A recent decision in a penalty hearing before the Federal Circuit Court serves as a warning for construction companies of the potential risks when subcontracting on unionised construction sites.

The first respondent, J Hutchinson Pty Ltd (Hutchinson) was a construction company responsible for the construction of a high-rise residential project on the north side of Brisbane. Hutchinson employed the second respondent, Mr Hawley, as a contracts administrator. Hutchinson also employed the third respondent, Mr Berlese, as a team leader. Mr Hawley reported to Mr Berlese.

Before tendering for tiling works, Hutchinson received an unsolicited phone call from C & K Tiling Pty Ltd (C & K). C & K provided Hutchinson with a quote to complete the tiling works and the parties entered into negotiations. During the course of these negotiations, Hutchinson, via Mr Hawley, queried whether C & K had an EBA. C & K responded that they did have an EBA in place and no further discussion about the EBA occurred at that time. The negotiations resulted in an understanding that C & K would commence the works on 22 October 2012.

One week before C & K commenced work, Mr Berlese sent an email to C & K requesting a copy of its company profile and EBA. The email also requested C & K attend a meeting with the CFMEU. Mr Hawley was copied in to that email. C & K confirmed its employees were paid entitlements under the provisions of their EBA, but indicated the CFMEU was not a party to the EBA.

On 22 October 2012 (the same day C & K was due to commence work), C & K sent an email to Mr Berlese and Mr Hawley stating:

Good afternoon John. As to our meeting with Mr Hawley and your site foreman on Wednesday 10 October 2012, we were advised that we were meant to commence works on the Circa One project this week. … However, I have not had a response back to my previous email regarding the direction given by Andrew Sutherland of the CFMEU to avoid using us due to C & K not having a current EBA with the union. If there is any issue relating to the EBA we currently hold, please let me know as soon as possible.

Two days later, Mr Hawley replied:

Jason, thank you for your time invested in the project. Unfortunately, without a union-endorsed EBA, we will not be able to engage C & K. When Cassidy and I met with you on site it was on the premise that your company had such an EBA in place as you had discussed over the phone.

The respondents admitted that not engaging C & K because the CFMEU was not a party to their EBA was a breach of a workplace right under section 340 of the Fair Work Act 2009 (FWA). The respondents also admitted that their actions were discriminatory and amounted to a breach of section 354 of the FWA.

Despite the respondents admitting to breaches of two sections of the FWA, the Judge accepted that those breaches arose from the same action and therefore considered it was unnecessary to apply a separate penalty for both contraventions.

The maximum penalty available at the time of the contravention was $33,000 for a corporation and $6,600 for an individual. In setting the penalties, the Judge stated that the breach of section 354 of the FWA would fit into the ‘worst’ category and that normally the maximum penalty would be imposed. Significantly, the Judge stated:

Such conduct strikes at the heart of freedom of association. For subcontractors, such as C & K, a major pathway to growing their business is to be awarded contracts from large construction companies like the first respondent. If the only way in which they can break into those circles is to have an agreement with the CFMEU, then the whole fabric of our industrial relations system will disintegrate.

Ultimately, while the Judge took a grim view of the respondents’ actions that triggered the breach, he did take into consideration the cooperation between the parties and decided not to apply the maximum penalty. The Judge issued a penalty of $25,575 against Hutchinson and $1,800 each against Mr Berlese and Mr Hawley for their respective roles in the decision not to engage C & K.

Construction companies of all sizes and their decision makers must exercise caution when engaging contractors. If there is a risk that industrial action might affect a construction project, this risk cannot be mitigated by only engaging subcontractors that will comply with union demands. Construction companies and their decision makers have an obligation at law not to discriminate, or take adverse action, against contractors and employees alike for their affiliation (or non-affiliation) with any union or employee organisation.