The Turnbull government is scrambling to find a successor to head its new building industry watchdog after chief Nigel Hadgkiss quit a day after admitting he had recklessly misrepresented union rights to employers for two years.

Employment Minister Michaelia Cash accepted Mr Hadgkiss' resignation from the Australian Building and Construction Commission on Wednesday and a spokesman said a replacement was "yet to be decided".

The shock resignation came as Mr Hadgkiss admitted in a statement of agreed facts that he had breached the Fair Work Act by canning corrections to ABCC information in 2014 that would have reflected new union rights to enter workplaces introduced by Labor.

The Construction, Forestry, Mining and Energy Union took Mr Hadgkiss to court over the matter and he is due to face civil penalty hearings on Friday, where he faces a potential maximum fine of $12,400.

The resignation is a major embarrassment to the Turnbull government, which has campaigned hard against the lawlessness of unions in the construction industry and only succeeded in restoring the ABCC in December last year.

Internal emails revealed in the CFMEU's case showed ABCC senior staff were concerned Mr Hadgkiss was "running something of a political and industrial risk by withholding info on the law as it currently stands".

But ABCC head of stakeholder engagement, Adam Copp, said Mr Hadgkiss was "absolutely adamant that he didn't want us to change anything as the government intention is to change the legislation".

"He said he was extremely comfortable handling it in [Senate] estimates or the media or whatever. He felt pretty strongly," Mr Copp said in an email.

In her statement, Senator Cash said Mr Hadgkiss "has played a pivotal role in restoring the rule of law to Australia's building and construction industry, despite relentless opposition and appalling intimidation from lawless construction unions and their political supporters."

The departure is a major win for the militant CFMEU, which considered Mr Hadgkiss public enemy number one and previously called on him to resign over the breach, saying his position was now "untenable".

"If the head of ASIC was found to have breached corporations law they'd have no choice but to resign. The regulator should be above all that," CFMEU national secretary Dave Noonan said.

But while acknowledging his members would welcome the resignation, Mr Noonan played down its significance.

"I don't see it as a victory," he told The Australian Financial Review. "The real issue is the laws, which are manifestly unfair and target one sector of the community."

Labor questions why Hadgkiss not stood down

 ACTU secretary Sally McManus said "working people will rightly enjoy the professional demise of a person who has made no secret of his agenda to reduce their working conditions".

"As head of the ABCC, he oversaw a draconian and authoritarian body that breached Australia's international obligations, persecuted workers and stripped away the right of silence from ordinary hard working Australians".

"Mr Hadgkiss was an important part of the Turnbull Government's anti-worker agenda. He was the Turnbull Government's hand-picked, ideological cop who was given enormous licence to go after working people."

Opposition employment spokesman Brendan O'Connor questioned why Senator Cash had not stood down Mr Hadgkiss when she became aware of his alleged conduct in October 2016.

"If he hadn't resigned today, would she ever have stood him down?" he said. "Minister Cash had ministerial responsibility for Mr Hadgkiss as Commissioner of the draconian ABCC while the warning bells were ringing for more than three years."

Mr Hadgkiss, 67, is a former Australian Federal Police assistant commissioner and was appointed to head the Fair Work Building and Construction Commission in 2013 before it became the ABCC.

His hardline approach was seen as re-energising the agency but his role was not without controversy.

Last year, a Federal Court judge slammed the watchdog for being "unjustifiably vexatious" and earlier this year another judge accused it of wasting time and taxpayers money on "a miniscule, insignificant affair".

In 2015, Mr Hadgkiss reportedly told staff that he was retiring after he was taken to hospital in November and diagnosed with a medical condition.

However, Senator Cash convinced him to take a period of extended leave rather than immediately retire.

Difficult role to fill

Mr Hadgkiss will now serve a two week transition to facilitate a handover to an acting commissioner.

The role, although highly paid at $426,160 a year, may prove difficult to fill given claims of intimidation of ABCC officials.

Recently promoted deputy commissioner of ABCC operations, Catherine Cato, who oversees the Turnbull government's new building code, is a potential successor to Mr Hadgkiss.

She was a senior lawyer at Australian Government Solicitors for eight years and served as legal director in the previous incarnation of the ABCC.

Former ABCC commissioner John Lloyd declined to comment on whether he would consider replacing Mr Hadgkiss but is understood to be content in his current position as Australia Public Service Commissioner.

Mr Hadgkiss' resignation came on the same day the Federal Court handed down unprecedented penalties against the CFMEU, fining it more than $2.4 million for an unlawful blockade at Lendlease's Barangaroo site.

Master Builders Australia chief executive Denita Wawn said the record penalties "highlight both the substance of Mr Hadgkiss's work as commissioner of the ABCC and the need for it to continue under his successor".

Australian Industry Group chief executive, Innes Willox, wished Mr Hadgkiss a "well-deserve, long and happy retirement", and said he had "worked tirelessly, fearlessly and effectively" to stamp out unlawful conduct in the construction industry.

"Under the leadership of Mr Hadgkiss, substantial progress has been made but there is still a lot of work to be done."