New security of payment laws to give Victorian workers a ‘fairer go’

The impact of changes to come from Victoria’s newly introduced Fairer Payments on Jobsites Bill “shouldn’t be understated”, one lawyer has said.

Yesterday (10 September), Victorian Minister for Housing and Building Harriet Shing introduced the Fairer Payments on Jobsites Bill, which provides new measures to help subcontractors recover money they are owed for completed work, including better access to dispute resolution.

The bill, the state government said in a statement, provides a “fairer go for subbies” and is part of a broader framework of reforms designed to protect consumers and workers by reinforcing confidence in the building industry.

“Subbies are central to Victoria’s building industry, and the Labor government is making sure they get paid fairly and promptly for their hard work,” the government said.

The bill is the government’s response to the parliamentary inquiry into employers and contractors, and it formalises registration processes for building surveyors and inspectors to boost the supply of skilled workers.

John Murray AM, who was appointed in December 2016 to conduct a national review on security of payment legislation and enhance protections for subcontractors to get paid on time (and then delivered the final Review of Security of Payment Laws report in mid-2018), said that Victoria’s bill will “significantly reform” Victoria’s current security of payments regime.

“It will ensure that the adjudication process will be able to deal with disputed payment claims quickly and fairly, addressing the imbalance of power that has had a devastating impact on subcontractors,” he said.

“The reforms will now enable subcontractors to recover payments for all work carried out under a building contract, including variation work.”

Significant uptick in security of payment activity coming?

In conversation with HR Leader, Pinsent Masons partner Tom Heading (pictured) said that Victoria has “lagged” other jurisdictions on the effectiveness of security of payment laws.

Presently, he said, delay costs and (in most cases) disputed variations cannot be claimed under Victorian security of payment.

The new laws, Heading said, will allow those delay costs and disputed variations to be claimed.

“This will result in a significant uptick in security of payment activity in Victoria, especially if the high activity levels we have seen in NSW and Queensland over the past 20 years are replicated in Victoria,“ he said.

The impact in Victoria of these changes “shouldn’t be understated”, Heading continued.

“Familiarity with security of payment is lower in Victoria – including among those administering construction projects – compared to our northern cousins. That’s a problem because compliance with the act can be tricky and the consequences of non-compliance can be severe,” he said.

“For example, a subcontractor under the new legislation could make an inflated claim for delay costs of $50 million, and if a response (a payment schedule) is not provided within 10 business days, then the full $50 million can be recovered by the subcontractor summarily in court on an interim basis – so cash changes hands – even if only $5 million is properly due under the subcontract. It would then be up to the head contractor to sue the subcontractor in court or arbitration to recover that $45 million overpayment for delay costs, which can take years.”

“It sounds severe and unfair, and it is.”

A clear message being sent

Speaking about the changes, Minister Shing said: “All workers – including subcontractors – deserve to be paid fairly and promptly. This legislation is focused on providing more certainty and confidence to subcontractors, which will, in turn, boost productivity across the industry.

“We’re working with consumer groups, businesses, unions and industry groups to make sure we get the balance right – so builders, tradies and suppliers can get on with delivering more safe, high-quality homes for Victorians.”

Victorian Trades Hall Council assistant secretary Amanda Threlfall said: “This bill sends a clear message to anyone in the building industry who refuses to pay subcontracted tradies: Victorian workers must be paid for their work on time and to the full agreed amount.

“Workers in the building industry will be protected by the reforms in this bill.”

Plumbing and Pipe Trades Employees Union Victoria assistant secretary Paddy McCrudden said: “The building industry relies on hard-working subcontractors like plumbers.

“The reforms in this bill will ensure subbies are paid fairly and won’t be forced to spend hours out of their week chasing money they are owed for completed works.”