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Last year, according to Dentons partner Persephone Stuckey-Clarke, the abolishment of one regulatory body resulted in a “a lack of deterrence” – something which has now played out with the CFMEU saga.
Persephone Stuckey-Clarke is an employment and safety partner at global law firm Dentons. Speaking on a recent episode of the HR Leader Podcast, produced in partnership with Dentons, Stuckey-Clarke delved into the allegations of corruption, bullying and lawlessness at the Construction, Forestry and Maritime Employees Union (CFMEU) and discussed some of the failings and recent changes that allowed certain issues in this space to flourish.
The Construction, Forestry and Maritime Employees Union (CFMEU) scandal kicked off in July, said Stuckey-Clarke, after allegations of corruption, illegal conduct, misuse of position, misappropriation of funds, intimidation, coercion and more within the CFMEU came to the surface, primarily around the CFMEU and its dealings with businesses in Victoria.
So, how did we get here? Stuckey-Clarke said that early last year, the powers of an industry watchdog were transferred to the Fair Work Obudsman, somewhat diminishing their strength.
“Up until the 6 March 2023, we had a business industry watchdog [the Australian Building and Construction Commission] and that was essentially the cop on the beat going into construction sites and monitoring and, I think in a lot of cases, discouraging intimidatory and unlawful coercion that may have been displayed on union sites that had a big deterring effect for organisations, particularly the CFMEU. It also resulted in a number of prosecutions against them,” she explained.
“In fact, the Fair Work Commission, in its recent application to the Federal Court to have an administrator appointed over the CFMEU, cited that there were some 2,500 our workplace contraventions undertaken by the CFMEU in the last 20 years and $24 million worth of fines. So that is a practice that was there and it was, I think, doing something to keep these costs under control.
“The ABCC was abolished and those powers moved last year to the Fair Work Ombudsman and in one case the Fair Work Commission. And I think it's fair to say that those powers are not as strong and that the activity of both of those regulators in discouraging the kind of behaviour we're talking about on site is significantly less than it was in the past.”
The abolishment of the ABCC created somewhat of a regulatory “vacuum”, where conduct isn’t necessarily a police matter but also falls a little far outside of the FWC’s remit.
“It was described as overly political and politicised organisation, and inherent in this area is an element of politics, and that may have been the case in some instances, but what the abolition of that organisation, I think we can see has led to is really a vacuum in active regulators in this space. And unfortunately, bad actors are attracted to areas where there is a lack of regulation,” Stuckey-Clarke added.
“So, we find ourselves now in a situation where it's not necessarily criminal conduct to be investigated and reported to by police. It's not necessarily a matter that the Fair Work Commission can do something about, it's not a matter that the Fair Work Ombudsman necessarily has jurisdiction over. And so really there is a lack of enforcement and a lack of deterrence in the space. And I think we're just seeing it play out. It is surprising that anyone could really genuinely be surprised that this is where we're sitting now.
“There is an application to put the CFMEU into administration and that's been brought by the Fair Work Commission in the Federal Court. But the reality is, as far as I understand it, there is no power under the legislation for that order to be made. And so, for it to be made, it would have to be unopposed by the CFMEU, who have not indicated that they will not oppose it, which has led to the introduction only this week of legislation to put the organisation into administration for three years, and that it looks like it will go through at this stage.”
If an administrator is appointed, it will only have a narrow impact on the space, despite being a “direct response” to the allegations against CFMEU, according to Stuckey-Clarke.
“What it doesn't do is introduce a more general regulatory environment to discourage behaviour of this nature by other organisations, employer and employee representative organisations. And it doesn't touch the CFMEU or other unions. It's reactive, it's been prepared quickly and we have a recent experience with legislation being prepared quickly and having to deal with that in another area of the law. So, I anticipate there'll be criticism that it is insufficient in that respect,” she said.
“Individual’s conduct is regulated by the criminal legislation and a whole raft of legislation and laws that say what we can and can't do. That's the same for corporations as well. And where corporations cannot function or survive, including corporations that act for the benefit of their members, such as those limited by guarantee, then there is a process to deregister them, have them deregistered through the courts, that kind of regulation over this different type of legal person, which is an employee or employer registered organisation, really doesn't exist in that fulsome sense.”
When asked what this saga says about the current state of affairs for the regulation of industrial relations and, more broadly, workplace and employment matters, Stuckey-Clarke emphasised that more legislation, as well as giving regulatory responsibilities to bodies who “didn't traditionally have those roles” simply isn’t working.
“For example, the Fair Work Ombudsman, as at April of this year, hadn't commenced any new prosecutions against the CFMEU at all for allegations of any kind of breach of Australian workplace laws. And of the 42 cases inherited from the ABCC, when it assumed those functions, it either partially or wholly discontinued about a third of them,” she added.
“And what that says is we have seen a marked decrease in prosecutions and being held to regulatory account of this particular employee organisation at the same time as seeing a corresponding anecdotal mainly, but increase in unlawful behaviour.”
More to come.
