Australia: Federal Court imposes penalties on Victorian Government for Construction Code adverse action breaches - but where next for construction industry regulation?

In Construction, Forestry, Mining and Energy Union v State of Victoria (No 2) [2013] FCA 1034 (11 October 2013), Justice Bromberg of the Federal Court of Australia ordered the Victorian Government to pay $53,000 in penalties to the CFMEU for engaging in unlawful adverse action and coercion through the implementation of its Construction Code and Implementation Guidelines.

In this In Brief, we examine Justice Bromberg's decision as a prelude to considering a number of developments and likely future directions for construction industry regulation under the new Coalition federal government.

BACKGROUND

This latest decision of Justice Bromberg followed two decisions handed down by his Honour on 17 May 2013,¹ finding that the Victorian Government's implementation of the Construction Code Guidelines involved unlawful adverse action and coercion against the employees of two bidders for government-funded work in breach of Part 3-1 of the Fair Work Act 2009 (Cth) (FW Act).

These earlier proceedings concerned a bid by Lend Lease (through a consortium) for the Bendigo Hospital Project; and a bid by Eco Recyclers Pty Ltd (Eco) to carry out demolition works on the Circus Oz Project in Melbourne through a head contractor, McCorkell Constructions Pty Ltd (McCorkell). Lend Lease and Eco had been informed by the Government's Code Construction Compliance Unit (CCCU) that their enterprise agreements were not compliant with the Construction Code Guidelines because they contained prohibited 'union-friendly' provisions. Both Lend Lease and Eco were encouraged by the CCCU to bring their agreements into line with the Guidelines. Ultimately, McCorkell denied Eco work on the Circus Oz Project due to Eco's non- compliance with the Guidelines.

SHOULD PECUNIARY PENALTIES BE IMPOSED ON THE VICTORIAN GOVERNMENT?

Having held in the 17 May decisions that the State of Victoria had taken adverse action against Lend Lease employees because of their entitlement to the benefit of the Lend Lease agreement, and that the State had coerced Eco and its employees to exercise a workplace right, Justice Bromberg then had to consider what penalties should apply.

Section 546(1) of the FW Act empowers the Federal Court to order a person to pay a pecuniary penalty for contravening a civil remedy provision of the legislation, including the adverse action provisions in Part 3-1. The Victorian Government argued that while it was bound by the FW Act, it was not liable to have a pecuniary penalty imposed upon it for breach of a civil remedy provision.

After reviewing the applicable statutory framework, Justice Bromberg rejected this contention and found that there was no indication that the Crown was not intended to be subject to civil sanctions imposed to promote compliance with the FW Act.

Justice Bromberg held that as the primary objective of the penalty provisions in section 546 is deterrence, the Victorian Government – as a substantial employer – should be liable to penalties for contravening a civil remedy provision of the FW Act.

WHAT PENALTIES SHOULD BE IMPOSED ON THE VICTORIAN GOVERNMENT?

The maximum penalty in respect of each of the FW Act breaches was $33,000. In the Lend Lease matter, Justice Bromberg imposed a penalty of $25,000 against the Victorian Government; and in the Eco/McCorkell matter, a penalty of $28,000 was imposed. According to his Honour, these relatively high penalties were justified because:

• The unlawful conduct in both cases was not inadvertent and occurred over significant periods of time.
• The conduct threatened the job security of the employees of Lend Lease and Eco, because it threatened Lend Lease's capacity to secure the tender for the Bendigo Hospital Project and threatened the future of Eco's demolition business.
• The conduct was endorsed by the highest levels of government and was taken in furtherance of "an industry wide policy" by the CCCU, which (as a highly influential participant in the building industry) should have been expected to "provide leadership and promote exemplary practice." The conduct was therefore "more egregious by reason of the influence, leadership status and standing in the industry of the contravener." Justice Bromberg further considered that "the size of the contravener is also a significant factor" in supporting a heavier penalty.

However, Justice Bromberg then ordered that payment of the penalties be stayed pending the determination of appeals brought by the Victorian Government against his decisions of 17 May (the CFMEU has also lodged a cross-appeal).

SO, WHERE TO FROM HERE?

The appeal proceedings are listed for hearing before a Full Federal Court bench commencing on 11 November 2013. The Federal Employment Minister Senator Abetz announced that the federal Government will seek to intervene in support of the State of Victoria's appeal. Senator Abetz stated that "as the Federal Court's decisions may have significant implications for the operation of the general protections provisions of the Fair Work Act, I consider it to be in the public interest that the Commonwealth intervene to make submissions about their correct interpretation."²

The decision by the Abbott Government to intervene in the appeal is not surprising. The Coalition's Policy to Improve the Fair Work Laws included a commitment to re-establish the Australian Building and Construction Commission (ABCC), and to work with State Governments which have put in place their own construction codes to ensure consistency with the federal Building Code.

Legislation abolishing the existing regulator, the Fair Work Building Industry Inspectorate (FWBII), and restoring the ABCC is expected to be introduced in the first sitting week of federal Parliament in mid-November. However, this bill is unlikely to be passed until after 30 June next year, when the composition of the Senate changes and the Government has better prospects of securing passage of legislation with support from the Palmer United-Motoring Enthusiast parties alliance.

Finally, the Federal Government has signalled a return to a tough approach to enforcement of building industry regulation against unions, with the appointments of former ABCC chiefs Nigel Hadgkiss and John Lloyd as Director and Advisory Board Chair of the FWBII.

We will keep you updated on further developments in future Corrs In Briefs.

Footnotes

¹Construction, Forestry, Mining and Energy Union v State of Victoria [2013] FCA 445; and Construction, Forestry, Mining and Energy Union v McCorkell Constructions Pty Ltd (No. 2) [2013] FCA 446. See our earlier In Brief.

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