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The Federal Government’s Building and Construction Industry Watchdog is back. The New Building Code – Major changes and summary

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This article was written by Chris Wheeler and Mark Evans.

The Federal Government recently re-established the Australian Building and Construction Commission (ABCC) – to (among other things) enforce a new code of practice under the Building and Construction Industry (Improving Productivity) Act 2016.

The new code of practice – the Code for the Tendering and Performance of Building Work 2016 (Code) sets the federal standard for workplace relations conduct expected from building industry participants (including building contractors and building employers) that wish to undertake Commonwealth-funded building work. The Code applies to all new tenders and tender submissions for Commonwealth-funded building work that arise from 2 December 2016.

Commonwealth-funded building work has a very broad definition like the previous Building Code 2013 (Former Code) including building work undertaken directly for a Commonwealth Government department – or indirectly funded by the Commonwealth by at least $5 million and that represents at least 50% of the payment value or that contribution is at least $10 million.

Building industry participants that do not comply with the Code will not be awarded Commonwealth-funded building work. In particular, the Code requires compliance by union officials with right of entry laws, freedom of association provisions protecting workers' choice around union membership, work health and safety laws, and security of payment laws.

New enterprise agreements made after the commencement of the Code must not contain restrictive work practices or discriminatory provisions. However, building industry participants covered by enterprise agreements made before 2 December 2016 have until 29 November 2018 to ensure their agreements are Code compliant.

The obligations in the Former Code continue to apply to Commonwealth-funded building work for which tenders were submitted before 2 December 2016.

Major changes

Enterprise agreements must not contain restrictive or discriminatory provisions

Enterprise agreements applicable to relevant building work tendered for after 2 December 2016 must not contain restrictive work practices or discriminatory provisions. For example, enterprise agreements cannot:

  • limit the ability of building industry participants to manage their business or improve productivity;
  • prescribe the number of employees or subcontractors that may be employed or engaged on a particular site, area, or at a particular time;
  • prescribe the terms and conditions on which subcontractors are engaged (including the terms and conditions of employees of a subcontractor); or
  • discriminate against certain persons, or classes of employees or subcontractors.

Enterprise agreements made before 2 December 2016 do not need to comply with the new non-restrictive work practice rules until 29 November 2018.

Strengthened security of payments and disputed payments provisions

The Code attempts to strengthen the security of payment requirements under the Former Code. The Code also prohibits building industry participants from engaging in fraudulent phoenix activities or coercive behaviour in relation to security of payment provisions.

Under the Code, any disputed or delayed progress payment must be reported to the ABCC and the relevant funding entity (the entity funding the project).

Building industry participants must have a documented dispute settlement process detailing how disputes about payments to subcontractors will be resolved. Those dispute resolution processes must include a referral process to an independent adjudicator for determination if the dispute cannot be resolved between the parties. Any decision by an independent adjudicator must be consistent with the Code.

Wider freedom of association and industrial action provisions

The Code expands freedom of association protections and industrial action obligations. Most notably, ensuring freedom of choice for individuals around union membership and requiring building industry participants to take steps to prevent or bring to an end certain types of industrial action. There are also requirements to report actual or threatened industrial action to the ABCC. In particular, building industry participants must ensure that individuals are:

  • free to choose whether or not to become members of building associations (unions) or to be represented by building associations;
  • free to participate or refrain from participating in lawful industrial activities; and
  • not discriminated against on the basis of their membership (or lack thereof) of a building association.

The Code sets out a number of detailed requirements aimed at reducing identification of individuals belonging (or not belonging) to building associations and discrimination based on membership or non-membership. The Code also attempts to reduce the influence of building associations or building industry participants to employ non-working shop stewards or delegates and curtail other building site activities like 'no ticket, no start' signs and 'show card' days.

Additional obligations on Commonwealth funding entities

The Code outlines additional obligations on Commonwealth funding entities to ensure that all tender processes and calls for expressions of interest comply with the Code, and require entities tendering for Commonwealth funded building work to comply with the Code.

Funding entities must also ensure that preferred tenderers provide certain information, including:

  • the extent to which domestically sourced and manufactured building materials will be used to complete the work (and compliance with Australian Standards);
  • an assessment of the whole-of-life costs of the project; and
  • whether the performance of building work will contribute to skills growth.

A funding entity must only enter into a contract with a building industry participant if satisfied that the building industry participant will comply with the Code, and has not had (or is complying with) an adverse decision, direction or other order made by a court or tribunal for a breach of the Act, a designated building law, work health and safety law or competition and consumer law and has not fully complied with such decision, direction or order.

As soon as practicable after a funding entity has issued a tender or EOI for building work, the funding entity must inform the ABCC.

Workplace Relations Management Plans (WRMP)

Where the Commonwealth's contribution to building projects is at least $5,000,000 and represents at least 50% of the total construction project value, or the Commonwealth's contribution is at least $10,000,000, funding entities must submit a WRMP for that project to the ABCC for approval and must include an ABCC approved WRMP in their tender or EOI. The WRMP must demonstrate how the Code will be complied with during the project, especially the fitness for work and security of payment provisions. Before approving the WRMP, the ABCC may require the WRMP to address additional issues, such as measuring productivity, managing site access by third parties, outlining organisational structures and reporting lines and managing workplace relations risks. A head contractor must ensure that all subcontractors comply with the WRMP. A failure by a head contractor to comply with its WRMP constitutes a breach of the Code.

Compliance and Monitoring

The Code contains anti-avoidance provisions, noting that building industry participants must comply with the Code in order to be eligible to work on Commonwealth-funded projects.

Building industry participants must notify the ABCC of all breaches or suspected breaches of the Code. Funding entities must also notify the ABCC of all allegations of breaches of the Code, and encourage the voluntary modification or cessation of noncompliant behaviour. The ABCC may evaluate compliance, and refer cases of building industry participant non-compliance to the Minister, who may impose exclusion sanctions on non-compliant building industry participants. The ABCC may also refer matters or make a complaint concerning non-compliant funding entities to the Secretary of the Department of Finance.

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