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Victorian Construction Code. Dead or Alive?

Update June 2013

Answer … Alive!

We’re strong supporters of the Victorian Construction Code. Here’s what we’ve said in the past. In our view the code is a critically important process for reform in the construction sector that holds the prospect of breaking the duopoly in construction. This is important to enabling sub-contractors and independent contractors to compete and have a fair go in construction.  

The key aspect of the code is that if construction businesses have bad industrial relations arrangements that damage productivity and increase costs, those businesses cannot tender for government work.

Court rules against the code

But a Federal Court ruling in May 2013 cast doubt on the effectiveness of the code.
  • The Age said the government had ‘backed down’.
  • The construction union, the CFMEU, says the government was wrong and should drop its approach
Here’s the (very complicated) Federal Court ruling against which the Victorian government is appealing. The single judge in the Federal Court declared that the Victorian government could not use the Code in the way it intended. The court declared that to do this breached particular provisions of the Fair Work Act, effectively and apparently nullifying the operation of the code.

The provisions of the Fair Work Act the Code offended are the ‘Adverse Action’ provisions which, in part, read:

Adverse Action


The Adverse Action provisions of the FWA are an invention of the Labor Government—weird, illogical and commercially dangerous. They say, for example, that if you wanted to paint your house and you didn’t choose a particular painter because you thought they’d do a bad job, you’d be in breach of the ‘adverse action’ provisions. The Victorian government says that it only wants to use contractors that it thinks can do a good job. The Federal Court has effectively ruled that the Victorian government is prevented from choosing the contractors it wants because of the Fair Work Act. It’s easy to see why this locks in bad, unproductive work practices and makes construction highly expensive. It will be interesting to see the outcome of the Victorian government’s appeal to the Full Bench of the Federal Court.

An interesting aspect of the Federal Court decision is that in order to rule to block the Victorian code, it required that the giant, multi-billion dollar construction firm, Lend Lease, be declared an ‘independent contractor’ by the Court.  

The code is still alive! Head contractors cannot force EBAs on subcontractors

But there is more to this story. The big construction firms (now a duopoly) control construction by requiring subcontractors to have the same industrial relations arrangements that the big firms have. In construction it’s the subcontractors and independent contractors who actually do the work. The head contractors are mostly just managers of the construction jobs, not usually employing a lot of workers. The really important dynamic in construction is how well the subcontractors can do this work.

Fortunately, even with the restrictions resulting from the Federal Court decision, the Victorian Code remains highly effective. The reason is that if a head contractor forces or pressures a sub-contractor into having an enterprise agreement he or she doesn’t want, the head contractor is in breach of both the Code and the Fair Work Act. This means that sub-contractors are free to have the workplace arrangements they want. The head contractor cannot control the industrial relations agreements which the sub-contractors have. And the sub-contractors have protection from the head contractors in this respect through the Victorian Construction Code Compliance Unit (CCCU).

This has been made clear by the head of the CCCU, Nigel Hadgkiss, in response to questions posed by ICA.

Interview with head of Code Compliance Unit

ICA: Nigel, thanks for the additional advice provided on the code subsequent to the federal court ruling on Lend Lease. Would you be able to advise on these specific questions.

1. If, for example a head contractor required a sub-contractor to have an enterprise agreement with a union would the head contractor be in breach of the Victorian Code? 

Yes. Guideline 5.4 states that parties are prohibited from requiring or attempting to unduly influence another party to have a particular workplace arrangement in place.  Further, in some circumstances such a requirement may breach the Fair Work Act's general protections, including discrimination.  Guideline 4.1 requires parties to comply with legislation.

2. If a head contractor ordered a sub-contractor off a work site because they did not have an enterprise agreement with or without a union, would the head contractor be in breach of the Code?

Yes.  Refusing to engage a sub-contractor because they did not have an enterprise agreement would be a breach of the FW Act.  Guideline 4.1 requires parties to comply with legislation.

3. If a head contractor imposed restrictions or penalties of any sort against a sub-contractor for not having an enterprise agreement, would the head contractor be in breach of the Code?

Yes. Imposing restrictions or penalties against a sub-contractor for not having an enterprise agreement would be a breach of the FW Act.  Guideline 4.1 requires parties to comply with legislation.

4. If a head contractor was in breach of the Code under the circumstances described above, what would be the sanctions against the head contractor?

Sanctions could include any of the following:

  • a formal warning that a further breach will lead to severe sanctions;
  • referral of a complaint to the relevant industry organisation for assessment against its own professional code of conduct and appropriate action;
  • reduction in tendering opportunities at either agency or government-wide level, for example, by exclusion of the breaching party from tendering for government work above a certain value or for a specified period (this sanction may only be imposed by the Minister for Finance in consultation with the responsible Minister);
  • reporting of the breach to an appropriate statutory body; and
  • publicising the breach and the identity of the party.

5. If the answers to 1, 2 and 3 above were in the affirmative (ie: yes, the head contractor would be in breach) and in relation to Expressions of Interest and information for new Victorian government construction contracts, can you advise whether all EOI documentation and contracts do and will clearly explain to potential head contractors that the head contractor cannot require a sub-contractor to have an enterprise agreement?

  • EOI documentation and contracts require the tenderer to acknowledge that they are aware that the Guidelines apply to the project; are deemed to have read and understood the Victorian Guidelines and the obligations they impose, and will comply with the Victorian Code and Guidelines.  What constitutes compliance throughout the Guidelines is not intended to be specifically addressed in the model clauses.
  • All briefings in relation to EOI and contracts do and will clearly state and explain to potential head contractors that the head contractor cannot require a sub-contractor to have an enterprise agreement.
  • The CCCU regularly conducts industry presentations and briefings setting out the requirements of the Guidelines.  The FAQs published by the CCCU on its website specifically deal with this issue. Parties are not required to have an agreement to comply with the Guidelines. If they do have an agreement, it is deemed compliant if approved by FWC.
6. If a sub-contractor was threatened by a head contractor for not having an enterprise agreement, can the sub-contractor lodge a complaint with the CCCU? Can such a complaint be lodged in confidence? 

Yes, sub-contractors can lodge a complaint with the CCCU and are encouraged to do so.  The information will be kept confidential if requested..

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