Building industry participants with enterprise agreements made or varied since 18 May 2016 must now comply with the Building Code 2013 and be certified as such by Fair Work Building and Construction (the FWBC) in order to be eligible to participate in Commonwealth funded building work.

In this article, Senior Associate Damon King summarises these “soft touch” regulatory changes and what they practically mean for building contractors (and their subcontractors) who wish to express an interest in or tender for works in respect of Commonwealth projects.

Background

The Building Code 2013 (Code), a procurement policy with statutory effect, mandates the Federal Government’s expectations in respect of standards of compliance with workplace laws by building industry participants.

The Code was introduced by the former Labor Government on 1 February 2013.

Formerly, compliance with the Code was assumed where a building industry participant’s enterprise agreement had been approved by the Fair Work Commission because it passed the Better Off Overall Test, notwithstanding that unlawful content may have been contained in the agreement.

As part of the Coalition Government’s current suite of IR reforms for the industry, a Ministerial Direction was issued earlier this year. That Direction requires that a formal assessment of such enterprise agreements must be undertaken by the industry workplace regulator, the FWBC, in order to verify compliance with the Code. These changes apply to Commonwealth funded projects whose procurement process commences from 1 June 2016 onwards.

Overview of the Code

The primary objective of the Code is to ensure that freedom of association genuinely exists on building and construction job sites and to prohibit industrial practices which enshrine more or less favourable treatment based on union membership or otherwise.

The Code prohibits union-friendly clauses in an enterprise agreement which, for example, requires a building contractor to:

  • ensure sub-contractors engaged by it:
    • have a union-approved pattern agreement in place; or
    • make over award payments or payments otherwise in accordance with union friendly industrial instruments;
  • employ a non-working shop steward or other person nominated by a union; and
  • ensure its employees pay a bargaining fee for services when they are not members of the union.

Likewise, building contractors will be obliged to ensure that any sub-contractors they use comply with the Code and that their enterprise agreements are Code compliant and verified as such by FWBC.

The FWBC’s assessment role

A building industry participant doing or seeking work to which the Code applies will need a letter from the FWBC confirming that any enterprise agreement made or varied since 18 May 2016 is “not inconsistent” with the Code.

The FWBC recommends the following assessment process for building industry participants seeking a letter of compliance:

  • Submit your draft enterprise agreement for Code assessment (an online tool is available).
  • The FWBC will advise by email whether the draft agreement is compliant or alternatively non-compliant. If the latter, the FWBC will provide a table summarising the matters of non-compliance and explain why they need to be rectified.
  • Resubmit a revised draft agreement for reassessment by the FWBC.
  • Once your draft agreement is assessed as compliant by the FWBC and it is then approved and registered by the Fair Work Commission, a final assessment can be undertaken and a letter of compliance issued by the FWBC.

Please note that building industry participants that pay their employees solely in accordance with an award or a common law contract are not required to obtain a letter of compliance with the Code from the FWBC.

Examples of compliance

Four helpful examples of enterprise agreements, which have recently been assessed by the FWBC as being compliant with the Code, have been published on its website and are available at the following link: https://www.fwbc.gov.au/building-code/building-code-2013-examples-compliant-enterprise-agreements

Non compliance with the Code

Failure to comply with the Code will render a building industry participant ineligible for Commonwealth funded building work.

Key takeaways

Before and during good faith bargaining with employees and their unions it will be necessary for building industry participants to carefully consider the matter of Code compliance, if they intend to express an interest in or tender for Commonwealth building projects.

Unions like the CFMEU are vehemently opposed to these changes. It will be highly advisable to seek the assistance of an expert industrial adviser when negotiating an enterprise agreement or a variation to an existing industrial instrument.