Any contractor who wants to work on federally-funded projects will need a renewed focus on industrial relations (IR) that preserves its right to manage its business or improve productivity.
With a critical focus on prohibiting enterprise bargaining that limits a contractor’s right to manage its business or improve productivity or that limits freedom of association, the draft Building and Construction Industry (Fair and Lawful Building Sites) Code 17 April 2014 (Draft Code) requires contractors to plan and manage IR proactively, to deliver any project on time and on budget.
The Draft Code is intended to be made under the Building and Construction Industry (Improving Productivity) Bill (BCII Bill), which would also restore the Australian Building and Construction Commission (ABCC).
Although unlikely to pass through the Senate before 1 July 2014, once the BCII Bill is passed, the Draft Code’s prohibitions on content will apply to enterprise agreements made on or after 24 April 2014.
The Draft Code applies initially in a number of ways, including to:
- building work undertaken for or on behalf of a Commonwealth department or agency;
- projects with indirect Commonwealth funding that represents either: (a) at least $10million; or (b) at least $5million and at least 50% of the total project value; and
- once a contractor is subject to the Draft Code, privately funded building work undertaken by the contractor.
The Draft Code adopts the expanding compliance model of earlier Codes and current State codes. As soon as the Draft Code covers a contractor, all “related entities” must comply with the Draft Code on all new projects including privately funded works. Related entities include all entities “connected with” a contractor, including all joint venturers and consortium members.
On Commonwealth funded construction work (but not privately funded work) the Draft Code also requires contractors to ensure that subcontractors are Code compliant before engaging them.
In each case, contractors will need to undertake careful due diligence, and be satisfied, before conducting business with them, that potential joint venturers or consortium members and subcontractors are Code compliant and will act consistently with the Draft Code.
DUTY TO COMPLY WITH ALL LAWS
The Draft Code requires strict compliance with the Fair Work Act 2009 (Cth) (FW Act), applicable industrial awards and/or enterprise agreements, and work health and safety laws, including:
- all prohibitions on strike pay laws;
- all entry requirements to exercise a statutory right of entry (RoE); and
- all procedures for the election of health and safety representatives.
Unregistered or side agreements do not comply with the Draft Code.
PROHIBITING PRACTICES THAT LIMIT THE RIGHT TO MANAGE OR IMPROVE PRODUCTIVITY
A contractor will not comply with the Draft Code if it adopts or allows any practice, policy or procedure that:
- limits the right of the contractor to manage its business or to improve productivity; or
- discriminates against certain persons, classes of employees, or subcontractors.
The scope of what might, in practice, limit a contractor’s right to manage its business or improve productivity is very broad. To assist, the Draft Code contains a number of examples. A summary of those examples is set out below.
Similarly, any enterprise agreement made on or after 24 April 2014 will not comply with the Draft Code if it includes any clause/s that, in practice, limit a contractor’s right to manage its business or improve productivity.
The ABCC may provide “preliminary advice [to a contractor] on whether a proposed enterprise agreement, if made in a certain form, would” comply with the Draft Code. Any determination issued “is taken to be conclusive” of Code compliance.
PROHIBITING COERCION AND PRACTICES THAT UNDERMINE FREEDOM OF ASSOCIATION
The Draft Code prohibits breaches of freedom of association rights, such as by providing benefits or imposing burdens on the basis of a union membership.
It also prohibits action to coerce or intended to coerce a contractor to make above-entitlement payments such as paying uniform site rates, or to support a particular product or arrangement or to contribute to a particular scheme or fund, such as for income protection.
A POSITIVE DUTY TO ACT - NOT JUST TO REPORT
The Draft Code requires contractors to act promptly. A contractor must notify the ABCC of:
- any breach or suspected breach of the Draft Code, and the steps the contractor proposes to take to address it, within two (2) working days of becoming aware of it; and
- the steps taken to rectify the breach, within 14 days of providing the initial notification.
A head contractor must also monitor how subcontractors grant RoE, and limit RoE to statutory rights.
A PARTICULAR FOCUS ON INDUSTRIAL ACTION
A contractor must take reasonably practicable steps to end unprotected industrial action by its employees.
As soon as possible, and within 24 hours of becoming aware of the threat or action, a contractor must report to the ABCC actual or threatened:
- industrial action (including protected action) affecting a federally-funded project; and
- unprotected action affecting any project (including privately funded work).
The Draft Code adopts a broader definition of “industrial action” than does the FW Act, expanding the circumstances when a contractor will have to act and report its plans and outcomes to the ABCC.
A WIDER RANGE OF SANCTIONS
Under the Draft Code, any non-compliance could see the reconstituted ABCC:
- impose an “exclusion sanction” of up to one year, preventing a contractor, or a division operating in a particular State or Territory, from tender for, or being awarded, federally-funded work; or
- issue a formal warning that a further failure may result in an exclusion sanction.
WORKPLACE RELATIONS MANAGEMENT PLAN (WRMP)
The Draft Code requires a contractor to prepare a WRMP, approved by the ABCC, for projects where the Commonwealth contribution is: (a) at least $10million; or (b) at least $5million and at least 50% of the total construction project value.
The WRMP must demonstrate “the systems, processes and procedures [...] in place” for how the contractor will, amongst other requirements, “deliver the project on time and within budget”, and address, amongst other matters, the key IR risks the contractor has identified for the project and how, in practice, it will be sure subcontractors comply with the WRMP.
WHAT DOES IT MEAN FOR CONTRACTORS?
Steps to consider now
Practices: Contractors will review their current policies, processes and procedures, to identify non-compliant practices and alter them before the Draft Code comes into effect.
Enterprise Agreements: Before deciding to bargain for a new enterprise agreement, contractors will consider how to comply with the Draft Code including during negotiations. A group-wide IR strategy may help avoid any group entity including non-compliant terms in an enterprise agreement that jeopardises the group’s Code compliance.
Contracts: Contractors will consider what extra clauses are needed in contracts and subcontracts, such as powers to require subcontractors to inform the contractor of which subcontractor employees are taking unprotected industrial action, to overcome potential privacy issues while trying to address industrial action.
Consortium members: Contractors will undertake all necessary due diligence, before entering into contracts, to select Code compliant consortium members and subcontractors.
WRMPs: Contractors will identify key IR risks for each project, strategies to eliminate / control those IR risks and draw up WRMPs where required, tailored to the IR risks of the project in question.
Subcontractor selection: Contractors will include Code compliance in subcontractor selection processes.
ABCC review: Contractors will consider carefully whether to share a draft enterprise agreement with the ABCC, for a pre-approval assessment before it goes to a vote, and obtain advice at the time.
During the life of a project
Contractors will monitor their own compliance with the Draft Code and any WRMP, monitor subcontractors’ compliance and obtain advice before:
- excluding a subcontractor over Code non-compliance concerns;
- addressing unprotected industrial action; or
- managing their reporting obligations to the ABCC or assisting the ABCC with its investigations.
Note: While the focus of the general information in this Alert is on contractors, the changes apply to other “building industry participants”. Any entity should obtain professional advice tailored to their particular circumstances before relying on any aspect of this general information.
Guidance note - Clauses prohibited by the Draft Code
Practices that limit productivity or the right to manage
The Draft Code prohibits practices and/or clauses in enterprise agreements that, in practice, limit a contractor’s right to manage its business or to improve productivity, or discriminate against persons, classes of employees or subcontractors, for example by:
- prescribing the number of employees or subcontractors that may be employed or engaged on a particular site, in a particular work area, or at a particular time;
- limiting the employment of casual or daily hire employees;
- requiring consultation with, or the approval of, a union about the source or number of, or even engaging any, employees, labour hire workers or subcontractors;
- prescribing the terms on which subcontractors may be engaged;
- prescribing the scope of work or tasks employees or subcontractors may perform;
- limiting an employer’s right to make decisions about redundancy, demobilisation or redeployment of employees based on operational requirements, such as selection based on length of service;
- requiring union logos, flags etc on uniforms, equipment or property supplied by any entity;
- indicating support for union membership or that membership is anything other than a matter for the individual, directly or by allowing a union to conduct induction or access to new employees or workers new to site;
- limiting when and where work can be performed to meet operational need, such as by adopting industry-wide rostered day off calendars unless they also allow the employer flexibility around operational requirements;
- limiting the employer’s ability to determine who will perform any work;
- granting any RoE beyond the strict limits of the FW Act; or
- requiring subcontractors to adopt the head contractor’s pay rates as site rates
Practices that limit/breach freedom of association
The Draft Code prohibits practices and/or clauses in enterprise agreements that, in practice, limit or undermine freedom of association, for example by:
- engaging or terminating employees or subcontractors because they are, or are not, or engage or do not engage, union members;
- engaging a non-working shop steward or job delegate;
- requiring a subcontractor to engage a non-working shop steward or job delegate or an individual nominated by a union;
- bargaining fees for workers who are not union members; or
- appointing or allowing union officials, delegates or representatives to administer inductions or to be the default representative for any dispute resolution or grievance procedure.