From 1 September 2017, businesses that operate in the building industry need to be aware that they are not likely to be able to work on any Commonwealth-funded building work if their enterprise agreements do not comply with the Code for the Tendering and Performance of Building Work 2016 (Code), including its new drug-testing rules. The amendments to the Building and Construction Industry (Improving Productivity) Act 2016 on 17 February 2017 reduced the transition period for enterprise agreement content from two years to nine months. The new transition period concludes 31 August 2017.

The amendments provided for limited exemption provisions for companies with non-code compliant agreements to tender for, and in some circumstances, be awarded Commonwealth funded building work, depending on when the agreement was made, when Commonwealth funded building work was/is tendered for, and whether the company operates under other enterprise agreements or other industrial arrangements.

The Code, which applies to all “building industry participants”, is likely to cover most businesses that are involved in supplying services to infrastructure and construction projects that are federally funded. The Code imposes stringent standards for management of workplace relations, including the need for frequent workplace drug and alcohol tests and steps to ensure building union officials strictly comply with right-of-entry laws.

Importantly for businesses that may have existing enterprise agreements, the Code sets rules for content of enterprise agreements covering employers and employees performing that work. Further, even if the business is not actually tendering for the Commonwealth-funded building work, there will be the practical issue of contractors being rejected from any such projects unless their enterprise agreements are Code compliant.

What does this mean?

Employers with non-Code compliant enterprise agreements are at immediate risk of being unable to be awarded or commence work on Commonwealth-funded building projects. Even though employers can still tender for Commonwealth-funded work during the transitional period, varying or renegotiating an enterprise agreement takes time and is unlikely to be achieved between the period of tendering and being awarded, or commencing work on a project.

Until September, an employer with a non-Code compliant enterprise agreement (made before 2 December 2016 - when the new Code commenced) will still be eligible to submit expressions of interests or tender for Commonwealth-funded building work. However, they will need to ensure that they have a Code compliant enterprise agreement before they can be awarded or actually commence work on a contract to perform Commonwealth-funded building work, otherwise they cannot be awarded or commence such work. Any non-Code compliant employer that is awarded a contract or tender between 2 December 2016 and the commencement of these amendments (which will be the day after they receive royal assent) can start or continue to undertake the building work under transitional arrangements. No exemptions apply to employers with enterprise agreements made after 2 December 2016. So, any businesses that are affected will need advice about the extent of non-compliance with the Code and the options available to make their enterprise agreements Code compliant.

These options include:

Option 1 - Vary existing enterprise agreement

Many employers negotiated enterprise agreements in the last bargaining round on the basis of commitments from building unions that they would agree to vary the enterprise agreement if and when the Code was introduced.

Employers should consider whether they can rely on those commitments to achieve variations within the requisite, condensed time frame. It is expected the building unions will dispute the view of the Government and/or the employers as to the changes required to achieve compliance.

Option 2 - Make a new enterprise agreement

If the changes required for Code compliance are significant, employers might seek to negotiate a new enterprise agreement that applies for a three- or four-year term. Of course, this will be difficult if opposed by the building unions. It may also open the doors for employees and unions to bring in other demands, and negotiations of this nature take time.

Option 3 - Apply to terminate existing enterprise agreement unilaterally

This option will certainly sanitise the employer in respect of a non-Code compliant enterprise agreement if granted by the Fair Work Commission, however, the application will most likely be fiercely contested by the building unions and/or impacted employees.  

Update Fitness for Work Policies and Procedures

Code-covered employers should undertake a review of current fitness for work policies and procedures and update these to ensure they are compliant with the requirements of the Code. Employers should ensure that there is an approach to managing drug and alcohol issues in the workplace to help ensure that no person attending a building site to perform building work does so under the influence of drugs or alcohol, so that they reflect the requirements of the Code. Michael Selinger, Editor–in–Chief, Health & Safety Handbook