Construction industry Alert: Enterprise Agreements must be immediately compliant with the Building Code 2016

Wednesday, 22 February 2017

All building and construction industry employers must ensure their Enterprise Agreements (EAs) are compliant with the new Building Code 2016 or risk being immediately disqualified from Commonwealth funded building work. 

Commonwealth funded building work includes Public Private Partnerships and many projects that are indirectly funded by the Commonwealth. 

The Parliament has passed Amendments to the Building and Construction Industry (Improving Productivity) Act 2016 which reduces the transition period for the new Code.  

Employers were to have until 29 November 2018 to ensure their EAs were Code compliant but the transition period will now end on 1 September 2017.  

Further, the Amendments also provide that Commonwealth funded building work may not be awarded to an employer that does not have a Code complaint EA. The consequence is that an employer with non-Code compliant EA can still tender for Commonwealth funded building work prior to 1 September 2017, but would likely need to ensure that they have a Code compliant EA before they could be awarded a contract to perform the work.

The change means that an estimated 3000 building and construction industry employers with non-Code compliant EAs may now be ineligible to be awarded or perform Commonwealth funded building work from as early as next week, unless they immediately renegotiate their EAs.  

Other transitional arrangements may also apply to building work to which the Building Code 2013 applied prior to 2 December 2016.

The Code applies to both builders and subcontractors. Subcontractors who are not Code compliant will not be eligible to be engaged on Commonwealth funded projects. The Code also applies to privately funded building work if employers are to remain eligible for Commonwealth funded building work. 

Examples of non-Code compliant clauses of EAs include: 

  • Clauses which prohibit or restrict casual employment or labour hire; 
  • Clauses which prescribe the number of employees or subcontractors that may be employed or engaged; 
  • Clauses which require union consultation or approval in relation to the type of employees employed; 
  • Clauses which require union consultation or approval in relation to the engagement of subcontractors or the terms of their engagement; and
  • Clauses which limit the right of an employer to make decisions about redundancy, demobilisation or redeployment of employees based on operational requirements.  

There are numerous other examples of non-Code compliant content. 

Any employer who has signed the 2016 CFMEU pattern EA in the last 2 years, or is otherwise unsure if their enterprise agreement complies with the Code, should immediately seek legal advice to avoid potentially serious adverse consequences for their business.

Further, the Building Code 2016 also differs from the Building Code 2014 in some respects. An EA that was assessed as compliant with the Building Code 2014 will not necessarily be compliant with the Building Code 2016.

Employers should act now to ensure their EA is Code compliant as the variation process may take some time.  Code compliance is likely to be a significant bargaining issue in the building and construction industry in the coming months.  

This article was written by Chris Egan, Partner.

Chris Egan 
Partner | Melbourne
P +61 3 8644 3672
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Important disclaimer: The material contained in this publication is of a general nature only and is based on the law as at 22 February 2017. It is not, nor is intended to be, legal advice. If you wish to take any action based on the content of this publication we recommend that you seek professional advice.