The Building and Construction Industry (Improving Productivity) Act 2016 (Building Act) became law on 1 December 2016, and became operational on the following day.[1] It introduces significant changes and a more empowered regulator.

The Building and Construction Industry (Improving Productivity) Bill (Bill) was first introduced by the Abbott Government in 2013. It was repeatedly blocked in the Senate, and was one of the measures which provided the trigger for the double-dissolution election in July 2016.

As first introduced, the Bill was essentially aimed at returning the law concerning workplace relations in the building industry to the state it was in prior to the repeal of the Howard-era Building and Construction Industry Improvement Act 2005 (BCII Act) by the Fair Work (Building Industry) Act 2012 (FWBI Act).

In order to secure cross-bench support for the Bill in the Senate, the Government retained a number of significant features of the FWBI Act, and introduced a number of additional provisions which did not appear in any of the previous iterations of the legislation.

Nevertheless, the Government has substantially succeeded in its objective of unwinding the changes made by the FWBI Act. In doing so, it has created important opportunities – and some challenges – for all participants in the building and construction industry.

8 key features of the Building Act

1. Defining building work

The scope of the new legislation is determined by the definition of the term ‘building work’ in section 6.

According to section 6(1)(a) building work includes ‘the construction, alteration, extension, restoration, repair, demolition or dismantling of buildings, structures or works that form, or are to form, part of land’. This accords with the common understanding of the meaning of the term.

However, section 6 goes on to extend the definition to include a range of additional conduct, including ‘transporting or supplying goods to be used in work covered by [the remainder of the definition] directly to building sites (including any resources platform) where that work is being or may be performed’. This means that the range of employers to whom the legislation now applies will include hauliers, shipping companies and others who are involved in the transport of plant, equipment or other goods to building sites,[2] as well as those who are involved in building work in the more conventional sense.

2. Restoring the ABCC

The most high profile of the changes brought about by the Building Act is the re-establishment of the Australian Building and Construction Commissioner (ABC Commissioner) and the Australian Building and Construction Commission (ABCC) following the abolition of both entities by the FWBI Act.[3]

In many respects, the powers of the restored ABCC are the same as those of Fair Work Building and Construction (FWBC), which it replaces. The former Director of FWBC is continued in office as the ABC Commissioner, and the former Fair Work Building Industry Inspectorate continues in existence but is re-badged as the ABCC.

When introduced in 2013, the Building and Construction Industry (Improving Productivity) Bill 2013 provided for the re-established ABCC, with the same powers to obtain information through the examination of witnesses and the production of documents as had been the case under the original BCII Act. However, in order to secure passage of the legislation in the Senate, the Government agreed to the retention of the ‘safeguards’ which had been introduced as part of the former Labor Government’s changes to the law in this area. Nevertheless, these are formidable powers, and it is important to appreciate that they apply to companies and their directors and executives just as much as they do to unions and their members and officials.[4]

As well as retaining its power to obtain information, the ABCC has also been given a number of powers – especially in relation to industrial action – that were not vested in FWBC. As a consequence of the Senate amendments, the ABCC is also required to operate subject to a number of constraints that did not apply to either the original ABCC or to FWBC. Furthermore, the legislative framework within which the restored ABCC will now operate differs from the FWBI Act in a number of important respects. Those differences will be of considerable practical significance for all building industry participants.

Amongst the new constraints is a requirement that in performing her or his functions, the ABC Commissioner ‘must ensure that the policies and procedures adopted and resources allocated for protecting and enforcing rights and obligations…are, to the greatest extent practicable having regard to industry conditions based on complaints received by the ABC Commissioner, applied in a reasonable and proportionate manner to each of the categories of building industry participants’.[5]

This requirement for even-handedness in the ABC Commissioner’s activities is also reflected in the reporting requirements in s 20 of the Building Act, and in the fact that the Minister can terminate the appointment of the ABC Commissioner if they fail ‘to perform her or his functions with impartiality as between all categories of building industry participants’.[6]

A further constraint under which the ABCC must now operate is the requirement that it perform certain functions under the FW Act, including enforcement of wages and entitlements, which had previously been shifted to the FWO to enable FWBC to concentrate on ‘industrial’ issues.[7]

It remains to be seen what the ‘reasonable and proportionate manner’ requirement means in practice, but one possibility is that the ABCC will focus greater attention on employer behaviour than has been the case in the past, in order to be able to show that it is meeting that criterion.

Employer behaviour may also come in for closer scrutiny as a result of the requirement that the ABCC deal with issues such as enforcement of wages and entitlements under the FW Act.

3. Powers of inspectors

In order to enforce the Building Act and the FW Act, ABCC inspectors can enter premises to investigate potential breaches of the Building Act or the Code for the Tendering and Performance of Building Work 2016 (2016 Code), where they reasonably believe that the Act or the Code applies and may be being breached.

They can also enter premises where they reasonably believe that there is relevant information on the premises, or that someone with access to such information is on the premises.

Whilst on a premises, an inspector can:

  • ‘inspect any work, process or object’;
  • interview any person;
  • require production of documents, and inspect or copy such documents; and
  • take samples of goods or substances.

It is unlawful to intentionally hinder or obstruct an inspector in the exercise of their powers, punishable by a fine of up to $180,000 for a corporation and $36,000 for an individual.

This means that all employers who will have a presence on building sites must have protocols in place for dealing with the exercise of right of entry by ABCC inspectors, and must ensure that site managers have access to training and relevant information in relation to the operation of those protocols.

These (or separate) protocols should also deal with the exercise of right of entry by union officials under the Building Act, the FW Act and State or Territory OHS legislation.

It is of the utmost importance not only that relevant protocols are in place, but that they are observed in practice.

4. Dealing with industrial action

What is ‘industrial action’?

The definition of ‘industrial action’ in section 7(1) of the Building Act is largely the same as the definition of that term in section 19(1) of the FW Act.

There are, however, significant differences between the two provisions in relation to the exclusions from the definition which are set out in sections 7(2) and 19(2) respectively.

Under section 7(2), for action to be excluded on the grounds that it has been agreed by an employer or an employee, the agreement must be provided in writing and in advance. This is identical to the definition of ‘building industrial action’ in section 36(1) of the BCII Act, but differs from the FW Act definition in that there is no requirement under section 19 that the agreement be signified in advance or in writing.

What is ‘unlawful industrial action’?

Section 46 of the Building Act provides that ‘a person must not organise or engage in unlawful industrial action’.

According to section 5 ‘industrial action’ will be ‘unlawful’ if it is not ‘protected industrial action’ within the meaning of section 8 of the Building Act.

That definition in turn refers to the concept of protected industrial action in the FW Act, but with the important difference that industrial action under the Building Act will not be protected if it is engaged in, or organised by, individuals or organisations which are not ‘protected persons’ as defined in section 8(3).

This is very similar to the situation under the Howard Government’s Workplace Relations Act 1996, and means that industrial action would not be protected if it involves:

  • employees of companies other than those to whom a proposed agreement would apply;
  • officials of unions who are not bargaining representatives for employees to whom the proposed agreement would apply; or
  • other third parties.

(By way of illustration: if employees of Company A were negotiating a new agreement with Company A and took industrial action in support of that agreement in conjunction with employees of Company B, then the action taken by Company A’s employees could not be protected, even if those employees and their union had in all other respects complied with the requirements of the FW Act.)

Picketing

Most (perhaps all) picketing falls outside the definition of ‘industrial action’ in the FW Act. This means that it cannot be protected against common law or statutory liability under that Act. It also means, however, that employers cannot obtain orders from the FWC under section 418 to stop or to prevent it.

In principle, employers faced with a picket which is interfering with the supply or delivery goods or services could seek relief in the ordinary courts if (as would almost invariably be the case) the action was unlawful at common law and/or under statute.

In practical terms, however, this does not always provide effective relief for employers – for example because of difficulty in obtaining relevant evidence or even being able to identify the persons involved in the picket (especially where they are not employed by the target employer).

This state of affairs has been a source of frustration for many employers in the construction industry. Section 47(1) of the Building Act tries to remedy this by providing that ‘a person must not engage in an unlawful picket’.

As defined in section 47(2), an unlawful picket is action which has the purpose or effect of preventing or restricting a person from accessing or leaving a building site or an ‘ancillary site’, or which ‘would reasonably be expected to intimidate a person accessing or leaving a building site or an ancillary site’, and that:

  • is motivated for the purpose of supporting or advancing claims against a building industry participant in respect of the employment of employees or the engagement of contractors by the building industry participant; or
  • is motivated for the purpose of advancing industrial objectives of a building association; or
  • is unlawful (apart from this section).

5. Coercion and discrimination

Part 6-2 of the Building Act proscribes a number of ‘coercive’ practices including taking ‘any action’ against another person with the intent to coerce that person to do certain things such as:

  • engage or not engage a particular person as an employee or as a contractor;
  • allocate particular work or duties to a particular employee or contractor;
  • nominate or not nominate a particular superannuation fund; and
  • make, vary or terminate an enterprise agreement.

To some extent, these prohibitions mirror provisions in Part 3-1 of the FW Act, but the Building Act recasts them by reference to the circumstances of the building industry and provides for penalties which are significantly higher than those available under the FW Act.

6. Penalties and remedies

Engaging in unlawful industrial action or unlawful picketing can attract monetary penalties of:

  • up to $180,000 for a body corporate (including a union) (compared to the previous maximum of $54,000 under the FW Act); or
  • $36,000 for individuals (compared with the previous maximum of $10,800 under the FW Act).

Unlawful industrial action/picketing can also lead to the issue of injunctions and the making of orders for compensation under section 81 of the Building Act.

In addition, section 48 of the Building Act provides that ‘any person’ can apply to a relevant State or Federal Court for an injunction to stop or prevent unlawful industrial action or picketing. Failure to observe such an injunction would be a contempt of court – paving the way for the imposition of unlimited fines and even imprisonment.

Clearly, it would be open to an employer whose business was adversely affected by unlawful industrial action or picketing to seek relief under sections 48 and 81. So could the ABCC – even if the employer(s) directly affected lacked the resources and/or the inclination to do so.

7. Project agreements

Section 59 of the Building Act is directed against the practice of entering into ‘project agreements’ which purport to provide standard employment conditions for building employees in respect of building work that they carry out at a particular building site or sites’, and which terms are to be observed by all employers on the site.

It achieves its object by providing that any agreement to such effect is ‘unenforceable’. It should be noted, however, that this provision applies only to agreements made after the commencement of the Building Act. Enterprise agreements made under the Fair Work Act 2009 (Cth) that may cover a particular project, however, continue to remain permissible.

8. The Building Code

One of the most important issues associated with the passage of the Building Act was the adoption of a new Code, to replace the Building Code which was put in place in the dying days of the Gillard Government in 2013 (2013 Code).

In April 2014, the Abbott Government published an ‘advance release’ of a Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (2014 Code) which it envisaged would replace the 2013 Code once the Bill became law.[8]

Amongst other things, the 2014 Code included significant restrictions on the inclusion in enterprise agreements of terms which could broadly be described as ‘union friendly’. These restrictions were stated (section 11(2)) to apply to all agreements made after 24 April 2014. This was intended to encourage industry participants to make Code-compliant agreements in the period between the advance release and the passage of the Bill, at which point the 2014 Code would commence to have legal effect. In any event, the 2014 Code never had legal effect, and as from 2 December 2016 the 2013 Code has been replaced by the 2016 Code.[9]

As an interim measure, starting in May 2016, the FWBC adopted a practice whereby it reviewed enterprise agreements which had been made and approved to ascertain whether they complied with the 2013 Building Code.[10] If the agreement was considered by FWBC to be Code compliant, it would issue a ‘letter of compliance’ to that effect. It also issued ‘draft assessments’ in relation to proposed agreements which were submitted to it before they were made.

The Senate amendments to the Bill have the effect that the 2016 Code does not apply to agreements which were made and found to be compliant with the 2013 Code until 29 November 2018.

This means that those employers in the building industry who made Code compliant agreements on or before 1 December 2016 do not need to have 2016 Code compliant enterprise agreements until November 2018. For those who are covered by such agreements, the 2016 Code will apply to negotiations for any new agreements to be made after 2 December 2016.

Importantly, all building industry participants will become code covered entities and must comply with the 2016 Code in relation to all their future work (the extent of which will depend on whether the entity has a 2013 Code compliant enterprise agreement or not) from the first time they submit an expression of interest or tender for Commonwealth funded building work.

The 2016 Code is very similar to the proposed 2014 Code, but there are some significant differences between the two documents. These include the fact that the 2016 Code:

  • prohibits ‘sham contracting’;
  • prohibits collusive tendering practices;
  • requires that jobs which are to be offered to persons who are not Australian citizens or permanent residents to first be advertised in Australia (in accordance with specified criteria), and that the employer be able to demonstrate that no citizen or permanent resident ‘is suitable for the job’;
  • provides that in future, exclusion sanctions are to be imposed by the Minister on the recommendation of the ABC Commissioner, rather than by the ABC Commissioner with a right to apply to the Minister for review as contemplated by the 2014 Code;
  • requires that tenderers for Commonwealth funded work demonstrate ‘a positive commitment to the provision of appropriate training and skill development for their workforce’;
  • requires that tenderers provide details as to numbers of apprentices and trainees, together with numbers of visa holders, that are intended to be engaged to undertake the work;
  • requires that tenderers provide information as to whether they have been found to have engaged in a range of forms of unlawful conduct within the previous three years, and that they undertake to obtain (and keep updated) similar information from any contractors that they may engage in the course of the project; and
  • requires that tenderers must provide a range of information about the proposed work, including as to ‘the extent to which domestically sourced and manufactured building materials will be used to undertake the building work’, and the impact on jobs of the project.

Like its predecessor, the 2016 Code applies only to ‘Commonwealth funded building work’. However, once an entity becomes a ‘code covered entity’, it must henceforth comply with the Code ‘on all new projects, including projects that are privately funded’.

An entity becomes a ‘code covered entity’ by submitting an expression of interest or tender for Commonwealth funded building work on or after 2 December 2016.

10 key steps all building industry employers should take now

In order to maximise opportunities (and minimise risks), there are certain steps employers should take immediately, even if they are covered by an enterprise agreement which does not need to comply with the 2016 Code until November 2018.

These steps include:

  1. Confirming whether they are, or are not, a building industry participant to whom the Building Act applies.
  2. Considering whether they are already, or may in the future wish to become, a Code covered entity.
  3. If an employer is already Code covered, or wishes to become so covered in the future, ensuring that they comply with the 2016 Code on all privately funded as well as Commonwealth funded projects.
  4. Developing appropriate procedures for dealing with the ABCC’s information gathering activities, including providing training and making legal assistance available to managers and directors who may be required to provide information to the ABCC.
  5. Reviewing and, if necessary, revising the policies and procedures they have in place to ensure compliance with their obligations under the FW Act and relevant industrial instruments – especially in light of the possibility that the ABCC will feel impelled to devote more of its energies and resources to ensuring employer compliance in response to its statutory obligation to discharge its responsibilities in a ‘reasonable and proportionate manner’.
  6. Putting in place arrangements for monitoring any potentially unlawful industrial action (including the possible involvement of non-protected persons) and picketing, so that the employer can be in a position to seek appropriate relief in a State or Federal court at short notice, and/or to provide information to the ABCC if/when called upon to do so.
  7. Ensuring that any industrial action to which the employer is prepared to agree (for example by paying wages for a stop work meeting) is agreed in advance and in writing.
  8. Developing and implementing protocols in relation to entry to sites by the ABCC, union officials, ‘assistants’ to health and safety representatives (especially in Victoria), and OHS regulators.
  9. Reviewing procurement and hiring procedures to facilitate the provision of relevant information about local content, use of overseas workers, apprenticeships and traineeships etc. in the context of tenders for Commonwealth funded work.
  10. Ensuring that industrial and commercial practices are consistent with the requirements of any State or Territory-specific Codes or regulatory requirements (eg. in relation to local content).