Australia: Enterprise bargaining in the shadow of the Fair and Lawful Building Sites Code 2014

Last Updated: 10 January 2016
Article by Jonathon Hadley and Lydia Daly
Focus: Fair and Lawful Building Sites Code 2014
Services: People & Workplace, Property & Projects
Industry Focus: Property

Despite all the publicity in early 2014 surrounding the advanced release of the Building and Construction (Fair and Lawful Building Sites) Code 2014 (draft Code), the draft Code and its substantive legislation, the Building and Construction Industry (Improving Productivity) Bill 2013 (Cth) (Bill), continue to be debated in the Federal Senate.

On 17 August 2015, a vote in the Senate resulted in a deadlock of 33 votes each side, meaning the Bill has now failed to pass the Senate on two occasions. Whilst this provides the Abbott Government with the trigger for a double dissolution election, Senator Abetz has already indicated the government intends to re-engage with cross-bench senators in a further attempt to secure approval of the Bill.

The dilemma

As a result of the continued delays in the official commencement of the draft Code, businesses in the building and construction industry that are looking to make a new enterprise agreement face a significant dilemma in deciding how to approach the bargaining process. In particular, building and construction employers may need to decide whether to:

  • agree with the Construction, Forestry, Mining and Energy Union (CFMEU) to make an enterprise agreement for 2015-2019 which may not be compliant with the draft Code, but which smooths the way for work on a unionised site
  • hold off on bargaining, at the risk of industrial action, in order to see if the draft Code is enacted by Parliament, or
  • make a new enterprise agreement (with or without the CFMEU as a party) that deals in some way with the application of the draft Code.

Under the draft Code, any contractors or subcontractors covered by an enterprise agreement that is made after 24 April 2014 and is not compliant with the draft Code will not be able to tender for work funded by the Federal Government.

Recent developments

The recent decision in CFMEU v CSR Limited t/a Viridian New World Glass (CSR Decision) 1 shed some light on the Fair Work Commission's (FWC) position in relation to enterprise agreements attempting to achieve compliance with the draft Code. Despite the Full Bench of the FWC acknowledging that compliance with the draft Code is "an imperative for businesses seeking [Government] contracts", it held that terms in an enterprise agreement that provide for draft Code compliance cannot be included if they affect the certainty of terms and conditions of employment, as required by the Fair Work Act 2009 (Cth) (FWA) and the 'better off overall test' (BOOT).

The CSR Decision concerned an appeal by the CFMEU, which sought to quash the approval of two enterprise agreements that incorporated the draft Code. The CFMEU argued that the clause seeking to ensure draft Code compliance meant that neither agreement passed the BOOT.

The Full Bench held that because the draft Code does not yet have statutory effect, its terms and its future are uncertain. Consequently, the terms of the two agreements were also uncertain, as they could, at any time, be changed significantly by the decision of a third party.

To ensure the certainty of the two agreements, the FWC gave CSR Limited the option of providing an undertaking that:

"If, subsequent to approval, any clause of this agreement is deemed inconsistent with the Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 the parties will address any inconsistency through an application to vary the agreement pursuant to the Fair Work Act 2009."

Ultimately, CSR Limited declined to provide the undertaking suggested by the FWC, with the result that the FWC issued orders quashing the two approval decisions for the enterprise agreements in issue. 2

In the meantime, other building and construction businesses have been entering into agreements with the CFMEU based on its template enterprise agreement for 2015-2019 (Union Agreement). Relevantly, the Union Agreement contains the following clause (Code Compliance Clause), which is similar to the draft undertaking proposed by the FWC in the CSR Decision:

"Code Compliance:
In the event that the Code comes into force and a provision of this Agreement is deemed as being non-compliant with the Code, the parties will take all necessary and reasonable steps to vary the Agreement so that the non-compliant provision of the Agreement is Code compliant. Actions taken by a party under this clause are not an extra claim."

Code Compliance Clause – friend or foe?

Contractors and subcontractors should be aware that the inclusion of wording in their enterprise agreements, like the Code Compliance Clause or the wording proposed by the FWC in the CSR Decision, may not be the complete panacea to their Code compliance problems. In particular:

  1. There is potential for a dispute with the CFMEU regarding which clauses are, or are not, draft Code compliant.
  2. Even if there is agreement that a provision is noncompliant, there might be delays in the process of amending the enterprise agreement which could prove costly for businesses. The lag time between seeking to vary an enterprise agreement and any FWC approval may prevent companies from tendering for Commonwealth Government-funded work. Tender response times for medium to large construction jobs are often around 4-6 weeks. To vary an approved enterprise agreement that is not draft Code compliant, a company will need to conform to the procedural requirements of the FWA. This includes giving employees 7 days' notice about the variation and its effect, conducting an employee vote, lodging documentation and obtaining FWC approval before the variation takes effect. This process may take up to several months, particularly if the variation is contested.
  3. Agreement to the CFMEU's log of claims enables the union to bargain for an enterprise agreement now that may not be compliant when the draft Code gains statutory force. We note that in 2014, the Master Builders Association and the Department of Employment expressed concerns that the CFMEU's enterprise agreement contained numerous clauses which are not compliant with the draft Code, in addition to containing other irregular or indirect extra claims.

Key takeaways

When looking to make a new enterprise agreement, it is important that contractors and subcontractors take time to consider not only the legal and operational effect of any claims sought by the CFMEU, but also how the enterprise agreement might provide for the application of the draft Code.

Any clauses referring to the draft Code must be written in such a way to ensure cooperation by all parties to immediately seek necessary variations to achieve Code compliance. Additionally, such clauses should be carefully drafted to ensure the certainty of agreement.

Footnotes

1[2015] FWCFB 3889
2[2015] FWCFB 4624

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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