Business News

Mon Jul 15

All eyes on Labor as alleged corruption envelops CFMEU. Here are the government’s options

Written by: Anthony Forsyth, Distinguished Professor of Workplace Law, RMIT University

The Nine newspapers and 60 Minutes exposé of alleged links between criminal elements and the Construction, Forestry and Maritime Employees Union (CFMEU ^[1]) demands a strong response by the Victorian, NSW and federal Labor governments.

The revelations raise, yet again, the question of how construction industry unions should be regulated.

This issue has been the subject of many inquiries and royal commissions, most recently the Heydon Royal Commission ^[2] on Trade Union Governance and Corruption.

The Heydon Royal Commission was established by the Abbott Coalition government, primarily in response to fraud and other misconduct by officials of the Health Services Union ^[3].

The revelations of Heydon’s links ^[4] with the Liberal Party compromised his ultimate findings.

However, the final report of his royal commission included a focus on the behaviour of building industry unions, asserting they had engaged in

systemic corruption and unlawful conduct, including corrupt payments, physical and verbal violence, threats, intimidation, abuse of right of entry permits, secondary boycotts, breaches of fiduciary duty and contempt of court.

On this basis, Heydon recommended the re-establishment of the Howard-era regulator, the Australian Building and Construction Commission (ABCC)^[5], to police unlawful industrial conduct by unions and their officials on building sites.

Man sitting behind raised desk speaking to people appearing before tribunal

The Heydon Royal Commission found building unions had engaged in corrupt and violent behaviour. Jeremy Piper/AAP ^[6]

The Turnbull government implemented this recommendation in late 2016, while also significantly increasing penalties for illegal strikes and pickets.

But the Albanese government abolished the ABCC ^[7]soon after taking office in 2022, delivering on a pledge to unions that construction workers should have the same rights as all other workers.

Labor also abolished the specialist regulator for trade unions, the Registered Organisations Commission, transferring its powers and functions to the Fair Work Commission (FWC)^[8].

What can the government do about the allegations?

Because most of the alleged conduct is criminal in nature, the options available to the Workplace Relations Minister, Tony Burke, are limited. He has mentioned deregistration ^[9] of the CFMEU.

Under the law ^[10], the minister can apply to the FWC to have the union’s registration cancelled.

But the grounds for this mainly relate to repeated breaches by a union of awards, agreements, FWC orders or court injunctions – that is, industrial rather than criminal misconduct.

In any case, deregistration is a drastic step with harsh consequences for the majority of CFMEU members who have done nothing wrong.

Deregistration would create chaos in the building industry, affecting all union members, not just those found guilty of misconduct. Darren England/AAP ^[11]

Their awards and enterprise agreements would no longer apply, creating chaos for the building sector.

As well, the more militant elements would no longer be bound by the legal restrictions applicable to registered unions – for example, constraints on unlawful strikes.

The minister could apply to the Federal Court for an order effectively placing the Victorian and/or NSW branches of the CFMEU (the main focus of the alleged misconduct) into administration ^[12].

This would be on the grounds the union has stopped functioning effectively – a high bar which a court may not agree has been cleared.

The national leadership of the CFMEU has already appointed an administrator ^[13] – from an independent law firm – to run the Victorian Branch, while its officials are investigated.

The minister could also request the FWC’s general manager investigate alleged misconduct ^[14] within the CFMEU, although this is limited to breaches of the legal requirements for financial management, accounting and auditing applicable to registered organisations.

If criminal connections involving some CFMEU officials are proven, there would be grounds for their disqualification ^[15] from holding office in the union by order of the Federal Court.

This applies where an official has been convicted of certain prescribed offences ^[16], including offences involving fraud, dishonesty, or intentional use of violence, intentional causing of death or injury, or intentional destruction of property.

Only the FWC general manager can seek such an order, not the federal minister.

Labor needs to take a stand

In opposition, Labor opposed legislation repeatedly put forward by the Turnbull/Morrison governments to crack down even harder on union corruption and misconduct.

The Ensuring Integrity Bill 2019 ^[17] would have widened the grounds on which unions could be deregistered and officials disqualified, and the circumstances in which dysfunctional unions could be placed into administration.

In an earlier piece in The Conversation ^[18] I said the bill was an overreach that would constrain the legitimate role of unions in representing their members.

However, this time Labor in government needs to act.

As well as working with state governments to ensure allegations of criminal behaviour are investigated by relevant authorities, Labor could revisit the grounds for court-ordered disqualification of union officials to capture a broader range of criminal behaviour and to enable the federal minister to apply for disqualification.

It may also be time to implement a “fit and proper person” test for holding union office in the construction industry.

There is room for the Albanese government to take decisive steps against the rogue elements in the CFMEU, devoid of the ideological antipathy to unions which coloured the Coalition’s approach to union regulation.