04 September 2015

What next? Collapse of the Government’s construction industry reform agenda

This article was written by James Gould and Daniel Delimihalis.

What you need to know

  • The Federal Government’s bid to re-establish the Australian Building and Construction Commissioner, together with a suite in reforms to regulation of the building and construction industry, has been defeated. However, the Government remains committed to building and construction industry reforms.
  • The Government had called for the ABCC to be given expanded coercive powers to investigate potential breaches of industrial relations legislation in the building and construction industry. Some stakeholders had also called for the proposed ABCC (or the current building and construction regulator) to be given power to take action against secondary boycott conduct. Under current legislation, only the ACCC and private litigants can take action in relation to secondary boycotts.
  • A recent speech by ACCC Chairman Rod Sims suggests that the ACCC will ramp up its industrial relations enforcement activity, including in the area of secondary boycotts, in the short to medium term future.

After a long and torrid journey through the Senate, the Building and Construction Industry (Improving Productivity) Bill 2013 (BCI Bill) has been defeated and with it the Coalition Government’s reform agenda for regulating construction industry participants’ conduct.

The BCI Bill would have re-established the Australian Building and Construction Commissioner (ABCC), reintroduced provisions dealing with unlawful industrial action, coercion and the associated civil penalties specific to the building industry.

We take a look at how the ABCC would have regulated the construction industry, and look to future priorities of the Australian Competition and Consumer Commission (ACCC) in enforcing competition law in the construction industry and in the field of industrial relations more generally, particularly in light of a recent speech by ACCC Chairman Rod Sims.

The BCI Bill’s journey through the Senate

The BCI Bill was introduced into the House of Representatives in November 2013 and then into the Senate in February 2014. Upon reaching the Senate the BCI Bill was relegated, twice, to a committee. The first committee report recommended the BCI Bill be passed. Unhappy with that result, the second committee was highly critical of the BCI Bill, labelling it as lacking an economic or productivity case justifying the reintroduction of the ABCC with invasive powers and higher penalties for construction industry participants.

The BCI Bill was not debated again in the Senate until August 2015, where BCI Bill was defeated 34-33.

What the BCI Bill would have meant for the construction industry

The BCI Bill would have extended a regulatory code to all construction industry participants. In the lead up to the BCI Bill’s introduction into parliament, the Minister for Employment released a forward copy of the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (the Code). Together with the Code, the BCI Bill would have provided for greater coercive powers than those of the existing building and construction regulator, Fair Work Building & Construction (FWBC). These proposed powers included:

  • issuing examination orders without the approval of the Administrative Appeals Tribunal;
  • requiring a person to give information to the ABCC including by examination before the ABCC;
  • entering a premise to inspect any work, process or thing;
  • removing the privilege against self-incrimination;
  • enabling the ABCC to investigate matters that occurred prior to the passing of the BCI Bill; and
  • in civil penalty proceedings, reversing the onus of proof so that a building industry participant would be required to disprove allegations levelled by the ABCC.

The BCI Bill would have also increased penalties associated with contravening the Code. New civil penalties for ‘Grade A’ offences would be $180,000 for corporations or $36,000 for individuals. ‘Grade B’ offence penalties would be $18,000 for corporations or $3,600 for individual. These penalties would extend to making it a criminal offence for failing to comply with the ABCC’s direction to provide information, and certain forms of unlawful industrial action.

Certain construction industry practices would have also been deemed unlawful and unenforceable. These include ‘project agreements’ that provide certain terms and conditions of employment that apply to specific projects. In contrast to enterprise agreements, project agreement are not approved by the Fair Work Commission.

What does this mean for construction industry participants?

The failure of the BCI Bill to pass the parliament means that construction industry participants are still bound by the current Building Code 2013. In many respects the current Code complements existing regulation in the Fair Work Act 2009 (Cth), with a strong emphasis on work health safety and rehabilitation and enabling employees to freely associate (or not associate) with unions. The current code does not seek to apply a higher standard of conduct to the construction industry.

The reintroduction of the ABCC with more coercive powers remains on the Coalition Government’s policy agenda. In light of some of the revelations so far in the Trade Union Corruption and Governance Royal Commission, particularly within the construction industry, further regulation may be deemed necessary.

The fundamental policy objective of increased government intervention in the construction industry is to liberalise the construction industry’s labour market and to reduce costs associated with unlawful agreements and unlawful industrial action.

Given the costs of infrastructure construction are higher in Australia than other comparable countries,[1] it is unlikely that the desire to reform the construction industry will decrease.

Competition law – secondary boycotts

Some stakeholders, including Master Builders Australia and the Australian Mines and Metals Association, made submissions to the Federal Government’s Competition Policy Review (Harper Review) to the effect that the ABCC (if re-established) or FWBC should be given the power to enforce secondary boycott provisions (which would mirror those in the Competition and Consumer Act 2010 (Cth)) (CCA).

The secondary boycott provisions in the CCA prohibit conduct in concert with others that hinders or prevents the supply of goods or services between a third and fourth person, for the purpose or with the effect of causing damage to the business of the fourth person, or a substantial lessening of competition in any market in which the fourth person operates.

The ACCC, which currently has sole responsibility for enforcing secondary boycott laws, had faced some criticism for what was perceived to be a lack of action in relation to secondary boycotts.

While the Harper Review did not recommend that such powers also be granted to the ABCC or FWBC, it did call upon the ACCC to exercise its secondary boycott powers with ‘increased vigour’.

ACCC insights

In a recent speech, ACCC Chairman Rod Sims shared some insights as the ACCC’s stance on competition law enforcement in the area of industrial relations.

The ACCC’s competition enforcement role in the industrial relations sphere is limited by a series of statutory and common law ‘exemptions’.

However, Mr Sims recognised that the ACCC may have taken too strict an approach to these exemptions and confirmed that the ACCC ‘may actually have more union-related major investigations than ever before’. He made specific reference to the ACCC’s current secondary boycott proceedings against the Construction, Forestry, Mining and Energy Union (CFMEU) in relation to its conduct towards Boral, two further in-depth secondary boycott investigations that are underway, and an investigation into alleged cartel behaviour in the ACT construction sector (with the possibility of more to follow).

Mr Sims also flagged that the ACCC will be making a submission to the Royal Commission into Trade Union Governance and Corruption (Royal Commission), suggesting reform in the following key areas:

  • the scope and complexity of secondary boycott provisions, specifically the high threshold imposed by the requirement for the ACCC to prove a purpose and effect test;
  • the fact that s 45E (the ‘stop supply/acquisition’ provision) only applies in circumstances where the relevant contract, arrangement or understanding applies to a particular person (as opposed to be a class of people – such as, Mr Sims suggested, ‘businesses that don’t have an enterprise bargaining agreement’);
  • telecommunications interception, noting that there is a need for investigatory authorities to have access to telecommunication interception material to effectively combat covert conspiracies such as cartels;
  • protection for whistle blowers and parties who assist the ACCC in its investigations, due to a range of commercial and safety concerns that may arise as a result of providing information to the regulator; and
  • compliance with compulsory information gathering powers (i.e. s 155 of the CCA).

The ACCC will also reiterate its concerns about the inadequacy of penalties for failure to comply with notices issued by the ACCC under s 155, reflecting the recommendation by the Harper Review Panel in March this year. The Government is expected to respond to the Harper Review Panel’s recommendations in September.

In the context of the Harper recommendations on secondary boycotts and the ACCC’s commitment to ramping up its IR enforcement activity in the short to medium term future, we will watch with interest whether the Government has the appetite to implement any of the ACCC’s suggested changes and how any such changes interact with more general construction industry reforms.

[1] Deloitte Access Economics, ‘Major infrastructure projects: costs and productivity issues’, 7 March 2014, p.iii

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