Australia: New code introduced – Contractors must be aware of enterprise agreement risks

The new national code for the tendering and performance of building work 2016 (Code 2016) commenced on 2 December 2016 to coincide with the re-establishment of the Australian Building and Construction Commission (ABCC). The governing legislation is the Building and Construction Industry (Improving Productivity) Act 2016 (Act).

The Code 2016 applies to building contractors carrying out building work from the first time they submit an expression of interest or tender for Commonwealth funded building work on or after 2 December 2016.

Key aspects of the changes deal with eligibility to express interest, tender for and be awarded commonwealth funded building work.

Prohibited clauses in EAs

The Code 2016 lists a range of prohibited content which, if found in a contractor's enterprise agreement (EA), will render the EA non-code compliant.

The Code 2016 stipulates, for example, that EAs must not contain clauses that:

  • limit building industry participants' ability to manage their business or to improve productivity, including decisions about redundancy, demobilisation or redeployment or about by who, when and where work can be performed to meet operational requirements;
  • discriminate between persons, classes of employees (e.g. casual, daily hire, visa workers), or subcontractors;
  • infringe upon freedom of association, including by encouraging or discouraging membership of a building association;
  • prescribe the number of employees or subcontractors that may be engaged on a site, in a work area or at a particular time, or the scope of work or tasks that may be undertaken;
  • restrict or require approval from or consultation with building associations about the source or number of employees or type of employment offered;
  • restrict or require approval from or consultation with building associations about the engagement of subcontractors, as well as provisions prescribing the terms and conditions on which subcontractors and their employees are engaged; and
  • prohibit rates of pay that incorporate ordinary time and other matters such as overtime and allowances.

New provisions

Workplace Relations Management Plans (WRMPs) are required under section 25 of the Code 2016 that must address certain matters including:

  • how workplace arrangements will be regulated and monitored on the project;
  • productivity measures on the project;
  • the approach to relationship management and the lines of communication and reporting on the project;
  • workplace relations risks on the project and a head contractor's past experiences in project delivery; and
  • how compliance with the Code 2016 will be monitored and promoted on the project.

The Code 2016 also includes new provisions dealing with Security of Payments which require contractors to report any disputed or delayed progress payment to the ABCC as soon as practicable after the date on which the payment falls due.

There are also new provisions dealing with engagement of non-residents and non-citizens. Requirements include that a code covered entity must ensure that no person that is not an Australian citizen or Australian permanent resident (within the meaning of the Migration Act 1958) is employed to undertake building work for the Code 2016 covered entity unless:

  • the position is first advertised in Australia; and
  • the advertising was targeted in such a way that a significant proportion of suitably qualified Australian citizens and Australian permanent residents would be likely to be informed about the position; and
  • any skills or experience requirements set out in the advertising were appropriate to the position; and
  • the employer demonstrates that no Australian citizen or Australian permanent resident is suitable for the job.

Transitional period for EA code compliance

On 17 February 2017 the Act was amended to drastically reduce the transitional period in which building contractors are required to have code compliant EAs to be awarded Commonwealth funded building work. The transition period has been reduced from two years to nine months and will conclude on 31 August 2017.

Important: companies with non-code compliant EAs can tender for, but not be awarded Commonwealth-funded projects during this transition period.

  • Ongoing exemption for pre 25 April 2014 EAs: EAs made on or before 24 April 2014 do not need to be made compliant with the 2016 Code.The following transition periods will apply depending on the date that a non-code complaint EA was made:
  • EAs between 24 April 2014 and 2 December 2016: contractors may express interest in and tender for Commonwealth funded building work but not be awarded the work.
    • If the tender was submitted after 17 February 2017 and the contractor has a non-compliant EA then it can still be awarded the Commonwealth funded work provided that the EA does not relate to that work.
  • EAs before 2 December 2016: contractors can still be awarded Commonwealth funded work provided that they tendered before 2 December 2016.
    • If the tender was submitted between 2 December 2016 and 16 February 2017, contractors can still be awarded the work even if the EA is non-compliant until 29 November 2018 (the original transition date).

The ABCC has released 5 different 'self-declaration' forms for contractors to demonstrate eligibility to express in, tender for and in some cases being awarded a contract for commonwealth funded building work.

The ABCC can also undertake a preliminary assessment of enterprise agreements for code compliance. Following its assessment the ABCC can issue a Letter of Compliance that the contractor can use when tendering for Commonwealth funded building work.

What should contractors do?

If contractors carry out Commonwealth funded building work or if they intend to do so, they should:

  • ensure that their EAs are code compliant – they can do this by applying for letters of compliance form the ABCC here;
  • ensure that Request for Tender and subcontracting agreements are compliant with the Building Code – failure to do so may lead to the imposition of sanctions such as an exclusion from carrying out Commonwealth funded work in the future.

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