AUSTRALIAN building giant Lend Lease faces being banned from billions of dollars of Victorian government work after signing a sweetheart deal with a powerful construction union.
Lend Lease's four-year workplace agreement with the Construction, Forestry, Mining and Energy Union has been described as being in blatant defiance of the Baillieu government crackdown on union-friendly deals in the building industry.
The Baillieu government has said it will ban builders from bidding for government-funded work if they sign deals with unions that do not comply with its new code. The new rules, which took effect from July, apply to deals signed in the private and public sectors, although a leading academic says they may fall foul of the Fair Work Act.
The development could have ramifications for Bendigo's new $630 million hospital with Lend Lease and Theiss heading two consortia short-listed to build the project.
Senior industry sources and a written analysis obtained by The Age said the Lend Lease deal includes at least half a dozen key clauses that are in clear breach of the code. That includes making it mandatory to fly union flags on cranes in Victoria - which is forbidden.
''The company agrees that on its cranes in Victoria the Australian flag together with the standard CFMEU flag will be flown,'' the Lend Lease agreement said.
''In lieu of the CFMEU flag the Good Friday Appeal flag and the [late CFMEU official] John Cummins memorial flag will be flown during the month of which those appeals occur.''
The code, based on Howard government provisions, aims to stop workplace deals that promote unionism or place restrictions on the use of external labour.
Premier Ted Baillieu has been sharply critical of Victoria's aggressive building unions, in particular during the recent blockade at a Grocon site in the CBD. He has blamed them for driving up the cost of big projects such as at the Wonthaggi desalination plant.
The Lend Lease deal is the first real test of the new regime, which unions have attacked as ''anti-worker'' and union bashing. The deal includes numerous restrictions on the use of labour that are meant to be forbidden.
They include dictating the minimum rates of pay employees of subcontractors receive and also by requiring that the use of labour hire and contractors be ''not in any way be designed to undermine the job security'' of Lend Lease staff.
The deal gives greater access for union officials to building sites than is allowed under the Baillieu code while unions also have to be consulted about labour hire providers - which is also forbidden.
CFMEU national construction secretary Dave Noonan, who helped negotiate the deal, said the union was not worried about falling foul of the state government. ''It's a legal agreement that's made under the Fair Work Act and we'll be insisting that it's honoured,'' he said.
If Lend Lease is sanctioned, it could be stopped from bidding on freeways, buildings and other publicly funded projects. Companies owned by Lend Lease, such as builders Abigroup and Baulderstone, can also be banned under the tough rules.
The state government is a major player in funding big projects either directly or through public private partnerships and the market is dominated by a handful of big firms. If Lend Lease and its subsidiaries were banned it could have major implications for the cost of building big projects.
University of Adelaide law expert Andrew Stewart said the Baillieu government rules could be vulnerable to challenge under the Fair Work Act for breaching workplace rights.
''I could foresee the possibility of legal argument that in imposing sanctions on a company for making an agreement that is lawful under the Fair Work Act, that they might raise a argument there's a breach of the adverse action protections.''
Director of construction code compliance Nigel Hadgkiss has been warning employers against signing deals with unions that are in breach. In a recent letter to the Australian Industry Group, obtained by The Age, he said: ''Compliance with the guidelines is an essential requirement to being awarded any tender.'' He noted an industry-wide agreement in electrical contracting that had at least 17 breaches.
Department of Treasury and Finance spokesman Mac Dalton would not comment on whether the Lend Lease deal was in breach saying it ''would not be appropriate''. But he said all bidders for government projects after July 1 had to submit bids that complied with the new rules.
Among the publicly funded projects Lend Lease has won in Victoria were the new $1 billion Royal Children's Hospital in Parkville and the $135 million Hamer Hall redevelopment in Southbank.
Lend Lease did not respond to a detailed list of questions.