On 25 January 2013, Workplace Relations Minister Bill Shorten MP issued a new code of practice for the building and construction industry. The Building Code 2013 (Building Code) was made as a legislative instrument, replacing the National Code of Practice for the Construction Industry (which operated as a policy instrument only).
The Building Code and the accompanying Supporting Guidelines for Commonwealth Funding Entities (Supporting Guidelines) took effect on 1 February 2013. These instruments codify previously applicable procurement rules applicable to contractors and participants in the building and construction industry, aimed at ensuring they comply with federal workplace relations laws.
In this In Brief, we explain the significance of the Building Code taking the form of a legislative instrument; the scope of application and content of the Code and Supporting Guidelines; consequences of breaching the Code; and the interaction of the Code with state government building codes (which has recently become quite a significant issue in the Victorian construction industry).
Previously, the National Code of Practice for the Construction Industry and successive versions of the Australian Government Implementation Guidelines for the National Code of Practice for the Construction Industry had no independent legal force and were not subject to Parliamentary scrutiny. This gave governments of both political persuasions considerable flexibility to change the guidelines in order to further their policy objectives and deal with changing circumstances.
By issuing the Building Code as a legislative instrument under the Fair Work (Building Industry) Act 2012 (Cth), the Government intends to provide contractors and building industry participants with greater certainty. Because legislative instruments must be registered with and may be disallowed by Parliament, a higher level of accountability is also achieved. To that extent the legislative instrument status of the Building Code implements, in part, views expressed by Murray Wilcox QC in his Transition to Fair Work Australia for the Building and Construction Industry Report (March 2009).
It seems that another motivation of the Government in legislating the Building Code is to put it on a more sound legal footing, given the emerging conflict between the federal procurement rules and those issued by some state governments (which we discuss further below).
Building contractors and building industry participants are subject to the Building Code if:
The Building Code applies only to on-site building and construction activities, and off-site activities that relate to on-site work (e.g. building work performed on an auxiliary site).
Building contractors and building industry participants covered by the Building Code must ensure that their subcontractors are also code-compliant.
For the most part, the obligations imposed on contractors and building industry participants by the Building Code reflect those that were previously applicable. These include:
Under the Supporting Guidelines, FWBC has the main responsibility for monitoring compliance with the Building Code by contractors and building industry participants.
The Code Monitoring Group in the Department of Education, Employment and Workplace Relations also has a role, including making recommendations to the Minister on the sanctions applicable to parties that breach the Building Code.
Those sanctions may include precluding a party that has breached the Building Code from tendering for Commonwealth-funded work for up to six months.
Minister Shorten has indicated that the new Code “reflects the original intent of the National Code of Practice for the Construction Industry as agreed between the Federal and State Governments in 1997. That intent was to lift the behavioural standards of the industry and to secure compliance with all legal obligations and ethical tendering requirements.”
Perhaps implicit in these comments is a suggestion that building codes introduced at state level have moved away from the intent of the original National Code, with some state governments seeking to use building industry procurement rules to counter the federal Government’s workplace relations policies.
Recent events in Victoria have illustrated this tension. The Victorian Government has taken steps to ensure compliance with its own Implementation Guidelines to the Victorian Code of Practice for the Building and Construction Industry (Victorian Code Implementation Guidelines) (operative from 1 July 2012; a new version was issued in December 2012). The NSW Government has also released draft Implementation Guidelines which are likely to commence operation by 1 July 2013.
Among other requirements, the Victorian Code Implementation Guidelines contain provisions prohibiting “union-friendly” clauses and clauses restricting the engagement of flexible forms of labour from being included in enterprise agreements.
The Construction, Forestry, Mining and Energy Union (CFMEU) has brought proceedings alleging that by excluding (or threatening to exclude) certain building companies from tenders for a Victorian Government-funded building project, the Government has breached the “general protections” provisions in Part 3-1 of the FW Act.
In another proceeding, CFMEU v Eco Recyclers Pty Ltd  FCA 24 (24 January 2013), Justice Bromberg of the Federal Court of Australia found that there was a prima facie case that McCorkell Constructions Pty Ltd had breached Part 3-1 by refusing to engage or make use of the services of Eco Recyclers Pty Ltd – because Eco had an enterprise agreement that did not comply with the Victorian Code Implementation Guidelines.
While both these proceedings await final determination, the federal Government has sought to directly address the conflict between the federal and state rules relating to agreement content.
This has been done through new provisions in the Building Code which provide that, in enterprise agreement negotiations, a contractor or building industry participant must not refuse to consider another bargaining representative’s proposal on the ground that a third party has indicated that:
In practice however this is unlikely to achieve more than to add to the existing good faith bargaining obligations under the FW Act. Ultimately, the Building Code will not prevent a Building Contractor refusing to agree to include terms in a proposed collective agreement that are inconsistent with state government codes such as the Victorian Code Implementation Guidelines. Moreover, putting aside the question of any legal consequence attaching to a contractor acting adversely against a prospective subcontractor or employee in reliance on a state government Code, Building Contractors wishing to tender for state government building work would be unwise to include provisions in a collective agreement that are prohibited by a state government code such as the Victorian Code Implementation Guidelines.