Australia: Abbott Government releases new Construction Code

On 17 April 2014, Employment Minister Senator Eric Abetz published an advance release of the Coalition Government's new code of practice for the construction industry. The proposed Building and Construction Industry (Fair and Lawful Building Sites) Code 17 April 2014 (2014 Code) will replace the Building Code 2013 introduced by the former Labor Government.1

The 2014 Code has been developed to "promote an improved workplace relations framework for building work to ensure that building work is carried out fairly, efficiently and productively for the benefit of all building industry participants";2 and is intended to "restore the rule of law and fairness to Australia's construction sector."3

In this In Brief, we analyse the key aspects of the 2014 Code, which represents a return to the stricter guidelines for construction industry procurement that existed during the final years of the Howard Government. We also outline the key steps that employers in the building industry should take in anticipation of the 2014 Code coming into effect, noting that its provisions relating to enterprise agreement content will operate from 24 April 2014.

WHO IS COVERED BY THE CODE, AND FROM WHEN?

The 2014 Code will apply to building contractors and building industry participants (Code Covered Entities) from the first time they submit an expression of interest or tender for Commonwealth funded building work on or after the date the Code takes effect. Code Covered Entities must comply with the Code (including, in most respects, on their privately funded projects) in order to be eligible to tender for, or be awarded, Commonwealth funded building work.

The Code will come into effect when the Building and Construction Industry (Improving Productivity) Bill 2013 (BCIIP Bill 2013) passes the Senate. This is unlikely to occur until after 1 July 2014 when the composition of the Senate changes and the Government has better prospects of securing passage of the Bill.4

However once it comes into effect, the Code will apply retrospectively to enterprise agreements made from 24 April 2014. Code Covered Entities with non-compliant enterprise agreements made on or after this date will be ineligible to "tender for and be awarded Commonwealth-funded building work."5

PROHIBITED CONDUCT, ARRANGEMENTS OR PRACTICES

In order to be code compliant, Code Covered Entities must not be covered by an enterprise agreement which includes clauses that:

  • impose limits on the right of the Code Covered Entity to manage its business or to improve productivity; or
  • discriminate, or have the effect of discriminating against certain persons, classes of employees or subcontractors; or
  • are inconsistent with the freedom of association requirements set out in the Code.

The Code specifically prohibits agreement clauses that:

  • restrict the employment or engagement of persons by reference to the type of contractual arrangement offered by the employer (e.g. an agreement provision that limits the employment of casual or labour hire/agency employees or labour only sub-contractors);
  • prescribe the terms or conditions on which subcontractors are engaged (this would likely preclude employer associations acting for principals on construction projects from imposing standard enterprise agreement terms and the requirement to enter into an agreement on subcontractors);
  • require a Code Covered Entity to consult or seek the approval of a union in relation to the engagement of subcontractors (this would eliminate "jump up" provisions which only permit the engagement of subcontractors who provide certain union-dictated terms and conditions to workers, despite lawful industrial arrangements already existing);
  • limit or have the effect of limiting the right of a Code Covered Entity to make decisions about redundancy, demobilisation or redeployment of employees based on operational requirements (e.g. "first on, last off" policies);
  • prohibit the payment of a loaded rate of pay, such as an amount paid that incorporates payment for ordinary time and other matters such as overtime and allowances in one loaded rate;
  • require work to be allocated to individual employees only in circumstances where the allocation is extended to all other employees in the same class (e.g. "one in, all in" overtime requirements or restrictions);
  • provide certain rights and entitlements to trade unions in the workplace, including clauses:
    • requiring union logos or mottos to be applied to company property or equipment;
    • directly or indirectly encouraging union membership, or other measures suggesting union membership is anything other than a matter of individual choice;
    • designating an area on site for the use of union members, officers, delegates or other representatives;
    • providing for union right of entry other than in strict compliance with Part 3-4 of the Fair Work Act 2009 (Cth) (FW Act).

Code Covered Entities must also not engage in any conduct, procedure or practice that would have the same effect as a prohibited clause in an enterprise agreement.

AGREEMENTS WITH SUBCONTRACTORS

The 2014 Code will impose obligations in relation to subcontractors that extend beyond the content of agreements. Code Covered Entities will be required to monitor and ensure that subcontractors actually comply with the Code while undertaking Commonwealth funded building work.

Further, if a subcontractor is found to be acting in a way that is non-compliant, Code Covered Entities must (to the extent reasonably practicable) ensure that the subcontractor takes appropriate remedial action.

INDUSTRIAL ACTION

Code Covered Entities will be required to report any threatened or actual unprotected industrial action in relation to building work generally, in addition to action relating to Commonwealth funded building work.

In addition to these reporting obligations, Code Covered Entities must also take steps or action to actually prevent or bring to an end any unprotected industrial action (e.g. by commencing legal action in the Fair Work Commission or a court).

FREEDOM OF ASSOCIATION REQUIREMENTS

In addition to maintaining the freedom of association requirements in the Building Code 2013 (including ensuring that persons are free to join and be represented by unions, or not to do so), the 2014 Code will mean that Code Covered Entities must ensure that persons are "not discriminated against in respect of benefits in the workplace because they are, or are not, members of a building association."

This will prevent benefits being used as a way of incentivising construction workers to join unions, and penalising construction workers who choose not to take up union membership. It will also eliminate demands by unions to provide preference or advantage in employment to nominated members of the union.

As in previous codes, a Code Covered Entity must not agree to requirements that it, or a subcontractor engaged by it, employs a non-working shop steward or job delegate. However the 2014 Code goes further by completely prohibiting a Code Covered Entity from employing a non-working shop steward or delegate. This addresses the issue of some companies employing shop stewards or delegates, even where not required to do so, because it is seen as a way of generating favourable treatment from certain unions.

RIGHT OF ENTRY PROVISIONS

Similar to the obligations in previous codes, Code Covered Entities will be required to comply with all Commonwealth and State and Territory laws that give a right of entry permit holder a right to enter the premises.

However the 2014 Code requires that Code Covered Entities also take an active role in ensuring that, as far as reasonably practicable, entry by an officer of a building association occurs only in compliance with Part 3-4 of the FW Act or a relevant work health and safety law; and that the relevant officer complies with all applicable legislative requirements upon entering the premises.

COMPLIANCE, MONITORING AND ENFORCEMENT ARRANGEMENTS

Enforcement of the 2014 Code will be within the remit of the Australian Building and Construction Commission (ABCC), once it is re-established following the passage of the BCIIP Bill.

If a Code Covered Entity fails to comply with the 2014 Code, or with a compliance notice, the Australian Building and Construction Commissioner may issue a formal warning or impose an exclusion sanction. Exclusion sanctions can include the exclusion of a Code Covered Entity from tendering and contracting for Commonwealth funded work for a period of up to one year.

ROLE OF COMMONWEALTH FUNDING ENTITIES AND WORKPLACE RELATIONS MANAGEMENT PLANS

In addition to the ABCC, Commonwealth entities that fund construction work (Funding Entities) have a role in monitoring and ensuring compliance with the 2014 Code.

Funding Entities must require applicants expressing interest in or tendering for Commonwealth funded building work to confirm that they will comply with the 2014 Code, from the time of lodging an expression of interest or tender and while undertaking the building work.

In certain circumstances, Funding Entities must also ensure that the tender documents include a requirement to have a Workplace Relations Management Plan (WRMP) approved by the ABCC. This will be necessary where:

  • the value of the Commonwealth's contribution to the project includes building work that is at least $5,000,000 and represents at least 50% of the total construction project value; or
  • the Commonwealth's contribution to the project includes building work that is at least $10,000,000.

A WRMP must demonstrate how a Code Covered Entity will effectively communicate the requirements of the Code to all building participants on site, promote a "fair, lawful, efficient and productive workplace" and deliver the project "on time and within budget." Code Covered Entities will need to satisfy any Funding Entity that they can fulfil the requirements of an applicable WRMP.

The ABCC may require a WRMP to address certain matters – including productivity measures (e.g. rostered days off) and "how productivity will be objectively measured, monitored and recorded on the project". Following concerns recently raised by employers about the high level of RDOs in the industry and the impact of labour costs on competitiveness, these provisions in the 2014 Code illustrate the Coalition Government's intention to effect cultural change in the Australian building and construction sector.

KEY STEPS FOR BUILDING INDUSTRY EMPLOYERS

It is unclear when the 2014 Code will commence operation, as this depends on both:

  • the passage of the BCIIP Bill by Parliament; and
  • the 2014 Code, as a legislative instrument, not being disallowed by Parliament.

However, as mentioned above, the Code will apply retrospectively to enterprise agreements made from 24 April 2014:

  • This means that building industry employers must now factor in the Code's provisions relating to prohibited content when negotiating enterprise agreements.
  • Employers with upcoming bargaining should therefore not agree to agreement clauses that, while lawful under the FW Act, will make them ineligible for work on Commonwealth funded projects.

Employers should also prepare for the coming into effect of the other provisions of the 2014 Code (some time after 1 July), by:

  • reviewing all project agreements, tenders and contracts to ensure compliance with the Code;
  • reviewing subcontractor relationships, as Code Covered Entities will be required to monitor the compliance of subcontractors once the Code commences.

Footnotes

1See our earlier In Brief.

22014 Code, section 5(a).

3Senator Eric Abetz, " Building and Construction Industry Code 2014 released", 17 April 2014.

4For further information on the BCIIP Bill 2013, see our earlier In Brief.

5Senator Eric Abetz, " Building and Construction Industry Code 2014 released", 17 April 2014.

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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