For The Labourer is Worthy of His Hire

The Troubleshooters Case

Peter Costello

"I am satisfied, in the light of all the evidence, that the two respondent unions, along with others in the building industry, have adopted a policy of trying to prevent the applicant from operating in the industry as it presently does."
The Hon Mr Justice Woodward 24 August 1989.

In May 1988, Troubleshooters Available commenced Court action against building unions and officials seeking protection of its right to trade without union interference.

After succeeding before Sir Edward Woodward in the Federal Court and in appeals against his judgment to the Full Federal Court and the High Court of Australia, Troubleshooters was vindicated.

The Judgments found that Troubleshooters lawfully traded, was entitled to lawfully trade, and was entitled to do so free from union conduct which had been taken for the purpose of causing it substantial loss and damage.

The Court actions which took over 40 hearing days over three years, are recorded in thousands of pages of transcript and over 250 pages of Judgment. Newspapers reported the somewhat hyperbolic view of the BWIU Secretary that it "....could be the most significant development in Australian industrial relations history".

But now it appears the story did not end with the High Court decision of 7th June 1991 ruling out further appeals. The union movement has another appeal under way, and this time the Judge is not impartial. The Judge is the Federal Labor Government.


The Nature of the Building Industry

The building industry in Australia can be divided into two sectors. One is the residential building sector, and the other the commercial/industrial sector. Residential building is almost totally performed on a contract basis. A bricklayer will contract to lay the walls, a carpenter will contract to erect the frame, a tiler will contract to lay roof tiles, and so on. The bricklayer, the tiler, the landscape gardener, contract to perform the job for an agreed price. They do not regard themselves as employees but as independent contractors.

There are contractors in the commercial/industrial building sector. An owner may contract a project manager. A project manager may contract a consulting engineer. A scaffolder may be contracted, an electrical contractor contracted to perform electrical work, and a plumber contracted to perform plumbing work. But as far as unions are concerned, only employees are allowed to actually do work on a commercial building site. The electrical contractor must employ electricians to do the work, the builder must employ the carpenters. The person who touches the wires, the person who picks up the trowel, the person who picks up the hammer on a commercial/industrial building site must be an employee. Of course, they must also be a member of a registered trade union. The practice "no ticket, no start" means that no one without a ticket can work on a building site.

The Troubleshooters case had nothing to do with union membership. Every person who worked through Troubleshooters held a union ticket. It is impossible to get on to a building site without one.1

The Troubleshooters case was all about whether men were entitled to work as independent contractors on commercial/industrial building sites. All (including unions) accepted the right of independent contractors to work in the residential building sector. The question was whether they should be quarantined to that sector.


Employee v. Independent Contractor

The difference between an employee and an independent contractor is and always has been recognised by Australian law.

The modern law of employment is descended from the law of master and servant. An employee undertakes to serve an employer in a particular capacity. The agreement between them is sometimes described as a "contract of service" as distinct from a "contract for services".

An independent contractor agrees to supply services. He contracts to produce a result - for example, to fix the wiring in your house or to lay concrete on your driveway. He does not agree to serve you or become your employee. He wishes to remain independent.

Most people are familiar with independent contractors in the building industry. If you ask an electrician to put some lights in your home you expect him to be self-employed or an independent contractor. You do not expect to become his employer when he walks into your home. If you did become his employer you would be liable to remit group tax out of the earnings, pay a workers' compensation premium, pay according to the Award, pay superannuation and a whole host of other obligations which are now attached to the employment relationship.

With an independent contractor the contractor has the obligation to perform the job, he is paid accordingly, and the relationship ceases once the job is completed.


Troubleshooters' Mode of Operation

Troubleshooters established a register of self-employed tradesmen and labourers. Before admitting people to the register they were interviewed, and the status of being an independent contractor was carefully explained to them. The concept is well understood in the building industry, where tradesmen routinely work as contractors in the residential sector.

Builders who required tradesmen or labourers could ring Troubleshooters, which would undertake to supply a suitably qualified person at a particular price. Troubleshooters would contact men on the register. An agreement to do the job would be struck between Troubleshooters and an available contractor.

For the builder Troubleshooters provided the service of locating qualified people. If there was fault in the work they had recourse against Troubleshooters. The builder could secure tradesmen and labourers for particular jobs.

Although building workers are notionally employed by the day under the Award, in practice it is very difficult to terminate employment. Evidence in the trial was that employees in the industry can only be sacked for theft and assault. Incompetence, laziness, insolence, and even drunkenness will not suffice at least until a number of warnings have been given. It is also risky for builders to employ if the nature of the job is short-term. If there is a downturn in work the employer finds himself over-staffed with no easy means of reducing numbers. Troubleshooters filled a valuable role in providing qualified contractors who could be retained short-term.

For Troubleshooters the arrangements had obvious benefits. It derived income in generating orders from builders, and obtaining jobs for contractors.

For the contractors there were obvious benefits. Once on the Troubleshooters register there was an organisation referring jobs to them. Troubleshooters effectively marketed the services of contractors in the building industry.


Union Opposition

The fact that builders, Troubleshooters, and contractors were happy with this arrangement did not mean that all could go about their work in peace. The building unions from the outset opposed the operation of Troubleshooters. One of the principals of Troubleshooters, Peter Bosa, first commenced business in 1973. After harassment led by the Builders' Labourers Federation, he was put out of business within two years.

In 1976 he re-established the business. He experienced union opposition from the outset, but it was not until May 1988 that the business commenced proceedings in the Federal Court to stem union interference.

For nearly twelve years the building unions and Troubleshooters played cat-and-mouse games as the unions tried to identify men working through Troubleshooters, and, after identifying them, take action. This cat-and-mouse game had its lighter moments. For example, the plasterer retained to fit out BWIU offices engaged Troubleshooters, so its contractors ended up plastering the very BWIU offices from which the union campaign was directed!

It was not an easy matter to identify contractors on site. Union officials commonly ask for a show of union tickets on site but since Troubleshooters contractors were members of the union, this did not disclose they had obtained the job through Troubleshooters.

Union officials later began to use the Building Unions' Superannuation Scheme as a means of identifying those working through Troubleshooters. Those working through Troubleshooters were enrolled in that scheme, and Troubleshooters paid amounts into the superannuation scheme on their behalf. The payments, however, were made by companies associated with Troubleshooters. Union officials could therefore get the man's BUSS number, check with the scheme to find the company which made payments in respect of him, and identify him as associated with Troubleshooters.

This is an interesting point because it illustrates how occupational superannuation schemes can be used for industrial purposes. The Building Union Superannuation Scheme was used to identify members of building unions who were not working in a way approved by union officials. The superannuation scheme allowed union officials to identify the targets they wanted to put out of the industry.

After people working through Troubleshooters had been identified, union officials would visit the builder or chief contractor on site. The builder's contract with Troubleshooters would be brought to an abrupt end. Troubleshooters would lose the contract, and the man would lose the job.

Of course only the builder and union officials knew what was said at their meetings. The union officials denied making threats. The builders often had trouble recollecting the conversations. But the sequence was invariably the same. Before the meeting Troubleshooters had a contract, and after it didn't. A large part of the legal case was spent trying to prove that the unions induced builders to cease contracting with Troubleshooters. No one in the industry doubted that the unions wanted to rid the industry of Troubleshooters. One witness remarked: "You would have to be blind if you could not see that or hear that".

The unions admitted, yes, they vehemently opposed Troubleshooters and wanted it out of the industry, but strenuously denied they had ever had its contractors thrown off building sites.

Troubleshooters never had difficulty with union members. It was never a worker who raised the cry against the contractors on building sites. Difficulties only arose after the visits by union officials.

The unions were open about throwing Troubleshooters off building sites in the late '70s and early '80s. A change occurred around the mid '80s when the first successful common law and Trade Practices Act court actions were taken against trade unions. Union officials became much more careful in dealing with builders and were obviously conscious of incurring liability for ruining the business of Troubleshooters. Great pains were taken to make it clear that Troubleshooters should be thrown off building sites without actually saying it.

Mr Justice Woodward's Judgment recounts how one builder :-

"was informed in graphic language that he was in a lot of trouble."

He asked:

"Is that because of Troubleshooters?"
And Bingham [union official] replied:
"You said that, not me."

Bingham added:

"But you can fix it."

Pomeroy [builder] said:

"You mean get rid of Troubleshooters off the job?"

Bingham again said:

"You said that, not me."

Bingham went on to say:

"You won't have a problem in the world if you fix it."

Sometimes union officials used code words to indicate their intentions.

Building unions have developed highly technical rules about safety on building sites. To the degree they protect safety, they are welcome, but since the rules are complex and vary according to who interprets them, they can cover every available situation. No self-respecting union official would ever be unable to find a safety breach on a building site if he wanted to do so.

On a site in Glen Iris a union official found a Troubleshooter. Rather than instruct the builder to remove him he spoke in code---a code well understood by the builder who gave evidence he was told:

".....if I did not abide by the building industry agreement, exactly as it says, he will make an example of the project; it will be the safest one in Melbourne."


Why the Campaign?

The curious question was why the building unions engaged in a campaign to drive Troubleshooters out of the commercial/industrial building industry. Two justifications were that Troubleshooters under-cut awards and the contractors were "tax bludgers."

Contractors to Troubleshooters had tax deducted under the prescribed-payments scheme. This scheme was introduced to prevent tax avoidance in the building industry. It was Parliament's scheme to prevent "tax bludging". From the evidence in the Troubleshooters case it worked very well. Troubleshooters fully complied with the income tax requirements. The claim was nothing more than malice.

The other aspect of the propaganda war was that Troubleshooters under-cut awards. During the course of five weeks of evidence, a number of union officials gave evidence to the effect they opposed Troubleshooters because they undercut awards. Yet none of these union officials had ever calculated the remuneration paid to Troubleshooters and compared it to the relevant award! None of the union officials had ever asked any one else to do the comparison. The comparison was done for the first time at the end of the legal action.

For twelve years unions opposed Troubleshooters for allegedly under-cutting awards. In those twelve years they had never taken steps to verify whether this was the case.

As a result of the Court action they were asked to do such a calculation. They retained accountants for the task. Troubleshooters paid contractors an hourly rate for hours worked. This was higher than the ordinary weekly wage for ordinary hours. But employees under an award had the value of different overtime rates, different work allowances, sick leave, and various other conditions. It is a difficult calculation to do and involves making assumptions as to how much overtime is to be worked, how many days' work will be stopped by rain and the like.

A great deal of complicated accounting evidence was given to the Judge on this question. The evidence was prepared for the purposes of the case, not for the campaign which preceded it. The trial Judge's finding on the evidence was as follows :

"I would say that the Troubleshooters carpenter would earn rather more than the award-wages carpenter, and that two labourers would earn about the same in years when the industry was busy. In a downturn of activity, the results would be difficult to predict."

The twelve-year campaign was based on calculations which were never done. When they were done, far from proving that Troubleshooters was under-cutting awards, it proved that for tradesmen at least, contractors were paid more than they would be paid under the award.

Bear in mind that the men who the building unions wanted to prevent from working through Troubleshooters were members of the union. They paid dues to the union leaders who sought to prevent them working. They received rates which were equal to or above rates under the award. Yet their own union officials embarked on a campaign to stop them working.

The union officials took the view that men who work for themselves are a threat to unionism, even if they are union members.2 As self-employed people they make decisions about how and how hard to work and are less likely to accept union directives on such questions.

They also undermine union propaganda. Troubleshooters negotiated the rate for its contractors. It got better rates than the union had secured under the award. Whatever the award did, it did not lead to higher pay. The award made the way in which people worked on building sites more complicated and less productive, but it did not secure better pay. Personally I think this is why contractors working through Troubleshooters did undermine unionism. They undermined the propaganda which says that unionism is the only thing that stands between modern society and children in the coal mines etc. Contractors on a negotiated rate were not the victims of exploitation. In fact they did better than awards. Contractors proved that freely-negotiated rates could increase productivity and increase pay. Since unions devote so much time to stopping freely-negotiated agreements, they were hostile to Troubleshooters. But the last thing unions want is evidence that freely-negotiated contracts can achieve better results for workers than unions and awards.

The argument with Troubleshooters was also an argument about control. It was an argument about whether people should be allowed to choose how they worked on commercial/industrial sites. Could they choose to work as contractors if they wished to? The union said no. As far as the union was concerned, all people working on these building sites had to work in ways approved by the union and the Industrial Relations Commission. The argument was whether unions and the Commission should control the way in which people worked, or whether people would be free to choose their own working arrangements.


The Outcome of the Case

The Building Workers' Industrial Union of Australia and the Victorian State Building Trades Union and various officials were found liable at common law, and pursuant to Section 45D of the Trade Practices Act.

They were liable for taking action to prevent builders honouring their contracts with Troubleshooters and for preventing Troubleshooters supplying services to builders in the commercial/industrial building industry.

The union has been ordered to pay around $420,000 for Federal Court legal costs to Troubleshooters. Of course, in addition it will have to pay its own legal costs which would be far in excess of that.

Troubleshooters is now seeking damages for the losses it suffered as a result of the union's unlawful conduct.

On 14th February 1992, the Victorian State Secretary of the BWIU wrote to members in the following terms:


"Dear Member,

You will notice there is an increase in your account for this half year. This has been made necessary by a decision of the Federal Court of Australia which has ordered our union and the Victorian State Building Trade Union to pay legal costs incurred by the bodyhire company Troubleshooters Available.
As has been reported in the unions [sic] journal we have been fighting to protect our hard won wages and conditions of employment in opposition to the all-in payments and other award destroying devices used by Troubleshooters.
This resulted in Troubleshooters taking us to the Federal Court.
Unfortunately, the Court ruled against us and ordered us and the VSBTU to pay Troubleshooters legal costs of $421,577.88.
This makes it necessary for each member throughout Australia to contribute an extra $5.00 for the next two six months period [sic], a total of $10.00.
BWIU Shop Stewards have voted to defer their shop stewards commission fees to assist the union financially.
These costs do not include over $300,000 legal fees already met by the union. The action taken by our union in defence of our awards was supported by the ACTU and our own membership.
We have also been vindicated by the fact that the Federal Government has announced its intention to pass legislation making the Troubleshooters Available type arrangements illegal by changing the Federal Industrial Relations Act.
Finally, I wish to thank you for your past support in helping our union achieve the benefits our members enjoy today and look forward to your continued support in the future in our efforts to defend and improve the living standards and working conditions for our members and their families.

Yours sincerely

(Signed) Vince Raffa

BWIU State Secretary"

Raising $420,000 for the BWIU is not all that difficult. All it takes is a $10 levy on the union fee. No building worker can work without paying the union fee, and therefore without paying the levy. Every building worker in the building industry, including those who worked through Troubleshooters, will now pay a levy to reimburse the BWIU for its campaign against Troubleshooters.

Note the tone of the letter of 14 February 1992. No apology is made. There is no contrition shown by the union or its officials for being found liable for breaking the law in the Federal Court. There is no acknowledgment at all of the Court finding that Troubleshooters did not under-cut awards. Indeed, the union still maintains that its campaign against Troubleshooters was based on its "award-destroying devices".

The language of this letter is the language of power. It exhibits a complete disregard for the Court's findings and disregard for the members' interests. There is no apology for spending what must be at least $1 million of members' funds on fruitless litigation.


The next Chapter

Unfortunately, the story does not close there. Senator Cook, currently Minister for Industrial Relations, and former BWIU union official, has announced that he intends to introduce legislation on the question of contractors.

Within 24 hours of the Full Court judgment, this Minister of the Crown pronounced "the law is an ass".

He wants to achieve, through legislation, what the building unions could not achieve through industrial action. He wants to reverse the effect of the Federal and High Court decisions. He proposes to restrict the rights of individuals to control their own working lives as independent contractors.

After vindication in the Courts, after obtaining declarations that it had the right to trade, Troubleshooters risks seeing it all taken away by government legislation. The unions always had the ear of those with the ability to write the law. The unions always had one last appeal Ä an appeal to a biased judge---the Labor Government.

The battle to reform Australian industrial relations is beyond the Courts. It is a battle that has to be fought in the Parliament and in national and state elections.


Endnotes:

1. Indeed, as part of "restructuring and efficiency" in the building industry, if someone is found on a building site without a ticket he is sent home, and all members of the union to which he should belong are entitled to stop work for 24 hours on full pay [See "No Ticket No Start No More" - Address to the H R Nicholls Society - Canberra, February 1989]
2. In a letter to the ACTU Secretary of 4th May 1990, BWIU Secretary, Tom McDonald complained: "Past experience shows that where workers work as self-employed sub-contractors, it is impossible to effectively unionise and organise the workers".


Why HR Nicholls?

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