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What can be done to stop the systemic unlawfulness in the building industry?

By Ken Phillips - posted Thursday, 17 April 2003

The Cole Royal Commission could simply have produced yet another list of corrupt practices and persons in the construction industry. But the recommendations of Terrence Cole have gone much further and exposed what no-one in the industry wants to publicly state, namely that key institutions that regulate the industry have failed.

All industries in a market economy are regulated by laws administered and enforced by government funded institutions. The system of industrial relations tribunals in conjunction with the consumer watchdog, backed by the courts and ultimately the police, are supposed to ensure that all people have fair and equitable opportunities to work, earn a living and engage in business. This underpins a free, civilised society and should have been operating in the construction industry.

But what Cole has documented is a pattern of unlawful activity so widespread and so accepted as a normal way of doing business, that the unlawfulness must be defined as systemic. The institutions that were supposed to ensure equity and fairness have failed on such a scale that Cole has recommended overriding their powers and creating a new body charged to succeed where they have failed.


Cole does not specifically accuse the institutions of failure but his key recommendation leaves no other conclusion. The lynch pin recommendation is for the establishment of an industry specific watchdog, the Australian Building and Construction Commission (ABCC) modelled along the lines of, and with powers similar to, the Australian Consumer and Competition Commission. Along with a new body to monitor compliance with occupational health and safety requirements, the ABCC will be charged to ensure that players in the industry cannot rort the game to achieve unfair advantage over others.

The ABCC is recommended to have powers to stop activities that are already illegal under one of Federal and State industrial relations legislation, the Trades Practices Act, the States Fair Trading Acts and criminal law. This includes the prevention of pattern bargaining, stopping of unregistered and/or secret agreements, the restriction of industrial agreements to employment matters, ensuring freedom of association, stopping the illegal removal of money from employee benefit funds and the prevention of intimidation, harassment and violence.

If the industrial relations commissions, the ACCC, appropriate government bureaucracies, the police, unions and employer associations had been doing or capable of doing their jobs, it should have been expected that Cole would have recommended fine-tuning of their powers. But no!

Cole details how even police have stood by and watched unlawful behaviour and by their submissiveness condoned unlawfulness. Nothing could be more telling of a system gone rotten! Even further, Cole's list of individuals who have committed unlawful behaviour, come mostly from within the ranks of the institutions that were supposed to ensure fairness.

The only institutions with a tick from Cole are the Australian Tax Office and the immigration department. Apparently both these authorities robustly enforce their responsibilities in the construction industry.

All other institutions are found wanting. Employer associations and unions receive special attention with recommendations that their officials be trained in the requirements of the law, pass tests to demonstrate they understand the law and be deregistered as officials if they fail to comply with or endeavour to ensure others comply with the law.


Ultimately the failure that Cole details is not that of market failure, but rather failure of the market regulators.

Cole recommends establishing a new regulator that is dedicated to the construction industry and with the powers, skills and resources to undertake its tasks. This is to be created via amendments to the Federal Industrial Relations Act but realising these amendments is where the next level of debate will be telling.

Unions have, with a predictability that is damaging their cause, announced vehement opposition to the creation of the ABCC. However it is not unions who threaten implementation of Cole's recommendations.

Systemic unlawfulness only becomes systemic because people in positions to move against unlawfulness either turn a blind eye or, for example, quietly damage the career of an official who tries to do something. The real threat to Cole's recommendations will come quietly and insidiously from behind closed doors, from elements within the current institutions that fear losing their existing power to the new regulator.

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This article was first published in The Australian Financial Review on 31 March 2003.

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About the Author

Ken Phillips is executive director of Independent Contractors of Australia.

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