Unlicensed head contractors risk fines and jail time under updated legislation

McCullough Robertson Lawyers writes, proposed amendments to Queensland building and construction legislation could leave unlicensed head contractors open to significant fines, jail time and non-payment for unlicensed work.

The impending removal of section 8 of Schedule 1A of the Queensland Building and Construction Commission Act 1991 (Qld) (‘QBCC Act’) could mean unlicensed head contractors no longer have the benefit of a current exemption which allows them to contract for building work on the proviso that they engage an appropriately licensed subcontractor to carry out the work.

McCullough Robertson Special Counsel Alex Power said since its introduction, the ‘head contractor exemption’ has been subject to significant criticism.

“The exemption was introduced in late 2013 and has been heavily relied upon by many unlicensed head contractors,” Power said.

“However, since its introduction, the exemption has been criticised by some industry members who claim that it provides a loophole for head contractors – allowing them to enter into contracts for building work without being subject to the strict obligations placed on licence holders.”

The legislative change will have far-reaching implications for building and construction contracts and tenders across Queensland and will pose serious potential consequences to unlicensed head contractors if they enter into contracts for or carry out building work.

“The change will impact contractors who don’t currently hold a licence for a specific scope of work and who have relied on licensed subcontractors to perform the work in question,” he said.

“For example, we regularly see civil contractors who perform minor building work as part of their scope of work – such as concrete pads or concrete retaining walls – but who may be unlicensed to carry out these works. While these civil contractors have long relied on the exemption to engage licensed subcontractors to fulfil certain components of building work, once the exemption is removed they will need to ensure they hold a licence in their own capacity. But this is just one example – the change would extend to any contractor unlicensed for a specific scope of work who may have been relying on the fact that their subcontractor holds a licence.”

Power said head contractors should be preparing for the change now, as some companies may have to undertake substantial licensing updates or implement structural change.

“We are advising unlicensed head contractors who have subcontracted or tendered for building work to seek advice as to whether they need to commence steps to become licensed,” he said.

“It may also be necessary for larger companies to look at their operations on a project by project basis and consider whether structural changes are required to ensure that head contractors are appropriately licensed. If they don’t take the steps now to ensure their projects are set up for the change, companies could find themselves liable for significant penalties – fines of up to $45,000, potential jail time, and strict limitations on the amounts that they can recover for the completed but unlicensed building work.”

Unlicensed head contractors risk fines and jail time under updated legislation.

“The timing of this change is not yet clear, nor is there any guidance as to whether any transitional provisions will apply, so the best advice is to be prepared – especially when non-compliance brings hefty penalties.”

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