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Education, Employment and Workplace Relations Legislation Committee
22/06/2012

MAMMONE, Mr Daniel, Director, Workplace Policy and Director, Legal Affairs, Australian Chamber of Commerce and Industry

Evidence was taken via teleconference—

CHAIR: Mr Mammone, thank you for agreeing to appear before the committee today. We do not have a submission, but that is fine; I appreciate the short notice. Maybe you could indicate whether you have a submission coming.

Mr Mammone : Yes, we are in the process of finalising that and will send that electronically.

CHAIR: Thank you for taking the time and effort to do that for the committee. We do appreciate it. I now invite you to make some opening comments to the committee. That will be followed by some questions.

Mr Mammone : ACCI welcomes the opportunity to provide evidence to this inquiry, albeit by telephone. We thank the committee for accommodating our request at short notice. We do have a written submission, which will be lodged today. I wish to, as part of an opening statement, read from various provisions of that written submission.

The ACCI notes that the inquiry into the Fair Work (Registered Organisations) Amendment Bill 2012 takes place against a significantly truncated timetable, which may not allow the committee to fully consider the impact on registered employer organisations. ACCI's submission to this inquiry and evidence today focuses only on the impact of the amendments on ACCI members who may be registered employer organisations under the Fair Work (Registered Organisations) Act 2009. ACCI members who are registered employer organisations may make submissions to this inquiry.

ACCI was consulted on the proposed changes through its membership of the National Workplace Relations Consultative Council. Meetings of the council are governed by statute and governed by confidentiality. We note that the process was short. The communique which was released following the 114th meeting of the NWRCC, which was held on 25 May, indicated in part:

The Council supports in principle measures to ensure that employer organisations and unions registered under this Act are representative of and accountable to their members, and are able to operate effectively and contribute to the proper function of the workplace relations system.

ACCI continues to express in principle support for the amendments, even though the issues the amendments seek to address have not arisen, to our knowledge, in the context of registered employer organisations. ACCI-member registered employer organisations who have considered the detail of these amendments as it would impact them as autonomous not-for-profit organisations registered under the act will provide detailed feedback to the committee by, we anticipate, close of business today.

The second reading speech for the bill indicates, amongst other things, that conduct by a small number of officials in some parts of one organisation has dented public confidence in all registered organisations in this country. Whilst ACCI believes that the act, which continues to reflect the former governance and accountability framework as it was then contained in the Workplace Relations Act 1996 as schedule 1, is an appropriate framework to regulate registered employer organisations who are not-for-profit entities. The justification for these amendments is in the general public interest.

It is in the public interest to ensure that federally registered trade unions and employer associations meet community standards on matters of financial accountability and transparency. Employers continue to have an indirect interest in ensuring that trade unions they may deal with are properly accountable to their members. Employers who are members of federally registered employer associations have a direct interest in the accountability of their associations. It is in the public interest for the government and parliament to review the adequacy of the existing framework in the wake of the general manager's report into the conduct of one registered employee organisation and the apparent shortcomings in the act as identified in that report.

It is important that the regulatory framework for registered employer organisations is commensurate with their purpose, resources and capacity to effectively function as not-for-profit industrial associations representing the interests of employers, as defined by their rules. ACCI's previous views on reforms to the governance of registered organisations have indicated that financial obligations under Corporations Law are a relevant factor that has to be applied having regard to the actual circumstances of registered organisations. ACCI believes that regulation should be balanced and workable and that it does not make the ordinary operations of a registered employer organisation unduly difficult or restrictive.

ACCI understands that many serving registered employer organisation officials are volunteers or hold dual roles as employees first and as an elected official second for the purposes of the act. To ACCI's knowledge, the amendments proposed in the bill were not and are not targeted to address the conduct of registered employer organisations or their officials. It is important that any legislative response is targeted to the potential mischief to be cured and that the focus is on protecting members' funds from misuse and increasing probity and transparency in a manner that is workable. ACCI anticipates that many registered employer organisations may provide further detail to the committee on the impact of amendments from a technical perspective.

It is important to appreciate that registered employer organisations are not homogenous and that each organisation has, within the required legal framework, adopted its own rules and implemented internal governance frameworks which reflect the particular circumstances of the organisation and its membership. It is not possible to provide specific feedback in relation to the impact of these amendments on individual registered employer organisations for that reason, given the diversity in rules and structure.

Further consideration or clarity as to the bill's intent or effect with regard to certain amendments may be required as a result of issues raised by registered employer organisations. It is essential that the government and the general manager of Fair Work Australia work collaboratively with registered employer organisations to ensure that any changes are workable in practice and that consultation on model rules and training requirements, for example, are conducted in consultation with duty holders.

That is the opening statement which, as I said, does refer to a number of provisions in a submission which will be filed with the committee.

CHAIR: Thank you, Mr Mammone. We will now go to Senator Abetz for some questions.

Senator ABETZ: Thank you, Mr Mammone, for your submission. You indicated you were consulted on 25 May at the consultative committee. Did you have any other contact with the minister's office or the department about this proposal?

Mr Mammone : As I recall, we were told about the specific proposals at the NWRCC meeting. Thereafter there was more consultation in conjunction with the department in terms of providing some of our members who are registered employer organisations something of a briefing on its intent and its effect.

Senator ABETZ: Your organisation is not a registered organisation but you have members who are—is that correct?

Mr Mammone : That is correct. Just to further flesh that out: ACCI is a not-for-profit company limited by guarantee. A number of our members are registered employer organisations under the federal act, as I understand it. Some of those are registered under state industrial relations laws and others are not registered under industrial relations legislation but are, similarly, companies limited by guarantee.

Senator ABETZ: You would be aware of the provision in the bill in relation to people who hold particular offices in registered organisations being required to undergo certain training. Whilst, as a general principle, that seems to be good public policy, can you see any reason, potentially, why Fair Work Australia could or should provide exemption certificates for people who are highly qualified—for example, if you have an office holder in a registered organisation who is in fact a qualified accountant or has done a company directors course and has a basic understanding of what their fiduciary and financial responsibilities are?

Mr Mammone : With respect to those provisions, the limited feedback that we have received from our members that are registered employer organisations is that there obviously already are duty holders that have sufficient skills, education or experience in regard to those matters. The feedback that we have received—and, I anticipate, will be given formally in submissions to this committee—is that there is sufficient support from the General Manager of Fair Work Australia to assist employer organisations to understand their new reporting obligations and to allow sufficient flexibility to tailor requirements as per the circumstances of those duty holders. That may mean, for example, allowing prior recognition of learning, for training, where they do have that extensive experience, education or knowledge of financial affairs. So, in terms of the specifics that you have mentioned, of an exemption certificate, I anticipate that there may already be sufficient flexibility within those provisions which might not necessarily require a formal exemption certificate.

Senator ABETZ: Thank you for that; I will follow that up with the department later on. Whilst none of your members, of course, would want to be subjected to criminal provisions, you would be aware that the corporations law has in it criminal provisions if certain conduct is undertaken. Can you see a public policy reason or argument as to why conduct by a company director, in inappropriately dealing with shareholders' funds, under the corporations law, which lends itself to a criminal charge, should be treated any differently if that same person were to deal with funds from members in a registered organisation? Why should there not be criminal provisions as well?

Mr Mammone : I guess in response to that all I can say is that, at this stage, we have had limited opportunity to consult with our registered employer organisation members in terms of this bill and these amendments. We have not had any formal or even informal discussions about other proposals. I guess the focus for our members that would be impacted by these amendments is understanding the intent and the effect for them in terms of what they would need to do to comply with the new requirements. We do not have a formal policy position. We have not had an opportunity to consult or meet as a group to make those policy decisions within our policy framework.

Senator ABETZ: It just seems to me that the organisations that we will have before us today and have had before us today are possibly speaking on behalf of those that will be the office holders rather than those members whom I for one would seek to protect. If we cannot talk about criminal penalties, I will move on to the proposed regime of civil penalties. Once again, we have a civil penalty regime where, if a person behaves in a certain manner, they are liable to a civil penalty of $6,600 under the Fair Work (Registered Organisations) Act, yet if they engage in exactly the same sort of conduct under the corporations law they could be subjected to penalties in the tens of thousands of dollars rather than simply the thousands of dollars. Can you think of any public policy reason why that should be the case?

Mr Mammone : I do not want to reiterate and repeat certain things for the sake of it, but once again we have only had the opportunity, within the limited time available, to get feedback from members about the existing increase in civil penalties. Obviously, as you point out, the corporations law has a different enforcement structure of both civil and criminal penalties, as I understand it. I cannot really elaborate, other than to say that the bill proposes to significantly increase the existing civil penalty provisions. Some of the concerns that have been expressed by some of our members are that any enforcement needs to be considered within the crime committed. So crimes of not providing paperwork on time et cetera, as distinct from misuse of members' funds, need to be appropriately dealt with. Obviously there will be significantly increased risks for duty holders that either intentionally or inadvertently get it wrong. So it is those sorts of issues that members have expressed to date.

Senator ABETZ: In general terms, filing documents late et cetera is not the purpose, as I understand it, of this legislation. It is more to do with ensuring that disclosures dealing with conflict of interest and other interests are made, and also dealing with issues such as acting in good faith with members' moneys. It just seems to me that, if you are not acting in good faith with shareholders' money, there is a penalty regime under the corporations law. If you are not dealing in good faith with people's membership money, I am not really sure what the material difference is that should make the penalty regime so starkly different. I am trying to find out from witnesses why that might be, or why that should be.

Mr Mammone : In relation to the proposed increase to civil penalties and which provisions they would attach to, it is our understanding at this stage that the increase to civil penalties would apply to every existing provision where there is a civil penalty offence created currently. However, without really looking at the detail, I am hesitant to say anything other than that is our impression of how the proposals would work. Perhaps the department could expand upon that. That goes back to the concern about offences around not providing paperwork et cetera on time rather than misuse of members' funds.

Regarding the criminality issues, it is our understanding that there is capacity at the moment to investigate possible criminal contraventions under state legislation. One of the proposals in this bill is for an express power, which does not appear to be in the current act, to allow matters to be referred. We note that the Fair Work Ombudsman has an express power in the Fair Work Act to refer matters, but it seems that is not the case for the general manager.

Senator ABETZ: So why don't we just do that in the Corporations Act as well—give ASIC the capacity to refer things to relevant police forces rather than having a criminal regime in the corporations legislation?

Mr Mammone : Once again, we just have not had that feedback from members.

Senator ABETZ: That is understood. Under this draft legislation, we are told at division 3A, 'Rules relating to disclosure', under section 148A(3) that rules made under this subsection must:

(a) require that such disclosure is made as soon as practicable after the remuneration is paid to the officer;

I think we parliamentarians—and a colleague will correct me if I am wrong—are given 30 days to change our register of interests. Who on earth is going to go to court and prosecute a matter to argue whether the disclosure was made as soon as practicable? Is there any reason you could not say it should be within 30 days or 60 days? I am a former lawyer. It would be great as a lawyer to be able to argue these things and earn a few more shekels, but at the end of the day I would have thought there should be a time limit, shouldn't there? Do you have any view as to the time limit for disclosure of these matters?

Mr Mammone : Unfortunately, on that particular subsection we have not received anything. That is not to say that there are no live issues about that subsection. In response, we have not received any particular feedback about that, but we have received some feedback around new disclosure requirements and information in relation to remuneration, which some members have expressed concerns about in terms of the manner in which someone's remuneration is disclosed, with the privacy issues associated with that where, essentially, they are an employee of the organisation and happen to be an elected official and act in that capacity. Obviously, there is a capacity for the rules to specify the manner in which disclosure is made and the availability for the model rules to deal with that. That was the issue we received some feedback on, and I anticipate that written submissions from our members who are registered in poor organisations may deal with that more fully.

Senator ABETZ: There is provision in this bill for model rules—

CHAIR: Unfortunately, Mr Mammone, I probably did not indicate to you earlier that we are sitting while the Senate is also sitting, and we are now going to be interrupted by a division or a quorum. We are going to have to suspend for a number of minutes until we return. I am sorry about that.

Proceedin gs suspended from 11:21 to 11 : 23

Senator ABETZ: On page 22 of the bill we have proposed section 148B, which talks about rules. On page 23 we are told:

(4) The rules of an organisation must require the disclosure, to the members of the organisation and its branches …

   …   …   …

(5) The rules must require the disclosure …

   …   …   …

(6) Rules made under subsection (4) or (5) must req uire the disclosures to be made …

and then we have further things. Model rules, as I understand it, can be made or suggested. Can you see any benefit in there simply being a set form of wording so that there is a consistency between all organisations in relation to disclosure? It just seems to me that potentially you could have different wording toing and froing between Fair Work Australia and a particular organisation. Having said that, I am nearly always an advocate for saying that one size does not fit all, so I am genuinely inquiring as to whether this is an occasion where possibly one size could fit all or whether the flexibility suggested is something that ACCI supports.

Mr Mammone : In relation to the model rules issue, the feedback, which, I should say, is limited feedback from a number of organisations at this stage, is that the flexibility for organisations to amend their own rules is probably sensible and workable. The fact that the model rules might allow some guidance and allow organisations who adopt them in whole or in part was something that members felt was also sensible. One of the issues in terms of a change of rule is that some of these amendments will require a mandatory change of an organisation's rule, and the feedback that we have received is that that change in a rule is not necessarily a straightforward matter.

Obviously the existing rules needed to be complied with in changing rules and organisations have different requirements in terms of calling meetings and the process for change. One of the things that members have raised and probably will reiterate in submissions to this inquiry is that there needs to be sufficient understanding and capacity for members to change rules. There was one suggestion that was mentioned about a possible opt-in mechanism, a sort of a fast-track change of rule where you would opt in to a model rule, for example. Once again, those are matters of detail that registered employer organisations will probably provide to the committee.

Senator ABETZ: All right.

CHAIR: Mr Mammone, you indicated that there was some concern raised by your members about the need to require disclosure of the remuneration of officers. What was the basis of that concern?

Mr Mammone : Some of the concerns about that aspect were that it is not so much disclosure of remuneration per se but that some issues may arise with the disclosure of certain individuals. Depending on their capacity, they may be employees predominantly employed at a certain position and that may, for better or for worse, allow benchmarking of other employees to occur et cetera. So it is not so much officials or officers in the capacity only; it is the dual roles of officials and employees which were some of the concerns that were raised in regard to that. It may be that there is sufficient flexibility in terms of the requirements to change the rules to deal with that, whether that be providing that information in bands etc. But it was something that was raised with us.

CHAIR: Does the term 'officers' have different meanings depending on the rules of different organisations, or is that term widely understood throughout registered organisations?

Mr Mammone : The term 'officer', as I understand it—and the department can clarify these matters this afternoon—is defined in the act. But organisations are different in how they then describe the roles of various people in the organisation. So you have a situation whereby some of those are elected officers, but first and foremost they are employees of the organisation.

CHAIR: I see—people may be elected as officers, but because of that position they are employed and their employment is automatic as an officer. Is that what you are saying? I would have thought that still served the purpose of the disclosure to the members about the highest-paid officials, officers or employees if they are conducting the role of an officer. Have I confused you?

Mr Mammone : I may not fully understand the different situations in this proposal. As I understand, some of the feedback was about people already employed by the organisation, and that may be in a higher-level role as a manager et cetera. The rules allow for the election of certain officers, so they would be eligible to participate and be elected as an officer. But I think it comes down to the particular rules of the organisation and how the organisation is structured. The issues of concern may differ depending on that, but it is basically an issue of someone as an employee and the remuneration that employee receives for services as an employee as distinct from their role as an officer.

CHAIR: In terms of penalties, is it your view that there is anything in this act that would stop or protect anyone thieving from, stealing from or defrauding a registered organisation from being reported to the police and prosecuted under criminal proceedings?

Mr Mammone : To clarify, is your question whether there is anything under the amendment bill or the existing act?

CHAIR: The act as potentially amended. I want to get your view on whether the Fair Work (Registered Organisations) Act as amended by this bill, if it is amended by this bill, gives any protection to people doing illegal activities.

Mr Mammone : I am not sure if I can answer that. I have not looked at the detail of those specific issues. It is something I could take on notice and give some consideration, but I note the committee's time frame for reporting.

CHAIR: Alright. As there are no more questions, thank you, Mr Mammone, for your quick acceptance to appear before the committee today. We are very grateful for that and we look forward to receiving your submission. Thank you for your presentation today.

Mr Mammone : Thank you.

Proceedings suspended from 11:34 to 11:47