Construction Unions Minting Millions from Insurance: Ai Group 1

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Friday, September 12th, 2014
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Unions in the construction industry are making millions from coercing employers to purchase income protection policies from union controlled insurance companies or worker entitlement funds at inflated prices and accepting commissions and distributions of surplus funds, an employer lobby group has claimed.

In its submission to the Royal Commission into Trade Union Governance and Corruption, the Australian Industry Group says inadequate regulation of governance arrangements for worker entitlement funds and union controlled insurance companies have led to a number of ‘inappropriate’ (though in some cases, not illegal) practices, and has called for a fundamental overhaul of regulation in this area.

Such practices allegedly include:

  • Allowing unions to receive millions of dollars each year each year in commissions and ‘management fees’ from providers of insurance products by forcing employers to buy products at grossly inflated prices
  • Distributing surplus funds to unions and employer association sponsors of funds
  • Redundancy funds making payments to members in circumstances other than in cases of genuine redundancy, such as where workers resign or are dismissed for poor performance
  • Use of funds to pay workers who are on strike; and
  • Discriminating against non-union members when providing fund benefits.

Furthermore, such practices hurt not only individual employers, Ai Group says, but also workers in cases where the insurance products concerned provided less generous benefits compared with other products readily available on the market.

In response, the group has called for industry-wide pattern agreements (often used as a tool for the aforementioned alleged coercion) to be outlawed and for new legislation to beef up governance and supervision of worker entitlement funds and union controlled insurance companies to prevent distribution of funds to union sponsors, discrimination against non-union members and payments to striking workers.

The group has also called for the list of unlawful terms in the Fair Work Act to be expanded to include employer requirements to pay contributions to purchase products from insurance companies or brokers which pay commissions to unions or to worker entitlement funds which fail to meet acceptable standards of governance and supervision.

Construction industry unions are deriving very lucrative and inappropriate revenue streams from the contributions made by employers to worker entitlement funds and from insurance products which employers are coerced to purchase at inflated prices,” the Ai Group submission says.

“As union membership revenue has declined, these revenue streams from employers have become central to union finances. The revenue streams need to be closed off to break the current business model of some construction industry unions where compliance with the law is evidently not seen to be necessary or important, and fines for unlawful behaviour are budgeted for as part of their normal business operations.”

The Construction Forestry Mining and Energy Union (CFMEU) did not respond to Sourceable’s requests for comment.

The latest call comes amid continued scrutiny of union practices through the Royal Commission, which has heard evidence regarding practices of a number of key unions including the CFMEU and is set to hand down its findings and recommendations later this month.

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  1. Andi Coleman

    Can we add groups like hia and master builders….