Recently, important changes to the Building and Construction Industry (Improving Productivity) Act 2016 (Cth) (Building Act) were passed by federal Parliament. This was followed by amendments to the Code for the Tendering and Performance of Building Work 2016 (2016 Code).
The changes relate to the implementation dates for the new restrictions on enterprise agreement content in the 2016 Code, which must be met by companies bidding for Commonwealth-funded building work.
In this article, we explain the amendments to the Building Act and the 2016 Code. We also provide links to a series of Fact Sheets with further information about these changes, and the application and requirements of both the 2016 Code and the Building Code 2013 (2013 Code) to the extent it remains applicable to particular projects.
The Building Act came into effect on 2 December 2016, re-establishing the Australian Building and Construction Commission and implementing new restrictions on industrial action, picketing and coercion in relation to building work (with increased penalties for breaches of these prohibitions).
The Building Act included provisions relating to the making and operation of the 2016 Code, which also took effect on 2 December 2016, replacing the 2013 Code.
The 2016 Code includes extensive limits on enterprise agreement clauses which impede workplace efficiency or the engagement of flexible forms of labour, or which provide support for the activities of trade unions (section 11 of the 2016 Code).
However, the Building Act provided for a transitional period during which companies covered by enterprise agreements (made before 2 December 2016) could continue to bid for and be awarded Commonwealth-funded work until 29 November 2018 – even if those agreements were not compliant with the 2016 Code.
Amendments to the Building Act two-year ‘grace period’
On 16 February 2017, Parliament passed the Building and Construction Industry (Improving Productivity) Amendment Act 2017 (Cth) (Building Amendment Act), which came into effect on 17 February.
This followed a change of position by Senator Derryn Hinch, who had been chiefly responsible for the inclusion of the two-year transitional period in relation to the 2016 Code enterprise agreement restrictions in the Building Act.
When Parliament returned from the summer recess, Senator Hinch supported the following changes to those transitional arrangements (as provided for in the Building Amendment Act):
Reducing, from two years (s 34(2E) of the Building Act - 29 November 2018) to nine months (31 August 2017), the transitional period in which companies could submit expressions of interest and tender for Commonwealth-funded building work – even though they have enterprise agreements which do not comply with the 2016 Code.
Prohibiting companies with non-2016 Code compliant agreements from being awarded Commonwealth-funded work (although such companies could still bid for that work).
These changes effect a significant reversal of the Building Act’s provisions allowing construction companies two years to make 2016 Code-compliant enterprise agreements. However, these new arrangements are now subject to detailed transitional rules as set out below.
Amendments to the 2016 Code: Further transitional rules
On 20 February 2017, the Minister for Employment Senator Michaelia Cash issued a legislative instrument amending the 2016 Code. The purpose of the amendments is ‘to align the 2016 Code with new subsection 34(2E) of the Building Act and to provide additional transitional exemptions to assist … with the transition to compliance with the 2016 Code’.
The amendments to the 2016 Code took effect on 21 February 2017. They establish the following exemptions to the general rule that if a company wishes to bid for and be awarded Commonwealth-funded building work, it (and all of its related entities) must not be covered by any enterprise agreements that contain any of the prohibited content in section 11 of the Code:
Enterprise agreements made before 25 April 2014 and which have not been varied since.
Enterprise agreements made between 25 April 2014 and 1 December 2016. The scope of this exemption depends on when the bid (i.e. expression of interest or tender) for Commonwealth-funded work was made, and the scope/application of the relevant enterprise agreement:
If the bid was submitted prior to 2 December 2016, and the agreement only applies to building work related to the pre-2 December 2016 bid – the exemption applies.
If the bid was submitted between 2 December 2016 and 16 February 2017, the exemption from the 2016 Code content requirements applies until 28 November 2018 in relation to building work resulting from these bids.
If the bid was submitted between 17 February and 31 August 2017, the exemption applies for bidding purposes only (a building company could not be awarded Commonwealth-funded work arising from such a bid until it has a 2016 Code-compliant enterprise agreement for that project). If the bidding entity or another entity within its corporate group has a non-2016 Code compliant agreement, it will not jeopardise the bidding entity’s ability to be awarded Commonwealth work during this period.
The impact of the Building Amendment Act and 2016 Code changes
To remain eligible for Commonwealth-funded work, building companies and contractors will need to ensure that enterprise agreements are compliant with the 2016 Code (unless they are subject to one of the transitional exemptions outlined above).
Options for ensuring 2016 Code compliance include varying or terminating ‘in term’ agreements in accordance with the relevant provisions of the Fair Work Act 2009 (Cth). These provisions generally require agreement to the variations or termination by a majority of employees, and approval by the Fair Work Commission. The views of any union(s) covered by particular agreements will also need to be taken into account.