A union representing construction workers in Australia has sensationally called for the nation’s current workplace regulator to be scrapped and replaced with a regulator whose board is at least half controlled by workers and unions.

The Construction, Forestry, Mining and Energy Union (CFMEU) has called for the abolition of the Fair Work Ombudsman (FWO), which is responsible under the Fair Work Act 2009 (the Act) for regulating and enforcing compliance with the Act.

In its place, the union has called for the establishment of a new workplace regulator whose board would be at least 50 percent controlled by unions and worker representatives.

In a statement released last week, incoming CFMEU National Secretary Zach Smith said the FWO had failed to address important matters in construction including wage theft, sham contracting and corporate insolvency.

“Australia’s industrial watchdog is more like a toothless Chihuahua than any serious workplace regulator,” Smith said.

“The Fair Work Ombudsman’s priorities are all wrong. It is fundamentally broken beyond repair.

“Australian construction workers are facing endemic corporate insolvency, wage theft and sham contracting. But the ombudsman is prioritising the anti-worker ideological fights of the previous Coalition government.

“We need to scrap the Fair Work Ombudsman and start again. It’s time to start from scratch with a body that puts workers first.”

The latest call comes after the role and powers of the former Australian Building and Construction Commission (ABCC) were transferred to the Fair Work Ombudsman late last year following the election of the Albanese Labor Government in May.

The former ABCC was highly regarded by building industry employer groups as an effective regulator of workplace relations but was despised by unions who saw the regulator as an attack dog of the former Coalition Government which unfairly targeted workers and unions.

The call also comes amid ongoing concern from employer groups that the CFMEU engages in widespread illegal conduct on work sites.

In its statement, the CFMEU called for the FWO to be scrapped in favor of a new regulator, whose board would be comprised of at least 50 percent workers’ representatives.

The proposed new regulator would also:

• Not commence or continue prosecutions against unions and their members for activity that is protected under the relevant International Labor Organisation conventions.
• Be armed with the power to effectively address security of payment issues.
• Make compliance and enforcement activity a priority including protecting workers’ rights and the recovery of unpaid wages and entitlements.

In its statement, the CFMEU said that the FWO had failed to address either wage theft or sham contracting and had failed to support workers and subcontractors in obtaining payment where major construction insolvencies occur.

On wage theft, the union claims that almost two thirds of the funds which FWO has recovered in the past five years has come from self-reported underpayments from large corporates as opposed to proactive enforcement actions such as audits.

Citing estimates from consulting and accounting firm PwC in 2019 that construction workers are underpaid $320 million each year, the union claims that underpayments in the building sector are rife.

On sham contracting, the union says that the FWO’s sham contracting unit that was established in 2019/20 has accounted for only 0.1 percent of the regulator’s overall recoveries since that time (FWO has recovered $819,89 in sham contracting related underpayments).

Finally, the union says the FWO has failed to support subcontractors and workers to recover money owed to them in the event of major building company collapses.

On this score, the union is calling for a nationally harmonized approach to security of payment regulation along the lines of recommendations contained in a review of security of payment laws around the nation which was conducted in 2017.

In particular, the union would like to see the creation of statutory trusts to enable subcontractors to more easily and readily recover money which is lost.

(Sourceable note: laws relating to security of payment are the jurisdiction of individual states and territories – each of which has its own Act which provides a statutory mechanism for resolving payment disputes.

The FWO does not have any legal or enforcement powers in respect of this area of law.)

On each of these issues, Smith said FWO has failed in its responsibilities.

“Wage theft is rife in construction but we simply don’t have a watchdog which is pulling its weight,” he said.

“The FWO is relying heavily on large corporates self-reporting wage theft despite being the regulator for 13 million Australian workers.

“If we want to properly address wage theft we need a tough cop on the beat not a regulator that needs bosses to tell them when workers have been ripped off …

“… Sham contracting is a massive issue which rips off construction workers but it’s clearly not a priority for the Fair Work Ombudsman …

” … We’re seeing Australian builders collapsing regularly. Only last week PBS went under with millions still owed to contractors and workers. But we haven’t heard a peep from the FWO.

“Either the FWO doesn’t care or they don’t have the power to act – neither is good enough and workers and businesses in the construction industry are suffering as a result.

“There is no federal government agency there to support small business and workers when these catastrophic corporate failures occur.”

In a statement, a spokesperson for the Fair Work Ombudsman denied that the regulator had failed.

In the last full financial year alone, the spokesperson indicated that the FWO recovered more than $532 million in unpaid/underpaid wages and entitlements for 384,805 workers nationally – a record annual recoveries figure for a record number of workers. In that year, the FWO filed a record 137 litigations to protect workers, the first time it had had filed more than 100 court actions in a year.

On sham contracting, the spokesperson pointed out that the FWO has resolved 630 disputes relating to this and misclassification of workers over the past two financial years alone.

Indeed, sham contracting is one of five areas which the organisation is targeting in its 2022/23 priorities.

Meanwhile, the union’s proposal for a new workplace regulator whose board consists of at least half union and worker representatives raises questions about how such an organisation would prosecute illegal union conduct as well as unlawful conduct from employers.

Over recent years, the union has drawn the ire of judges for the repetitious nature of its unlawful behaviour.

In December 2020, for the example, Federal Court judge David O’Callaghan declared that the union was a ‘well-resourced, recidivist offender of workplace laws’.

The CFMEU did not respond to questions from Sourceable that having a regulator whose board is at least 50 percent controlled by unions would be effective in prosecuting those same unions for workplace law contraventions.

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