THE move to ban big builder Lend Lease from all work funded by the state government is being challenged in court for allegedly breaching the Fair Work Act.
Unionists claim the government is discriminating against the builder and its workers.
The challenge in the Federal Court could imperil the state government's attempt to crack down on union-friendly deals in the building industry. It comes as a judgment in a similar case last week indicated the union's legal arguments had a ''good prospect'' of success at trial.
In a statement of claim lodged this month, the Construction, Forestry, Mining and Energy Union alleges the government is breaching the Fair Work Act by either banning or threatening to ban Lend Lease from the Bendigo hospital tender.
The project was thrown into chaos in December last year after the state government's ban on Lend Lease, one of two consortia bidding the $630 million project.
The union's argument centres on ''adverse action'' provisions of the Fair Work Act, which give workers and companies a right to a workplace agreement. It says that means the state government cannot refuse to use Lend Lease for having a valid agreement with the union under federal law.
The deal with the union, approved by the Fair Work Commission, fell foul of the state code as it requires union flags to be flown, limits outside labour and dictates subcontractors' pay rates. The state's building code is aimed at changing behaviour in the industry.
Attorney-General Robert Clark said through a spokesman that the government would strongly defend itself against the union claim, and its code was ''fully consistent'' with the Fair Work Act.
''The guidelines are intended to help bring an end to the kinds of unlawful practices and cost blowouts for which the Victorian construction industry has been notorious,'' the spokesman said.
CFMEU state secretary John Setka said the union would ''keep fighting against the Baillieu government's interference'' in its deal with Lend Lease.
News of the looming court battle, which is expected to be heard in March, comes as local MPs Jacinta Allan and Maree Edwards last week slammed construction delays and demanded a finish date to the Bendigo Hospital project.