Fair Work Commission Rejects Exclusion Mechanism For Building Code
Friday 24 July 2015 @ 10.58 a.m. | Industrial Law
The Fair Work Commission has recently rejected two Enterprise Agreements which sought to introduce an exclusion mechanism that would conform to the coalition Government's proposed Building and Construction Industry (Fair and Lawful Building Sites) Code 2014. The 2014 Code was introduced early in 2014 and once passed it will apply to all building agreements retrospectively as from the 24 April 2014.
Background
On 17 April 2014, Employment Minister Eric Abetz published the Code as part of the Government’s new direction towards the construction industry. The 2014 Code replaces the existing Building Code 2013 introduced by the previous Government. The 2014 Code was developed to:
“promote an improved workplace relations framework for building work to ensure that building work is carried out fairly, efficiently and productively for the benefit of all building industry participants [and is intended to] restore the rule of law and fairness to Australia’s construction sector.”
The aim of the Code is to provide a uniform set of rules that would free builders from having to comply with potentially conflicting Federal and State building and construction codes. However, currently, the 2014 Code is still being debated in the Senate with no guarantee or indication it will pass in the near future.
The 2014 Code
If enacted, companies would be prevented from winning Government building contracts where the Enterprise Agreements contain clauses which:
- impose limits on the right of the Code Covered Entity to manage its business or to improve productivity;
- discriminate, or have the effect of discriminating against certain persons, classes of employees or subcontractors;
- are inconsistent with the freedom of association requirements set out in the Code;
- restrict the employer engaging casual or daily-hire employees;
- limit managerial prerogative and productivity improvement;
- discriminate against employees or subcontractors;
- require employers to consult with unions about recruitment decisions (including engaging subcontractors); or
- limit the ability of an employer to make redundancies or redeploy staff.
Current Issues
The 2014 Code’s retrospective application coupled with its difficult journey through the Senate is causing a lot of undue problems with building contractors at the moment. Building companies who are currently bargaining for new Enterprise Agreements are experiencing major issues especially where unions are insisting on clauses inconsistent with the 2014 Code. As it stands, any agreements that fall foul of the 2014 Code are not in breach at the moment. However, once the 2014 Code passes, its retrospective application would immediately cause existing agreements to be in breach.
Fair Work Commission Decision
An employer tried to creatively get around this current predicament by introducing an “automatic exclusion mechanism” into the Enterprise Agreement. Effectively, the clause will act to exclude any terms that are inconsistent with the 2014 Code if the 2014 Code is enacted as law.
The Commission ruled that this automatic exclusion mechanism was not allowed because it resulted in the terms of the Agreement not being sufficiently clear or certain for the purposes of the “Better off Overall Test” (BOOT Test). The Commission provided the alternative suggestion that the employer should make a proper application to vary the Agreement following the processes set out in the Fair Work Act 2009.
Further Issues
There are very limited bases upon which an existing Agreement may be varied and, as such, the FWC’s recommendation is not readily practicable. Employers would essentially need to obtain the consent of employees in order to amend the Agreement and achieve compliance with the Code. This could effectively mean that employers would be forced to renegotiate Enterprise Agreements to ensure compliance.
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
Enterprise Agreements incorporating the Draft Building Code given the BOOT
Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 released
Abbott Government Releases New Construction Code
Proposed Federal Building and Construction Code - where does it leave building contractors now?