Construction Industry - Essay Example

Dispute Factors and Dispute Categories in Construction Industry Introduction Ilter (2012) reported that construction industry is also incurring heavy amount of indirect cost due to loss of productivity, fatigue, tarnished reputation, tumultuous business relationship due to industrial disputes. Hence, the importance of finding a sustainable solution for handling industrial disputes has not only become necessary but also a growth indicator for construction industry. Ilter (2012) stated that despite the important nature of topic of industrial disputes in construction industry, very few researchers have put their foot forward in order to address the key issues on the topic. Probable reason for the lack of interest among researchers on the topic is deep rooted to pertinent aspects like legal complexity, lack of circumstantial evidences and geographic diversity. The mentioned factors make conducting research on internal disputes in construction industry pretty much ambiguous and challenging. Conjunction of complexity, diversity and literature gap in the topic has influenced the researcher to write this paper in order to shed light on pertinent issues regarding industrial disputes in construction sector. The researcher will take help of the research works of previous researchers in order to develop theoretical background of the paper while at the later section; the researcher will cite practical implications of the topic even in 2013. Defining Industrial Dispute Love et al. (2010) defined dispute as the disagreement between two parties regarding a particular issue and in broader sense, the dispute can include tension between supplier & vending party, workplace disagreement between employee and employer, dispute between stakeholders etc. The study will focus on issues like termination of employment, grievances between employee-employer, grievances between stakeholders etc. Love et al. (2010) and Bray, Waring and Cooper (2011) argued that industrial dispute doesn’t only focuses on employer-employee differences rather other issues like workmen-workmen disputes or employer-employer dispute. Hence, the researcher has increased the scope of the study in order to capture all the dimensions of industrial disputes in comprehensive manner. What can be the major dispute issues in case of construction industry? Well, the reader will get different answers as they move from one country to another. Industrial dispute issues faced by Australian construction industry might not be similar with the British construction industry due to factors like different political orientation, economic volatility, culture and expectation of workers etc. However, in the next section, the researcher will try to find some definitive industrial dispute issues facing by construction industry in general. Dispute Occurrence Love et al. (2010) pointed out that dispute occurrence can be instigated by diversified array of factors such as dispute regarding the wage of employee, dispute regarding working hours, disputes regarding quality standard, misunderstandings and unpredictability between employee-employer etc. Yiu and Cheung (2007) pointed out that dispute between employer and supplier might occur due to faulty supply, frequent client change, increased project cost etc. There are examples of industrial dispute between construction worker and employer regarding unhealthy working condition or construction site hazards. In short, the above examples are denoting the diversity of dispute issues among employee and employer. Major industrial dispute issues in construction sector will be identified in the following section. Pathogens Love et al. (2010) stated that dispute might arise due to the nature of task being performed by the workers in the workplace and there are instances, when suppliers or workers fail to comply with the compliances and mandatory quality norms. Love et al. (2010) gave examples of construction projects, when labors of the supplier disagreed with the frequent change in work location which was causing them trouble. However, there are cases, when construction employees were dissented with workers due to wrongful discharge from the duty or lay-off. From the legal viewpoint, wrongful discharge from duty can be viewed as breach of implied contract between construction workers and employers. In many cases, it has been found that the worker has been terminated due to poor ethics or non-compliance with company policies. Love et al. (2010) argued that normal employee-employer contract might not work in case of construction workers. For example, suppose a construction company hires a worker on a temporary basis without any formal employment application and then suddenly terminate the employee after completion of the project. In such cases, terminated construction worker might not have the advantage to take legal actions against employer due to non-availability of employment authentication. According to Love et al. (2010), dispute regarding employment termination is very common phenomenon in case of construction industry and there can be two reasons behind rise of such disputes. Wrongful breach of implied contract between Construction Company and workers. Violation of public policy regarding wage and employment conditions. Employment Aspect & Enterprise Bargaining Construction industry depends heavily on performance of workers in the site and undeniable fact is that chances of injury or accident exist for employees working in construction site due to movement of heavy equipments. Chan and Suen (2005) also pointed out that workers might show agitation against employer regarding the poor working condition, lack of infrastructural support, poor facilities etc. Ashworth (2005) pointed out that there are instances, when employee might dispute against the variation in pay, unrealistic job expectations, lack of availability of information, risk allocation etc. Generally, construction workers work under the supervision of supervisor reports to the company owner. According to Ashworth (2005), the supervisor might not have the power to explain the price variation or increase in project cost or fluctuation of decision client to workers and this is the reason, why workers fail to understand strategic move of the construction company. Hence, tension may arise between worker and employer regarding the workplace decisions. Careful analysis of research works of Busby and Hughes (2004) reveals the fact that employee-employer dispute in the workplace is relatively stable phenomenon and nature of the phenomenon hardly differs from other industry. However, same cannot be said when it comes to enterprise bargaining issue (Fair Work, 2013). In case of Australia, enterprise bargaining is defined as the process of negotiation between employer and employee, bargaining representatives in order to make an comprehensive enterprise deal (Fair Work, 2013). The Fair Work Act 2009 is being used as the guiding principles for enterprise bargaining process. Unified enterprise agreement was created in order to replace the existing workplace agreements while enterprise agreement is reached between employee and employer through collective bargaining. During collective bargaining, employees table their demand in front of employer and employer considers or negotiates over the demand and finally, both the party reaches a conclusive agreement. Till date, very few researchers have focused on enterprise bargaining issue in case of Australian construction industry hence literature on the topic is scarce. Research work of Chan and Suen (2005) reveals the fact that construction industry works in project wise manner and companies shifts workers on a project to project basis. Hence, establishing a standard enterprise bargaining process is difficult for construction industry. However, there are enterprise bargaining can also be used by construction companies regarding unethical work practice of employees, dispute regarding wages and working hours, implementation of new technologies etc. As a result it can be said that the agenda of enterprise bargaining is to keep the organization running smoothly and address any kind of industrial dispute in smooth fashion. However, in modern days, industry disputes not only include employer-employee differences but also include conflict between stakeholders. Stakeholder Aspect It is evident from the research work of Fryer et al. (2004) that construction projects involve multiple stakeholders such as supplier o raw material, third party vendor, project management team, client, local authority, government, legal offices etc. Fryer et al. (2004) also pointed out that industry disputes might occur between any of the above mentioned stakeholders. Hence, industry disputes not only addresses employer-employee disagreement rather scope of the word is much bigger and it can cover much larger aspects of the issue. Following tables can be used to depict nature of disputes between stakeholders in case of construction industry. Table 1: Stakeholder Driven Industry Dispute Factor Stakeholders Reason of the Dispute Project value and Project Duration Client and the project management team Rise in cost and time length of the project can create dispute between clients and project management team. Practice Client and the project management team Late instruction or sudden change in project instruction or inadequate technical specifications can raise dispute between clients and project management team. Supply Supplier, project management team and client Rise in cost of supply, faulty supply or failure to supply material on time can raise dispute among stakeholders. Legal Norms Project owner, government and legal authority Non-compliance with government norms or land leasing problems can raise dispute among stakeholders. In some cases, illegal acquisition of land can fire dispute between stakeholders. Macro-environmental Aspects In recent times, nature of the labor market has changed due to various reasons such as shift of political balance, economic turbulence, advent of latest technology, renewal of legal norms and social equilibrium alteration etc. Fryer et al. (2004) also found similar kind of tectonic shift in case of supply and demand of construction labor market. Important fact is that, quantitative analysis of Chan and Suen (2005) reveals the fact that attrition rate in construction industry is far greater than other industry and there can be multitude of reasons for such discrepancies such as, 1- many labors are employed on the basis of projects and they are being terminated after the completion of the project, 2- level of education among construction workers is moderate which makes them improper for conducting skill intensive jobs etc. However, the study is not very sure about the occurrence of the above reasons but role of legal, political, social and technical issues on industry relation can be defined in the following manner; Table 2: Labor Market Supply-Demand Condition Factors Labor Market Supply Labor Market Demand Legal Employment regulation has been created by governments of different countries (eg. Fair Work Act 2009 by Australian Government). Such regulations are giving options to employees to bargain for their demand and also affecting the balance of labor supply to construction industry. Labor demand is fluctuating for construction industry due to stringent labor policy and regulations. Construction companies have become selective in terms of hiring and trying to satisfy the requirements of workers in order to maintain the industry relation. Social Falling birth rates and workforce aging is the key concern of employers and that is also reducing labor market supply. Migration of workforce is also decreasing the supply of labor. Construction companies demand labor pool that is physically able to perform the hard works but aging labor force is directly a shot in the arm for these companies. In many cases, migration of workforce compels the company to put extra pressure in the shoulder of existing labors and that may spoil the industry relationship between employee and employer. Economic Fluctuating exchange rate, high inflation rate, stagnant GDP growth and current account deficit have been creating pressure on people to earn more money to satisfy basic needs of life. Hence, there are families where both husband and wife are working and same situation can also be observed in case of construction industry. Such increase in supply of labor has natural outcome of economic turbulence. As a result of economic crisis, cash flow for companies is decreasing and companies are downsizing employee strength in order to decrease operational cost. Relationship between employee and employer is worsening after the start of downsizing spree. Technological Due to advent of technology, workers are banking on learning new technology and count as valuable addition in labor market supply. Supply of talented and skilled workers has been increased in recent years. Construction industry prefers to banking on modern technology which can not only automate the working but also increase the production output to a certain level which might not be achieved by deploying human labors. Hence, the industry is witnessing a sharp crunch in demand of labor in construction industry. (Source: Sage Pub, 2009) Is the issue still relevant in 2013? The definitive answer to the question is yes and in case of construction industry, there are countries like Australia, UK that are facing challenges to address problems regarding workplace relation. Hannan and Ferguson (2013) reported that countries like Australia are suffering heavy losses due to turbulence in workplace relation. Hannan and Ferguson (2013) also reported that construction workers in Australia are facing harsh consequences of worker uproar and trade union activities. Australian government has taken strict measures such as legalizing assault on unions, increasing criminal penalties for any kind of destructive activities within workplace, preparing ethical conduct list for workers etc, in order to suppress trade union activities and increase industry productivity. It is evident from the report of Hannan and Ferguson (2013) that overall productivity of construction industry has dropped by at least 10% in recent years due to poor industry relation between employee and employer. As of 2013, only a handful of construction companies have aligned their activity with The Fair Work Act; this is the reason why majority of construction companies in the country are facing dilemma regarding enterprise bargaining issue. Hence, the research topic in this essay is not only relevant in 2013 but also concerning issue for most of the construction majors. There are reports about the labor movement regarding unlawful termination of workers in the construction sites, working in hazardous environment, sexual harassment, gender specific biased attitude etc in case of many construction companies. Same is the condition for Australian companies and in many cases; these reasons have influenced workers to go against the company. It is evident from the above discussion; turbulent industry relation in construction industry is pretty much contemporary topic even in 2013. Approaches for Dealing with the Issue Kapelyushnikov, Kuznetsov and Kuznetsova (2011) argued that actual nature of workplace relationship cannot be understood in comprehensive manner without assimilating the knowledge on capitalism and communism. Kapelyushnikov, Kuznetsov and Kuznetsova (2011) stated that varieties of capitalism (VoC) concepts are available for theorists that can help them to judge whether an industry relationship between workers and company is ethical or not. What about trade unions and labor movement? Well, communism is the driving force behind labor movement and providing the hope to workers to fight for their share and not to tolerate capitalist greed. However, in case of construction industry, one may observe different kinds capitalists forces are working together. For example, Kapelyushnikov, Kuznetsov and Kuznetsova (2011) pointed out that construction companies might ask workers to work in hazardous environment without taking proper security provisions. Companies use such practices in order to avoid cost of investing money in implementation of security measures and increase the operating margin. On the other hand, employers might prefer to rely on trained and skilled employee in order to produce high quality products and due to such stringent focus on quality, the company might downsize employees. In those cases, workplace relation is bound to get sour and workers might show agitation against the employer. How the problem can be solved? In simple words, there is no permanent solution to the problem and in the last 200 years, various companies sorted out the problem through their own negotiation process. The essay will state following methods for resolution of the disputes. Figure 1: Dispute Resolution Stages (Source: Chong and Zin, 2012) Research works of Akan (2011) and Singh (2001) also supports the fundamental aspects of the above model and these scholars pointed out that the model might work well in case non-contrived setting. Let us use the model in context of the construction industry, 1- Grievances- in this phase, dispute between workers and the management of the construction company may arise due to various reasons such as mass downsizing, unlawful termination of employment, discriminating in terms of gender & race, low wages, extension of working hours etc, 2- Negotiation- line managers try to negotiate with agitated workers over the issue, 3- Mediation- if negotiation fails, then construction companies try to mediate the issues by conducting brainstorming and meeting with workers. In most of the cases, labor agitations can be resolved through mediation process and the construction owners accept some of the demand but there are instances, when collective bargaining of labor needs to be adjusted through legal process such as adjudication, arbitration and litigation. In case of litigation, dispute between workers and the company might be settled with the help judiciary intervention or legal help. In case of Australia, The Fair Work Act has been created in order to resolve the industry disputes through enterprise bargaining and the model is alternate version of litigation phase. Careful consider of research works of Price (2007) and Yıldırım and Calıs (2008) reveals the fact that despite the presence of well defined labor laws, companies tend to find loopholes in the laws in order to pressurize laborers. Although, the above mentioned steps are systematic in nature but such resolution process is pretty much time taking and confusing. In such context, as already mentioned that enterprise bargaining process of Australia can speed up the dispute resolution process but further researches are need in order to validate utility of the model in context industrial dispute resolution in construction industry. Conclusion Ilter (2012) stated that construction industry should be classified as the most notorious sector when it comes to industrial dispute and lack of employment trust. Love et al. (2010) also reported the fact that construction industry is the ‘biggest loser’ when it comes to incurring increase in direct cost (0.5 to 5 percent of construction project’s contract value) due to industrial disputes. Due such issues, resolving industrial dispute has become challenge for construction companies in order to achieve both sustainability and profitability in business. Although, the researcher has given a systematic dispute resolution framework but companies should validate the practical implication of the model. However, it can be concluded that industrial relation is a sensitive issue and comprehensive engagement of both employee and employer is needed in order to maintain harmony in the relationship. Reference List Akan, T., 2011. Does political culture matter for Europeanization? Employee Relations, 33(3), pp. 221-248. Ashworth, A., 2005. Contractual procedures in the construction industry. New York, NY: Pearson Longman. Bray, M., Waring, P. and Cooper, R., 2011. Employment relations: Theory and practice. Sydney: McGraw-Hill. Busby, J. S. and Hughes, E. J., 2004. Projects, pathogens, and incubation periods. International Journal of Project Management, 11(2), pp. 95-117. Chan, E. H. W. and Suen, H. C. H., 2005. Dispute resolution management for international construction projects in China. Management Decision, 43(4), pp. 589-602. Chong, H. Y. and Zin, R. M., 2012. Selection of dispute resolution methods: Factor analysis approach. Engineering, Construction and Architectural Management, 19(4), pp. 428-443. Fair Work., 2013. Enterprise Bargaining. [pdf] Available at: [Accessed 14 September 2013]. Hannan, E. and Ferguson, J., 2013. Coalition's changes to industrial relations face a Green delay. [online] Available at: [Accessed 16 September 2013]. Ilter, D., 2012. Identification of the relations between dispute factors and dispute categories in construction projects. International Journal of Law in the Built Environment, 4(1), pp. 45-59. Kapelyushnikov, R., Kuznetsov, A. and Kuznetsova, O., 2011. Diversity within capitalism: The Russian labour market model. Employee Relations, 33(4), pp. 395-412. Love, P., Davis, P., Ellis, J. and Cheung, S. O., 2010. Dispute causation: Identification of pathogenic influences in construction. Engineering, Construction and Architectural Management, 17(4), pp. 404-23. Price, R., 2007. Employment law in principle. Sydney: Thompson Law Book Company. Sage Pub., 2009. The Labour Market Context of HRM. [pdf] Available at: [Accessed 16 September 2013]. Singh, G., 2001. National culture and union density. The Journal of Industrial Relations, 43(3), pp. 330-9. Yıldırım, E. and Calıs¸, S., 2008. The impact of EU accession on Turkish industrial relations and social dialogue. Industrial Relations Journal, 39(3), pp. 212-28. Yiu, K. T. W. and Cheung, S. O., 2007. Behavioural transition: A framework for construction conflict-tension relationships. IEEE Transactions on Engineering Management, 54(3), pp. 498-505. Read More