The related Building and Construction Industry (Consequential and Transitional Provisions) Act 2016 (Cth) (Consequential Act) was passed on the same day. The ABCC's enabling legislation has received Royal Assent and has now commenced operation.

The establishment of the ABCC was originally a recommendation of the Cole Royal Commission, based on the lawless behaviour it found was prevalent in the building and construction industry. The increased civil penalties now provided for under the ABCC Act are also consistent with the maximums recommended by the more recent Royal Commission into Trade Union Governance and Corruption.

The Abbott and Turnbull Governments were originally unable to get the ABCC's enabling legislation through the Senate and this led to the double dissolution election of July this year.

Bills which became the ABCC Act and Consequential Act were introduced to the House of Representatives on 31 August 2016.

Importantly though, a number of significant amendments were subsequently made in the Senate – including key changes as a result of negotiations with Derryn Hinch's Justice Party (DHJP) and the Nick Xenophon Team (NXT).

These changes have now been reflected in the Code for the Tendering and Performance of Building Work 2016 (2016 Code), which was published on 2 December 2016 and which building industry participants must comply with to qualify for Commonwealth funded building work. Due to the amendments agreed with DHJP and NXT, enterprise agreements made before 2 December 2016 will, until 29 November 2018, be exempt from the content requirements contained in the 2016 Code. That phase in period was agreed in circumstances where the next federal election is likely to be late 2018 or in the first half of 2019. Importantly, the 2016 Code's enterprise agreement content requirements will apply to all enterprise agreements made after 2 December 2016.

What does the ABCC Act do?

The primary objective of the ABCC Act is to establish an improved workplace relations framework for building work within the building and construction industry to ensure that such work can be carried out fairly, efficiently and productively.

Changes generally

The ABCC and the Australian Building and Construction Commissioner (Commissioner) will be reinstated and replace the Fair Work Building Industry Inspectorate (FWBII) and the Director of the FWBII (Director). The ABCC, the Commissioner and the staff of the ABCC (including inspectors) will have broader powers than the Director and FWBII. However, existing limitations on how the ABCC and Commissioner exercise these powers (particularly examination powers) have been retained.

The ABCC Act applies to 'building work', which is broadly defined, and it largely adopts the framework of the Fair Work (Building Industry) Act 2012 (Cth) (FWBI Act) and Fair Work Act 2009 (Cth) (FW Act). Though much of the conduct prohibited under the ABCC Act mirrors that contained in the FW Act, the ABCC Act provides for greatly increased penalties.

Unlawful industrial action

Industry specific provisions prohibiting unlawful industrial action have been reintroduced. Those provisions allow for any person to apply for an injunction to restrain a person from engaging in unlawful industrial action (without requiring an order from the Fair Work Commission) or an unlawful picket (a new civil penalty provision) in relation to building work. They also incorporate and strengthen FW Act prohibitions relating to strike pay.

The ABCC Act's definition of 'industrial action' is consistent with the FW Act, and includes bans on working, employees failing to attend work and employer lockouts. Importantly, action which is engaged in concert with, or is organised by, one or more persons who are not 'protected persons' will not be protected action.

As with the FW Act, action that is agreed to by the employer and employees in advance or action which is taken by an employee based on a reasonable concern about an imminent risk to their health and safety will not contravene the ABCC Act.

Coercion and discrimination

The ABCC Act also introduces enhanced industry specific provisions prohibiting coercion, discrimination and unenforceable agreements.

In particular, the provisions prohibit conduct taken with intent to coerce:

• a person to engage or not engage a particular person or independent contractor or to allocate or not allocate particular duties or responsibilities to that person or contractor;
• an employee to nominate, or an employer to make contributions into, a particular superannuation fund;
• a person to make or vary an enterprise agreement (except where that conduct is protected action).

The ABCC Act also prohibits any action being taken against a person based on whether or not they are covered by an enterprise agreement. It also prohibits unwritten or informal agreements, which aim to set terms and conditions of employment across whole projects.

Reverse onus

The reverse onus provisions which presently exist in the FW Act are mirrored in respect of unlawful picketing, coercion and discrimination provisions. In practice, this will mean that once an allegation is made that a person has taken unlawful action for a particular reason or with a particular intent, that reason or intent will be assumed unless proven otherwise.

The Senate removed a specific requirement in relation to industrial action which required a person relying upon an alleged reasonable concern about an imminent risk to health or safety to prove that such a concern existed. However, individuals who are seeking to defend an allegation of a breach of a civil remedy provision by relying on a statutory excuse or exception to the alleged breach will retain the evidential burden of establishing that excuse or exception.

Information gathering

Subject to continued oversight from the Administrative Appeals Tribunal, the Commissioner has information gathering powers to require a person to give information, produce documents or attend an interview to give evidence in relation to an investigation. Processes relating to examination notices and the conduct of examinations are also set out in the ABCC Act.

The powers of Inspectors and Federal Safety Officers have also been restructured so that different officers may exercise powers for different compliance purposes. Inspectors are now responsible for ensuring compliance with relevant building laws, including the 2016 Code. Federal Safety Officers are only responsible for ensuring compliance with the WHS accreditation scheme.

Penalties

The applicable penalties are considerably higher than those under the FW Act, increasing from a maximum of $10,800 to $36,000 for individuals and from a maximum of $54,000 to $180,000 for bodies corporate. These penalties can potentially apply to each breach.

Code of practice

On 2 December 2016, the Minister for Employment issued the 2016 Code, which takes effect as a code of practice under the ABCC Act.

The 2016 Code replaces the earlier Building Code 2013, and is modelled on the draft code issued in April 2014. It sets out requirements that building industry participants must comply with to be eligible to tender for and win Commonwealth funded building work. It will apply to all Commonwealth funded building work for which a Commonwealth funding entity has called for an expression of interest or tender on or after 2 December 2016. Once the 2016 Code applies to an industry participant, they must comply with it on publicly and privately funded projects to remain eligible for Commonwealth funded work. The Building Code 2013 will continue to apply in respect of Commonwealth funded building work procured prior to 2 December 2016.

The 2016 Code formalises obligations set out in the draft 2014 Code that:

1. Building industry participants must not make enterprise agreements that contain content (relevant examples of which are set out in the 2016 Code) that is unproductive, discriminatory or contrary to freedom of association (however, until 29 November 2018, these content requirements will not apply to enterprise agreements made before 2 December 2016);
2. Building industry participants must:
   • strictly enforce right of entry requirements and protect freedom of association;
   • comply with applicable industrial instruments and industrial laws;
   • not coerce or otherwise require contractors, consultants or subcontractors to make over-award payments or have particular workplace arrangement in place;
   • notify the ABCC in respect of breaches of the Code as well as actual or threatened industrial action;
   • draft a Workplace Relations Management Plan (WRMP) on certain types of Commonwealth funded projects (WRMPs must, among other things, deal with how the 2016 Code will be complied with on the relevant project);
   • implement fitness for work policies and procedures to ensure workers are not affected by alcohol or other drugs; and
   • police subcontractor compliance with the 2016 Code on Commonwealth funded projects whether or not particular subcontractors would themselves be required to comply with the 2016 Code in their own right.

The 2016 Code also includes a number of new provisions included as a result of compromises reached with the cross-bench as part of passing the ABCC Act, including;

1. specific prohibitions in respect of sham contracting;
2. prohibitions on collusive tendering practices;
3. greatly strengthened security of payment obligations, which include requirements that:
   1. builders have a documented dispute resolution process that details how payment disputes will be resolved (which must provide an option for resolution by referral to an independent adjudicator);
      the ABCC be notified of any 'disputed' or 'delayed' payment; and
4. new strict market testing requirements which require that an employer show that 'no Australian citizen or Australian permanent resident is suitable' for a particular vacant position before a non-citizen or non-permanent resident can be engaged in the role.

With the exception of requirements to police subcontractor compliance, the formulation of WRMPs, and the tendering information requirements referred to below, most obligations contained in the 2016 Code apply to privately and publicly funded projects.

In addition, the 2016 Code also contains new requirements that building industry participants must satisfy in the process of completing an expression of interest or request to tender for Commonwealth funded work, including:

• demonstrating a positive commitment to the provision of appropriate training and skill development;
• listing the number of its apprentices and those of its employees who hold visas;
• providing details of any payment it has been required to make under a security of payment adjudication certificate;
• (in respect of 'preferred tenderers') providing information on the extent to which domestically sourced and manufactured building materials will be used to undertake the building work, whether such materials comply with Australian standards, an assessment of the 'whole of life' costs of the project, an assessment of the 'impact on jobs of the project to which the building work relates'; and whether the project 'will contribute to skills growth'.

Federal Safety Commissioner

The ABCC Act continues the Office of the Federal Safety Commissioner, the purposes of which is to promote work health and safety in the building and construction industry and implement the accreditation scheme. The scheme requires that any person who wishes to carry out work funded by the Commonwealth or a Commonwealth authority must be accredited in accordance with the scheme.

Security of Payments Working Group

The ABCC Act also establishes a Security of Payments Working Group to monitor the impact of the activities of the ABCC on the conduct and practices of building industry participants including in relation to their compliance with security of payment laws.

The group will also make recommendations to the Commissioner about steps that could be taken to improve compliance with security of payment laws and to the Minister about matters the Minister requests the group to consider.

Reporting

The Commissioner must report quarterly and annually to the Minister (who must provide the report to both Houses of Parliament) about the ABCC's functions and the exercise of its powers, including the matters the Commissioner investigated, the cost of those matters, proceedings commenced, legal expenses, industry conditions, examination notices issued, the assistance and advice provided to building industry participants, the extent to which the 2016 Code was complied with in each financial year, directions given by the Minister and delegations made by the Commissioner.

Review

The Minister is also to arrange a review into the operation of the ABCC Act within 12 months of commencement. The resulting report in relation to the review must be tabled in both Houses of Parliament.

Further consequential amendments

The Consequential Act repeals the FWBI Act and addresses consequential and transitional matters relating to the ABCC Act.

The amendments include the following transitional arrangements:

• The ABCC Act will apply in relation to any building work performed, any action taken or any omission that occurs after 2 December 2016.
• The powers to obtain information conferred under the ABCC Act will apply in relation to any contravention or alleged contravention of the Building and Construction Industry Improvement Act 2005 (Cth) and the FWBI Act that occurs before 2 December 2016.
• The Commissioner’s powers under the ABCC Act to intervene and make submissions in proceedings will extend to proceedings commenced before 2 December 2016.
• The Commissioner may begin or continue to participate in or institute building proceedings even if the conduct giving rise to the proceeding was the subject of a matter that was settled before 2 December 2016.
• The Commissioner will be substituted as a party in proceedings in which the Director is a party and which are pending before the transition time.

A number of matters from the FWBI Act are preserved including the existing safety accreditation scheme, examination notices issued before the transition time, the confidentiality of protected information, and the protection afforded to the Director under the FWBI Act from liability for conduct in good faith.

What do the changes mean for the industry?

The ABCC legislation will result in a regulator with increased powers to monitor behaviour in the industry, prosecute alleged breaches and seek significantly higher monetary penalties for individuals and unions that breach applicable legislative requirements.

The 2016 Code is a key issue for principal contractors and subcontractors. It will be important to develop protocols dealing with its requirements, including:

• advertising for roles on sites;
• information required when tendering; and
• collating information about compliance with the 2016 Code as required.

A review of commercial contracts may also be necessary, particularly to ensure that building industry participants have appropriate powers to monitor subcontractor compliance with the 2016 Code on Commonwealth funded projects, and to reflect its new requirements.

While builders with existing non-Code compliant enterprise agreements will be able to tender for Commonwealth funded projects until November 2018, any new enterprise agreements must be compliant. If negotiating a current enterprise agreement an audit of proposed terms to ensure compliance is crucial. Under the 2016 Code, the ABCC will retain the FWBC's capacity to provide compliance assessments for draft enterprise agreements.

For further information regarding the consequences for you and your business, please contact us.