09 March 2005
All contractors on the Australian Government's new land transport plan, AusLink, must adhere not only to the Government's National Code of Practice for the Construction Industry, but also its workplace relations policy. What does this mean for contractors?
The Australian Government's push to require building contractors to implement its workplace policies in order to obtain federal funding has been given a major platform with the announcement of AusLink.
AusLink will involve funding of $11.8 billion for road, rail and port connectors over the next five years, together with $872M already committed to rail upgrades in New South Wales, resulting in some $12.7 billion in expenditure overall. By contrast, the Snowy Mountains Scheme would cost $6 billion in today's money.
Funding of AusLink
AusLink will be funded primarily by the Australian Government and is also aimed at attracting private sector infrastructure investors. AusLink funding will comprise:
The Australian Government currently requires all construction activities undertaken by federal entities subject to the Financial Management Act 1977 to comply with its "Guidelines on Complying with Legislation and Government Policy in Procurement". The guidelines require compliance with:
Compliance with workplace relations policy
The Australian Government's workplace relations policy seeks to promote bargaining by the parties at the enterprise level, with preference given to Australian Workplace Agreements (AWAs) or collective agreements
made directly with employees (ie. non-union section 170LK agreements rather than section 170LJ agreements). The framework arrangements for agreement-making are set out in the Workplace Relations Act 1996.
The Australian Government's workplace relations policy also seeks to limit bargaining to matters pertaining to the employment relationship. The Agreement Validation Act which commenced on 15 December 2004 validates all AWAs and collective agreements certified, approved or varied prior to the High Court's decision in Electrolux. The terms in any agreement which do not relate to the employment relationship will be void.
In addition, the Australian Government's workplace relations policy aims to encourage independent contracting, which in the building industry is the overwhelming method of employment amongst sub-contractors. To protect freedom to contract, an Independent Contractors Bill will be introduced in 2005. The Independent Contractors Act would prevent unions from seeking orders from the Australian Industrial Relations Commission to rope contractors into the workplace relations system by deeming them to be "employees", particularly in the larger commercial building projects. However, the legal distinction between contractors and employees is one problem still to be addressed.
The Australian Government has also stepped up its plan to introduce AWAs to small businesses by cutting registration and approval times so that filing and approving AWAs will in future occur at the same time, with the five day period employee consideration period to be abolished.
Compliance with the National Code
The National Code requires contractors to:
The primary focus of the National Code is the "freedom of association" provision, which effectively bans compulsory unionism.
Attaching the strings
Transport Minister John Anderson has been unequivocal in stating that the roadworks money, which along with rail is a major component of AusLink funding, will only be available to States that adopt the National Code. He has indicated he will withhold the cash "as long as it takes" to get States to conform on the basis that the Government requires acceptable value from its funding:
"I am not going to allow this historic opportunity to upgrade our land transport system to be frittered away on featherbedding and inefficiency… This code is non-negotiable."
(The Age, 21 November 2004).
Some States may find it difficult to do other than comply with the National Code because the AusLink projects are too expensive to fund on their own. The Bracks Government previously rejected a $90M federal grant for the redevelopment of the MCG because the money was conditional on compliance with the Government's workplace relations reform agenda. At the time, the Victorian Government was able to fund the MCG project without federal assistance. The States, however, are unlikely to reject the AusLink funding given the amount of funding involved. Indeed, the Victorian Government announced on 8 February that it would adopt the National Code so that it could access the AusLink funding.
Further, federal laws look very likely to change in 2005 so that compliance with the National Code will no longer be a matter of choice.
The Federal Workplace Relations Minister Kevin Andrews has stated that the building industry is a key element of the Government's fourth term agenda. Accordingly, the main vehicle for building industry reform, the Building and Construction Industry Improvement Bill ("BCII Bill"), will be reintroduced to the Senate in 2005. The stand-alone regulator - the Australian Building and Construction Commission - will be part of the package. Its charter is to gather information and launch legal actions to redress the Cole Royal Commission findings that the industry is characterised by illegal and improper payments, threats of violence, chronic failure to honour legally binding agreements, contempt for commission and court rulings, and with a culture of coercion, harassment and intimidation.
To date the Australian Government's strategy in forcing compliance with the National Code through funding has been an important alternative to legislation as a means of breaking union control of building sites. However, once the Government achieves control of the Senate, the BCII Bill, in tandem with the other workplace measures on the Government's legislation agenda, will achieve many of the policy outcomes now being implemented through the funding strategy, of which AusLink is the newest - and arguably most significant - platform.
National Construction Code to apply in Victoria
On 8 February 2005 the Federal and Victorian Governments announced that Victoria had agreed to apply the National Code of Practice for the Construction Industry and the Australian Government Implementation Guidelines on AUSLink Construction Projects in Victoria. A formal agreement is yet to be finalised but the announcement has significant implications for the construction industry in Victoria.
Under the Code and the Implementation Guidelines, Contractors and Subcontractors must meet stringent requirements in relation to industrial relations arrangements. For instance the Code prohibits direct or indirect coercion or pressure being applied by a Contractor to another Contractor or Subcontractor to make over award payments. Project agreements can only be applied with Ministerial approval.
Many of the construction industry certified agreements in Victoria reflect what is known as the “pattern agreement”. Many of the terms in the pattern agreement and some of the practices which are applied under it will be in breach of the Code and the Implementation Guidelines.
Principals will need to put in place cascading contractual arrangements to ensure that they are able to meet the new requirements. Construction companies will need to review their current practices and arrangements if they are to comply. All parties will need advice on the powers of the Building Industry Taskforce to audit compliance with the Code and the Implementation Guidelines.