Farewell to the ABCC - Changes to regulation of the building and construction industry

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4 April 2012

On 21 March 2012, the Senate passed the Building and Construction Industry Improvement Amendment (Transition to Fair Work) Bill 2011. The Bill will come into operation when it receives Royal Assent.

The Bill significantly amends the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act) and largely implements the recommendations of the Honourable Murray Wilcox QC in his report entitled Transition to Fair Work Australia for the Building and Construction Industry (Wilcox Report).

The key changes:

  • The Bill abolishes the Office of the Australian Building and Construction Commissioner (ABCC) and establishes a new statutory agency, the Fair Work Building Industry Inspectorate (Inspectorate).  The Inspectorate will be a stand alone statutory agency.
  • While the Bill retains the use of coercive powers by the Director of Inspectorate, it also imposes a number of safeguards.
  • The use of coercive powers by the Director of the Inspectorate will be sunsetted in three years, not five years as previously proposed.  A decision as to whether the powers will be extended will be made at that time.
  • The role of “Independent Assessor” has been introduced with power to make determinations that the coercive powers be “switched off” in respect of particular projects on which “building work” commences after the commencement of the Bill.
  • The provisions of the FW Act will apply unchanged to workers in the building industry.  Provisions within the BCII Act which dealt with industry-specific laws (such as unlawful industrial action, discrimination, coercion and unfair contracts) will be repealed. 
  • The Bill removes existing higher penalties for building industry participants for breaches of industrial law and broader circumstances under which industrial action attracts penalties.
  • In order to ensure that all building industry participants are not subject to multiple proceedings, the Inspectorate will be prevented from prosecuting building workers when the parties have settled or discontinued matters.

Who is covered by The Bill and what type of work?

Much like the BCII, the Bill affects the rights and obligations of “building industry participants”.  This includes:

building employers, building employees (those who perform building work), building contractors and building associations (including officers, delegates, representatives and employees of those associations).

The definition of “building work” as existed under the BCII Act is largely retained with one important difference.  The Bill now expressly excludes from the definition of “building work” off site pre-fabrication made to order components.  This is intended to exclude manufacturing that takes place in permanent off-site facilities and separate from a building project.

The Inspectorate

The Inspectorate will be headed by a Director, appointed by the Minister.  The functions of the Director include, amongst other things:

  • providing education, assistance and advice to building industry participants;
  • monitoring compliance with designated building laws and the Building Code by building industry participants;
  • investigating any act or practice by a building industry participant that may be contrary to a designated building law, a safety net contractual entitlement or the Building Code; and
  • commencing proceedings in a court, or to make applications to FWA, to enforce designated building laws and safety net contractual entitlements as they relate to building industry participants.

Inspectors who are appointed by the Director of the Inspectorate will have the same powers as inspectors appointed under the Fair Work Act 2009 (Cth) (the FW Act).  This includes powers to enter premises, inspect any work, interview any person and require a person who has the custody or, or access to a document to produce that document.

Exercise of coercive powers

The Bill retains provisions which have the ability to compel a person who is capable of giving evidence that is relevant to an investigation by the Director, to give the information or produce the documents to the Director, or attend before the Director to answer questions relevant to the investigation.

However, the Bill imposes a number of safeguards on the exercise of these coercive powers by the Director. These include:

  • a requirement that the Director make application to a presidential member of the Administrative Appeals Tribunal (presidential member) prior to exercising the coercive powers;
  • a requirement that the presidential member be satisfied that the use of the coercive powers by the Director is warranted (having regard to a number of criteria);
  • an entitlement for a person attending an examination to answer questions to be reimbursed their reasonable expenses, including loss of wages or other income, reasonable legal expenses and reasonable travel and accommodation expenses; and
  • an entitlement for a person attending an examination to be represented by the person’s choice of legal representative;
  • provisions which prevent the Director from requiring a person attending an examination to enter into a confidentiality undertaking in relation to the examination;
  • a requirement that all examinations be videotaped and for the Director of the Inspectorate to provide a report and the video tape to the Commonwealth Ombudsman for review, with the Commonwealth Ombudsman to report at least annually on the use of the coercive powers.

Implementation guidelines for the National Code of Practice for the construction industry ("Guidelines")

Revised Guidelines were issued by Workplace Relations Minister Bill Shorten on 3 March 2012. The amended Guidelines will apply to all projects that are the subject of an expression of interest or tender let for the first time on or after 1 May 2012.

The most significant changes will relate to the removal of blanket prohibitions against project agreements.  Project agreements will be allowed if they are made and approved under the FW Act or in accordance with State industrial law.

Further, whilst a general ban on unregistered agreements will be retained, the Guidelines will allow unregistered agreements to be made dealing with such things as community welfare activities, reduction of carbon pollution, initiatives to promote women, indigenous or mature aged workers, workers’ health and wellbeing initiatives (such as suicide prevention, health checks, dust diseases screening) and programs to reduce bullying, sexual harassment and workplace discrimination.

It will be considered a fundamental breach of the Guidelines if an employer is found to have engaged in sham contracting and employers may be subject to sanctions.

The former requirement that parties tendering for Australian Government funded construction activity must strictly comply with their right of entry requirements in accordance with legislation, court orders or industrial instruments appears to have been relaxed in the revised guidelines.

Finally, enterprise agreements made under the FW Act after 1 May 2012 must include a genuine dispute resolution process that provides, amongst other things, for an independent third party such as Fair Work Australia to conciliate or mediate a dispute. If the dispute is not resolved, an independent third party such as Fair Work Australia must have the capacity to settle the dispute via a binding decision. 

conclusion

Whilst the Bill introduces considerable changes to the BCII Act and in particular the range of matters considered unlawful as well as the nature of penalties that might be imposed, it would be unwise for any employer or union to become complacent.

Rather, there is a high likelihood that the Inspectorate will continue to actively monitor compliance with designated building laws, investigate any act or practice that may be contrary to a designated building law or a safety net contractual entitlement or ultimately commence proceedings in a court, or to make an application to Fair Work Australia.

Further, even though the use of the coercive powers has been curtailed, the Director retains considerable powers to obtain information, documents and answers to questions.  We expect these powers to obtain information through means other than the exercise of the coercive powers will be utilised and for the presence of the Inspectorate on building sites to continue.

What the Bill means for employers

On a practical level, employers who have previously operated under the BCII Act need to come to terms with how the Bill will affect their operations and projects. 

Some of the areas where employers should start taking immediate action include:

  • reviewing and amending Industrial Relations Manuals that were written at a time when the BCII Act was in force as well as taking into account changes to the Guidelines.  For example, some manuals might include directions to project managers or site managers that once the Bill comes into operation will no longer be necessary;
  • reviewing and amending project documents which may have imposed obligations or restrictions on certain activities because of the BCII Act or the Guidelines;
  • reviewing and amending site documents and/or guides for dealing with industrial action, right of entry or other incidents;
  • considering what training will be necessary for project managers, site managers and senior management about changes to rights and obligations under the Bill; and
  • if a project is due to commence after the commencement of the Bill, an employer may wish to seek advice as to whether there is any prospect of an application to the “Independent Assessor” to “switch off” the coercive powers with respect to that project.

Contacts

John Tuck

Partner. Melbourne
+61 3 9672 3257

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Heidi Roberts

Partner. Melbourne
+61 3 9672 3562

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Jack de Flamingh

Partner. Sydney
+61 2 9210 6192

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Janine Young

Partner. Melbourne
+61 3 9672 3254

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Nicholas Ellery

Partner. Perth
+61 8 9460 1615

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Stephen Price

Partner. Sydney
+61 2 9210 6236

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Stacey Killackey

Senior Associate. Melbourne
+61 3 9672 3303

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