Long-serving Construction, Forestry, Mining and Energy Union (CFMEU) organiser Bill White was charged with trespass when he refused to leave the Royal Hobart Hospital redevelopment site in July and police were called.
Mr White's arrest sparked union rallies and warnings the $586 million project could be delayed.
He pleaded not guilty and Magistrate Catherine Rheinberger found he had no case to answer because it was unclear who had legal authority over the communal area Mr White had visited.
A relieved Mr White said building company Fairbrother had been to blame.
"It's a waste of everyone's time," he told reporters.
"I don't see what the problem is, us talking to our members.
CFMEU state secretary Bill Oliver welcomed the outcome.
"The CFMEU puts Fairbrother on notice," he said in a statement.
"We will defend our members and officials no matter what it takes.
"It was legitimate business which Bill White was conducting, and there was no cause to forcibly remove him.
"The CFMEU is fighting to improve the wages and conditions of Tasmanian workers, which lag behind those on the mainland."
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