Australian Building and Construction Commission Mark II

An industry-specific regulator

On 1 December 2016, the Australian Building and Construction Commission (ABCC) (Mark II) was restored as the industrial regulator for the construction industry, achieving in large part a key election promise (and double-dissolution trigger) of the Turnbull Coalition government.

You wouldn’t know it, but despite all the controversy, there has been bipartisan support for an industry-specific regulator in the building sector since 2005, when the ABCC (Mark I) was first introduced by the Howard Coalition government. Reflecting the findings of successive Royal Commissions that the industry was beset by serious breaches of industrial and other laws, the Gillard Labor Government maintained the regulator (re-badging it as Fair Work Building and Construction – FWBC) with Gillard acknowledging that ‘serious problems existed’ and that abolition of an industry-specific regulator ‘would not have been a responsible course’.

So what’s changed?

ABCC Mark II is similar to the first, including an armoury of increased penalties, broader definitions of unlawful industrial conduct and – most significantly – stricter procurement rules for companies tendering for Commonwealth government work.

Important changes include:

  • a broader definition of ‘building work’, which will include supply of goods to construction sites and offshore sites;
  • a greater disincentive for unlawful industrial conduct, with fines increasing from $54,000 to $180,000 (for unions and companies) and from $10,800 to $36,000 (for individuals);
  • a capacity for the ABCC to prosecute, and affected persons to seek injunctive and compensatory relief from, pickets which prevent access / egress or would be reasonably expected to intimidate a person from accessing / leaving a site; and
  • the ability to maintain prosecutions in the public interest, even where a private settlement has been reached between the parties.

The ABCC retains the compulsory interrogation powers held by FWBC, under which persons can be compelled to give evidence on pain of six months imprisonment, but receive immunity from prosecution.

New procurement rules

Most significantly, the ABCC will oversee a new Commonwealth procurement code, the Code for the Tendering and Performance of Building Work 2016 (Cth) (Tendering Code). The Tendering Code commenced on 2 December 2016 (replacing the existing Building Code 2013 (Cth)) and imposes a number of new site management rules and enterprise agreement content requirements on tendering firms. The stakes are high – companies which fail to comply can be disqualified from tendering for Commonwealth-funded work.

Managing union right of entry and freedom of association

In order to minimise site disruption, new site management rules require that any entry by union officials occur in strict compliance with the Work Health and Safety Act 2011 (ACT) and Fair Work Act 2009 (Cth) (FW Act). This means that union officials cannot be ‘invited’ on-site where they do not have a valid right of entry under those laws.

To assist head contactors in achieving Tendering Code compliance, Meyer Vandenberg Lawyers, in conjunction with the Master Builders Association of the ACT, has developed a right of entry app for iphones, which can be downloaded from the app store here. The app is designed to assist site supervisors in real time when navigating right of entry laws.

The Tendering Code also requires head contractors to adopt policies which pro-actively support freedom of association. This broadly requires head contractors to supervise union officials while on-site, and to eliminate any impression of ‘no ticket, no start’ policies, including a prohibition on employers providing employees with union-branded clothing and on union-facilitated inductions of employees.

Workplace Relations Management Plans

For projects where the Commonwealth’s contribution to a project is above certain thresholds,[6] the Tendering Code also requires head contractors to submit a ‘workplace relations management plan’ (WRMP) for approval by the ABCC. WRMPs must detail how (among other matters):

  • a productive workforce will be maintained, including the ability to flexibly deploy employees and contractors to meet project demands;
  • productivity will be measured and recorded;
  • freedom of association will be protected on-site;
  • industrial risks will be managed, including detail about whether a tenderer has delivered projects on time and within budget over the last two years, and whether any failure to do so was due to the tenderer’s inability to flexibly deploy labour to meet project demands; and
  • drugs and alcohol will be managed on-site (including via mandatory testing).

The ABCC will monitor on-site compliance with WRMPs, which head contractors must ensure are also complied with by contractors. A breach of a WRMP will constitute a breach of the Tendering Code.

Content of enterprise agreements

The Tendering Code imposes a number of content rules on enterprise agreements, with the central aim of ensuring that projects are not delayed by restrictive work practices.

Enterprise agreements must not impose limitations on how an employer deploys labour or contain terms which otherwise prevent improvements in productivity. For example, the following provisions typically found in pattern CFMEU enterprise agreements are prohibited:

  • mandatory scheduling of rostered days off around public holidays (so-called ‘lock-down’ weekends);
  • the capacity for the CFMEU to hold paid meetings with employees (which can be called daily for up to four hours, and can be used to take effectively protected industrial action without otherwise complying with the FW Act); and
  • requirements for contractors to pay their employees the same terms and conditions found in a head contractor’s enterprise agreement.

Last minute amendments to the Tendering Code mean that firms with existing agreements have until November 2018 to renegotiate agreements that comply with the Tendering Code. Large parts of Australia (including NSW, Queensland and Victoria) have recently completed bargaining rounds with the CFMEU, meaning that in a practical sense most (though not all) employers will feel no immediate need to renegotiate, having until November 2018 to comply. However, for companies with expired pattern CFMEU enterprise agreements which have not yet been renegotiated, any negotiations in 2017 will need to be for Tendering-Code compliant agreements.

This bifurcated approach is likely to see tenderers with Tendering Code-compliant enterprise agreements lent an appreciable competitive advantage (due to the elimination of restrictive work practices) over those companies which wait until November 2018 to comply. It is also possible that companies which (lawfully) wait until November 2018 to renegotiate their enterprise agreements may nevertheless fail to have their WRMPs approved, as they may be unable to adequately demonstrate how they will flexibly deploy employees and subcontractors to meet project demands. This could mean that tenderers lose tender bids due to the restrictive impacts of their current enterprise agreements, even though they technically have until November 2018 to negotiate new ones.

The ABCC is currently assessing enterprise agreements for compliance. Tenderers can email their agreements to using the form on the ABCC website.

Local labour, local materials

The Tendering Code also requires tendering firms to attempt to source labour locally before sponsoring foreign workers. As with existing migration laws, this requires employers to advertise jobs locally before hiring workers from overseas, but also specifies that the advertising be conducted on an Australia-wide basis. Tendering firms will also be required to provide information about the extent to which locally-sourced materials will be used on projects, and whether any materials (particularly foreign ones) comply with relevant Australian standards.

What should you do?

The return of the ABCC will see a far greater level of regulatory scrutiny applied to the construction industry. An immediate focus is likely to be on tendering, site management, enterprise agreements and WRMPs. Head contractors, as much as unions, are likely to be the focus of early regulatory action.

With new penalties in place, head contractors must act now to ensure freedom of association, including elimination of undue union influence in the awarding of contracts and any impression that union membership is mandatory (or even encouraged) for employees. Hiring arrangements for foreign workers should also be reviewed, along with an audit of the origin and Australian-standard compliance of building materials.

For firms tendering for Commonwealth Government work, site protocols dealing with union rights of entry must be implemented now. Tendering firms with CFMEU enterprise agreements (whether current or expired) – and especially head contractors which will need WRMPs – should also commence negotiations for Tendering Code-compliant enterprise agreements, or else risk missing out on federal work. Meyer Vandenberg Lawyers has assisted multiple employers in the ACT region in negotiating Tendering Code-compliant enterprise agreements and in advising on right of entry protocols.

For more information contact our Employment, Workplace Relations and Safety Team:

Will Ward — Special Counsel — Employment Workplace Relations and Safety
(02) 6279 4366

John Nikolic — Associate — Industrial Relations
(02) 6279 4317