October 2012 Industry Update

Side deals – not worth the paper they’re written on

Industry sources are telling us that some subcontractors are risking back-payment of wages, legal action and preclusion from tendering for Government work by operating under side deals.

Side deals are unregistered and informal agreements, which may contain any manner of conditions or terms, attached to an Enterprise Bargaining Agreement (EBA). Side deals are unenforceable.

Fair Work Building Industry Inspectors have become aware that some subcontractors in Queensland are operating under side deals, outside the scope of their EBA. Subcontractors mistakenly believe side deals allow them to pay their workers below EBA rates for jobs outside of metropolitan areas.

This is not on. Workers must be paid at least the amount outlined in their EBA or Modern Award.

If an employer is concerned that an EBA may make them non-competitive in non-metropolitan areas, they should consider a ‘sectionalised’ agreement which allows the EBA to be adjusted to conditions in a local market.

Subcontractors who agree to side deals and pay their workers below-EBA rates, risk the following:

  • Back-payment of wages: FWBC has broad powers to investigate underpayment of wages and entitlements in the building and construction industry. Workers who are paid under a side deal at less than their EBA rates may make a claim to recover their entitlements.  Since becoming operational on 1 June 2012, we have secured $417,565 in back-pay for workers.
  • Legal action: It is unlawful under s50 of the Fair Work Act 2009 to pay employees in the building and construction industry less than the rates outlined in the relevant EBA. FWBC may prosecute suspected breaches, leaving employers liable to a penalty of up to $33,000.
  • Preclusion from Government jobs: Side deals are not compliant with the National Code of Practice for the Construction Industry and the National Code Guidelines. Employers who sign up to and operate under such agreements may find themselves subject to sanctions including preclusion from tendering for Federal Government-funded work for a period of time (s6.1.2).

Employers have an obligation to ensure workers are paid a fair day’s pay for a fair day’s work. They must comply with the relevant EBA or Award.

Employers who are confused about their obligations under their EBA or the validity of side deals should contact FWBC on 1800 003 338 or go to fwbc.gov.au. Employees can also contact us to find out about their entitlements.

The PayCheck Plus tool on the Fair Work Ombudsman’s website may also be useful. PayCheck Plus enables employers and workers to stay up-to-date and informed about employee entitlements and calculate minimum rates of pay, allowances, penalty rates and overtime.

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