appearances were restricted to those who were called to give evidence or against whom adverse evidence had been called.

In fact although many unionist witnesses appeared and were represented, the unions themselves rarely appeared,as organisations in their own right, in the proceedings. The decision restricting the right to appear was a precursor to a further decision on how evidence would be presented and tested in the Commission generally.

Throughout the course of the hearings, union witnesses wishing to refute adverse evidence led against them by Counsel Assisting were required to provide written statements.

In addition, union witnesses wishing to cross-examine those persons who made adverse statements against them, were required to furnish the Commission with Applications to Cross-Examine. These had to specify the evidence which they sought to cross-examine and the contrary evidence to be relied on. The Royal Commissioner then determined, on the basis of the application, whether or not the witness who provided the adverse evidence should be cross-examined.

By the time contrary evidence had been collected and submitted and an Application to Cross-Examine had been made and heard, days and even weeks had passed since the original evidence was called. By the time any cross-examination was allowed, damaging evidence had been led and published widely in the media, thus producing one-sided reports. The rebuttal of damaging evidence was rarely reported.

It was no easy task to gain approval from the Royal Commissioner to cross-examine. Many more applications were refused than approved.

The Royal Commissioner would advise legal counsel of his rulings in relation to the Applications to Cross-Examine by providing a document entitled “Order of Witnesses”. This was usually provided to the legal representatives on the evening before the witnesses were to be cross-examined, or on the morning of the hearing itself. Sometimes the Royal Commissioner would provide reasons for refusing the applications, sometimes he would not.

Given that nearly all the time spent in public hearings involved anti-union topics, it was normally the union or its officials seeking to cross-examine. Therefore the cross-examination procedure predominantly impacted upon the unions.

An example of the readiness of the Commissioner to dismiss Applications to Cross-Examine related to a claim by Michael Pyers, a manager of the Housing Industry Association in Canberra, who had given evidence in the following terms:

I was informed by Mr Hynd [of the Housing Industry Association] that Mr Brcic (a CFMEU official) subsequently returned to the site and cut the leads on a hoist because the bricklaying team was not in the union and showed no interest in becoming CFMEU members.[40]

Mr Brcic provided a witness statement (25 June 2002) to the Commission in response to the allegations of Mr Pyers. An Application for Cross-Examination was made in respect of that statement. The relevant paragraph of Mr Brcic’s statement read as follows:

I refer to paragraph 48 of the Pyers statement. I deny that at any stage I “… cut the leads on a hoist” either because of union membership amongst the bricklaying team or for any reason. I did however return to the site the day after the site visit referred to in the immediately proceeding paragraph. I spoke to various people at the site including the bricklayers who were not as hostile to me as they had been on the previous day. Even though WorkCover had issued various notices on the previous day including notices relating to the electrical leads, I noticed that the leads were still not tagged. I removed the untagged lead from the hoist and handed it to the builder Mr Childs, and asked that it and the hoist be tagged. Mr Childs accepted that the proper tagging had not been done. He said “I’ll get it tagged”. Annexed and marked with the letters “JB1” are a number of Rectification Notices that I issued during this period.

Despite the above factual conflict, the Royal Commissioner refused the Application to Cross-Examine by counsel for Mr Brcic. No reasons were given for the refusal. Mr Latham, counsel for Mr Brcic, requested the Royal Commissioner re-examine his ruling:

MR LATHAM: Commissioner, there's one point that I'd like to raise in relation to this. It's the evidence of Mr Brcic in relation to an allegation that is made by Mr Pyers at paragraph 48, that Mr Brcic subsequently returned to the site and cut the leads on a hoist because a bricklaying team was not in the union. That is squarely contradicted by Mr Brcic, but seems to have been disallowed, and we'd seek that you re-examine that point. It's an allegation of criminal conduct.

COMMISSIONER: What he said was, as I recall it, he came out and pulled the leads out, he didn't cut them. Is that right?

MR LATHAM: Who said?

COMMISSIONER: Mr Brcic said.

MR LATHAM: He hasn't given evidence yet.

COMMISSIONER: Where is his statement?

MR LATHAM: It's in the first paragraphs, in paragraph - - -

COMMISSIONER: 2 to 5, is it? Paragraph 48?

MR LATHAM: It's actually paragraph 6.

COMMISSIONER: He says: "I removed the untagged lead from the hoist and handed it to the builder and asked that it and the hoist be tagged." The difference between cutting it and pulling it out is effectively to stop it. There doesn't seem to me to be a material difference.[41]

Unfair presentation of evidence and inadequate opportunity to respond

In the course of the hearings, Counsel Assisting would generally initiate the presentation of a case study with evidence adverse to unions. Even before oral evidence could be given, Counsel Assisting frequently delivered an opening statement neatly summarising the anti-union allegations before the waiting media. There does not appear to have been one occasion where Counsel Assisting fairly presented both contrary and supportive evidence to the Commission.

Counsel Assisting’s usual practice was to call the witnesses who made allegations against the unions. These witnesses would often be asked to adopt their statement and were then released. Counsel Assisting rarely attempted to present contrary evidence.

Typically, union witnesses were not approached by Counsel Assisting, nor the investigators of the Commission, in order to put their response to the allegations raised. Instead, documents entitled “Notices of Adverse Evidence” were provided to the union witnesses, a few days before the hearing, or on many occasions on the actual day of the hearing, and occasionally, not at all.

The individual then had a very short time to consider the material, often consisting of hundreds of pages of the computerised “Courtbook”. Responding was a time consuming and expensive process, requiring many hours of down-loading and printing. Often numerous statements were added to the Courtbook system overnight, meaning unions had to work around the clock to keep up with the allegations being made. Sometimes these witness statements were dated weeks earlier but there appeared to be no consistent effort to maximise the notice given to the person or entity against whom the allegations were made.

Many statements in reply were prepared overnight and on weekends without opportunity for proper investigations to be made.[42] Frequent complaints were made to the Commission both during hearings and through correspondence by solicitors, but the practice continued in all hearings.

While in a few extreme cases, where the union witness was expected to consider hundreds of pages and prepare material in response overnight, the Commission allowed short adjournments. Otherwise, the usual practice of requiring an immediate response was permitted to continue throughout all hearings in all states. Enormous time pressures were placed on the unions and those assisting them to read the material and prepare responses.

Throughout the hearings, union witnesses were nearly always cast in the role of the accused. They were forced to spend their time responding to allegations made against them.

Senior counsel for a number of union witnesses, Mr Steve Crawshaw, criticised this process on 13 June 2002. The Royal Commissioner replied as follows:

That is the way the Commission has been operating since last December and it is the way it is going to continue to operate, unless some court tells me otherwise.[43]

The full exchange between Mr Crawshaw and the Royal Commissioner is found in the transcript of 13 June 2002 at pages 8380 to 8384.

In contrast to the demands placed upon unions in submitting material, Counsel Assisting often failed to meet the directions timetable for the presentation of their material. Deadlines were extended for the presentation of Counsel Assisting’s submissions meaning that unions were still being given lengthy submissions by Counsel Assisting as late as Christmas Eve 2002.

Finally, Counsel Assisting made no effort to put before the Commission differing versions of events. If evidence was placed before the Commission, Counsel Assisting did little to present further evidence which might challenge it. In effect, Counsel Assisting were saying they were content to let that version of events stand unless the union witnesses chose to contradict it. The inquiry had abandoned the idea of canvassing all parties involved to determine where the truth lay.

Baulderstone Hornibrook at the National Gallery of Victoria site

An example of this relates to a case study examination of the renovation of the National Gallery of Victoria. The Commission produced evidence that the builder, Baulderstone Hornibrook, paid $275,000 to “a consultant” to engineer an agreement between the union and MF Davine, an electrical contactor, to exclude a union-nominated shop steward from the site.

The allegations included damaging and false speculation that the money had gone to the CEPU.[44] Hundreds of pages of witness statements were given to the employers many weeks before the public hearings on this and other matters concerning the dispute. In contrast, the union received them late on the afternoon of Friday 22 February 2002, with hearings commencing the following Monday.

Dean Mighell, Victorian Secretary of the electrical division (ETU) of the CEPU, was not given an opportunity to prepare a considered response to the various allegations made by employers, nor was he permitted to cross-examine the Baulderstone Hornibrook witnesses about their evidence.

Despite that, it became clear during the hearing that neither the CEPU nor the shop steward involved knew anything about the transaction. The first the CEPU knew of these events was through the Royal Commission itself. Counsel Assisting was unable to make any suggestion that CEPU officials had acted improperly.

It seemed that once the Commission was satisfied that the union was not in any way involved in this incident, there was little interest in uncovering the full story.

Instead the Commission appeared to be more interested in examining the union’s industrial action in reaction to the treatment of this issue than in pursuing evidence that Baulderstone Hornibrook may have made these payments or whether this amounted to a breach of industrial laws protecting union representatives from discrimination.

Nambour Hospital

Another example relates to a dispute at the Nambour Hospital in Queensland. The Commission conducted an extensive set of public hearings into this dispute which extended over three weeks of sitting time and heard from almost fifty witnesses. This was almost longer than the dispute itself.

During this hearing, the electrical division of the CEPU alleged that a non-union agreement made by Eatons Group Pty Ltd, an electrical contractor, had been signed on behalf of employees by senior managers, namely Peter Bowen and Peter Gower. Peter Bowen had also signed on behalf of the employer. Peter Ong, a CEPU organiser, gave evidence and provided the business cards of Peter Bowen and Peter Gower. The business cards identify Peter Gower as the Regional Manager for Eatons, and Peter Bowen as the Queensland State Manager for Eatons.

Under state and federal law, the Eatons Certified Agreement[45] was required to be approved by a valid majority of all the employees to be covered by the agreement.

As the agreement did not contain managerial classifications, this raised doubts about its validity under Queensland legislation.

After the Agreement was signed the company engaged additional employees to work on the Nambour site. The company claimed that the new workers were bound by the Agreement even though they had no input into it.

When approached by the CEPU (Electrical Division) about entering an EBA, Eatons claimed that they would not do so as they already “had an agreement directly with their employees”.[46]

The Union submitted that the Eatons Certified Agreement was a sham and did not comply with the jurisdictional requirements under the Industrial Relations Act 1989 (Qld) for certification[47]. Counsel Assisting did not call Mr Bowen to give evidence. Mr Gower was summonsed to give evidence and provided a witness statement. He was not asked a single question by Counsel Assisting in relation to the Certified Agreement[48].

In spite of this evidence, the final submissions of Counsel Assisting[49] concerning this matter concluded that there was no basis for questioning the validity of the agreement.

The Commission’s Interim Report

The Royal Commissioner set 5 July as the date by which Counsel Assisting was to provide a list of persons, and organisations, against whom adverse findings might be found arising from evidence led in the Sydney hearings. The list was not intended to be comprehensive, thus leaving room for others to be added. Nevertheless the document gave an indication of where the Sydney proceedings were headed.

Counsels Assisting listed 32 persons and organisations. Not one employer was on the list.

The Royal Commissioner issued a report to the Commonwealth Government titled “First Report” (“Report”) dated 5 August 2002. The Report made a number of findings and interim recommendations adverse to the interests of union witnesses. It also foreshadowed substantial recommendations for reform in the final report.

The Royal Commissioner said at Paragraph 4 of the Report that, after taking evidence from New South Wales he was:

satisfied that the material received evidences practices and conduct which exhibit:

a) widespread disregard of, or breach of, the enterprise bargaining provisions of the Workplace Relations Act 1996;

b) widespread disregard of, or breach of, the freedom of association provisions of the Workplace Relations Act 1996;

c) …

d) widespread requirement by head contractors for sub-contractors to have union endorsed enterprise bargaining agreements before being permitted to commence work on major projects in state capital central business districts;

e) widespread requirement for employees of sub-contractors to become members of unions in association with their employer obtaining a union endorsed enterprise bargaining agreement;

f) widespread disregard of the terms of enterprise bargaining agreements once entered into;

g) widespread application of, and surrender to, inappropriate industrial pressure;

h) widespread use of occupational health and safety as an industrial tool;

i) widespread making of, and receipt of, inappropriate payments;

j) unlawful strikes and threats of unlawful strikes;

k) threatening and intimidatory conduct;

l) …

m) …

n) disregard of federal and state codes of practice in the building and construction industry;

o) disregard of the rule of law.

The Royal Commissioner in paragraph 5 of the Report stated that “much of the evidence of such conduct is not in dispute”. Yet in New South Wales alone, all the evidence presented by Counsel Assisting alleging inappropriate or unlawful conduct by unions or their officials was contradicted by oral evidence and statements from union witnesses.

With respect to Sydney, the Royal Commissioner issued the Report without calling for, or hearing, any submissions from the union witnesses on the evidence before the Commission.

Unions learnt of the First Report only on 20 August 2002 (some 15 days after the date of the Report), by way of a Media Release from the Minister for Employment and Workplace Relations.

The issuing of the Report, before the unions had had the opportunity to put their views in either evidence or submission, was simply unfair.

This issue was the subject of litigation before the Federal Court, arising from a claim by the CFMEU that the Commission had not provided it with procedural fairness. Although Justice Branson held that there was no legal procedural unfairness arising out of the interim report, this was in the context of the wide powers of Royal Commissions and the fact that they are not required to act judicially. However, the issues to be considered in determining procedural unfairness at law are narrow. Accordingly, as Justice Branson points out, there were no conclusions made that the Federal Court endorsed the procedure of the Commission:

It should, in my view, be stressed that it is not the role of this or any Court to oversee the day to day conduct of a Royal Commission so as to ensure, for example, that the openings of Counsel Assisting are complete and accurate, that evidence is fairly gathered and used, that individual witnesses are questioned fairly and that cross-examination is not restricted unfairly or arbitrarily. . . . [50]

The Role Of The Media

The processes adopted by the Commission in relation to presentation and testing evidence led inevitably to wide media coverage of allegations against unions, but with little if any coverage of later evidence rebutting the allegations.

In some cases, it appeared that the Commission’s media office alerted the media to allegations of which the subject might be unaware. This meant that stories would appear, with the potential to cause harm to the individuals involved, with the other side reported much later and often not at all.

Baulderstone Hornibrook

The allegations about the payments made by Baulderstone Hornibrook, included alleged assurances by these “consultants” that would ensure that the union dropped its demand in relation to the employment of its appointed shop steward, were published initially without making it clear that the union knew nothing of the payment and had not received any of the money.[51]

The “boatload of thugs”

In a statement made to the Commission, Peter Killick, a manager for Fairbrother, a Tasmanian building company, alleged that in a conversation between himself and officials from the CEPU an official said something to the effect of “thugs/ boatloads of thugs/ unemployed members/ thugs with bats”[52] would be brought over to “sort them out”. He gave a total of four different accounts of the conversation in his written statement, in his oral evidence and in various diary notes, which he conceded were not written until months later. Indeed, in his oral evidence he alleges that Kevin Harkins, the Tasmanian Secretary of the electrical division of the CEPU, had made the comments, whilst his statement refers to another person.

Mr Killick later gave evidence that “somewhere along the line I got it wrong”[53]. However, this was too late for Mr Harkins, whose reputation suffered from front page media articles naming him as having made such statements.

The eve of the Victorian election

The crudest example of media bias arising from the Commission was the front page of the Herald Sun on the day before the Victorian State election. The article took up the entire front page on Friday 29 November 2002.

UNION DEALS EXPOSED

Royal Commission building blast

By JASON FRENKEL, industrial reporter

A SCATHING report by the building industry royal commission attacks the Bracks Government's industrial relations practices -- but it will not be released until after tomorrow's state election.

Premier Steve Bracks' office yesterday confirmed it had received the submission from lawyers assisting commissioner Terence Cole, QC.

The confidential report alleges four counts of inappropriate behaviour by the Bracks Government in relation to three major building projects in Victoria.

The Victorian Government has admitted twice to the royal commission that it acted inappropriately in its handling of industrial relations.

But the submission contains two new allegations the Government acted inappropriately.

The allegations involve Saizeriya's Melton food factory, the Latrobe Regional Hospital and Housing Ministry flats in Kensington.

The Herald Sun understands the submission alleges:

THE Bracks Government offered compensation -- believed to be up to $2 million -- to Saizeriya after its building site was hit by industrial strife.

FEARS of a union backlash twice influenced the Government's conduct in awarding contracts.

THE Government failed to intervene in the hiring of a $13,000 mystery plumber, who never worked on the project for which he was hired.

The submission, prepared by counsel assisting the commission, Richard Tracey, QC, was sent to the State Government during the past six weeks.

It details the case that Mr Tracey will make to Mr Cole as he prepares his final report.

This report -- initially expected to clash with the state election -- has been delayed until January 31.

The commissioner will make his recommendations based on the critical submission. They could include possible charges by the Director of Public Prosecutions.

Although the Government comfortably won the election, this extraordinary attempt to damage the Government’s electoral chances by leaking the material should be investigated by the Commission.

Conclusion

This document is not a comprehensive review of the work of the Royal Commission into the Building and Construction Industry. Such a review would require a book, and no doubt, once the report has been made public someone will write the full story.

The ACTU has set out to demonstrate that the Commission was deeply flawed. Established as part of a political strategy to undermine unions, it does not seem to have been able to rise above its unfortunate origins.

The ACTU repeats its condemnation of criminality, including violence and intimidation, wherever these occur, and calls for any allegations in relation to such conduct to be dealt with through the legal system.

However, despite issues of fraud, corruption and violence being included in the terms of reference, these matters were never the focus of this Commission. Industrial relations issues especially as they related to the activities of unions and union officials, became the dominant, almost exclusive preoccupation of this inquiry.

There is not much doubt, that the Commission will recommend a range of administrative and legislative actions to be taken against unions involved in the industry. There seems to be little likelihood that the Commission will recommend changes to the existing law to allow for industry-wide bargaining and site agreements, which are widely held to be appropriate for the particular needs of this industry.

It is far less certain that it will make recommendations going to the root causes of the industrial disputes in the industry: the failure of employers to adhere to legal standards in relation to OHS, payment of wages and other employee entitlements, payment of tax, payment of workers’ compensation premiums and provision of proper training.

In order to address these issues, the Government needs to strengthen laws and provide substantially more resources for data collection and enforcement. Appendix 1 contains a comprehensive list of recommendations submitted to the Commission by the CFMEU.

Tragically, it is more likely that Government efforts will focus on making it harder for unions to work towards ensuring that employees receive their fair entitlements in a safe workplace.

Appendix 1: Recommendations Made To The Royal Commission By The Cfmeu

(i) Safety

The CFMEU regards the poor safety record of employers as one of the industry’s most serious problems. It is the most glaringly obvious example of “inappropriate or illegal” conduct the industry has to offer.

We note also that for the most part, OH&S is currently regulated in the State/Territory jurisdictions.

The Commission chose to deal with the issue of occupational health and safety in a particular way. That is, the topic was the subject of discussion papers and a conference and some limited exposure through the public hearing process. The CFMEU does not accept that this was the best way to deal with the issue. Nor in our view has there been adequate reasons given as to why this topic was treated in the way it was when industrial relations matters were dealt with through the adversarial process.

Nonetheless, as the Commission will express a view in relation to the issue of safety, we say the Commission should make the following findings and/or recommendations:-

• The respective State and Territory Governments should allocate more resources to their workplace inspectorates, including the establishment of a specialist unit for the construction industry where such units do not presently exist.

• There should be established a national OH&S database for the industry administered by NOHSC or other appropriate body and funded by the Commonwealth. Each State/Territory jurisdiction should be required to report all OH&S incidents [including notices, accidents and fatalities] in the industry to that body on a regular basis.

• A record should be kept as part of this database from which clients, contractors, unions and the public at large could obtain details of the safety record of all contractors in the industry. All information collected through such process be made publicly available. An annual report should be prepared by that body and tabled in Parliament.

• Such information could also be used by the relevant licensing bodies who should be required to take an employers safety record into account when issuing a license. Guidelines should be established for such licensing bodies to allow for “repeat offenders” to be denied the necessary license and thereby be excluded from the industry.

• Each contractor should be obliged to produce, either as part of the prequalification procedure or as part of the tender, its safety plan for the project and that such safety plan be taken into account in assessing the suitability of that contractor for the project. For successful tenderers, such safety plan should be made available upon request to the site safety committee and the unions with coverage for the site.

• There should be a national review of OH&S laws applying in each state and territory with a view to ensuring that existing penalties, including financial/criminal sanctions, act as an adequate deterrent to poor OH&S practices.

• Each state/territory should review existing legislative provisions in respect of safety committees and safety representatives with a view to ensuring that workers rights for representation and involvement are guaranteed and that adequate and appropriate measures exist as mandatory minimum requirements.

•

• A program should be introduced nationally requiring that all plant and equipment (including tower cranes, mobile travel towers, scissor lifts, concrete pumps, hoists, pile drivers, compactors, skid steer loaders, dozers, excavators, etc), used in the industry be inspected annually, certified as safe and conforming to manufacturers specifications. The “Crane Safe” program applying to mobile cranes in Victoria [and which has national industry support] could be used as a model for such a program.

• Union officials should have a national right to enter workplaces to investigate complaints about OH&S issues.

• The Commission should recommend the introduction of industrial manslaughter legislation in every jurisdiction.

• The Commission should recommend that government contracts not be let to contractors with a proven track record of non-compliance with OH&S standards.

ii) Taxation Issues

The Commission should recommend:-

• the setting up of a properly resourced national ATO Unit dedicated to investigating and prosecuting sham subcontractor arrangements and misuse of the ABN system in the construction industry. This unit should conduct regular liaison meetings with unions and employer groups and provide a public report of its activities annually.

• that the 80:20 concept arising out of the Ralph Review be properly implemented and the watered down model presently in place be rescinded.

iii) Corporate Insolvencies “Phoenix” Companies

The Commission should recommend that there be tougher penalties for those found to have repeatedly abused corporate structures by having companies wound up leaving employees, revenue authorities and other creditors unpaid. Such penalties should include, in serious cases, a lifetime disqualification from directorship of any corporate entity.

Consideration should also be given to legislation that allows the “corporate veil” to be lifted so that employees have direct access to the assets of directors/shareholders in appropriate circumstances such as fraud.

There should be a dedicated construction industry unit within ASIC with industry liaison and reporting responsibilities as outlined for the corresponding ATO body described above.

There should be a “whole-of-government” approach to the abuse of corporate structures that includes communication between the ATO, state revenue authorities and ASIC.

iv) Structure of Working Arrangements – Sub-Contracting and Labour Hire

The Commission should recommend that s127A of the Workplace Relations Act be amended so that bona fide contractors have recourse to an effective remedy in situations where the contract is proved unfair and the Court be given wide ranging powers to make orders to redress that unfairness. It should also recommend that this jurisdiction be exercisable in lower courts with simpler procedures with the Federal Court exercising a supervisory jurisdiction.

The Act should be amended to include labour hire agencies within the definition of “employer” in s4.

The Commission should recommend the establishment of a comprehensive national licensing regime for the labour hire industry.

The Commission should recommend amendments to all relevant OH&S legislation to guarantee that the client “employer” and labour hire company are both jointly and severally liable for the OH&S of labour hire workers, including the rehabilitation of injured workers[54]

v) Security of Payment for Employees

The security of payment issue for employees in the construction industry concerns both entitlements that accumulate over time such as annual leave, as well as payments owing from week to week. In the latter case problems with payment are often the result of unconscionable behaviour of head contractors in withholding progress payments on spurious grounds in order to extract commercial advantage from smaller sub-contractors.

Because the industry is a cyclical one and is filled with undercapitalised operators, insolvency often jeopardises hard earned entitlements which are the only safety net building workers have. The risk is higher for them than for many others in the community.

Companies are also “sunk” deliberately for tax evasion purposes, leaving workers unpaid.

There has been a myriad of proposals over the years as to the best way to deal with the problem yet it still exists. It is often treated as a contractual problem and the remedy directed at the various means available to ensure that money flows down the line. To that extent consideration should be given to extensions of schemes like that which applies in NSW. However that approach alone is not sufficient. Workers stand in a different category. They are not in the business of risk taking. Their entitlements must be statutorily guaranteed.

A statutory scheme must be based on the principle that the costs of such a scheme should be borne by employers. It is not appropriate that taxpayers bear the burden. It should be regarded as a cost that is an ordinary incident to running a business. An across the board employer levy should be introduced. Critics of such a scheme say it penalises good employers. The argument is misconceived. It is the equivalent to arguing that the requirement to insure for workers compensation penalises employers with safe systems of work.

The Commission should recommend national legislation to ensure that head contractors are responsible for and take steps to ensure that the entitlements of the employees of subcontractors have been met prior to the release of progress payments and retentions.[55]

vi) Non-Payment of Employee Entitlements

There are two significant disincentives to instituting legal proceedings in the case of employer non-compliance with awards and agreements. These are time and cost. Court proceedings to recover unpaid entitlements can take a year or more to be processed through the court system. It is often necessary to engage lawyers in the process. By contrast, employer relief from alleged action taken in breach of a contract of employment in the form of industrial action, is swift.

A streamlined, simple and timely process is needed to allow workers to resolve alleged award breaches. The right to legal representation should be limited in such a process.

We note that a Vice-President of the Commission has recently raised the prospect of a “labour court” with members of the Commission being dual appointees to such a court, with the capacity to exercise judicial power to resolve such issues[56]. That prospect warrants serious consideration by the Commission.

vii) Avoidance of Workers Compensation Premiums

Insurance companies should be subject to financial penalty where the certificates of currency they issue are based on obviously false wage and workforce estimates. Penalties should also apply to employers who provide such false information.

Workplace inspectorates should conduct regular random audits of employer workers compensation cover in the industry and prosecute where such cover is inadequate.

(viii) Exploitation of Illegal Immigrant Labour

Typically, these arrangements involve the use of workers on restricted tourist visas for extended periods on Australian construction sites. The workers themselves are often grossly exploited, but the Australian taxpayer is also affected because of the avoidance of tax and other statutory obligations inherent in these arrangements.

The Royal Commission should recommend that employers who engage persons outside the terms of their visas be subjected to heavy financial penalties. It should also recommend that such cases be automatically referred to the Department of Employment and Workplace Relations and the relevant union by the Department of Immigration and Multicultural Affairs to ensure that all employee entitlements are paid.

viii) The Apprenticeship System and Training:

One of the greatest challenges facing the construction industry is how to maintain the quality and productivity associated with the industry in a context where the skills base of the industry has been steadily depleted over the past decade. Research has shown that the number of apprentices engaged in the industry has fallen from 30,312 in the 1989 to 24,288 (including trainees) in the 1997[57].

The growth in group training companies has come nowhere near replacing the number of building trade apprentices that have disappeared from the industry in recent times. The Royal Commission should recommend steps to increase the numbers of apprentices in the industry, including the introduction of employer incentives; ratios of apprentices for Government contracts; the direct employment of apprentices by Government bodies and a more secure funding system for group apprenticeship schemes.

The Commission should recommend the introduction of a national skills card for the industry. Apart from opposition from the HIA and parts of the MBA, there is general industry support for the introduction of a skills card. This card would contain information on the individual worker and the skills that they have obtained, judged against national competencies and licensing requirements. The existence of such a scheme would help to ensure that employers have a properly trained workforce, which would in turn have a positive effect on safety in the workplace.

(x) Allowing for Site Agreements, Pattern Bargaining and Choice of Representation.

The Commission should have regard to Australia’s international obligations and ILO criticisms of the present Act insofar as it promotes individual over collective agreement making, does not facilitate the parties determining for themselves the level at which they negotiate and allows employers to dictate to employees who they are to be represented by[58]. The Commission should recommend that the present Act be amended to ensure that it is consistent with all Conventions to which Australia is party.

Industry and sector agreements have a proven record of resolving disputes and providing for industry level consultation. The Commission should recommend the rights of employees to pursue agreements at other than an individual workplace level be enshrined in legislation.

The Act should be amended to remove impediments to site agreements. The capacity for unions to be excluded from sites for which they have coverage, at the behest of employers, is a limitation on freedom of association and should be removed from the Act.

(xi) National Construction Industry Council

The Commission should recommend a tri-partite industry body be set up and funded by the Commonwealth. Such a body would consist of representatives of all the major industry parties including Government, business and union representation and would meet with a view to discussing and implementing ideas to improve efficiency, stability and fairness in the industry.

(xii) National Construction Industry Fund

Some consideration should be given to the establishment by the Commonwealth of a National Fund for expenditure on public infrastructure projects designed to take account of the cyclical nature of the industry. A portion of the Commonwealth’s construction budget could be set aside on a regular basis and dedicated to the Fund for expenditure exclusively during industry downturns and/or in regions where the level of unemployment in the industry is high. Targeted spending of this kind would ensure that at least part of the Commonwealth’s procurement budget would be carried out with the interests of those affected by the industry’s structural flaws in mind and the effects of political considerations such as the election cycle or old fashioned pork-barrelling, minimised.

(xiii) National Licensing

A national licensing and pre-qualification system should be introduced for all companies that operate in the building and construction industry. All companies that tender for work and any subcontracting company that they intend to use, must be licensed. The licensing requirements should be fairly onerous and strictly enforced. The criteria for licensing could include all workers having a skills card, all plant and equipment regularly tested by the crane safe program, having a clean financial history in regard to taxation obligations and workers compensation, no directors or managers having convictions for fraud or bankruptcy and no major convictions for award breaches.

-----------------------

[1] Stephen Donaghue Royal Commissions and Permanent Commissions of Inquiry Butterworths 2001 pp 17-18.

[2] RCBCI Overview of the Nature and Operation of the Building and Construction Industry DP1, May 2002 pp15-16

[3] Ibid p22

[4] RCBCI Statistical Compendium for the Building and Construction Industry DP2, May 2002

[5] Ibid p28; RCBCI Workplace Health and Safety in the Building and Construction Industry DP6, July 2002 p55

[6] NSW Labor Council Workers Online workers..au Issue No 42, 28 June 2002

[7] See Australian Taxation Office Submission to the Royal Commission into the Building and Construction Industry June 2002, doc. 006.0500.0085.0022 p1

[8] supra

[9] supra, page 1

[10] ATO submission, pp 10-11

[11] supra

[12] supra

[13] supra

[14] Transcript 9000/14

[15] Supra

[16] RCBCI Productivity and Performance in the Building and Construction Industry DP3, May 2002

[17] Australian Construction Productivity International Comparison Access Economics and World Competitive Practices Pty Ltd. August 1999.

[18] Constructing the Future: A Study of Major Building Construction in Australia Employment Studies Centre, University of Newcastle. August 1999.

[19] Transcript 12285: 27ff

[20] Exhibit 1151, para. 28

[21] See photographs annexed to the statement of Kevin Harkins, “KH1” , TS 3702 and following.

[22] See generally TS White, pp3937 to 3945

[23] Exhibit 239B, TS 3934.

[24] See Submissions of Counsel Assisting, paragraph 503.

[25] See TS Wilkins, TS 3915, and witness statement of Wilkins and annexures.

[26] See Submissions of Counsel Assisting, paragraphs 504 to 509 inclusive.

[27] Submissions of Counsel Assisting, paragraph 508.

[28] Transcript p14353

[29] Transcript p12753

[30] Transcript p14385

[31] Witness statement of Bradley O’Carroll, para 31; Witness statement of Randall Godfrey, para 3

[32] Transcript pp1292 and following; O’Carroll, paras 20-21

[33] Transcript p1295/40

[34] Transcript p1293/30

[35] Statement of Tony Murphy, 11 March 2002, para 43

[36] Submissions of Facts (Tasmania) from Counsel Assisting, paras 391-413

[37] Workers Online Issue No 143, 5 July 2003

[38] Workers Online Issue No 145, 19 July 2003

[39] See statement of Adrian Cowie, and attachments thereto including letter to the Royal Commission dated 22 January 2002.

[40] Statutory Declaration of Michael Pyers para 48 6 June 2002

[41] Transcript pp9413-9414.

[42] This information provided by solicitors Maurice Blackburn Cashman, solicitors for the CEPU and AWU in the Commission hearings.

[43] Transcript pp 8382-8383

[44] Witness Statement of Graham John Milford-Cottam

[45] Exhibit 84

[46] Witness Statement of Peter Ong, para 14.

[47] Submissions made on behalf of Bradley O’Carroll and Peter Ong, paras 16 –18.

[48] Transcript pp 855-857

[49] Final submissions of Counsel Assisting, Nambour Dispute, paras 24-25 .

[50] Ferguson v Cole [2002] FCA 1411 (20 November 2002) para 81

[51]Melbourne Age 26 February 2002, ppA1-2; Australian Financial Review 26 February 2002, p3

[52] See doc 053.0333.0886.0203, attachment PJK 3 to the Witness Statement of Peter Killick; transcript 3665/43, TS 3867/5, TS 3867/12, TS 3866/45

[53] Transcript 3875/20

[54] See “Labour Hire in Australia – Motivation, Dynamics and Prospects” Working Paper no. 76 Dr. R Hall ACCIRT University of Sydney April, 2002.

[55] See s127 Industrial Relations Act 1996 (NSW).

[56] See address to ACT Industrial Relations Society Annual Conference October, 2002.

[57] NCVER figures cited in Construction Training Australia’s Strategic Initiatives 1999.

[58] See Right to Organise and Collective Bargaining Convention (No.98), Freedom of Association and Protection of the Right to Organise Convention (No.87).

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