30 Nov 2016

ABCC back in business, review contracts and enterprise agreements now

With the passage through Senate earlier today of the final stage of the Government's industrial relations reform agenda to re-establish the Australian Building and Construction Commission (ABCC), businesses in the construction industry should be reviewing their contractual arrangements with contractors and subcontractors, and current enterprise agreements.

This development comes a week after the passage of the Fair Work (Registered Organisations) Amendment Bill which together form two parts of the most significant industrial relations reform since the creation of the Fair Work Act in 2009.

Changes to the ABCC Bill made by the Senate

The Bill received the support of nearly all cross-bench senators but not without significant last minute amendments that:

  • introduce a security of payments regime to the Building Code (this SOP regime is as yet undrafted) to protect unpaid sub-contractors which will require head contractors to hold money in a trust type arrangement which will be made accessible to unpaid businesses in the subcontracting chain;
  • abolishes the reverse onus of proof provision in the former draft relating to proceedings for unlawful industrial action and picketing. The ABCC must now establish on the balance of probabilities that the activity was carried out for a particular reason;
  • allow building industry participants before 29 November 2018, to tender for and be awarded Commonwealth funded building work even if they have a non-compliant agreement. Any new enterprise agreements entered into after the Code commences must comply with the Code. This provides a transition period for existing agreements to be re-negotiated so they are Code compliant before 29 November 2018; and
  • from March next year, companies bidding for government projects worth more than $4 million will need to show how they are contributing to the Australian economy.

Not just about re-establishing the ABCC

The main purpose of the Bill is to reintroduce the ABCC as the industry regulator and abolish the current Fair Work Building Industry Inspectorate (FWBII).

While most attention has been on the restoration of the ABCC and its increased jurisdiction and powers, the Bill also:

  • expands the definition of "building work" to cover the transportation or supply of goods to building sites and offshore resources platforms;
  • creates a new prohibition on the organising or taking of unlawful industrial action, including unlawful picketing, which will cover conduct that has the purpose of preventing or restricting access to, or from, a building, or ancillary site, where the conduct is for the purpose of advancing industrial claims, motivated by advancing industrial objectives of the relevant union, or is otherwise unlawful;
  • creates an express power of the Court to order injunctions to stop unlawful action, including pickets;
  • expands the existing offence of coercion to include superannuation and to make it explicit that action intended to force an employer to enter into an enterprise agreement is unlawful;
  • prohibits specific agreements where the intent is to provide standard terms and conditions to workers across multiple employers outside of the Fair Work Act (pattern bargaining);
  • significantly expands the power of the regulator who now has the power to compulsory examine people that may have been involved in a contravention, or who could otherwise assist the ABCC in its investigations;
  • removes the current limitation preventing the regulator from initiating or continuing enforcement action where the parties involved have settled a dispute; and
  • significantly increases penalties for unlawful industrial actions committed by individuals and corporate entities ‒ including unions with the same penalties applying to unlawful picketing.

How the new ABCC will affect your business

Senator Abetz says the new regulator will put a "tough cop back on the beat". Significantly, the ABCC's powers and protections now extend to businesses responsible for transporting materials to building sites.

The three areas that will have the most impact on business in the building industry will be:

The Building Code in 2018: this      

  • includes new requirements for companies' contractual arrangements with contractors and subcontractors; and
  • enables further Commonwealth control over the industrial practices of companies tendering for federally funded projects.

New procurement rules: taking effect from March next year, these require businesses bidding for government projects worth more than $4 million to show: 

  • how much locally-produced material they will source;
  • how they are contributing to local employment;
  • how they are growing local skills;
  • the whole-of-life cost of the project, not just the build cost; and
  • that the material they use comply with Australian product standards.

A new offence of unlawful picketing: this is designed to capture conduct that disrupts the supply of goods, services and labour to building sites. While this mostly relates to trade unions, it can also cover any person who engages in this sort of activity and would cover conduct such as secondary boycotts by suppliers.

Getting your business ready for the ABCC

Building industry participants will need to:

  • review their contractual arrangements with contractors and subcontractors to ensure that they are up to date and that any issues identified are addressed;
  • review relevant requirements in the Building Code and consider how they might affect their business, particularly if these businesses undertake Commonwealth-funded building work; and
  • consider whether their current enterprise agreement complies with the Building Code, and whether re-negotiation of the enterprise agreement is necessary when the new Building Code is introduced in 2018;
  • if re-negotiation of an enterprise agreement is required, take steps now to plan for that process, including for any industrial campaign and protected industrial action that may be taken.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.