The Federal Government says it is developing a new building code to prevent employers from getting government work if they strike workplace agreements with unions deemed to be restrictive.

Employment Minister Eric Abetz says the union movement is holding small contractors to ransom at construction sites around the country, in an industry worth billions of dollars and jobs.

"Head contractors do sweetheart deals with trade unions which then requires any subcontractor on major projects to sign up to trade union enterprise bargaining agreements," he said.

"[That] might be completely contrary to the arrangements the subcontractors have.

"There's no logical reason why a head contractor would demand that of the subcontractor other than the pressure that has been brought to bear, and threats and intimidation made, by elements of the trade union movement."

Mr Abetz says the code will address what he calls the closed shop between the nation's major contractors and unions.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 3 minutes 36 seconds 3 m 36 s Listen to Lindy Kerin's report Download 1.7 MB

"We want to stamp out that sort of intimidation, that sort of thuggery, that sort of illegality because quite frankly it has no place in the modern workplace of 2014," he said.

He says the Government has a suite of policies to restore "the rule of law".

Mr Abetz says they include changes to the Fair Work Act and the restoration of the Australian Building and Construction Commission, which is "before the Parliament".

CFMEU says new code is a return to WorkChoices

Construction, Forestry, Mining and Energy Union (CFMEU) national secretary Dave Noonan says the Federal Government is determined to return to WorkChoices.

"The comments about closed shop are simply rhetoric from Mr Abetz," he said.

"What the Government is saying is that they wish to use their procurement power as a client.

"They wish to coerce other clients in the building industry into demanding that there are key clauses in workplace agreements which replicate important parts of the WorkChoices legislation."

Mr Abetz says the code will indicate to employers that want government work that they "have to abide by certain rules and conditions" which he described as "not onerous".

"Most ethical employers would say there's no difficulty complying with this code," he said.

However, Mr Noonan says it is part of the plan to return to WorkChoices "in a step-by-step fashion".

"The other parts of this plan are of course their Royal Commission into unions, and the Productivity Commission inquiry into the industrial relations system," he said.

"All of these are designed to enact radical workplace reform, precisely the thing that Mr Abbott said that he would not do before the election."