Western Australian Building and Construction Industry Code of Conduct 2016 (the Code) – Are building contractors and subcontractors complying?

This Code came into force on 1 January 2017. It has been developed to ensure that public funds in Western Australia are spent on certain State Building Work using only safe and reputable Building Contractors. The Code promotes fair and efficient practices and productive workplace relations.

As a Building Contractor or Subcontractor you need to be aware that if you are working on any State Building Work or Private Covered Building Work that the new Code may impose a number of obligations on you.

The Building and Construction Code Monitoring Unit has been established within the Department of Commerce (BCCMU) to monitor Code compliance. The BCCMU may report findings of alleged material Code non-compliance that arises in respect of State Building work and Covered Private Work to the Minister for Commerce. If the Minister accepts the Report then in effect the Minister makes a finding of material Code non-compliance.

Such a finding may be taken into account in future procurement processes for State Building work and may adversely affect the prospects of, or serve to prevent, the Building Contractor and its Related Entities being awarded the State Building Work.

Even if as a Building Contractor you have been complying with the Commonwealth Code you may now also be subject to this Code. Set out briefly below the obligations placed on Building Contractors who are covered by the Code.

Who is covered?

From 1 January 2017, this Code will apply to all Building Contractors that tender for and secure:

1. WA State Building work with a value in excess of $10million. This Code will eventually apply to all WA State Building Work regardless of value but this is unlikely to be implemented until mid 2017; and
2. Private Covered Building Work procured through a tender process or executed by a contract at a time when the Building Contractor was subject to the Code. Building Contractors must advise the BCCMU of any Private Covered Building work valued at over $2million.

A Building Contractor becomes covered by the Code upon submitting a response to a Covered Tender Process and will, unless the Tender Conditions say otherwise, be subject to the Code for the duration of that tender process and if successful for the duration of the Covered Contract (a contract to perform State Building Work or a contract to perform Private Covered Building Work).

What does it mean for Building Contractors who become subject to the Code?

Building Contractors working on a tender or contract that is covered by the Code are required to comply with the Code and take all reasonable steps to ensure Subcontractors and Building Industry Participants performing Building Work that falls under the Code comply with each obligation of the Code. The Building Contracts must ensure that compliance with this Code is a condition of all Subcontracts.

A Building Contractor will not be in breach of the Code for the acts or omissions of a subcontractor from breaching a contractual obligation owed to a third party if:

1. The subcontractor became subject to the contractual obligation before becoming involved with Private Covered Building Work; and
2. It was necessary to avoid breaching a contractual obligation with material adverse commercial or operational consequences.

A Building Contractor must notify the BCCMU of a breach or suspected breach of the Code as soon as practicable but no later than 48 hours after becoming aware.

In brief, the Code sets out the following workplace requirements for Building Contractors which include:

1. Compliance with laws decisions, directions: complying with all Designated Industrial Laws, Building Laws and all Work Health and Safety Laws to the extent that they apply to them;

2. Unregistered written agreements and other agreements, workplace reform and dispute settlement procedure:

1. not bargaining or making an agreement that either will not, or the Building Contractor reasonably believes will not, be certified, registered, lodged or otherwise approved; and
2. complying with any applicable requirements of the Fair Work Act 2009 (Cth) or the Industrial Relations Act 1979 (WA).

3. Sham Contracting: Not engaging in Sham Contracting;

4. Engagement of non-citizens or non-residents: Taking all reasonable steps to ensure that any persons engaged are lawfully entitled to work in Australia;

5. Workplace arrangements: Not requiring a subcontractor to have particular workplace arrangements in place;

6. Above-entitlement payments and related matters: Ensuring that a Subcontractor is not coerced or undue influence or pressure is not exerted on them to make an above-entitlements payment.

7. Freedom of Association: Adopting and implementing policies that are consistent with applicable industrial law and ensure that persons are free to become members and be represented by Industrial Associations and participate in lawful industrial activities;

8. Entry to premises where building work is performed: In compliance with all laws that they give a right of entry permit holder a right to enter premises where work is performed;

9. Industrial Action: Requirements to report actual or threatened industrial action to BCCMU after becoming aware of the threat or as soon as practicable. Building Contractors must provide the BCCMU with access to the site, employees, contractors and assist and not obstruct them;

10. Requirement to have a Workplace Relations Management Plan (WRMP): The WRMP must satisfy either the requirements of Schedule 2 of the Code or is required under a Commonwealth Code and satisfies each of the requirements for a WRMP under that code. Each WRMP under the Code must include, document or address each of the following:

1. general matters: This includes the approach to ensuring compliance with the Code (eg processes and procedures) and must be communicated to the Subcontractor;
2. workplace arrangements and compliance: Approach to regulating and monitoring workplace arrangements on the project and ensuring compliance with statutory workplace rights;
3. other parties and lines of communication: The WRMP must set out the organisational structure and reporting lines on the project including for example, identifying the personnel that will be responsible for: subcontractor management; compliance with the Code; grievance management; and its approach to managing site access by third parties (eg right of entry and monitoring); and
4. workplace relations risk: The WRMP must identify the risks on the project and the approach to managing those risks and the subcontractors that are engaged by the Building Contractor. This will include processes and procedures for dealing with Industrial Action and employee grievances.

11. Drug and alcohol management: The fitness for work policy must include management of alcohol or other drugs in the workplace in the manner set out in the Code; and

12. Security of payment: A Building Contractor must:

1. security of payments: comply with all applicable laws (including the Construction Contracts Act 2004 (WA)) relating to the security of payments that are due to persons;
2. prohibited provisions: not include in any construction contract (as defined in the Construction Contracts Act 2004 (WA)) any provision which is a prohibited provision for the purposes of Division 1 of Part 2 of the Construction Contracts Act 2004 (WA);
3. timely payments: ensure that payments made by the Building Contractor are made in a reasonable and timely manner; and
4. dispute resolution: as far as practicable, ensure that disputes about payments are resolved in a reasonable, timely and consultative way.

The Code also includes provisions about matters involving disputes with small businesses and not engaging in collusive tendering.

What if you fail to comply?

Building Contractors performing State Building Work may (depending upon the terms of Covered Contracts) owe contractual obligations to Funding Entities to comply with this Code. Failure to comply with this Code may comprise a breach of contract and give rise to remedies in contract.

A Building Contractor which fails to comply with this Code may be the subject of a Final Code Compliance Report that makes a finding of material Code non compliance. Such a finding will be provided to the Minister and may be taken into account in future procurement processes for State Building Work and may adversely affect the prospects of being awarded State Building Work. Further, the BCCMU may report any non-compliance to the appropriate government agency or statutory body.

A breach of the Code may also result in the Building Contractor being in breach of the Fair Work Act 2009 or applicable State Legislation and therefore an employee/contractor may have remedies under the employment legislation as well as the Code.

This article is not intended to be legal advice and should not be relied upon as such. For more information regarding the Code and the implications for your business in respect of your current workplace arrangements please contact Erica Hartley on (08) 9420 1561 or in respect of your tendering practices and building contracts please contact Michael Hollingdale on (08) 9420 1564.

Click here to view the code.

This article was written by Erica Hartley, Partner, Michael Hollingdale, Partner and Victoria Stamper, Associate.