Australia: Decision presents serious issues for the construction industry

Last Updated: 1 May 2011
Article by Gerard Phillips

In a decision handed down yesterday, Senior Deputy President Acton of Fair Work Australia approved the new Victorian pattern enterprise bargaining agreement (EBA) for electrical trades, dismissing the objections of employer groups and the Australian Building and Construction Commissioner (ABCC).

This decision has serious consequences for the construction industry for two primary reasons:

  • the EBA contains a number of terms which are not compliant with the National Code of Practice for the Construction Industry and Implementation Guidelines (the Code)
  • the clauses at the heart of the debate are inevitably going to be repeated in CFMEU claims across the country this year.

What are the problem clauses?

The clauses which the employers and the ABCC objected to are in many respects ghosts from the past and construction industry participants will be familiar with their predecessors.

1. Labour hire/Security of employment

The clause in question requires employers to consult with the union and employees when it wishes to engage contractors or labour hire employees. This consultation must occur within the 14 days prior to the contractors commencing work and involves the provision of significant information. If there is a dispute over the engagement or the consultation, the union has the right to refer the matter to the Disputes Panel for determination. This in effect gives the Disputes Panel the right to veto an employer's freedom to use contractors as it requires. Any employer who has appeared before the Disputes Panel in Victoria will be aware of how difficult it is to obtain a favourable decision.

Once engaged, the contractors or labour hire workers must be paid on terms no less favourable than those contained in the EBA, regardless of the terms and conditions of any agreement covering those workers.

2. Right of entry

The second controversial clause states that an Electrical Trades Union (ETU) official shall be allowed to enter the workplace to assist with representing an employee under the Dispute Resolution Clause. This right is not restricted by the entry provisions in the Fair Work Act and the usual requirement to give 24 hours notice.

The dispute must have been notified to the employer first, and while on site, the union official cannot use the entry for any other purpose such as holding a mass meeting, conducting a safety audit or review, inspecting records or talking to other employees.

3. Union recognition

The clause requires the employer to "promote" union membership to all prospective and current employees. It also requires the shop steward, during the official induction program, to explain the terms of the EBA to new employees. All employees who are members of the ETU are to be encouraged to participate in union meetings. The term "encouragement" has a positive meaning – that is, the employer cannot take a passive approach.

What does the decision mean?

This decision means that these terms are allowed to be in EBAs under the Fair Work Act. From a practical perspective, given these are issues with a high degree of importance to building industry and other unions, it is certain they will appear in similar if not identical terms in claims lodged by other unions on a national basis. Employers will need to think long and hard about their negotiations and whether they are prepared to have such terms in their EBAs.

Where does it leave the Code and the Industry?

This decision leaves the ABCC in a very difficult position. These clauses are clearly not compliant with Code and on the face of it, a subcontractor with an EBA in similar terms, will not be able to work on projects where compliance with the Code is requisite.

However, the position of the Federal Government has been that EBAs certified in accordance with the Fair Work Act (such as this one) will be deemed to be compliant with the Code. This policy will need to change to avoid a direct contradiction with the terms of the Code itself when these EBAs are assessed. Either that or the Code itself will have to be amended. Ultimately something will need to give as it stands now, electrical contractors with an agreement in these terms will not be Code compliant and therefore no Contractor on a directly or indirectly funded Government project will be technically able engage them.

This is a critical issue for the ABCC and the Government to resolve particularly given these types of clauses will now spread across the industry.

For now, construction industry participants need to be cautious in allowing any subcontractors with EBAs containing clauses such as the ones above to work on Code projects. In addition, the industry needs to prepare to deal with demands to include such clauses in any negotiations in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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