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Trade Union Governance and Corruption—Royal Commission—Final report—Volume 5, December 2015


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TABLE OF CONTENTS

VOLUME 5

LAW REFORM

Subject Page

CH 1 INTRODUCTION 1

A - INTRODUCTION 3

B - STRUCTURE OF VOLUME 6

C - HISTORY OF TRADE UNION REGULATION IN AUSTRALIA

9

British settlement to Federation 9

Development of industrial arbitration 14

Move away from industrial arbitration: 1990s onwards 17

Changes to unions and union regulation from late 1980s onwards 19

D - PRESENT COMMONWEALTH STATUTORY FRAMEWORK

22

Fair Work (Registered Organisations) Act 2009 (Cth) 22

Rights of employee organisations under the Fair Work Act 2009 (Cth) 26

Subject Page

General observations concerning possible reform of the Fair Work (Registered Organisations) Act 2009 (Cth)

31

E - PRESENT STATE STATUTORY FRAMEWORK 32

New South Wales, Queensland, South Australia and Western Australia 32

Tasmania 34

Victoria 35

F - ROLES OF TRADE UNIONS IN AUSTRALIA 36

Role in assisting members and improving society 36

Commercial role 37

Statutory role in industrial relations system 39

Political role 40

CH 2 REGULATION OF UNIONS 41

A - INTRODUCTION 43

B - DUAL STATE AND COMMONWEALTH REGULATION

46

C - REGISTERED ORGANISATIONS REGULATOR

53

The current registered organisations regulator: General Manager of the Fair Work Commission 54

An independent standalone registered organisations regulator 55

Resources of the registered organisations regulator 64

Subject Page

Powers of the registered organisations regulator 65

D - FINANCIAL ACCOUNTABIILITY 74

Training of officers and employees 75

Requirements to have financial policies 79

Financial disclosure requirements by organisations and branches 83

Internal compliance and audit 93

External auditing 96

E - RECORD-KEEPING REQUIREMENTS 106

Minutes of committee of management meetings 106

Financial records 111

F - WHISTLEBLOWERS 112

Background 112

Existing protected disclosure regime 113

Persons who can make a protected disclosure 115

Persons entitled to receive a protected disclosure 118

Remedies for adverse action 121

G - USE OF UNION FUNDS 124

Use of union funds in union election campaigns 124

Use of union funds as political donations or for political expenditure 126

H - CONDUCT OF UNION ELECTIONS 129

Subject Page

APPENDIX A 135

CH 3 REGULATION OF UNION OFFICIALS 153

A - INTRODUCTION 155

B - DUTIES OF UNION OFFICERS TO THEIR UNION 157

Statutory duties of union officers 157

Appropriateness of corporate governance model for trade unions: submissions received 163

Appropriateness of corporate governance model: consideration 166

Are union officers subject to the duties in the Corporations Act 2001 (Cth)? 169

Meaning of ‘officer’ 172

Limitation of statutory duties to those in relation to financial management 176

Good faith duty 182

Civil penalties for breach of statutory duties 188

Criminal penalties for breach of statutory duties 201

Indemnity for civil and criminal penalties 207

Disclosure of material personal interests of officers 210

Requirement of conflicted officers not to participate in decision-making 216

Enforcement of officers’ duties by members 218

Subject Page

C - STATUTORY DUTIES IN RESPECT OF COURT ORDERS

222

The problem 222

Remedies under the Fair Work (Registered Organisations) Act 223

D - DISQUALIFICATION OF UNION OFFICERS 225

Existing disqualification regime 225

Defects in the current regime 227

Options for reform: ‘fit and proper person’ qualification 230

Options for reform: banning orders 231

CH 4 CORRUPTING BENEFITS 237

A - INTRODUCTION 238

Reasons for outlawing corrupting benefits 244

B - EXISTING LAWS REGULATING CORRUPTING BENEFITS 245

Blackmail and extortion 246

Secret or corrupt commissions 247

Overseas approach 250

C - INADEQUACY OF EXISTING LEGAL FRAMEWORK 253

D - REFORM TO EXISTING LEGAL

FRAMEWORK

259

Subject Page

Disclosure of benefits made to registered organisations 260

Corrupting benefits offence in relation to officers of registered organisations 263

Prohibition on payments by employers to employee organisations or their officials 266

CH 5 REGULATION OF RELEVANT ENTITIES 271

A - INTRODUCTION 272

B - DISCLOSURE OF FINANCIAL

RELATIONSHIPS BETWEEN UNIONS AND RELEVENAT ENTITIES

274

C - REGULATION OF RELEVANT ENTITIES GENERALLY 277

D - ELECTION FUNDS 279

Prohibition of any compulsion on employees to contribute to an election fund 282

Basic regulation of election funds 286

E - WORKER ENTITLEMENT FUNDS 295

Regulation under Corporations Act 2001 (Cth) 298

Fringe benefits tax exemption 301

Problems with existing regulation 302

Options for reform: submissions 308

Options for reform: consideration 314

F - EMPLOYEE INSURANCE SCHEMES 321

Subject Page

Introduction 321

Existing regulation 322

CH 6 ENTERPRISE AGREEMENTS 327

A - INTRODUCTION 328

B - TERMS REQUIRING CONTRIBUTIONS TO EMPLOYEE BENEFIT FUNDS OR EMPLOYEE INSURANCE SCHEMES

329

Introduction 329

Submissions received in response to the Discussion Paper 331

Options for reform 335

C - SUPERANNUATION FUNDS 340

Mandatory superannuation fund clauses 340

Default superannuation fund clauses 345

D - PATTERN BARGAINING 345

Introduction 345

Current provisions relating to pattern bargaining 348

History of legislative attempts to address pattern bargaining 349

Options for reform - pattern bargaining 352

CH 7 COMPETITION ISSUES 355

A - INTRODUCTION 356

B - SECONDARY BOYCOTTS 358

Subject Page

Introduction 358

Penalties 361

Secondary boycotts engaged in for a market sharing purpose 363

Restraint on competitors of secondary boycott target 370

General obligation to report boycott activity? 374

Appropriate regulator 377

C - ANTI-COMPETIVE CONDUCT IN ENTERPRISE BARGAINING 382

Introduction 382

Discussion 384

Conclusions 388

CH 8 BUILDING AND CONSTRUCTION 391

A - INTRODUCTION 393

B - THE CFMEU 395

Deregistration of the CFMEU 402

Legislative disqualification of officers 406

C - BACKGROUND TO THE AUSTRALIAN BUILDING AND CONSTRUCTION COMMISSION

409

The Cole Royal Commission 409

The Building and Construction Industry Improvement Act 2005 (Cth) 410

Subject Page

Changes by the Labor Government 413

The proposed return to the ABCC 416

Office of the Fair Work Ombudsman and Fair Work Inspectors 417

D - A SEPARATE, INDUSTRY SPECIFIC, REGULATOR 418

Introduction 418

Submissions opposing a separate regulator 419

Consideration 424

Conclusions 435

E - COMPULSORY INVESTIGATORY AND INFORMATION GATHERING POWERS 437

Introduction 437

Compulsory examination powers of other regulators 438

Submissions 443

Assessment 452

F - INDUSTRY SPECIFIC INDUSTRIAL LAWS 460

Issues 460

Submissions 468

Conclusions 473

G - RICO 478

What is RICO? 479

Subject Page

Adoption in Australia? 481

APPENDIX A - BUIDING & CONSTRUCTION INDUSTRY LTIGATION 487

CH 9 RIGHTS OF ENTRY 575

A - INTRODUCTION 576

B - RECOMMENDATIONS TO INCREASE DETERRENCE 583

Indemnification of officers for breaches of the right of entry regime 587

Recommendations regarding the issue, retention and revocation of permits 588

Aspects of the existing law regarding applications for permits 589

Recommendations regarding permit qualification matters 591

Recommendations regarding disclosure obligations 597

Recommendations regarding conditional permits 600

Possible reforms not recommended 601

C - RIGHTS OF ENTRY UNDER THE WORK HEALTH AND SAFETY ACT 2011 (CTH) 605

Burden of proof 613

Compulsory reports 614

D - NUIMBER OF OFFICIALS ACCESSING WORKPLACES 615

E - OFFICIALS AND INSPECTORS 616

Subject Page

CH 10 REFORM OF THE ROYAL COMMISSIONS ACT 1902 (CTH) 619

A - INTRODUCTION 619

B - POWERS UNDER THE ROYAL COMMISSIONS ACT 1902 (CTH) 620

C - SERVICE 621

D - PENALTIES 626

E - SURVEILLANCE DEVICES LEGISLATION 630

APPENDIX 1 TO VOLUME 5 - MODEL LEGISLATIVE PROVISIONS 635

APPENDIX 2 TO VOLUME 5 - POLICY SUBMISSIONS RECEIVED 637

REPORT Volume 5

Royal Commission into Trade Union Governance and Corruption

CHAPTER 1

INTRODUCTION

Subject Paragraph

A - INTRODUCTION 1

B - STRUCTURE OF VOLUME 9

C - HISTORY OF TRADE UNION REGULATION IN

AUSTRALIA

15

British settlement to Federation 16

Development of industrial arbitration 25

Move away from industrial arbitration: 1990s onwards 31

Changes to unions and union regulation from late 1980s onwards 34

D - PRESENT COMMONWEALTH STATUTORY

FRAMEWORK

40

Fair Work (Registered Organisations) Act 2009 (Cth) 41

Rights of employee organisations under the Fair Work Act 2009

(Cth)

50

1

Subject Paragraph

General observations concerning possible reform of the Fair

Work (Registered Organisations) Act 2009 (Cth)

64

E - PRESENT STATE STATUTORY FRAMEWORK 68

New South Wales, Queensland, South Australia and Western

Australia

69

Tasmania 72

Victoria 74

F - ROLES OF TRADE UNIONS IN AUSTRALIA 75

Role in assisting members and improving society 76

Commercial role 79

Statutory role in industrial relations system 82

Political role 83

2

A - INTRODUCTION

1. This Volume of the Report is devoted to recommendations in relation

to law reform.

2. The Interim Report made a number of recommendations for referral of

material to relevant regulatory and prosecutorial bodies.1 Volume 1 of

this Report lists a number of further referrals. The Interim Report,

however, did not reach any final conclusions or make

recommendations as to law reform. That was because the

Commission’s hearings and investigations were not complete at the

time of the delivery of the Interim Report.2

3. Prior to the publication of the Interim Report, the Commission released

a series of Issues Papers seeking submissions as to law reform on a

number of specific topics: (1) the protection available to

whistleblowers; (2) the duties of union officials; (3) the funding of

union elections; and (4) relevant entities. The Commission received a

total of 37 submissions in relation to these Issues Papers from a range

of interested persons and general law reform submissions from

governments, unions and employers.

4. At that time, the Commission’s factual inquiries were at a preliminary

stage. It was not possible to canvass all of those areas where law

reform might be desirable.

1 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, pp 30-36. 2

See Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, p 4 [11].

3

5. On 19 May 2015, the Commission issued a more comprehensive

discussion paper titled ‘Options for Law Reform’ (Discussion Paper).3

The Discussion Paper tried to elicit informed opinions from interested

parties on a range of potential law reform options and their desirability.

It also tried to elicit the views of interested persons in respect of

whether there were other areas of law reform that the Commission had

not explored, but which should be considered. The Commission

received a total of 20 submissions (including confidential submissions)

from various government agencies, employer and union related parties.

All of them were taken into account in formulating the

recommendations for law reform set out below.

6. It is of some significance that the Commission did not receive

submissions from the Australian Council of Trade Unions (ACTU)

after it made a decision to boycott the Commission in 2014.4 The

ACTU’s decision not to engage in policy debate was unfortunate

because it meant that the Commission was not provided directly with

the views of Australia’s peak union body on matters affecting its

members. However, the Commission has had detailed regard to

various submissions made by the ACTU to a range of Parliamentary

and other inquiries.

3 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15. 4

Letter from the Australian Council of Trade Unions to the Royal Commission into Trade Union Governance and Corruption dated 23 June 2014.

4

7. Consistently with the theme of the Discussion Paper, this Volume of

the Report endeavours to consider possible law reform options in the

following way. First it identifies a potential problem with the existing

legal and regulatory framework exposed by the Commission’s

inquiries. Then it analyses:

(a) whether its cause is a lack of, or insufficient, regulation, and

whether it requires the introduction of new laws or

amendments to existing provisions;

(b) whether existing laws are not sufficiently clear to address the

problem or require amendment to better reflect their original

intent; and

(c) whether existing laws, while appropriately targeted towards

the problem, are being ignored or insufficiently enforced.

8. The Discussion Paper also made two key points, which should be

repeated here.

(a) While broad, the terms of reference assume that employee

associations (that is trade unions) will continue to remain an

important part of the industrial landscape, and their basic

functions and responsibilities under the Fair Work Act 2009

(Cth) and the general law will remain.

(b) Unions have historically achieved much for their members,

and for society more broadly. Some of those achievements

are discussed below. The matters for law reform identified

5

below do not arise out of the conduct of members. Nor do

they arise out of the existence of unions per se. Rather, they

arise out of the conduct of some union officials and the

employers that deal with them.

B - STRUCTURE OF VOLUME

9. This Volume of the Report is divided into the following ten Chapters:

Chapter 1 Introduction

Chapter 2 Regulation of Unions

Chapter 3 Regulation of Union Officials

Chapter 4 Corrupting Benefits

Chapter 5 Regulation of Relevant Entities

Chapter 6 Enterprise Bargaining

Chapter 7 Competition Issues

Chapter 8 Building and Construction

Chapter 9 Rights of Entry

Chapter 10 Reform of the Royal Commissions Act 1902 (Cth)

6

10. In addition, there are two Appendices. Appendix 1 contains certain

model legislative provisions for consideration. The purposes of

drafting these was merely to assist in understanding the reasons

underlying the proposals for reform. No claim whatsoever is made that

they represent satisfactory legislative drafting. Model provisions have

not been provided in relation to every recommendation made, only

those where a level of detail is necessary to understand the

recommendation. Appendix 2 sets out a list of the various submissions

received by the Commission in relation to policy and reform issues.

11. Each Chapter deals with a number of issues, or problems, with the

existing law on the same broad theme. Following identification of the

issue or problem there is consideration of possible solutions having

regard to submissions received:

(a) in response to the Discussion Paper;

(b) in response to the Issues Papers;

(c) from affected parties in relation to particular case studies; and

(d) from other parties in relation to policy issues raised by the

Commission more generally.

12. Regard has also been had to the public submissions made to, issues

papers released by, and the draft and final reports of a number of other

inquiries which have been, or are being, conducted into issues that

overlap with or complement matters arising out of the Commission’s

inquiries. These inquiries include:

7

(a) the Competition Policy Review;5

(b) the Financial System Inquiry;6

(c) the Productivity Commission Inquiry into the Workplace

Relations Framework;7 and

(d) a number of Senate committee and other parliamentary

committee inquiries into proposed legislation in the industrial

relations area.

13. Following analysis of the various arguments, there is a

recommendation for reform. A summary of each recommendation is

contained in a box at the end of the relevant section. Some

recommendations are more technical than others, and it may be

necessary in some cases to refer to the discussion concerning that

recommendation. A complete list of recommendations can be found in

Volume 1 of this Report.

14. The balance of this Chapter sets out some important matters of

background that inform questions of trade union governance.

5 Competition Policy Review, Final Report (March 2015). 6 Financial System Inquiry, Final Report (December 2014). 7

The Australian Government Productivity Commission Inquiry into the Workplace Relations Framework Inquiry Report was handed to the Australian Government on 30 November 2015. At the time of writing this report, that Inquiry Report had not been released by the Government. Regard has been had, in this Report, to the draft report released in August 2015.

8

C - HISTORY OF TRADE UNION REGULATION IN AUSTRALIA

15. A basic appreciation of the history of trade union regulation in

Australia is relevant to understanding the role of unions in Australia’s

industrial and political framework. That role necessarily underpins law

reform concerning union governance. Set out below is a summary, not

intended to be comprehensive, of key developments in terms of legal

regulation.8

British settlement to Federation

16. In CFMEU v North Goonyella Coal Mine Pty Ltd,9 Logan J referred to

the Tolpuddle Martyrs’ Case10 and the public outrage which followed

that case involving the prosecution of farm workers who swore an oath

to organise themselves to prevent the reduction of their wages. He said

that these factors provided:11

the inception of a movement which gradually throughout the 19th century led to the recognition by the British parliament and then by colonial parliaments here of trade unions as lawful organisations.

17. Whether or not that is so, the history of trade unions in Australia starts

in English law at the time of British settlement in Australia. In Britain

8 See generally J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958); K D Ewing, Trade Unions, the Labour Party and the Law (Edinburgh University Press, 1982); D W Smith and D W Rawson, Trade Union Law in Australia (2nd ed, Butterworths, 1985), chs 3-9; J V Orth, Combination and Conspiracy: A Legal History of Trade Unionism 1721-1906 (Clarendon Press, 1991); B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010) chs 2, 20. See also Submissions of the Transport Workers’ Union, 14/11/14, pp 8-15. 9

[2013] FCA 1444. 10 R v Lovelass (1834) 6 Car & P 595; 172 ER 1380. 11

[2013] FCA 1444 at [30]-[31].

9

at the turn of the 19th century, the Combination Acts of 179912 and

180013 attached criminal liability to combinations of workmen for any

purpose relating to their employment.14 The consequence of those

laws was effectively to outlaw any form of trade union. The 1800 Act

was repealed in 1824 but the repeal coincided with considerable

industrial violence and unrest.15 As a result, the following year the

Combination of Workmen Act 1825 (1825 Act) was passed which had

the effect of reinstating some, but not all, of the restrictions on

combination. The legislation expressly legalised agreements between

workmen as to the wages and working hours they would accept.

However, it expressly criminalised acts of interference with an

employer or employee by way of ‘threats’, ‘intimidation’ or ‘by

molesting or in any way obstructing another’.

18. The upshot of the 1825 Act was that trade unions were not illegal

associations by statute.16 The 1825 Act applied to the Australian

colonies by virtue of the Australian Courts Act 1828 (Imp). Later

12 An Act to Prevent Unlawful Combinations of Workmen 1799 (39 Geo 111 c 81). 13 An Act to Prevent Unlawful Combinations of Workmen 1800 (39 and 40 Geo 111 c 106). 14

See J V Orth, Combination and Conspiracy: A Legal History of Trade Unionism 1721- 1906 (Clarendon Press, 1991), pp 43-67. 15 B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.10]. 16

See Williams v Hursey (1959) 103 CLR 30 at 61-62 per Fullagar J. It appears that there was little enforcement in Australia of the restrictions in the 1825 Act, which were progressively repealed in the Australian colonies from 1878 onwards: see J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), p 89.

10

cases also made it clear that, despite some statements to the contrary,17

they were not illegal associations at common law.18

19. However, at common law union members could be liable for criminal

conspiracy if they induced members to strike in breach of their

contracts of employment.19 Further, as in Britain, each of the

Australian colonies and thus after Federation the States had master and

servant laws which imposed criminal sanctions on employees who

breached their contracts of employment.20 In addition, the objects of a

trade union were commonly, although not invariably, held to be in

restraint of trade, with the result that the rules of the trade union and

any trusts set up for the holding of property were unenforceable in

court.21 A consequence was that in general no civil action would lie

against a member of trade union who misappropriated trade union

property.22 Further, in the majority of cases, there was no criminal

offence committed either.23

20. Clearly, this placed trade unions and their members in a precarious

position. The position of trade unions in Britain was substantially

17 See, eg, Hilton v Eckersley (1855) 6 El & Bl 47 at 53; 119 ER 781 at 784. 18 Hornby v Close (1867) LR 2 QB 53; R v Stainer (1870) LR 1 CCR 230; Mogul Steamship Co v McGregor, Gow & Co [1892] AC 25 at 39, 42, 46, 51, 58. 19

R v Bunn (1872) 12 Cox 316. 20 See J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), pp 90-93 for discussion of the application of those laws. 21

See Williams v Hursey (1959) 103 CLR 30 at 61-62 per Fullagar J referring to Hilton v Eckersley (1855) 6 El & Bl 47; 119 ER 781 and Hornby v Close (1867) LR 2 QB 53. 22

See D W Smith and D W Rawson, Trade Union Law in Australia (2nd ed, Butterworths, 1985), p 15. 23 See J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), pp 15-16.

11

improved in 1871 with the enactment of the Trade Union Act 1871

(UK). That legislation provided that the purposes of any trade union

should not, merely by reason of being in restraint of trade, be unlawful

so as to render void or voidable any agreement or trust.24 However, the

obvious consequence of this provision would have been to render the

rules of a trade union enforceable between the members on the basis of

contract and could have resulted in courts being required to enforce

agreements to strike or boycott. As a result, s 4 of the Trade Union Act

1871 (UK) provided that nothing in the Act would enable a court to

entertain any legal proceeding with the object of enforcing certain

agreements.

21. In addition to these reforms, the legislation introduced a system of

registration. Under it the property of a registered trade union was

vested in trustees and the trustees were entitled to bring or defend any

action concerning the property, rights or claims to property of the trade

union. The legislation regulated the affairs of registered trade unions

in a number of important respects:

(a) The trustees of a registered trade union were not liable to

make good any deficiency in the funds of the union, but were

liable only for the money actually received on account of the

union.25

24 Trade Union Act 1871 (UK), s 3. 25 Trade Union Act 1871 (UK), s 10.

12

(b) The treasurer and other officers of a registered trade union

were liable to account to the trustees or members, which

account was required to be audited.26

(c) Officers and members were made criminally liable for the

fraudulent misapplication of the funds of the union for any

purpose other than those specified in the rules of the trade

union.27

(d) A trade union could not be registered unless it had certain

rules including rules as to the purposes of the trade union, the

investment of funds and the annual or periodical audit of

accounts.

22. The Trade Union Act 1871 (UK), as amended by the Trade Union Act

1876 (UK), was fairly quickly adopted in each of the Australian

colonies that became States.28 However, except in New South Wales,

few trade unions appear to have obtained registration under these

Acts.29

23. In 1875, the United Kingdom Parliament enacted the Conspiracy and

Protection of Property Act 1875 (UK), which among other things

removed criminal liability for conspiracy to do acts in contemplation or

26 Trade Union Act 1871 (UK), s 11. 27 Trade Union Act 1871 (UK), s 12. 28

Trade Union Act 1876 (SA); Trade Union Act 1881 (NSW); The Trade Unions Act 1884 (Vic); Trade Unions Act 1886 (Qld); Trades Unions Act 1889 (Tas); Trade Unions Act 1902 (WA). 29

See D W Smith and D W Rawson, Trade Union Law in Australia (2nd ed, Butterworths, 1985), p 48.

13

furtherance of a trade dispute and for breaches of contract by an

employee.30 Similar legislation was later enacted in all of the

Australian colonies except New South Wales.31

24. The overall result was that at the time of Federation (or shortly

thereafter in the case of Western Australia), trade unions in Australia

were similar to their British cousins. Trade unions were legal in all

Australian States. They were capable of being registered. Registration

conferred some benefits on a union. However, the precise legal

consequences of registration under the State Acts were somewhat

obscure. Was the registered trade union a body corporate? Was it a

‘quasi-corporation’? Or was it simply an unincorporated association

with some characteristics of a body corporate?32 The internal affairs of

registered trade unions were subject to a limited degree of regulation,

but unregistered trade unions were entirely unregulated.

Development of industrial arbitration

25. Operating in parallel with these British developments was the

development in Australia from the 1890s onwards of two forms of

30 See K D Ewing, Trade Unions, the Labour Party and the Law (Edinburgh University Press, 1982), p 11. 31

Conspiracy and Protection of Property Act 1878 (SA); Conspiracy and Protection of Property Act 1889 (Tas); Employers and Employès Act 1891 (Vic); Conspiracy and Protection of Property Act 1900 (WA); Trade Union Act 1915 (Qld). 32

The seminal case was Taff Vale Railway Co v Amalgamated Society of Railway Servants [1901] AC 426. See the discussion in E Sykes, ‘The Legal States of Trade Unions’ (1956) 2(2) SLR 271; M Pittard, ‘A personality crisis: the Trade Union Acts, State registered unions and their legal status’ (1979) 6 Mon LR 49.

14

legislative regulation of industrial conditions - wages boards and

compulsory industrial arbitration.33

26. Wages boards, which operated principally in Victoria and Tasmania,

fixed wages in certain industries. Trade unions had no direct part in

such a system.34 However, they played a critical role in the

compulsory industrial conciliation and arbitration systems which were

successively established in Western Australia, New South Wales, the

Commonwealth, Queensland and South Australia. In these

jurisdictions, registered trade unions could submit industrial disputes

for compulsory conciliation and arbitration to the relevant industrial

court. That court could settle industrial disputes within the court’s

jurisdiction by overseeing agreed settlements, making non-binding

recommendations and making awards that would become binding on

the parties but also, depending on the scope of a dispute and on the

jurisdiction, on other employers and employees in the same industry.35

A valid award created rights and obligations in the employees bound

by the award which derived their force from statute. However, the

award did not form part of the employees’ contracts of employment.36

It was not possible for employers and employees to contract validly on

terms that were less favourable than the award. Under these systems,

registered trade unions could also enter into collective or industrial

33 See generally J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), ch 8. 34

See B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.31]. 35 See generally J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), ch 10; B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.45]-[2.48], [11.01]. 36

See Byrne v Australian Airlines Ltd (1995) 185 CLR 410.

15

agreements with employers or associations of employers, although this

was not the main focus of the systems.37

27. In 1904, the Commonwealth Conciliation and Arbitration Act 1904

(Cth) was enacted. Among other things it established a

Commonwealth Court of Conciliation and Arbitration with the power

to resolve interstate industrial disputes. Part V of that Act provided for

the registration of organisations being associations of employers or

associations of employees with more than 100 employees. Registered

organisations received the benefits of separate legal personality. They

became entitled to certain privileges in relation to industrial disputes.

One of these privileges was the capacity to submit industrial disputes

in which an organisation was interested to the Commonwealth Court of

Conciliation and Arbitration. Another was the capacity to be

represented before the Court in the hearing and determination of any

industrial dispute in which the organisation was interested.

28. With the growth and development of the Federal and various State

compulsory arbitration systems, trade unions inevitably came under

greater regulation:38

The arbitration system recognizes the institution of trade unionism and gives it important rights. To the extent that it does so it must take away rights of the individual employee. In such circumstances the only protection which can be given the employee is the imposition of various restrictions on trade unions to protect the interests of individual members from unfair union action. The motives behind the restrictions are twofold - the protection of the interests of the individual member and the

37 J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), pp 117-124. 38

J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), p 182.

16

protection of the public interest to ensure that an association which has been given power by the state does not act in a way contrary to the interests of the state.

29. Over time, both at the State and Commonwealth level legislation was

introduced regulating the activities of trade unions registered under

relevant industrial legislation.39 In short, increased regulation was the

price to be paid for the rights and privileges conferred on registered

trade unions under the industrial relations legislation. There was no

requirement on a trade union to be registered but there was an obvious

incentive to do so.

30. The Commonwealth Conciliation and Arbitration Act 1904 (Cth)

survived for over 80 years, finally being replaced by the Industrial

Relations Act 1988 (Cth).

Move away from industrial arbitration: 1990s onwards

31. Initially, the Industrial Relations Act 1988 (Cth) was little more than a

consolidation of the Commonwealth Conciliation and Arbitration Act

1904 (Cth).40 However, during the 1990s there was a shift by the

Federal Labor Government away from compulsory industrial

arbitration toward enterprise bargaining - that is, towards agreements

between unions and individual employers on an enterprise basis.41 The

shift towards enterprise bargaining was formalised by the Industrial

39 For a summary of the developments from 1900 to the 1950s, see J H Portus, The Development of Australian Trade Union Law (Melbourne University Press, 1958), pp 182-202. 40

See B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.44]. 41 See B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.49]-[2.56].

17

Relations Reform Act 1993 (Cth). The trend was continued by the

Coalition Government from 1996. First, there were further

amendments to the Industrial Relations Act 1988 (Cth) in 1996

(renamed the Workplace Relations Act 1996 (Cth)). Ultimately the

WorkChoices legislation was enacted in 2006.42

32. The WorkChoices legislation decoupled the Federal industrial relations

system from the ‘conciliation and arbitration’ power in the

Commonwealth Constitution. More significantly, it expanded

considerably the scope of the Commonwealth industrial relations

system by applying Commonwealth law to all employees employed by

trading or financial corporations.43 The consequence was to diminish

very significantly the importance and application of the traditional

State-based industrial relations systems.

33. Subsequently, the Federal Labor government introduced the Fair Work

Act 2009 (Cth). Although that Act differs in many respects from the

WorkChoices legislation, it still seeks to regulate industrial relations on

a national basis. In addition, in 2009 each of the States other than

Western Australia referred certain powers to the Commonwealth

concerning industrial relations.44 The result is that in those States,

subject to certain exceptions largely confined to various public sector

42 Workplace Relations Amendment (Work Choices) Act 2005 (Cth). 43 From 1996, Victorian employees were also subject to Commonwealth law after Victoria referred legislative power in relation to industrial relations to the Commonwealth: Commonwealth Powers (Industrial Relations) Act 1996 (Vic). 44

Industrial Relations (Commonwealth Powers) Act 2009 (NSW); Fair Work (Commonwealth Powers) Act 2009 (Vic); Fair Work (Commonwealth Powers) and Other Provisions Act 2009 (Qld); Fair Work (Commonwealth Powers) Act 2009 (SA); Industrial Relations (Commonwealth Powers) Act 2009 (Tas).

18

employees, all employees are subject to federal industrial relations

regulation under the Fair Work Act 2009 (Cth).45

Changes to unions and union regulation from late 1980s onwards

34. In combination with changes to the industrial relations landscape,

during and following the late 1980s there were considerable changes to

the number and structure of unions as a result of legislative changes

and direction from the ACTU:46

(a) At 30 June 1986, the Australian Bureau of Statistics (ABS)

reported a total of 326 trade unions in Australia.47 200 of

those unions (61.3%) had less than 2,000 members. Eight

unions had more than 80,000 reported members each,

together accounting for 30.7% of trade union members.

There were 146 unions registered under Commonwealth law

reflecting 81% of total reported trade union membership.48

(b) By 30 June 1996, the ABS reported a total of 132 trade

unions in Australia. 76 of those unions (57.5%) had less than

2,000 members. 12 unions had over 100,000 members each

45 See B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [2.78] for a general summary of the excepted classes. 46

B Creighton and A Stewart, Labour Law (5th ed, Federation Press, 2010), [20.59]. 47 Australian Bureau of Statistics, 30 June 1986, Trade Union Statistics, Australia (ABS Catalogue No 6323.0), p 1. 48

Australian Bureau of Statistics, 30 June 1986, Trade Union Statistics, Australia (ABS Catalogue No 6323.0), pp 1, 2, 5. The membership figures are total members as opposed to financial members.

19

together accounting for 71.2% of union members.49 There

were 46 unions registered under Commonwealth law

reflecting 86% of total reported trade union membership.50

35. The reduction of the number of unions and the creation of ‘super

unions’ through amalgamation led, among other things, to the

increased concentration of power in the hands of union officials. At

the same time there was an increase in the complexity of the day-to-day operations of those amalgamated unions.

36. At the same time, as a result of a range of complex factors including

substantial changes in the structure of the economy, union membership

began to decline significantly:

(a) In August 1986, the ABS reported that 46% of Australia’s

employees were trade union members.51

(b) By August 1996, that figure reported by the ABS had dropped

to 31%, with 24% union membership in private sector

employment and 55% union membership in the public

sector.52

49 Australian Bureau of Statistics, 30 June 1996, Trade Union Statistics Australia (ABS Catalogue No 6323.0), pp 5, 7, 9-10. The membership figures are total members as opposed to financial members. 50

Australian Bureau of Statistics, 30 June 1996, Trade Union Statistics Australia (ABS Catalogue No 6323.0), p 13. 51 Australian Bureau of Statistics, August 1996, Trade Union Members Australia (ABS Catalogue No. 6325.0), p 5. 52

Australian Bureau of Statistics, August 1996, Trade Union Members Australia (ABS Catalogue No. 6325.0), pp 5-6.

20

(c) In August 2006, 20% of employees were trade union

members. A higher proportion of public sector employees

were trade union members (43%) than private sector

employees (15%).53

(d) As at August 2014, only 15% of employees were trade union

members. 11.1% of private sector employees (996,700) were

trade union members, compared with 39.5% (573,400) of

public sector employees.54

37. There were also significant changes from the 1990s onwards to the

way registered unions were regulated. Registered unions at both State

and Commonwealth level had long been subjected to various forms of

regulation concerning their rules, elections for office with the union

and accounting. However, during the 1990s various State legislatures

introduced provisions imposing statutory duties on union officials

similar to those imposed on company directors: New South Wales

introduced such duties in 1991,55 Western Australia in 199556 and

Queensland in 1997.57

38. At the Commonwealth level, equivalent duties were first introduced in

2002 when the Workplace Relations Amendment (Registration and

53 Australian Bureau of Statistics, August 2006, Employee Earnings, Benefits and Trade Union Membership (ABS Catalogue No. 6310.0), p 5. 54

Australian Bureau of Statistics, August 2014, Characteristics of Employment, Australia (ABS Catalogue No. 6333.0), data cube 16 (table 16.1), released 27/10/15. 55 Industrial Relations Act 1991 (NSW). 56

Industrial Relations Legislation Amendment and Repeal Act 1995 (WA). 57 Industrial Organisations Act 1997 (Qld).

21

Accountability of Organisations) Act 2002 (Cth) introduced

Schedule 1B to the Workplace Relations Act 1996 (Cth).

39. Despite the demise of the traditional industrial arbitration systems from

the 1990s onwards, and the changes to unions, trade unions still

possess a number of significant rights and privileges under both

Commonwealth and State laws. The current statutory framework

regulating trade unions in the various jurisdictions is outlined below.

D - PRESENT COMMONWEALTH STATUTORY FRAMEWORK

40. At the Commonwealth level, there are two relevant pieces of

legislation: the Fair Work (Registered Organisations) Act 2009 (Cth)

(FW(RO) Act) and the Fair Work Act 2009 (Cth) (FW Act). In

essence, the FW Act provides for the registration of employee

associations (that is, trade unions) and employer associations as

‘organisations’. It also contains provisions regulating such

organisations. Among other things, the FW Act confers certain rights

and powers on employee organisations and their officials.

Fair Work (Registered Organisations) Act 2009 (Cth)

41. The FW(RO) Act is largely based on Schedule 1B of the Workplace

Relations Act 1996 (Cth).

22

42. Under the FW(RO) Act, a ‘federally registrable’ association of

employees or employers or an enterprise association is eligible to apply

for registration as an ‘organisation’.58

43. An association of employees is ‘federally registrable’ if it is a

constitutional corporation (i.e. a trading, financial or foreign

corporation) or some or all of its members are ‘federal system

employees’.59 A ‘federal system employee’ is defined as a ‘national

system employee’ within the meaning of that term in the FW Act or an

independent contractor who, had he or she been an employee, would be

a ‘national system employee’.60 In turn, a ‘national system employee’

includes an employee employed or usually employed by (a) a

constitutional corporation, (b) the Commonwealth or a Commonwealth

authority, (c) a person who employs or usually employs flight crew

officers, maritime workers or waterside workers in connection with

interstate trade or commerce, or (d) an employer who carries on

activity in a Territory.61

44. By these techniques the legislation bases itself at least on the

Commonwealth legislative powers conferred by ss 51(i), (xx), (xxxix)

and 122 of the Constitution. The constitutional validity of the

predecessor to the FW(RO) Act, which in this respect was substantially

58 Fair Work (Registered Organisations) Act 2009 (Cth), s 18. 59 Fair Work (Registered Organisations) Act 2009 (Cth), s 18B. 60

Fair Work (Registered Organisations) Act 2009 (Cth), s 6. 61 Fair Work Act 2009 (Cth), ss 13, 14.

23

identical to the FW(RO) Act, was upheld by the High Court in The

WorkChoices Case.62

45. Further, as a result of the referral of powers mentioned in paragraph 33

above, the definition of ‘national system employee’ also includes

employees employed by other entities in those referring States (eg sole

traders, partnerships), except (to varying degrees in each State) certain

public sector and local government employees.63

46. The consequence is that most employees in Australia are ‘federal

system employees’ for the purposes of the FW(RO) Act.

47. An organisation registered under the FW(RO) Act is a body corporate.

That is, it is a legal entity with separate legal personality. It has certain

rights, powers and liabilities e.g. the ability to own property, to sue and

be sued.64 Most, if not all, trade unions in Australia operating federally

are organisations registered under the FW(RO) Act (or one of its

predecessors), and are therefore subject to the provisions of the

FW(RO) Act.

48. The FW(RO) Act regulates organisations in a number of ways. In very

broad terms:

(a) chapter 2 concerns the registration and cancellation of

registration of organisations;

62 New South Wales v Commonwealth (2006) 229 CLR 1 at [309]-[327]. 63 Fair Work Act 2009 (Cth), ss 30C, 30D, 30H, 30M, 30N, 30S. 64

Fair Work (Registered Organisations) Act 2009 (Cth), s 27.

24

(b) chapter 3 deals with the amalgamation and withdrawal from

amalgamation of organisations;

(c) chapter 4 sets out provisions dealing with the ability of

organisations to represent particular persons;

(d) chapter 5 prescribes and regulates the rules of organisations;

(e) chapter 6 concerns membership of organisations;

(f) chapter 7 provides for democratic control of organisations

through elections;

(g) chapter 8 imposes a range of reporting and accounting

requirements on organisations; and

(h) chapter 9 regulates the conduct of officers and employees of

organisations and branches of organisations.

49. Under the FW(RO) Act, the regulation of organisations is overseen

principally by the General Manager of the Fair Work Commission.

The General Manager of the Fair Work Commission is a separate

statutory office. The holder is appointed by the Governor-General on

the nomination of the President of the Fair Work Commission for a

period not exceeding five years.65 The Fair Work Commission itself is

a body consisting of a President, two Vice Presidents, an unspecified

number of Deputy Presidents and Commissioners and six expert panel

65 Fair Work Act 2009 (Cth), ss 656, 660.

25

members.66 Fair Work Commission members are appointed by the

Governor-General, and hold office until aged 65.67

Rights of employee organisations under the Fair Work Act 2009 (Cth)

50. Apart from the benefit of separate legal personality conferred by the

FW(RO) Act, the FW Act confers a number of significant rights and

privileges on registered employee organisations.

Participation in enterprise bargaining

51. First, employee organisations are critical participants in the enterprise

bargaining system established by the FW Act.

52. In essence, the enterprise bargaining system requires employees

(through their bargaining representatives) and their employers to

bargain in good faith for terms and conditions of an enterprise

agreement. Any agreement that is ultimately made must result in the

employees to whom it is to apply being ‘better off overall’68 than the

relevant modern award that covers them (and which would apply to

them but for the existence of the enterprise agreement).69 Together

66 Fair Work Act 2009 (Cth), s 575(2). 67 Fair Work Act 2009 (Cth), s 629. Expert panel members hold office for a period specified in their instrument of appointment, and the period must not exceed five years: s 629(4). 68

Fair Work Act 2009 (Cth), s 186(2)(d). The Fair Work Commission may, in exceptional circumstances, approve an enterprise agreement where it does not pass the ‘better off overall test’ if the approval would not be contrary to the public interest: Fair Work Act 2009 (Cth), s 189. 69

See Fair Work Act 2009 (Cth), ss 47, 48, 52, 53 in relation to when a modern award and enterprise agreement cover and apply to an employer, their employees and a registered organisation.

26

with the National Employment Standards contained in the FW Act,

modern awards set the minimum safety net for employees’ terms and

conditions within the Commonwealth industrial relations system.

53. The decision to commence bargaining is usually consensual. But in

certain circumstances, such as where a majority of employees would

like to bargain with a reluctant employer and as a consequence the Fair

Work Commission makes a ‘majority support determination’,70 an

employer can be required to engage in bargaining and in so doing to

comply with good faith bargaining requirements, even where the

employer’s preference is that its employees’ terms and conditions be

covered by a modern award. However, the good faith bargaining

requirements do not require the making of concessions or the reaching

of agreement on the terms that are to be included in an enterprise

agreement.71

54. As will be apparent from the above summary, ‘good faith bargaining’

is critical to the content of enterprise agreements. Contrary to the

position under the previous ‘WorkChoices’ legislation, trade unions

have a distinct role in that process.

55. Pursuant to s 176 of the FW Act, an employee organisation is the

default bargaining representative for a proposed enterprise agreement

(that is not a ‘greenfields agreement’) if an employee to be covered by

70 Fair Work Act 2009 (Cth), s 237. 71 Fair Work Act 2009 (Cth), s 228(2). For the tortured results that arise from being compelled genuinely to negotiate but not being required to make concessions, see Endeavour Coal Pty Ltd v Association of Professional Engineers, Scientists and Managers, Australia (2012) 206 FCR 576 and APESMA v Peabody Energy Australia Coal Pty Ltd [2015] FWCFB 1451.

27

the proposed agreement is a member of the employee organisation and

the employee organisation is entitled to represent the employee’s

industrial interests in respect of the work to be covered by the

agreement.

56. An employee who is a union member may appoint someone other than

the union to be his or her representative, but so long as there is one

union member who has not appointed someone else, the union will be a

bargaining representative and will therefore play a role in determining

the content of an enterprise agreement.72 The union will also be

entitled to give written notice to the Fair Work Commission that it

wishes to be covered by the agreement. That coverage must be noted

by the Fair Work Commission in its decision to approve the

agreement.73

57. In addition, employers who wish to engage employees in a genuinely

new enterprise may bargain with an employee organisation for a

‘greenfields agreement’. Such an agreement may be made at any time

after bargaining commences between an employer and any employee

organisation that they agree to bargain with, and which is entitled to

represent the industrial interests of the employees who will be covered

by the agreement.74

72 Fair Work Act 2009 (Cth), s 176. 73 Fair Work Act 2009 (Cth), ss 183, 201. 74

Fair Work Act 2009 (Cth), ss 172(4), 182(3).

28

Right of entry powers

58. Secondly, union officials also have extremely broad ‘right of entry’

powers under the FW Act, the Work Health and Safety Act 2011 (Cth)

and State and Territory work health and safety laws.

59. Section 512 of the FW Act allows the Fair Work Commission, on the

application of an organisation, to issue an entry permit for an official of

the organisation if the Commission is satisfied that the official is a ‘fit

and proper person to hold the entry permit’. Although this provision is

not limited to the officials of employee organisations, so that in theory

the officials of employer organisations could be granted a right of entry

permit, the rights conferred on a permit holder in effect limit the

holders of permits to trade union officials.

60. Subject to certain conditions and limitations, an entry permit holder is

permitted to enter premises to investigate suspected contraventions of

the FW Act,75 to hold discussions with workers whose industrial

interests the permit holder’s organisation is entitled to represent76 and

to exercise powers conferred by State or Territory work health and

safety laws.77 Whilst on the premises, the permit holder may inspect

anything relevant to a suspected contravention of a modern award,

enterprise agreement, workplace determination or Fair Work

Commission order, and inspect and make copies of any record or

75 Fair Work Act 2009 (Cth), s 481. 76 Fair Work Act 2009 (Cth), s 484. 77

Fair Work Act 2009 (Cth), s 494.

29

document (other than a ‘non-member record’) on the premises that is

directly relevant to the suspected contravention.78

61. The Work Health and Safety Act 2011 (Cth) contains provisions which

are similar to the FW Act. It allows a union official who has

completed relevant safety training and who holds an entry permit under

the FW Act to apply for a Work Health and Safety Permit. In general

terms, that permit allows the holder to enter premises to inquire into

suspected contraventions of the Work Health and Safety Act 2011 (Cth)

and also to consult and advise workers on health and safety matters.

Similar rights of entry are provided under State and Territory work

health and safety laws.79

62. In effect, union officials who hold an entry permit are authorised to act

in a manner in some ways akin to police officers in relation to

industrial and work health and safety laws. However, in fact their

powers exceed those of the police in at least one respect: unlike police

officers they do not need a search warrant obtained from a court prior

to entering premises and examining documents stored there. In

addition, permit holders are not required to provide advance notice of

entry where it relates to inquiries into suspected contraventions of

work health and safety laws.

78 Fair Work Act 2009 (Cth), s 482. 79 Work Health and Safety Act 2011 (ACT); Work Health and Safety Act 2011 (NSW); Work Health and Safety (National Uniform Legislation) Act 2011 (NT); Work Health and Safety Act 2011 (Qld); Work Health and Safety Act 2012 (SA); Work Health and Safety Act 2012 (Tas); Occupational Health and Safety Act 2004 (Vic).

30

Rights in relation to awards

63. Thirdly, employee organisations have broad standing rights to apply to

the Fair Work Commission to vary, revoke or make a modern award,80

to commence proceedings in the Federal Court or Federal Circuit Court

seeking a civil remedy81 or to appear before the Fair Work

Commission on behalf of a member.82

General observations concerning possible reform of the Fair Work (Registered Organisations) Act 2009 (Cth)

64. It is apparent from the above summary that in considering possible

reforms to the FW(RO) Act two matters should be kept in mind.

65. First, for the most part the FW(RO) Act draws no distinction between

employer and employee organisations. Accordingly, any changes to

the FW(RO) Act must take this into account.

66. Secondly, not all organisations, whether employee organisations or

employer organisations, are the same size. Not all have the same level

of resources. Thus, whilst a change in the law may not impose much

of a regulatory burden on a large trade union such as the CFMEU or

the AWU, it may impose a much greater burden on a smaller employee

or employer association.

80 Fair Work Act 2009 (Cth), s 158. 81 Fair Work Act 2009 (Cth), ss 539-540. 82

Fair Work Act 2009 (Cth), s 596.

31

67. As at 3 December 2015, there are 109 registered organisations, of

which 47 are unions. The remaining 62 are employer organisations or

enterprise associations.83 However, registered trade unions are

considerably larger than registered employer organisations. Based on

the 2013 annual public returns provided to the Fair Work Commission,

there were just over 2 million members of registered trade unions,

compared with just under 100,000 members of registered employer

organisations. Further, almost half of the 47 registered trade unions

were larger in terms of members than the largest employer

organisation, the Master Builders Association of Victoria.

E - PRESENT STATE STATUTORY FRAMEWORK

68. Each State has legislation that regulates trade unions to varying

degrees. Although the legislation varies between States there are three

general patterns of regulation.

New South Wales, Queensland, South Australia and Western Australia

69. In these States, the equivalents of the Trade Union Act 1871 (UK) have

been repealed and there is no legislation that regulates trade unions as

such.84 Instead, as under the FW(RO) Act, provision is made for the

registration of industrial organisations or associations of employees

83 Based on information available at Fair Work Commission website, Registered Organisations http://www.fwc.gov.au/registered-organisations/find-registered-organisations accessed 3/12/15. 84

In New South Wales and South Australia, the provisions of the Trade Union Act 1871 (UK) that excluded trade unions from the restraint of trade doctrine have been re-enacted: Industrial Relations Act 1996 (NSW), ss 303-305; Fair Work Act 1994 (SA), s 137.

32

and employers.85 Registration confers separate legal personality on the

State-registered organisation. In terms of numbers:

(a) As at August 2014, there were 45 registered employee

organisations (unions) and 43 registered employer

associations in New South Wales.86

(b) As at 30 June 2015, there were 27 employee organisations

(unions) and 19 employer organisations registered in

Queensland.87

(c) As at 30 June 2015, there were 28 employee associations

(unions) and 11 registered employee associations registered

under South Australian legislation.88

(d) As at 30 June 2015, there were 43 employee industrial

organisations (unions) and 18 registered employer industrial

organisations registered in Western Australia.89

70. Certain privileges under State industrial relations legislation are

conferred on State-registered organisations of employees, for example,

85 Industrial Relations Act 1996 (NSW), Part 3 of Chapter 5; Industrial Relations Act 1999 (Qld), Chapter 12; Fair Work Act 1994 (SA), Chapter 4; Industrial Relations Act 1979 (WA), Division 4 of Part II. 86

New South Wales Government, Policy Submission, August 2014, pp 15-16. 87 Queensland Industrial Relations Commission, Annual Report 2014-2015, (September 2015), pp 19-20. 88

Industrial Relations Commission of South Australia, Annual Report 2014-2015, (September 2015), pp 27-32. 89

Western Australian Industrial Relations Commission, Annual Report 2014-2015, (September 2015), p 11.

33

right of entry powers, and rights to negotiate and enter collective or

enterprise agreements with respect to employees who are otherwise not

covered by the federal system.

71. State-registered organisations are also subject to regulation. The

precise regulation varies between States. In South Australia, regulation

is limited largely to certain matters concerning rules of an organisation

and the preparation of accounts.90 In New South Wales, Queensland

and Western Australia there is, to varying degrees, regulation similar to

that which exists under the FW(RO) Act and in general involves

regulation of the rules of organisations, the election and duties of

officers of those organisations and reporting and accounting

requirements.91

Tasmania

72. Tasmania has a hybrid model. The Trades Unions Act 1889 (Tas),

which is based on the Trade Union Act 1871 (UK), remains in force.

But it is largely obsolete. In 2015, only four trade unions are registered

under the Trades Unions Act 1889 (Tas).92 Trade unions that are

registered have at least some attributes of separate legal personality

and are subject to the regulation (albeit fairly limited) imposed by the

90 Fair Work Act 1994 (SA), ss 124-125, 128. 91 Industrial Relations Act 1996 (NSW), Part 4 of Chapter 5; Industrial Relations Act 1999 (Qld), Parts 3-12A of Chapter 12; Industrial Relations Act 1979 (WA), ss 62, 69-70, 74-80. 92

Letter from the Solicitor-General of Tasmania to the Solicitor Assisting the Commission dated 14 May 2015. The Act has never been highly utilised. Smith and Rawson report that at the end of 1981, there were 18 unions registered under the Trades Unions Act 1889, most of which were very small: D W Smith and D W Rawson, Trade Union Law in Australia (2nd ed, Butterworths, 1985), p 48.

34

Trades Unions Act 1889 (Tas). Trade unions which are not registered

remain as unincorporated associations (unless they are incorporated

under some other legislation) and are not subject to any specific

regulation.

73. However, in addition, Part V of the Industrial Relations Act 1984 (Tas)

provides for the registration of employee or employer associations as

‘organisations’.93 Unlike the legislation in New South Wales,

Queensland, South Australia and Western Australia, registration does

not confer separate legal personality on a registered organisation.

However, it does confer a number of benefits on the organisation under

the Tasmanian industrial relations system. These benefits include the

right to appear before the Tasmanian Industrial Relations Commission,

the right to enter into industrial and enterprise agreements and the right

of its officers to enter premises. Registered organisations must comply

with certain minor requirements in relation to rule changes and

amalgamations but regulation does not otherwise affect them.

Victoria

74. Prior to 1996, Victoria also adopted the hybrid model currently

adopted in Tasmania. The Trade Unions Act 1958 (Vic), based on the

Trade Union Act 1871 (UK), regulated trade unions directly, and

Part 12 of the Employee Relations Act 1992 (Vic) provided for the

93 As at 3 December 2015, there were 29 employee associations (i.e. unions) and 25 employer associations formally registered under the Industrial Relations Act 1984 (Tas): a list of registered organisations is available on the Tasmanian Industrial Relations Commission website, http://www.tic.tas.gov.au/registered_organisations/employee_orgs, and http://www.tic.tas.gov.au/registered_organisations/employer_organisations, accessed 3/12/15.

35

recognition of employee and employer associations with consequent

benefits for the purposes of the then Victorian industrial relations

system. However, in 1996 Victoria referred most of its powers

concerning industrial relations to the Commonwealth and Part 12 of

the Employee Relations Act 1992 (Vic) was repealed.94 Consequently,

the only current Victorian legislation regulating trade unions is the

Trade Unions Act 1958 (Vic). As is the case in Tasmania, few trade

unions are registered under that Act.95

F - ROLES OF TRADE UNIONS IN AUSTRALIA

75. As noted in paragraph 15 above, any consideration of law reform in

relation to union governance must have regard to the roles and

significance of unions in contemporary Australia.

Role in assisting members and improving society

76. There can be little doubt that during the course of the 20th century,

trade unions in Australia helped improve the working conditions not

only of their members, but of workers more generally. The ACTU,

formed in 1927 as a ‘peak body’ for Australian trade unions, was

involved along with individual unions and their members in numerous

successful campaigns for better conditions including equal pay for

94 Commonwealth Powers (Industrial Relations) Act 1996 (Vic). 95 As at November 1995, there were 25 organisations registered under the Act: see Victorian Government Printer, Scrutiny of Acts and Regulations Committee Redundant and Unclear Legislation, Review of Trade Unions Act 1958, November 1995, pp 5-6. The Committee reviewing the Act recommended that it be repealed, but the recommendation was not implemented. Nevertheless, the Act is still little utilised. Information provided to the Commission by the Victorian Government indicated that as at May 2015 there were only 26 organisations registered under the Act.

36

women, increases in the minimum wage, long service leave and

occupational health and safety laws.

77. These improvements in broader social conditions were largely

achieved at a time of high trade union membership. As noted in

paragraph 36 above, the proportion of trade union membership in

Australia has consistently fallen over the last three decades from 46%

in 1986 to only 15% in 2014.96 Notwithstanding declining

membership, modern trade unions continue to provide a number of

valuable benefits to their members. They seek better, safer and fairer

working conditions for their members. They help to recover wages

and other entitlements when employers have failed to pay them. They

can investigate and help remedy safety issues in the workplace. They

can assist members in litigation, and fund it. They can provide pastoral

care and more general assistance to members.

78. The officials in charge of unions thus play an important role in the

lives of their members. They occupy a position of considerable trust.

They are in charge of substantial sums of money which is not their

own.

Commercial role

79. Despite the humble beginnings of the trade union movement, it is clear

that many modern trade unions are large and complicated commercial

96 Australian Bureau of Statistics, August 2014, Characteristics of Employment, Australia (ABS Catalogue No. 6333.0), data cube 16 (table 16.1), released 27/10/15.

37

enterprises.97 Evidence given before the Commission has shown that

large unions, such as those named in the Commission’s Terms of

Reference, receive significant revenue from commercial agreements

concerning insurance schemes, redundancy funds and training funds.

They operate complex commercial structures. They have large

numbers of staff. They operate across multiple jurisdictions. The

funds which certain unions have established, and which they and their

officials administer, are even more complex in structure: incorporated

associations, unincorporated associations, trusts and various corporate

entities.

80. Even if a trade union carries on commercial activities, it is exempt

from income tax, provided the trade union incurs its expenditure and

pursues its objectives principally in Australia, complies with all of the

substantive requirements of its governing rules and applies its income

and assets solely for the purposes for which the trade union was

established.98 Under ordinary principles of taxation law, funds

contributed by members of a not-for-profit association to the

association for the common benefit of the members (for example,

membership and subscription fees, donations by members) do not

97 See eg, R R S Tracey, ‘The Legal Approach to Democratic Control of Trade Unions’ (1985) 15 MULR 177 at 179; M Christie, ‘Legal Duties and Liabilities of Federal Union Officials’ (1986) 15 MULR 591 at 592; A Forsyth, ‘Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model’ (2000) 13 AJLL 1 at 12-13. 98

Income Tax Assessment Act 1997 (Cth), s 50-15. Similar exemptions apply in respect of employee and employer associations registered under the Fair Work (Registered Organisations) Act 2009 (Cth). The other main classes of entity which have tax exempt status are registered charities, education and health institutions, and sporting and cultural associations.

38

constitute income of the association.99 However, unless the association

has tax exempt status, income received from external sources (for

example, grants, sponsorships, third party commissions) is treated as

assessable income and subject to tax.

81. The tax exempt status which is afforded to trade unions has the

consequence that the substantial revenues which modern trade unions

generate from sources other than their members are not subject to tax.

The privilege of tax exempt status afforded to trade unions is one

justification for the interest of the Commonwealth in proper union

governance and financial accountability.

Statutory role in industrial relations system

82. The statutory role of trade unions in the State and Commonwealth

industrial relations systems has already been discussed: see paras 50-63, 70 and 73 above. In short, registered trade unions and their

officials occupy a privileged position in Australia’s industrial relations

systems. As has already been noted, the right of entry powers

conferred on trade union officials are extremely broad, exceeding those

of the police in some respects. The granting of the various statutory

privileges justifies proper legislative measures to safeguard the

interests of those affected by those privileges and the general public

interest.

99 This is so-called ‘mutuality principle’. In essence it is based on the idea that an organisation cannot derive income from itself.

39

Political role

83. The final contextual aspect that must be borne in mind is the political

power and influence exercised by the officials of trade unions. The

deep historical ties between the trade union movement and the

Australian Labor Party (ALP) are well-known, the latter emanating

from the former at the turn of the twentieth century. Those

institutional ties remain strong today. Union affiliation fees and union

donations are a core part of ALP funds. Union loans can be another

source of help. A person who is eligible to join a union must be a

financial member of a union if he or she wishes to become a member

of the ALP.

84. Apart from these general institutional ties, union officials play an

important role in the selection of ALP representatives for State and

Federal Parliament. Through the various rules of the ALP, the

Secretaries of large affiliated trade unions exercise substantial voting

power at ALP State Conferences, and have a very significant role in

determining the composition of the Australian Senate100 and State and

Federal Parliaments more generally.

85. Why is this relevant to union governance? It is relevant because, given

the substantial political power that is capable of being exercised by

trade union officials, there is a heightened public interest in

maintaining safeguards against any form of corruption by trade union

officials and those employers with whom they deal.

100 See Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, pp 19-20.

40

CHAPTER 2

REGULATION OF UNIONS

Subject Paragraph

A - INTRODUCTION 1

B - DUAL STATE AND COMMONWEALTH

REGULATION

7

C - REGISTERED ORGANISATIONS REGULATOR 23

The current registered organisation regulator: General Manager of

the Fair Work Commission

24

An independent standalone registered organisations regulator 28

Resources of the registered organisations regulator 49

Powers of the registered organisations regulator 50

D - FINANCIAL ACCOUNTABIILITY 62

Training of officers and employees 63

Requirements to have financial policies 73

41

Subject Paragraph

Financial disclosure requirements by organisations and branches 81

Internal compliance and audit 102

External auditing 110

E - RECORD-KEEPING REQUIREMENTS 132

Minutes of committee of management meetings 132

Financial records 145

F - WHISTLEBLOWERS 146

Background 146

Existing protected disclosure regime 153

Persons who can make a protected disclosure 159

Persons entitled to receive a protected disclosure 164

Remedies for adverse action 175

G - USE OF UNION FUNDS 180

Use of union funds in union election campaigns 181

Use of union funds as political donations or for political

expenditure

186

H - CONDUCT OF UNION ELECTIONS 193

42

Subject

APPEND

INTR A -

1.

2.

DIX A

RODUCTIO

This Chapte

unions gener

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financial

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detect the

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43

(f) a lack of, or unawareness about, union policies dealing with

financial matters;

(g) misuse of credit cards by union officials;

(h) bullying, intimidation and victimisation of those opposed to

the interests of the union Secretary; and

(i) failures in record-keeping.

3. More generally, a number of the case studies revealed an unhealthy

culture within many unions whereby a longstanding union Secretary,

often with an extremely autocratic leadership style, develops a cult of

personality and the committee of management becomes little more than

a rubber stamp. In the Health Services Union (HSU) and the National

Union of Workers (NUW), New South Wales Branch this culture

developed to such a point that those in charge of the union treated the

union’s money as if it were their own.

4. The remainder of the Chapter is concerned with broad scale reforms to

union governance and regulation to seek to address these issues. More

specific reforms concerning the duties of union officials are considered

in Chapter 3 of this Volume.

5. The remainder of the Chapter is divided into seven parts.

(a) Part B examines the desirability and practicality of uniform

laws throughout Australia governing the registration, de-

44

registration and regulation of registered employee and

employer organisations: see paragraphs 7-22.

(b) Part C asks which body, or bodies, should be responsible for

regulating organisations registered under the Fair Work

(Registered Organisations) Act 2009 (Cth) (FW(RO) Act)

and what investigatory and enforcement power that body, or

those bodies, should have: see paragraphs 23-61.

(c) Part D concerns a range of measures to improve the financial

accountability of registered organisations: see paragraphs 62-131.

(d) Part E deals with record-keeping: see paragraphs 132-145.

(e) Part F examines measures to improve the protections for

whistleblowers: see paragraphs 146-179.

(f) Part G considers the use of union funds, in particular for

purposes associated with promoting a cause or causes of a

union Secretary: see paragraphs 180-192.

(g) Part H deals briefly with the conduct of union elections: see

paragraphs 193-200.

6. The Commission received a range of submissions in relation to these

issues in response to the Issues Papers, the Discussion Paper and more

45

DUA B -

7.

8.

9.

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Report. 2 See Wil Employme

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46

Relations Act 1996 (NSW) (State-registered branch). This

is a separate legal entity which is a body corporate,

incorporated by the law of New South Wales.

(c) The State-registered branch and the Federal branch have

substantially the same members and the same officers. The

two branches, and their officers, are subject both to regulation

under the FW(RO) Act and the Industrial Relations Act 1996

(NSW). All funds are held for the benefit of the State-registered branch and the Federal branch jointly.

(d) However, there are separate State and Federal rules of the

branch, which differ in important respects. There are also

different requirements under the FW(RO) Act and the

Industrial Relations Act 1996 (NSW) as to the content of the

rules. Section 154D of the FW(RO) Act currently requires

the rules of a federally-registered organisation or a branch of

that organisation to have certain rules concerning financial

training. There is no such requirement in the Industrial

Relations Act 1996 (NSW).

(e) Further, there are different duties imposed on officers under

the FW(RO) Act and the Industrial Relations Act 1996

(NSW).

47

10. These complex arrangements, stemming from the existence of dual

State and Commonwealth regulation, are far from unique to the NUW,

New South Wales Branch. In fact, they are extremely common.3

11. The potential for overlapping and conflicting State and Commonwealth

laws is not new. The problems were identified in 1969 in Moore v

Doyle.4 In 1974, the Sweeney Report sought to address some of the

issues.5 But the problems remain. In New South Wales and South

Australia, the potential for overlapping regulation in relation to newly

registered organisations is reduced by the relevant legislation drawing

a distinction between, on the one hand, State-registered organisations

that are organisations or branches of organisations registered under the

FW(RO) Act (which are not generally subject to State regulation) and,

on the other hand, those that are not registered under the FW(RO) Act

(which are subject to State regulation).6

12. It is possible that some of the problems will decline over time. There

has been a shift to a largely national industrial relations system. But

transitional arrangements were put in place to ensure that State-registered organisations that previously represented employees within

the State industrial relations systems could continue to do so in the new

Federal industrial relations system. Currently, a number of State-registered organisations are ‘transitionally recognised associations’.7

3 See Schedule 1A to the Fair Work (Registered Organisations) Regulations 2009 (Cth) for a list of State-registered organisations with federally-registered counterparts. 4

(1969) 15 FLR 59. 5 Committee of Inquiry on Co-ordinated Industrial Organisations, Report (1974). 6

See Industrial Relations Act 1996 (NSW), Parts 4 and 5 of Ch 5; Fair Work Act 1994 (SA), Parts 2 and 3 of Ch 4. Contrast the position in Queensland and Western Australia. 7 See Fair Work (Registered Organisations) Act 2009 (Cth), Sch 1.

48

The consequence of being a ‘transitionally recognised association’ is

that the State-registered organisation is regarded as a Federal

organisation for the purposes of the FW Act.8 Thus, it is able to

continue to represent its members in the Federal industrial relations

system. Transitional recognition expires on 1 January 2017, although

it can be extended by up to two years in certain circumstances.9 State-registered organisations can apply for permanent recognition as a

‘recognised State-registered association’ but only if they do not have a

‘federal counterpart’.10 The overall result is that after 1 January 2019

many State-registered organisations with a federal counterpart will

have a considerably reduced role in representing the industrial interests

of members.11 Consequently some State-registered organisations may

cease to exist.

13. However, it is not clear that this will occur. And there will remain

State-registered unions with coverage of public sector employees that

remain covered by State industrial laws.

14. The Commission received a number of submissions about whether it

was desirable and practicable to have a single set of rules in relation to

the registration, deregistration and regulation of registered

organisations throughout Australia.12 The Discussion Paper raised two

8

Fair Work (Registered Organisations) Act 2009 (Cth), Sch 1, cl 3. 9 Fair Work (Registered Organisations) Act 2009 (Cth), Sch 1, cl 6; Fair Work (Registered Organisations) Declaration 2010. 10

Fair Work (Registered Organisations) Act 2009 (Cth), Sch 2. 11 See generally the discussion in B Creighton and A Stewart, Labour Law (Federation Press, 5th ed, 2010), pp 679-680. 12

Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, pp 9-10; Associate Professor Louise Floyd Law Reform Submissions, 21/8/15, p 1 referring to L Floyd, ‘The Fair Work Act’s forgotten issues’ (2010) 33 ABR 1; Institute of Public

49

ways this could occur: by the States adopting uniform laws or by the

States referring their powers to the Commonwealth. The third way -

that the Commonwealth could unilaterally enact legislation ‘covering

the field’ - is not possible given the current constitutional basis of the

FW Act and the FW(RO) Act.

15. Apart from the submission received by the Employment Law

Committee of the Law Society of New South Wales the submissions

received were largely in favour of harmonisation of the various

existing regimes.

16. The Committee did not support uniformity on the ground that in its

perception there were insufficient benefits to be achieved.13 It argued

that any attempt to establish uniform laws would not be easy. Further,

the introduction of uniform provisions would mean that New South

Wales registered organisations operating only in the State or without a

counterpart Federal body would be exposed to more regulation in their

internal affairs. Yet, the argument ran, there is no evidence that the

regulatory regime applicable to them under the State legislation is

seriously deficient. The Committee also argued that it was undesirable

and unlikely that State governments would refer their powers over the

regulation of State registered industrial organisations to the

Commonwealth. It submitted that any referral of powers would be

Affairs Law Reform Submissions, pp 11-12; Housing Industry Association Pty Ltd Law Reform Submissions, 21/8/15, p 7; Master Builders Australia Law Reform Submissions, 21/8/15, p 5; Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, pp 1-4. 13

Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, pp 1-4.

50

likely to create additional complexity for the administration of

registration, deregistration and regulation.

17. If past practice is a guide, it may be accepted that it is unlikely that the

States would refer their powers concerning the regulation of employer

and employee associations to the Commonwealth. Although in 2009,

New South Wales, Queensland, South Australia, Tasmania and

Victoria each referred a broad range of legislative powers to the

Commonwealth, regulation of employer and employee associations

was explicitly excluded from the reference.14 And this was at a time

when all of those States and the Commonwealth had Labor

governments.

18. Further, given the continued existence of State-based industrial

relations systems, there will be a continued need for organisations to be

recognised under State-based industrial relations systems.

19. However, it is difficult to accept the proposition that a single set of

rules governing registration, deregistration and regulation of employee

and employer organisations could lead to additional complexity. To

the contrary, this would simplify the very complex existing legislative

frameworks. In terms of cost and efficiency, the referral of powers to

the Commonwealth would have the very significant advantage that

there would be a single statutory regulator with supervision of

registered organisations throughout Australia rather than the

14

Industrial Relations (Commonwealth Powers) Act 2009 (NSW), s 3(1) (para (m) of definition of ‘excluded subject matter’); Fair Work (Commonwealth Powers) and Other Provisions Act 2009 (Qld), s 3(1) (same); Fair Work (Commonwealth Powers) Act 2009 (SA), s 3(1) (same); Industrial Relations (Commonwealth Powers) Act 2009 (Tas), s 3(1) (same); Fair Work (Commonwealth Powers) Act 2009 (Vic), s 3(1) (para (m) of the definition of ‘State subject matters’).

51

multiplicity of current regulatory authorities. Uniform laws would

have other obvious advantages including certainty of regulation and a

reduced burden of regulation on dual registered organisations.

20. Whilst accepting the practical difficulties of implementing any uniform

scheme of regulation within Australia, it is considered that the potential

benefits justify the States and Commonwealth giving consideration to

implementing a national regime in relation to the registration,

deregistration and regulation of industrial organisations of employees

and employers.

Recommendation 1

Commonwealth and State governments give consideration to adopting a national

approach to the registration, deregistration and regulation of employee and

employer organisations, with a single regulator overseeing all such organisations

throughout Australia.

21. The balance of this Volume of the Report focuses on the governance

and regulation of organisations registered under the FW(RO) Act. The

reasons for this approach were explained in the Discussion Paper.

First, the Terms of Reference identify, non-exhaustively, five specific

unions for consideration, each of which is an organisation registered

under the FW(RO) Act. It is therefore sensible to focus on that Act.

Secondly, it is unmanageable to deal with the law in every jurisdiction.

This Report is already long and dealing with each jurisdiction

separately would make it even longer. Thirdly, the FW(RO) Act has

the greatest coverage of members. Fourthly, apart from perhaps the

52

I

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53

The current registered organisations regulator: General Manager of the Fair Work Commission

24. Currently, the regulation of organisations under the FW(RO) Act is

entrusted, albeit not completely, to the General Manager of the Fair

Work Commission (the General Manager).

25. The General Manager’s primary function is to assist the President of

the Fair Work Commission in ensuring that the Fair Work Commission

performs its functions and exercises its powers.15 The Fair Work

Commission’s functions and powers are primarily adjudicative and

concern substantive industrial relations matters. These include, for

example, resolving unfair dismissal claims, settling industrial disputes,

conducting reviews of modern awards and approving enterprise

agreements. The General Manager is subject to the direction of the

President, both generally and in relation to particular matters.16 The

President may delegate this power to a Vice President or a Deputy

President.17

26. In addition to this role, the General Manager has statutory functions

under the FW(RO) Act in relation to the regulation of registered

organisations. The General Manager’s regulatory functions are

separate from the adjudicative functions of the Fair Work Commission.

15 Fair Work Act 2009 (Cth), s 657(1). 16 Fair Work Act 2009 (Cth), s 582(2). The General Manager is not required to comply with a direction by the President that is inconsistent with the General Manager’s performance of functions or exercise of powers under the Public Governance, Performance and Accountability Act 2013 (Cth) or the Public Service Act 1999 (Cth) in relation to the Fair Work Commission: s 658. 17

Fair Work Act 2009 (Cth), s 584(1).

54

However, the General Manager remains subject to a direction of the

President, either generally or in relation to a specific matter.

27. Although the vast bulk of the regulation of organisations is entrusted to

the General Manager, the Fair Work Commission proper has a role in

registering18 and deregistering19 organisations, in relation to the

amalgamation of organisations,20 and in relation to changes to certain

aspects of the rules of organisations.21

An independent standalone registered organisations regulator

28. Since 2013, the current Federal government has attempted to introduce

legislation providing for the creation of a separate ‘Registered

Organisations Commission’ and transferring most of the General

Manager’s current regulatory functions concerning registered

organisations to the Registered Organisations Commission.22 Three

attempts have been made. Each has failed. The most recent attempt to

create a Registered Organisations Commission was the Fair Work

(Registered Organisations) Amendment Bill 2014 [No 2] (Cth), which

was defeated in the Senate on 17 August 2015.

18 Fair Work (Registered Organisations) Act 2009 (Cth), s 20 19 Fair Work (Registered Organisations) Act 2009 (Cth), s 30. 20

Fair Work (Registered Organisations) Act 2009 (Cth), s 53. 21 Fair Work (Registered Organisations) Act 2009 (Cth), ss 157, 158. 22

Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), Fair Work (Registered Organisations) Amendment Bill 2014 (Cth) and the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth).

55

29. The Discussion Paper invited submissions about whether there should

be a single statutory regulator of organisations, separate and

independent from the Fair Work Commission, and if so, who that

regulator should be.

30. Most of the submissions received on this issue were in favour of a

statutory regulator separate from the Fair Work Commission.23 For

example, the Institute of Public Affairs submitted:24

…in order to ensure that the lines of responsibility and accountability are clear, and to improve standards and behaviour, all functions to do with the registration, administration, compliance and deregistration of registered organisations should be transferred to a single, stand-alone authority.

31. The case against was put by the Shop Distributive and Allied

Employees’ Association (SDA) who submitted that to remove the

regulatory function from the Fair Work Commission would:25

…be to weaken the authority of the FWC and diminish the necessary trust and confidence between the FWC and organisations of employers and employees under the federal system.

32. In its submission to an inquiry by the Senate Education and

Employment References Committee in relation to the Fair Work

23 Associations Forum Pty Ltd Law Reform Submissions, 4/9/15, p 2; Master Builders Australia Law Reform Submissions, 21/8/15, p 8; Australian Industry Group Law Reform Submissions, 21/8/15, p 4; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 11; Boral Law Reform Submissions, 2015 (received 27/8/15), p 9; Associate Professor Louise Floyd Law Reform Submissions, 21/8/15, p 2; Institute of Public Affairs Law Reform Submissions, August 2015, p 11. 24

Institute of Public Affairs Law Reform Submissions, August 2015, p 11. 25 Shop, Distributive & Allied Employees Association Law Reform Submissions, 27/8/15, para 24.

56

(Registered Organisations) Amendment Bill 2014 [No 2] (Cth) the

Australian Council of Trade Unions (ACTU) submitted that:26

There is absolutely no basis for suggesting that there is any institutional limitation inherent in the present regulatory structures. The General Manager, as the investigative authority, is functionally distinct from the remainder of the Fair Work Commission. Neither the fact that the General Manager’s appointment is made by government on the nomination of the President of the Commission, nor the fact that the General Manager has administrative as well as investigative functions, is remarkable or objectionable. For example, similar provisions apply to the appointment and role of the CEO of the Australian Crime Commission. A bare assertion that the formal institutional arrangements impacted [sic] the efficacy of the HSU investigations is insufficient to justify the evisceration of the General Managers [sic] regulatory powers and, moreover, is simply incorrect.

33. There are in fact several strong arguments in favour of establishing an

independent regulator separate from the Fair Work Commission.

34. First, there are no apparent reasons why the General Manager of the

Fair Work Commission, which is an adjudicative body, should also

have the responsibility of regulating registered organisations and

investigating breaches of the FW(RO) Act. Contrary to the SDA’s

submission, it is not apparent how removing the regulatory functions

from the General Manager would in any way weaken the authority of

the Fair Work Commission or diminish ‘trust and confidence’ between

the Fair Work Commission and organisations of employers and

employees. Contrary to the ACTU’s submission, the General Manager

is not analogous to the Chief Executive Officer of the Australian Crime

Commission. The Chief Executive Officer is the head of a single

26 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 18.

57

regulator with a single focus. The General Manager’s administrative

and regulatory tasks have no real connection.

35. Secondly, the current regulatory regime is apt to confuse the public

about the role of the Fair Work Commission, which is essentially

adjudicative. The review of the FW Act in 2012 noted that it would be

appropriate to consider changes to the law to make clear the difference

between the functions of the Fair Work Commission (then Fair Work

Australia) ‘as a tribunal and as an administrator overseeing registered

organisations’.27

36. Thirdly, the fact that the General Manager has a range of other

important tasks in relation to the Fair Work Commission has the

potential for the regulation of organisations, and for investigations and

inquiries, to be given a lower priority. This is evidenced by the fact

that, prior to the series of well-publicised incidents involving the HSU,

Fair Work Australia (as the Fair Work Commission was then called)

gave little attention and devoted little resources to enforcing regulatory

compliance.28 Although the General Manager now has a separate

Regulatory Compliance Branch, this is only one of four branches of the

General Manager.

37. Fourthly, conducting inquiries and investigations into possible

contraventions of the law is time and resource intensive. To meet

criteria of transparency and accountability, it is better to have a

27 Department of Education, Employment and Workplace Relations, Towards more productive and equitable work places: an evaluation of the Fair Work legislation (2012), p 250. 28

See KPMG, Process Review of Fair Work Australia’s investigations into the Health Services Union (2012), pp 3, 27.

58

separate entity, with a separate budgetary allocation, to conduct that

work rather than for a general budgetary allocation to be made to the

Fair Work Commission which allocation must also cover the core

adjudicative functions of the Commission.

38. Fifthly, enforcing the FW(RO) Act requires expertise in relation to

registered organisations. It is therefore sensible to have staff who are

dedicated to dealing with issues concerning registered organisations.

39. Sixthly, appointments to the Fair Work Commission regularly give rise

to claims of bias by both sides of politics. Appointees are regularly

described as ‘union friendly’ or ‘employer friendly’. Whether those

claims have substance or not, a regulator that is not regarded as

impartial risks losing legitimacy and public confidence. The current

position whereby the President may give the General Manager a

direction, including a direction in relation to a particular case, is

accordingly not appropriate. The regulator should be free of the

suggestion of political bias.

40. A good argument against the creation of a separate Registered

Organisations Commission, as proposed in the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2] (Cth), is that a number of

regulatory functions concerning registered organisations would remain

the responsibility of the Fair Work Commission, including the

registration, deregistration and amalgamation of organisations. The

59

ACTU submitted, in respect of an earlier iteration of the Bill, that it

was:29

unconvinced that there is any necessity to establish a new statutory office to regulate Registered Organisations […] it seems counter intuitive to split the existing functions of a regulator in two and re-allocate staff across different agencies to achieve reform in this area.

41. Several readily apparent difficulties can arise out of a dual regulatory

model including inefficiency, duplication and information sharing

problems.

42. However, this problem could be resolved by transferring all regulatory

functions to a single stand-alone authority. That is the case in respect

of companies registered under the Corporations Act 2001 (Cth). They

are regulated by the Australian Securities and Investments Commission

(ASIC). The relevant functions currently reposed in the Fair Work

Commission proper, such as the registration of organisations, are

largely administrative in nature. To the extent that the Commission’s

functions may be considered judicial they should be reposed in a

Chapter III court, such as the Federal Court or the Federal Circuit

Court.

43. In relation to whether a separate regulator should be established, or

whether ASIC or some other existing body should be appointed as the

relevant regulator, a number of possibilities were canvassed in the

submissions:

29 Australian Council of Trade Unions, Submissions to the Senate Standing Legislation Committee on Education and Employment on the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 10.

60

(a) The Institute of Public Affairs submitted that a separate

regulator should be established ‘along the lines of the

Australian Securities and Investment Commission’.30

(b) The Associations Forum Pty Ltd submitted that the regulator

for registered organisations should be the Australian Charities

and Not-for-Profits Commission, on the basis that:31

[t]he [Australian Charities and Not-for-Profits Commission] looks after tax-exempt mutual[s], and ROs are mutuals that currently pay no tax. Further, [the Australian Charities and Not-for-Profits Commission] has been recently set up with modern systems for good governance and compliance.

(c) Boral supported the proposal under the most recent bill for the

Registered Organisations Commission being appointed as the

separate statutory regulator. But Boral submitted that it

should operate within the existing Office of the Fair Work

Ombudsman.32

(d) Master Builders Australia supported the establishment of an

independent Registered Organisations Commission to be

headed by a Registered Organisations Commissioner.33

(e) Associate Professor Floyd did not support ASIC being

appointed the regulator but submitted that ‘Australia should

30 Institute of Public Affairs Law Reform Submissions, August 2015, p 11. 31 Associations Forum Pty Ltd Law Reform Submissions, 4/9/15, p 2. 32

Boral Law Reform Submissions, 2015 (received 27/8/15), p 10. 33 Master Builders Australia Law Reform Submissions, 21/8/15, p 7.

61

adopt a new, separate and independent regulator for the

regulation of trade unions’.34

44. It is not recommended that regulatory functions concerning registered

organisations be transferred to ASIC. Transferring the regulatory

functions to an existing regulator would defeat many of the main

advantages (for example, transparency and accountability of funds,

efficiency, expertise) achieved by removing the functions from the

General Manager. Further, ASIC already has a range of

responsibilities in relation to the regulation of corporations and

concerning financial services. Transferring regulatory functions in

respect of registered organisations to ASIC risks a lack of focus on

ASIC’s core responsibilities as well as a lack of focus in relation to the

regulation of registered organisations.

45. Nor it is recommended that ASIC be given partial responsibility for

regulating registered organisations. This is for the reasons identified in

the previous paragraph, as well as the practical and administrative

difficulties that are likely to arise from having two regulators.

46. For example, a number of problems would be likely to arise if ASIC

were given the power to investigate ‘serious contraventions’ of the

FW(RO) Act, but the General Manager retained the role, and its

current powers, to investigate other contraventions.35 In many

investigations, the seriousness of an allegation is not apparent until the

investigation has already commenced. Also, an allegation may seem

34 Associate Professor Louise Floyd Law Reform Submissions, 21/8/15, p 2. 35 This is the regulatory model currently proposed by the Australian Labor Party: ‘Fact Sheet: Better Union Governance’, released 7/12/15, p 1.

62

innocuous in isolation but in conjunction with other allegations or a

course of conduct, its seriousness may take on a different complexion.

In particular, an action or course of conduct which is carried out on a

systemic basis may be serious, even if a single instance of such

conduct is not.

47. Yet on the proposed model, ASIC would have no power to commence

an investigation unless it determined it was serious. Thus, there is a

potential for a waste of time and expertise involved in the transfer of

investigations from the General Manager to ASIC. At present, ASIC

staff does not necessarily have experience concerning the affairs of

registered organisations. The proposed model would be likely to

duplicate qualified personnel at both regulators. Moreover, ASIC has

very limited visibility into the affairs of registered organisations.

Although the General Manager should share information with ASIC, to

avoid ASIC staff duplicating the work of the staff of the General

Manager, in practice, ASIC’s investigation power is likely to be

limited to cases where a matter has been referred to ASIC by the

General Manager. In addition, confining ASIC’s power to cases of

‘serious contraventions’ invites legal arguments to be made that ASIC

did not have the power to conduct an investigation, because the

investigation did not concern a ‘serious contravention’ of the FW(RO)

Act. Another difficulty is that, as discussed below, there is currently a

very broad ‘derivative use’ immunity that applies to materials obtained

in any investigation by the General Manager. If that ‘derivative use’

immunity were retained, it would severely prejudice ASIC’s ability to

bring civil or criminal proceedings following an investigation by the

General Manager.

63

Recommendation 3

All regulatory functions of the General Manager and the Fair Work Commission

insofar as they apply to registered organisations under the Fair Work

(Registered Organisations) Act 2009 (Cth) be transferred to a new Registered

Organisations Commission. The Registered Organisations Commission should

be an independent stand-alone regulator. The structure of the Australian

Securities and Investments Commission may provide a useful legislative model.

48. Subsequent recommendations refer to the generic registered

organisations regulator, rather than the Registered Organisations

Commission. This is to emphasise that the subsequent

recommendations are not dependent on the acceptance of

Recommendation 3.

Resources of the registered organisations regulator

49. In order to conduct its functions, the registered organisations regulator

must be properly resourced with a separate budgetary allocation.

Recommendation 4

The Commonwealth government ensure that the registered organisations

regulator is properly resourced to carry out its functions, with a separate budget

for which it is accountable.

64

Powers of the registered organisations regulator

50. In addition, the regulator must have sufficient information-gathering,

investigatory and enforcement powers to enable it to carry out its

functions. The powers reposed in ASIC provide a useful comparison.

51. The current powers of the General Manager in relation to conducting

investigations and inquiries are set out in Part 4 of chapter 11 of the

FW(RO) Act. These powers are confined in a number of significant

respects.

52. First, the General Manager may generally only conduct inquiries or

investigations into limited aspects of the FW(RO) Act.36 Specifically,

inquiries and investigations may only be conducted into whether:

(a) Part 3 of chapter 8 of the FW(RO) Act, which deals with the

accounts and audit of registered organisations, or the

reporting guidelines or regulations made under that Part, is

being complied with;

(b) the rules of a reporting unit37 ‘relating to its finances or

financial administration’ are being complied with; or

(c) a civil penalty provision has been contravened.

36 The General Manager also has the power to conduct an investigation in certain other limited circumstances: see Fair Work (Registered Organisations) Act 2009 (Cth), ss 332-334. 37

Where an organisation is not divided into branches, the reporting unit is the whole of the organisation. Where an organisation is divided into branches, each branch is a reporting unit: see Fair Work (Registered Organisations) Act 2009 (Cth), s 242.

65

53. It is unclear what is meant by the rules of a reporting unit ‘relating to

its finances or financial administration’. For example, does this

include rules concerning the conduct of officers (for example, training

requirements, disclosure of material personal interests) that may affect

the reporting unit’s finances? More significantly, the General Manager

cannot conduct an inquiry or investigation into whether a criminal

offence, such as the offence under s 190 of the FW(RO) Act relating to

the use of an organisation’s funds, has been committed. This may be

contrasted with ASIC’s power to conduct investigations where it has

reason to suspect that there may have been a contravention of the

corporations legislation (other than certain minor excluded

provisions).38

54. Secondly, the General Manager (or authorised delegate) may require

persons to give information, produce documents, or answer questions

relating to matters relevant to an investigation. But there are limits on

the General Manager’s powers.

(a) Unlike ASIC,39 the General Manager has no power to require

the answers to be given under oath or affirmation. The

penalty for giving false or misleading information to the

General Manager is minimal. The maximum penalty for an

individual is a fine of 30 penalty units (currently $5,400).40

38 Australian Securities and Investment Commission Act 2001 (Cth), s 13(1)(a). 39 Cf Australian Securities and Investments Commission Act 2001 (Cth), s 19(2). See also, Competition and Consumer Act 2010 (Cth), s 155 in relation to the Australian Competition and Consumer Commission. 40

Fair Work (Registered Organisations) Act 2009 (Cth), s 337(1)(b), (c).

66

(b) These powers only apply in the first instance to certain

limited officers and employees (or former officers and

employees) or auditors of a reporting unit.41 It is not until the

General Manager has first sought the information from those

persons, that the General Manager can seek information from

other persons. The ACTU has sought to justify this approach

on the basis that the ‘first line of investigation should … be

the persons who are most likely to have the information the

regulator seeks’.42 It has also submitted that ‘it is almost

inconceivable that any person’ outside the limited group of

officers and employees (or former officers and employees) or

auditors could ‘provide any information of value to

investigators’.43 Both of these submissions are remarkably

unimaginative. Banks, telecommunication companies and

third party suppliers can all provide highly useful information

to investigators. To take one simple example, an

investigation into possible inappropriate use of a union credit

card will often begin by an examination of the credit card

statements. The best way of obtaining such records is to seek

their production from the credit card supplier. Further, the

consequence of the current arrangements is that a person

under investigation will often be the person to whom the

request for information or documents will be made or will

41 Cf Australian Securities and Investments Commission Act 2001 (Cth), s 19(1) which applies to any person. 42

Australian Council of Trade Unions, Submissions to the Senate Education and Employment Committee on the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 14. 43

Australian Council of Trade Unions, Submissions to the Senate Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 35.

67

otherwise be ‘tipped off’ at a very early stage of the

investigation. The ACTU have also asserted that the General

Manager has, under s 335(2)(b) of the FW(RO) Act, a greater

power than ASIC to require certain persons to access

documents on the regulator’s behalf and supply them to the

regulator.44 This is not correct in two respects. First, what

s 335(2)(b) in fact does is to empower the General Manager

to require a person to produce documents in that person’s

custody or control or to which that person has access.

Secondly, ASIC has a power to require a person to give ASIC

‘all reasonable assistance’ in connection with an investigation

which includes the power to require a person to produce

documents to which they have access.

(c) The maximum penalties for not complying with a notice are

minimal. The maximum penalty is a fine of 30 penalty units

(currently $5,400).45 This may be contrasted with a

maximum fine of 100 penalty units (currently $18,000) or 2

years’ imprisonment, or both, for a similar failure under the

Australian Securities and Investments Commission Act 2001

(Cth).46

(d) Unlike ASIC,47 the General Manager has no general power to

inspect a registered organisation’s books and records for the

44 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 14. 45

Fair Work (Registered Organisations) Act 2009 (Cth), s 337. 46 Australian Securities and Investments Commission Act 2001 (Cth), s 63. 47

Australian Securities and Investments Commission Act 2001 (Cth), s 28(b), 30.

68

purposes of ensuring compliance with the FW(RO) Act. That

power would be useful in conducting ‘random audits’ of

registered organisations to ensure proper accounting practices

are being carried out.

(e) Unlike ASIC,48 the General Manager has no power to seek a

warrant from a court to seize books or documents.

55. Thirdly, although the FW(RO) Act abolishes the privilege against self-incrimination so that a person cannot refuse to give information,

produce a document or answer a question on the ground that to do so

might incriminate the person or expose the person to penalty, the Act

creates:

(a) a broad ‘direct immunity’ in relation to documents

produced;49 and

(b) an even broader ‘derivative use’ immunity that prevents ‘any

information, document or thing obtained as a direct or

indirect consequence of giving the information, producing the

document or answering the question’ from being used against

the person in a criminal proceeding (other than in relation to

failing to answer) or proceeding for a penalty.50

56. The latter, particularly having regard to the words ‘direct or indirect

consequence’, is a significant fetter on any proceeding being

48 Australian Securities and Investments Commission Act 2001 (Cth), ss 35-37. 49 Fair Work (Registered Organisations) Act 2009 (Cth), s 337(5)(a). 50

Fair Work (Registered Organisations) Act 2009 (Cth), s 337(5)(c).

69

commenced subsequent to an investigation. There were equivalent

provisions in the Australian Securities Commission Act 1989 (Cth).

But they were repealed in 1992 after they caused serious difficulties in

criminal prosecutions51 and the same difficulties apply in relation to

proceedings for a penalty. Without the derivative use immunity, the

direct immunity in relation to documents is of limited utility. On its

own the direct immunity has the consequence that if documents are

produced by a person in relation to an investigation, they cannot be

used against the person. Yet, subject to the possibility that the

documents have been lost or have been destroyed in a ‘clean up’, the

documents could be obtained again, either by subpoena in a proceeding

for a civil penalty or in relation to a criminal offence, by the police

obtaining and executing search warrants.

57. In addition to these limitations on the General Manager’s investigatory

powers, the General Manager has limitations on its enforcement

powers:

(a) Although the General Manager may investigate whether

‘rules of a reporting unit relating to its finances or financial

administration’ have been contravened, the General Manager

can only take action under s 336 if the General Manager is

satisfied that the reporting unit has contravened the rule. If so

satisfied, the General Manager may issue a notice to a

51 See Explanatory Memorandum to Corporations Legislation (Evidence) Amendment Bill 1992 (Cth), pp 1-2. See Joint Statutory Committee on Corporations and Securities, ‘Use Immunity Provisions in the Corporations Law and the Australian Securities Commission Law’ (1991), [3.1.5]; Sofronoff P, ‘Derivative use immunity and the investigation of Corporate wrongdoing’ (1994) 10 QUTLJ 122 at 129-130, 134, Australian Law Reform Commission Traditional Rights and Freedoms—Encroachments by Commonwealth Laws (ALRC Interim Report 127, 3/8/15), [12.96]-[12.97].

70

reporting unit ‘requesting that the reporting unit take

specified action’ to rectify a contravention,52 and the Federal

Court may make appropriate orders to ensure that the

reporting unit complies with the General Manager’s request.53

The consequence is that where the rule is one that requires a

particular officer to do something, rather than a reporting unit

(for example, undertake training, disclose material personal

interests), the General Manager has no power under s 336 to

do anything about a breach of such a provision. The General

Manager could seek a bare declaration of breach but there

would rarely be any public interest in doing so given the time

and expense involved.

(b) Unlike ASIC,54 the General Manager has no power to accept

an ‘enforceable undertaking’. ASIC has the power to accept

an ‘enforceable undertaking’ from a person in relation to any

of ASIC’s powers or functions. Breach of the undertaking

allows ASIC to apply to a Court for immediate relief.

58. The Fair Work (Registered Organisations) Amendment Bill 2014

[No 2] (Cth) provided for information-gathering and investigatory

powers to be given to the proposed Registered Organisations

Commission based on the powers conferred on ASIC under Part 3 of

the Australian Securities and Investments Commission Act 2001 (Cth).

52 Fair Work (Registered Organisations) Act 2009 (Cth), s 336(2)(a). Breach of the rules is not a civil penalty provision or criminal offence so the other options available to the General Manager under s 336 do not apply. 53

Fair Work (Registered Organisations) Act 2009 (Cth), s 336(4), (5). 54 Australian Securities and Investments Commission Act 2001 (Cth), s 93AA.

71

As noted above, that Bill was rejected by the Senate on 17 August

2015.

59. Submissions made to the Commission by the Australian Chamber of

Commerce and Industry,55 Master Builders Australia56 and Boral57

supported the amendments proposed in the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2] (Cth). The Institute of

Public Affairs submitted that the:58

…new regulator should be given information gathering and investigatory powers along the lines of the Australian Securities and Investment Commission, including the power to require answers under oath, seek warrants and seize documents, with penalties for non-compliance.

60. On the other hand, the ACTU has rejected the suggestion that the

regulator should have powers similar to those of ASIC.59 A number of

its submissions have been examined above. A number of its other

submissions proceed on the basis that conferring on the Registered

Organisations Commissions powers similar to ASIC could only be

intended to ‘spook’ or ‘intimidate’ members or registered organisations

or to engage in ‘state sanctioned harassment’.60 There is nothing to

55 Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 12. 56

Master Builders Law Reform Submissions, 21/8/15, p 7. 57 Boral Law Reform Submissions, 2015 (received 27/8/15), p 5. 58

Institute of Public Affairs Law Reform Submissions, August 2015, p 11. 59 Australian Council of Trade Unions, Submission to the Senate Committee on Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, pp 34-36; Australian Council of Trade Unions, Submission to the Senate Committee on Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, pp 13-17. 60

Australian Council of Trade Unions, Submission to the Senate Committee on Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, pp 14-15.

72

suggest that ASIC, or any other regulator, engages in any of these

practices. And there is nothing to suggest that the regulator of

registered organisations would do so either.

61. A more compelling point that the ACTU has made is that many of the

investigations currently conducted by the General Manager may not

reveal any contravention of the law but reveal a need for an

organisation or reporting unit to improve its practices.61 That is no

doubt correct. That strongly supports a grant to the regulator of

registered organisations of a power to accept enforceable undertakings.

However, it provides no reason why the regulator of registered

organisations should not have an appropriately balanced range of

powers to deal with all eventualities to ensure that it can deal

effectively with unlawful conduct.

Recommendation 5

Sections 330 and 331 of the Fair Work (Registered Organisations) Act 2009

(Cth) be amended to allow the registered organisations regulator to make

inquiries and conduct investigations as to whether criminal offences contrary to

the Fair Work (Registered Organisations) Act 2009 (Cth) have occurred. The

meaning of the ‘rules of a reporting unit relating to its finances or financial

administration’ be clarified to include any rules concerning officers or

employees that may have a direct or indirect effect on the finances or financial

administration of a reporting unit.

61 Australian Council of Trade Unions, Submission to the Senate Committee on Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 34.

73

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74

The Discussion Paper raised a number of questions about this topic62

and the Commission received a broad range of submissions in

response.63

Training of officers and employees

63. In 2012, the former Labor government introduced, in the Fair Work

(Registered Organisations) Amendment Act 2012 (Cth), a number of

amendments to the FW(RO) Act which sought to improve union

governance. One of the significant reforms was the introduction of

s 154D to the FW(RO) Act. That section relevantly provides:

(1) The rules of an organisation or branch of an organisation must require each officer of the organisation or the branch (as the case may be) whose duties include duties (financial duties) that relate to the financial management of the organisation or the branch (as the case may be) to undertake training:

(a) approved by the General Manager under section 154C; and

(b) that covers each of the officer’s financial duties.

64. Section 154C enables the General Manager to approve training if

satisfied that the training covers one or more of the duties of officers of

organisations and branches that relate to the financial management of

62 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, ch 3.4 (Questions 8-17). 63

Australian Industry Group Law Reform Submissions, 21/8/15, pp 4-6; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, pp 12-15; Associations Forum Pty Ltd Law Reform Submissions, 4/9/15, p 3; Boral Limited Law Reform Submissions, 2015 (received 27/8/15) pp 10-13; Master Builders Australia Law Reform Submissions, 21/8/15, pp 10-16; Victoria Police Law Reform Submissions, 10/9/15, pp 33-34; Woden Contractors Pty Ltd Law Reform Submissions, 24/8/15, pp 12-13.

75

organisations or branches. The training must be completed within six

months after the person begins to hold office.

65. The goal of the provision is laudatory. But there are three main

problems with the drafting.

66. First, s 154D imposes no direct obligation. It only creates a

requirement as to the content of the rules. The General Manager’s

powers to enforce the rules are limited. As discussed above,64 the

General Manager does not have a power to take action under s 336 in

relation to breaches of rules by persons other than the reporting unit

itself. Thus, if an officer fails to undertake training, the General

Manager cannot presently take action to remedy that failure (other than

seeking a bare declaration, which as explained does little to serve the

public interest).

67. Secondly, s 154D does not apply to any employees of the union. As

the case study concerning the NUW, New South Wales Branch

illustrates, employees of an organisation can have a significant degree

of control over union finances. It is important that employees of an

organisation that are involved in the finances or the financial

administration of that organisation are also required to undertake

training.

68. Thirdly, it is not clear that s 154D applies to all members of the

committee of management of an organisation or branch. It is essential

that all members of the committee of management have such training.

64 Paragraph 57.

76

69. Recommendation 7, if implemented, would alleviate the third problem.

The first and second problems would be alleviated by amendments to

the wording of s 154D.

70. However, amending s 154D would create other problems. Rule

changes are costly and time consuming both for the organisations and

branches involved and for the General Manager. An easier solution

would be to repeal s 154D and replace it with a direct statutory

obligation on officers to complete approved training. Given the

protective purpose of the section, it does not seem appropriate to

impose a monetary penalty on an officer who fails to complete the

required training within the prescribed six months. Nor is it

appropriate to penalise the organisation or branch for the officer’s

failure to complete training.

71. Instead, the registered organisations regulator should be empowered to

disqualify a person who does not complete the required training from

acting as an officer of an organisation or branch for a period of up to

two years, provided that:

(a) the registered organisations regulator is satisfied that the

person has not completed the required training; and

(b) the registered organisations regulator has provided the person

with an opportunity to show cause why the person should not

be disqualified.

72. In relation to employees required to undertake the training, there

should be an obligation upon the Secretary, or other person with day-

77

to-day control of the organisation or branch, to ensure that those

employees complete the training within six months after commencing

employment at the organisation. A similar disqualification process

should be available in relation to a Secretary who fails, without

reasonable excuse, to ensure that relevant employees have conducted

approved training.

Recommendation 8

Section 154D of the Fair Work (Registered Organisations) Act 2009 (Cth) be

repealed and replaced with a statutory provision requiring:

(a) all members of the committee of management of an organisation or

branch, and all officers whose duties relate to the financial

management of the organisation or branch, to undertake approved

training; and

(b) the Secretary of an organisation or branch to ensure that employees of

the organisation or branch involved with the finances or financial

administration of the organisation or branch complete approved

training.

The registered organisations regulator’s power to conduct inquiries and

investigations should include contraventions of this statutory provision.

Contravention by a person of the statutory obligations should entitle the

registered organisation regulator to disqualify the person from acting as an

officer of an organisation or branch for a period of up to two years.

78

Requirements to have financial policies

73. Another reform introduced by the Fair Work (Registered

Organisations) Amendment Act 2012 (Cth) was the introduction of

s 141(1)(ca) which required each organisation to have rules requiring:

…the organisation and each of its branches to develop and implement policies relating to the expenditure of the organisation or the branch (as the case may be).

74. Again, although this obligation is laudatory its ineffectiveness was

demonstrated in the NUW, New South Wales branch case study.

Consistently with the statutory requirement, the federal rules of the

NUW contained the following:65

The Union and its branches shall have in operation appropriate policies relating to the expenditure of the organisation and each branch.

75. The rule, which is in accordance with ‘model rules’ published by the

Minister for Workplace Relations,66 provides no guidance on the types

or kinds of ‘appropriate policies’ and even whether they should be in

writing. In fact, there was no evidence that the New South Wales

branch of the federal union had adopted any formal or written policies

concerning expenditure.

65 NUW National Rules, NUW MFI-13, 5/11/15, r 14E. 66 Guidelines Containing Model Rules Under the Fair Work (Registered Organisations) Act 2009 (Cth), March 2013, Gazette C2015G00378.

79

76. Developing and adopting financial policies is a basic good governance

measure. The Report to the ACTU Executive by the Independent

Panel on Best Practice for Union Governance recommended that:67

Unions should develop a comprehensive documented set of policies and procedures governing the management of union funds, and consolidate it into an appropriate policies and procedures manual.

77. The recommendation went on to recommend that unions develop

policies covering a total of 14 topics including:68

(a) how financial decisions are to be made and reported;

(b) the levels of authority or delegated authority of various

persons and bodies;

(c) the establishment, operation and governance of any subsidiary

or other entity related to the union;

(d) major procurements and the review of major costs areas and

significant supply and service contracts on an annual basis;

(e) basic market testing by seeking at least two quotations for

smaller but still substantial purchases;

(f) hospitality and gifts;

67 Independent Panel on Best Practice for Union Governance, Report to ACTU Executive to Invite Comment and Discussion, March 2013, p 6. 68

Independent Panel on Best Practice for Union Governance, Report to ACTU Executive to Invite Comment and Discussion, March 2013, pp 6-7.

80

(g) the issuance and use of, and accountability for, credit cards;

and

(h) employment and remuneration of officers and staff.

78. The law in Queensland provides a useful comparison to the FW(RO)

Act. Section 553A of the Industrial Relations Act 1999 (Qld) imposes

a statutory obligation on Queensland-registered organisations to have a

policy, complying with the requirements prescribed in regulations, in

relation to a number of specific topics. The topics are:

(a) decision-making concerning financial matters;

(b) authorisation and delegations relating to the organisation’s

spending;

(c) the organisation’s credit cards;

(d) the organisation’s contracting activities;

(e) travel and accommodation;

(f) spending on, and receipt of, entertainment and hospitality;

(g) gifts;

(h) how complaints about financial matters are dealt with; and

(i) matters relating to the financial management or accountability

of the organisation prescribed under a regulation.

81

79. Breach of the obligation is an offence carrying a maximum penalty of

85 penalty units (currently equivalent to $10,013).

80. Having regard to the importance of organisations adopting proper

financial policies, it is recommended that the Queensland legislative

model be adopted and adapted to organisations and branches or

organisations registered under the FW(RO) Act. Contravention should

attract a civil penalty, rather than be a criminal offence. In addition,

organisations and branches should be required to review their policies

on a regular basis (say every four years to reflect the term of office in

many organisations) and to lodge a copy of their current policies with

the registered organisations regulator.

Recommendation 9

Section 141(1)(ca) of the Fair Work (Registered Organisations) Act 2009 (Cth)

be repealed. A new civil penalty provision be introduced requiring

organisations and branches to adopt, in accordance with their rules, policies

binding on all officers and employees concerning financial management and

accountability.

The required policies should include policies concerning financial decision-making, receipting of money, levels of authorisation of expenditure, credit

cards, procurement, hospitality and gifts, the establishment, operation and

governance of related entities and any other matter prescribed by regulations.

Organisations or branches should be required to review their policies every four

years and to lodge a copy of their current policies with the registered

organisations regulator.

82

Financial disclosure requirements by organisations and branches

81. Another measure to improve financial accountability is to increase the

disclosure of financial information to members and the public. For

example, if members of the New South Wales branch of the NUW had

known that hundreds of thousands of dollars were being spent annually

on credit cards, it may have prompted more questions to be asked.

82. At present, the FW(RO) Act achieves financial disclosure in three main

ways.

83. The first way is through ‘s 237 statements’. Section 237(1) of the

FW(RO) Act obliges organisations (and branches of organisations,

where an organisation is made up of branches) to lodge with the Fair

Work Commission (within 90 days of the end of each financial year or

such longer period as the General Manager allows) a statement that

identifies relevant particulars in relation to each loan, grant or donation

of an amount exceeding $1,000 made by an organisation. The s 237

statement must be signed by an officer of the organisation or branch.69

The statement is not publicly available, but may be inspected by a

member of the organisation or branch concerned during office hours.70

84. The second way is through annual financial reports.

85. Part 3 of chapter 8 of the FW(RO) Act provides for a number of

obligations on ‘reporting units’ in relation to financial records,

69 Fair Work (Registered Organisations) Act 2009 (Cth), s 237(2). 70 Fair Work (Registered Organisations) Act 2009 (Cth), s 237(4).

83

accounting and auditing. Where an organisation is not divided into

branches, the reporting unit is the whole of the organisation. Where an

organisation is divided into branches, each branch is a reporting unit.71

86. At present, reporting units are required to prepare a general purpose

financial report annually.72 The report must be prepared in accordance

with the Australian Accounting Standards and reporting guidelines

issued by the General Manager under s 255. Currently, pursuant to the

reporting guidelines all reporting units are required to apply the Tier 1

reporting requirements. Further, the current reporting guidelines

require that the report must contain certain declarations by the

committee of management and must be signed by a ‘designated

officer’ within the meaning of s 243 of the FW(RO) Act.73

87. In addition to the general purpose financial report, the committee of

management must prepare an operating report.74 The financial report

must be audited by an ‘approved auditor’.75 Following the audit, the

reporting unit must provide a full report to members free of charge

consisting of the auditor’s report, the financial report and the operating

report, or provide a concise report in accordance with s 265 of the

FW(RO) Act. The full report must also be presented to a general

71 Fair Work (Registered Organisations) Act 2009 (Cth), s 242. 72 Fair Work (Registered Organisations) Act 2009 (Cth), s 253. 73

A ‘designated officer’ is an officer of the reporting unit who, under the rules of the reporting unit, is responsible (whether alone or with others) for undertaking the functions necessary to enable the reporting unit to comply with Part 3 of Ch 8 of the Fair Work (Registered Organisations) Act 2009 (Cth). 74

Fair Work (Registered Organisations) Act 2009 (Cth), s 254. 75 Fair Work (Registered Organisations) Act 2009 (Cth), s 257.

84

meeting of members of the reporting unit76 and subsequently be lodged

with the Fair Work Commission.77

88. The third way is through a number of provisions requiring

organisations and branches to have rules requiring the organisation and

branch to disclose certain information to their members. These

provisions were introduced by the Fair Work (Registered

Organisations) Amendment Act 2012 (Cth) and commenced operation

on 1 January 2014. In summary:

(a) Section 148A(4) requires organisations to have rules

requiring the disclosure to members of the organisation of the

identity of the five officers who have the largest ‘relevant

remuneration’.78 For each of those officers, the rules must

also require the disclosure of (a) either the actual amount of

the officer’s relevant remuneration or the information

specified in the rules as being ‘considered by the

organisation’ to be an appropriate disclosure79 and (b) certain

information in relation to non-cash benefits provided to the

officer.80

76 Fair Work (Registered Organisations) Act 2009 (Cth), s 266. 77 Fair Work (Registered Organisations) Act 2009 (Cth), s 268. 78

‘Relevant remuneration’ is defined as the remuneration paid to the officer by the organisation plus any relevant remuneration disclosed to the organisation by the officer pursuant to s 148A(1) of the Fair Work (Registered Organisations) Act 2009 (Cth). That subsection requires the rules to require the officer to disclose to the organisation remuneration paid to the officer (a) as a member of a Board or (b) by a related party of the organisation, in connection with the performance of the officer’s duties. 79

Fair Work (Registered Organisations) Act 2009 (Cth), s 148A(6). 80 Fair Work (Registered Organisations) Act 2009 (Cth), s 148A(7).

85

(b) Section 148A(5) requires branches of organisations to have

similar rules, but they need only identify the two officers who

have the largest ‘relevant remuneration’.81 The information

that must be disclosed is the same as in the case of

organisations.

(c) Section 148B requires organisations and branches to have

rules requiring the disclosure to members of the organisation

and its branches of material personal interests disclosed by

the officers.82 Those obligations are examined in Chapter 3

of this Volume.

(d) Section 148C requires organisations and branches to have

rules requiring the organisation or branch to disclose

payments made by the organisation or branch to a related

party.83 Those obligations are examined in Chapter 5 of this

Volume.

89. Apart from issues that arise in relation to ss 148B and 148C (which are

considered in Chapters 3 and 5 of this Volume respectively), there are

a number of problematic issues with the present financial disclosure

regime.

81 ‘Relevant remuneration’ is defined as the remuneration paid to the officer by the branch plus any relevant remuneration disclosed to the organisation by the officer pursuant to s 148A(2) of the Fair Work (Registered Organisations) Act 2009 (Cth). That subsection requires the rules to require the officer to disclose to the branch remuneration paid to the officer (a) as a member of a Board or (b) by a related party of the branch, in connection with the performance of the officer’s duties. 82

Fair Work (Registered Organisations) Act 2009 (Cth), s 148B. 83 Fair Work (Registered Organisations) Act 2009 (Cth), s 148C.

86

90. First, s 237 statements, the apparent purpose of which is to provide

more detailed information concerning loans, grants and donations than

appears in the annual reports are only available to a member upon

request to the General Manager. In contrast, the annual reports are

freely available online.

91. Secondly, there is no requirement that s 237 statements be audited.

Nor is there any requirement that the s 237 statements be approved by

the committee of management, although that may occur in practice.

92. Thirdly, understanding union accounts requires a high degree of

financial literacy. Further, most union accounts are very lengthy and

complex. Disclosures of financial remuneration and related party

transactions are invariably buried deep within the document.

Accordingly, they are of limited value.

93. Fourthly, s 148A has a number of problems:

(a) It does not actually require the rules to disclose the

remuneration of the relevant officers, but permits a rule that

allows for disclosure of information that the branch considers

appropriate disclosure.

(b) Most unions and branches satisfy the current requirement by

including a note to the annual financial statements. However,

the Commission observed numerous financial reports for the

2014 financial year which simply did not include the

disclosure required by the rules.

87

(c) The only consequence of an organisation or branch failing to

include the required disclosure is that the General Manager

may, ultimately,84 issue a notice to the relevant organisation

or branch to comply with the rule. If the branch or

organisation fails to comply, the General Manager can

commence action in the Federal Court to make orders to

require the branch or organisation to comply.85 However,

such proceedings are expensive, and in all likelihood time

consuming, and there is no civil penalty for failing to comply.

(d) The obligation of the organisation or branch to disclose

‘relevant remuneration’ depends on the obligation of the

officer under the rules required by ss 148A(1) and 148A(2) to

disclose remuneration received from related parties and

others. As has been previously discussed, the General

Manager presently has no ability to enforce the rules made in

accordance with those subsections as they are rules requiring

a person other than a ‘reporting unit’ to do something.

94. Fifthly, the scope of the financial disclosures is limited. The legislation

in Queensland provides a useful comparison. Division 2A of Part 12

of chapter 12 of the Industrial Relations Act 1999 (Qld) requires

Queensland registered industrial organisations to keep a number of

‘registers’. The required registers are registers of:

84 See Fair Work (Registered Organisations) Act 2009 (Cth), s 336(2)(a). 85 Fair Work (Registered Organisations) Act 2009 (Cth), s 336(5).

88

(a) gifts, hospitality and other benefits given and received;86

(b) political expenditure in excess of $10,000;87

(c) credit card and cab charge expenditure, including copies of

credit card statements;88 and

(d) loans, grants and donations in excess of $1,000.89

The registers must be kept for seven years and are available to the

public for inspection.90 Further, they must be published for two years

either on the organisation’s website or on the website of the

Queensland Industrial Relations Commission.91 Breach of these

requirements is a civil remedy provision.92

95. Further, s 237 does not require disclosure of ‘in kind’ benefits such as

the provision of free services. Another limitation is that the s 237

statements only require disclosure of loans, grants and donations made

by the organisation or branch, not loans, grants and donations made to

an organisation or branch. This issue is discussed in detail in

Chapter 4 of this Volume.

86 Industrial Relations Act 1999 (Qld), s 557A. 87 Industrial Relations Act 1999 (Qld), s 557B. 88

Industrial Relations Act 1999 (Qld), s 557C. 89 Industrial Relations Act 1999 (Qld), s 557E. 90

Industrial Relations Act 1999 (Qld), ss 557H-557I. 91 See Industrial Relations Act 1999 (Qld), ss 557F, 655A. 92

Industrial Relations Act 1999 (Qld), ss 557H, 557F.

89

96. Sixthly, although s 237 and the sections imposing obligations to

prepare and lodge financial reports are civil penalty provisions, the

penalties for contraventions of these provisions by a branch are

imposed on the organisation as a whole,93 rather on than the particular

officers responsible for the contravention. Thus, the failure by one

branch properly to comply with its obligations could lead to a civil

penalty being imposed against the whole organisation in circumstances

where the branch operates autonomously. To avoid this consequence,

it may be appropriate to impose civil penalties on ‘designated

officers’94 of a reporting unit if they fail to take all reasonable steps to

ensure compliance by the reporting unit with its financial obligations

under the FW(RO) Act.95

97. Having regard to the deficiencies identified above, it is recommended

that a self-contained financial disclosure regime be introduced to the

FW(RO) Act as a new division of Part 3 of chapter 8. That regime

would be designed to supplement the existing provisions concerning

annual financial reports by requiring reporting units to prepare a

number of short separate ‘financial disclosure statements’ dealing with

discrete topics, similar to the existing s 237 statement. The financial

disclosure statements should be approved by the committee of

management of the reporting unit, and signed by the Secretary and

financial compliance officer.96

93 Fair Work (Registered Organisations) Act 2009 (Cth), s 305(3). 94 Currently defined in s 243 to mean an officer of a reporting unit who under the rules of the reporting unit is responsible for undertaking the functions necessary to enable the reporting unit to comply with Part 3 of Chapter 8. 95

See Corporations Act 2001 (Cth), s 344(1). 96 See paras 102-109 below.

90

98. As is currently the position in relation to s 237, failure to lodge the

financial disclosure statements within the prescribed period should be a

civil penalty provision. Civil penalties should also apply to designated

officers who knowingly or recklessly make a false statement in a

financial disclosure statement.

99. The financial disclosure statements should include a statement in

relation to:

(a) Loans, grants and donations, including in-kind donations,

made by the reporting unit exceeding $1,000 (including a

series of payment or in-kind benefits that together exceed

$1,000). This would replace the existing s 237 statements.

(b) Remuneration of the highest paid officers of a reporting unit.

The detail required should be similar to that currently

required by s 148A but in addition should require the amount

and a breakdown of the remuneration to be disclosed.

Further, the provision should make clear that organisations

must disclose the highest remunerated officers taking into

account remuneration paid by branches. Currently, some

organisations only disclose the remuneration of officers who

are paid by the organisation rather than a branch.

(c) Credit card and charge card expenditure by officers of the

reporting unit, including the credit card statements

themselves.

91

100. Chapter 4 of this Volume considers an additional financial disclosure

statement relating to donations and other payments made to an

organisation or branch.

101. To ensure members have easy access to this information, the financial

disclosure statements should be publicly available on the Regulator’s

website.

Recommendation 10

A new division dealing with financial disclosures by ‘reporting units’ to their

members be introduced to Part 3 of Chapter 8 of the Fair Work (Registered

Organisations) Act 2009 (Cth) to replace and strengthen existing provisions

concerning financial disclosure. The regime would require ‘reporting units’ to

lodge audited financial disclosure statements with the registered organisations

regulator on discrete topics, including (a) loans, grants and donations by the

reporting unit, (b) remuneration of officers and (c) credit card expenditure.

Civil penalties should apply to reporting units that fail to comply with their

obligations under the regime. Further, civil penalties should also apply to

officers who knowingly or recklessly make a false statement in a financial

disclosure statement.

92

Recommendation 11

Officers with responsibility for ensuring compliance by a reporting unit with its

financial obligations under the Fair Work (Registered Organisations) Act 2009

(Cth) be subject to civil penalties if they fail to take all reasonable steps to

ensure the reporting unit complies with its financial obligations.

Internal compliance and audit

102. A particular problem in the case studies concerning the HSU and the

NUW was the lack of any officer at the union, other than the Secretary,

who was responsible for ensuring that the finances of the union were

being managed in accordance with the law and the rules and policies of

the union.

103. Although external auditing is very important97 it is generally limited to

expressing an opinion about whether an entity’s financial report is

prepared, in all material respects, in according with the relevant

financial reporting framework.98 There are a number of inherent

limitations to an external audit that mean that even the most

professionally conducted independent audit cannot pick up all cases of

fraud.99 Under the Australian auditing standards, ‘[t]he primary

97 See paras 110-131 for recommended changes to the external auditing provisions of the Fair Work (Registered Organisations) Act 2009 (Cth). 98

See Auditing and Assurance Standards Board, Auditing Standard ASA 200, cll 3, 11. 99 A fact recognised in the auditing standards: see Auditing and Assurance Standards Board, Auditing Standard ASA 200, cll A45-A52.

93

responsibility for the prevention and detection of fraud rests with both

those charged with governance of the entity and management’.100

104. The result is that proper internal compliance and financial controls are

critical to preventing corruption and misappropriation of funds.

105. To address this issue, it is recommended that reporting units be

required to appoint a financial compliance officer with responsibility:

(a) for ensuring that the reporting unit complies with the

provisions of the FW(RO) Act and the regulations concerning

financial administration and the financial policies of the

reporting unit;

(b) to report regularly to the committee of management, and any

finance committee that exists, concerning the finances of the

reporting unit, and in particular to report any irregularities or

deficiencies in compliance with the provisions identified in

(a) to the committee of management;

(c) together with the Secretary (or other person appointed under

the rules of the reporting unit) to prepare the annual accounts

and deal with external accountants and auditors;

(d) together with the Secretary to sign the reporting unit’s

financial disclosure statements;101 and

100 Auditing and Assurance Standards Board, Auditing Standard ASA 240, cl 4. 101 See Recommendation 10 above.

94

(e) to oversee and supervise staff who occupy positions of

responsibility in relation to the financial affairs of the

reporting unit.

106. The requirement to appoint an officer should be a statutory

requirement rather than a required rule. The first reason is that rule

changes are costly and time consuming to implement. The second

reason is that a direct statutory obligation is easier to enforce and more

likely to be complied with. The financial compliance officer should be

appointed directly by the committee of management, having regard to

the character, experience, and any relevant financial training and

qualifications of the individual. Failure to appoint such an officer

within a three month period, and to notify a change of officer within

one month should be a civil penalty provision.

107. Given the varying sizes of registered organisations and the fact that

some organisations are run largely by volunteers, it is not appropriate

to mandate legislatively any minimum qualification or training, or that

the person holding office be an employed officer. The financial

compliance officer could be an existing officer of the reporting unit,

who took on the role of finance compliance officer in addition to his or

her existing duties. The object of this proposal is to ensure that there is

at least one officer of the reporting unit in addition to, and sufficiently

independent of, the Secretary who is aware of and responsible for

financial management.

108. It is critical that the financial compliance officer be different from the

Secretary to avoid a repeat of the situation that arose in the operation of

95

the HSU and the NUW, New South Wales branch whereby the

Secretary was effectively solely in charge of the finances.

109. The financial compliance officer should be subject to a statutory

obligation to report any reasonably suspected breach of the FW(RO)

Act or regulations or reporting guidelines made under it in relation to

financial administration, or any of the reporting unit’s financial

policies or rules concerning finances to the committee of management.

Contravention should be a civil penalty provision. Such reports should

be recorded in the minutes.

Recommendation 12

All reporting units be required to appoint a financial compliance officer with

responsibility for ensuring compliance by the reporting unit with its financial

obligations under the Fair Work (Registered Organisations) Act 2009 (Cth),

regulations and reporting guidelines and the reporting unit’s financial policies

and rules concerning finances. The financial compliance officer must be

separate and independent from the Secretary. The compliance officer be subject

to a statutory obligation to report any reasonably suspected breaches to the

committee of management.

External auditing

110. As noted above, external auditing is also extremely important. The

failure of the auditors to detect the substantial misappropriation of

funds in the HSU Vic No 3 Branch and the NUW, New South Wales

branch raises a number of questions about the efficacy of the existing

96

system. In addition, the financial reports for a number of branches and

organisations reveal that the same auditor has audited the branch or

organisation over many years.

111. The Discussion Paper identified a number of potential issues with the

existing audit requirements under the FW(RO) Act.102

112. One issue identified in the Discussion Paper was the absence of any

requirement that auditors of reporting units be registered with ASIC.103

Currently, audits must be conducted by ‘approved auditors’. An

‘approved auditor’ is any person who is a member of CPA Australia,

The Institute of Chartered Accountants in Australia or the Institute of

Public Accountants and holds a current Public Practice Certificate.104

However, a person whose registration as an auditor has been suspended

under the Corporations Act 2001 (Cth) is not an approved auditor

while the suspension is in force.

113. In contrast, company auditors must be registered with ASIC.105 In

order to be registered, company auditors must have certain academic

qualifications and professional competency standards. They must also

satisfy ASIC that they are capable of performing the duties of an

auditor and otherwise be ‘fit and proper’.106 The Corporations Act

2001 (Cth) also contains detailed provisions in relation to the power of

102 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, pp 31-32. 103

Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, pp 31-32; q 11. 104 Fair Work (Registered Organisations) Regulations 2009 (Cth), r 4. 105

See Corporations Act 2001 (Cth), s 324BA. 106 Corporations Act 2001 (Cth), s 1280.

97

the Companies Auditors and Liquidators Disciplinary Board, on the

application of ASIC, to cancel or suspend the registration of a

registered auditor.107

114. Some submissions to the Commission advocated requiring auditors of

registered organisations to be registered with ASIC.108 On the other

hand, Master Builders Australia submitted that prima facie no change

in qualifications were required.109

115. One difficulty with requiring all auditors of registered organisations to

be registered company auditors is that there are considerably fewer

registered company auditors than persons with the currently prescribed

accounting qualifications. It is therefore likely that requiring auditors

to be registered company auditors would increase, perhaps

substantially, the cost of compliance on reporting units.

116. At the same time, the absence of (a) any requirement that the persons

auditing reporting units must be ‘fit and proper’ and (b) any ability on

the part of the registered organisations regulator to seek to prevent a

person from auditing an organisation, are serious defects in the current

legislative regime.

117. The Australian Labor Party has proposed that auditors of reporting

units should be registered either with the Fair Work Commission or be

107 Corporations Act 2001 (Cth), s 1292 and following. 108 Associations Forum Pty Ltd Law Reform Submissions, 4/9/15, p 3; Boral Law Reform Submissions, 2015 (received 27/8/15) p 10. 109

Master Builders Australia Law Reform Submissions, 21/8/15, p 11.

98

a registered auditor.110 It appears to be proposed that the Fair Work

Commission would not register a person as an auditor unless, in

addition to the current qualifications, the person is of ‘good character’.

118. There is considerable merit to this approach. However, rather than

having two parallel regimes it is recommended that it be a requirement

that all auditors of reporting units must be registered with the

registered organisations regulator. The reason is that the registered

organisations regulator should have a power to prevent inappropriate

persons from auditing reporting units (for example persons who are not

fit and proper or have failed to carry out the duties of an auditor) and

the most convenient way of achieving this is if all auditors are required

to be registered and the registered organisations regulator has the

power to suspend or cancel registration. Registered company auditors

would automatically be entitled to be registered with the registered

organisations regulator. Persons who are not registered company

auditors would need to satisfy the existing qualifications, and in

addition satisfy the regulator that they are fit and proper persons to

conduct an audit of a reporting unit.

119. A second issue identified in the Discussion Paper concerning auditors

was the lack of stringent auditor independence requirements that

currently apply in relation to company auditors.111 Currently a person

cannot audit a reporting unit if they are an ‘excluded auditor’.112

Similarly, a firm cannot audit a reporting unit if a member of the firm

110 Australian Labor Party, ‘Fact Sheet: Better Union Governance’, released 7/12/15, p 2. 111 Corporations Act 2001 (Cth), Part 2M.4, Div 3. 112

Fair Work (Registered Organisations) Act 2009 (Cth), s 256(3), (5).

99

is an excluded auditor.113 Contravention of these restrictions exposes

an individual to a maximum civil penalty of 60 penalty units ($10,800)

and a body corporate to a maximum civil penalty of 300 penalty units

($54,000). Persons are excluded auditors if they are:114

(a) an officer or employee of the reporting unit or the organisation of which the reporting unit is a part; or

(b) a partner, employer or employee of an officer or employee of the reporting unit or the organisation of which the reporting unit is a part;

(c) a liquidator in respect of property of the reporting unit or the organisation of which the reporting unit is a part; or

(d) a person who owes more than $5,000 to the reporting unit or the organisation of which the reporting unit is part.

120. As will be apparent, the definition of excluded auditor is very narrow.

A person who is a former officer or employee of the reporting unit

would not be excluded. Nor would a partner, employer or employee of

such a person. Nor would a person who has a close personal or

financial relationship with an officer or employee of the reporting unit.

121. In contrast, the Corporations Act 2001 (Cth) has extremely detailed

provisions dealing with auditor independence.115

122. It is not recommended that those provisions be copied in their entirety

in respect of reporting units. For one thing, some of the provisions are

extremely complex and consequently not easy to follow. However, the

Corporations Act 2001 (Cth) does have a general exclusion that applies

113 Fair Work (Registered Organisations) Act 2009 (Cth), s 256(4), (6). 114 Fair Work (Registered Organisations) Act 2009 (Cth), s 6. 115

See Corporations Act 2001 (Cth), Part 2M.4, Div 3.

100

where an auditor is in a ‘conflict of interest situation’, which will exist

where, because of the circumstances:116

(a) the auditor is not capable of existing objective and impartial

judgment in relation to the conduct of the audit; or

(b) a reasonable person, with knowledge of all of the relevant

facts and circumstances, would conclude that the auditor is

not capable of exercising objective and impartial judgment in

relation to the conduct of the audit.

123. It would seem appropriate if the definition of ‘excluded auditor’

included a person in that position, as well as including persons referred

to in paragraph 120.

124. The Discussion Paper also raised the issue of whether the auditor

rotation requirements in the Corporations Act 2001 (Cth) should be

applied to some or all organisations.117 Division 5 of Part 2M.4 of the

Corporations Act 2001 (Cth) imposes rotation requirements on

auditors of listed companies in an attempt to promote further auditor

independence. The auditor rotation requirements provide that:118

(a) an individual who has played a significant role in the audit of

a listed company (for example the lead auditor or review

auditor) for 5 successive financial years must wait at least 2

116 Corporations Act 2001 (Cth), s 324CD. 117 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, pp 31-32. 118

Corporations Act 2001 (Cth), s 324DA.

101

financial years before again playing a significant role in the

audit of the company;

(b) an individual must not play a significant role in the audit of a

listed company for more than 5 out of 7 successive financial

years.

125. Auditor rotation assists in ensuring auditor independence. But it can

also lead to additional cost to reporting units where the incoming

auditor has less experience in relation to the particular reporting unit

and may need time to develop specialised knowledge. The Discussion

Paper raised for discussion whether, having regard to the potential

compliance burdens for small organisations, auditor rotation

requirements should only be applied to large organisations.119 The

Commission received few submissions on that topic, although Master

Builders Australia did not believe there was merit in placing different

audit requirements based on size measured by turnover or some other

financial indicator.120

126. One difficulty with imposing differential requirements is determining

an appropriate definition of a large organisation. Another relevant

matter is that for smaller organisations whose finances are less

complex the costs involved in using a new auditor will be relatively

small. The reporting units that are most likely to incur additional

compliance costs for auditor rotation are those reporting units which

have the most complex finances. In other words, the regulatory burden

119 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, pp 31-32. 120

Master Builders Australia Law Reform Submissions, 21/8/15, p 11.

102

is unlikely to be lessened substantially if reduced requirements are

imposed on smaller organisations.

127. On balance, it is recommended that the existing auditor rotation

requirements for listed companies be applied to all reporting units,

irrespective of size. This reform is supported by the Australian Labor

Party.121

128. A final issue is whether there should be changes to the existing

penalties for contraventions by auditors.

129. Currently, an auditor who:

(a) accepts appointment, or continues to act, whilst being an

excluded auditor;122 or

(b) makes a statement in a report that is knowingly or recklessly

false or misleading;123 or

(c) fails to report suspected breaches of the FW(RO) Act or the

reporting guidelines to the General Manager, in circumstances

where the auditor is of the opinion that the matter cannot be

dealt with by a comment in the report or by reporting the

matter to the committee of management;124

121 Australian Labor Party, ‘Fact Sheet: Better Union Governance’, released 7/12/15, p 2. 122 Fair Work (Registered Organisations) Act 2009 (Cth), ss 256(3), 256(7). 123

Fair Work (Registered Organisations) Act 2009 (Cth), s 257(10). 124 Fair Work (Registered Organisations) Act 2009 (Cth), s 257(11).

103

is subject to a maximum civil penalty of 300 penalty units ($54,000) if

the auditor is a body corporate or 60 penalty units ($10,800) otherwise.

130. By way of comparison:

(a) Contravention of various auditor independence requirements

under the Corporations Act 2001 (Cth) are criminal offences

with the maximum penalty for an individual of 6 months

imprisonment or a fine of 25 penalty units ($4,500) or both.125

The maximum penalty for a body corporate is 125 penalty

units ($22,500).126

(b) Under the Corporations Act 2001 (Cth) there is requirement

to notify ASIC in writing if the auditor has reasonable

grounds to suspect a contravention of the Corporations Act

2001 (Cth) and either (a) the contravention is a significant one

or (b) the contravention is not significant and the auditor

believes that the contravention has not been or will not be

adequately dealt with by commenting on it in the auditor’s

report or bringing it to the attention of the directors.127 An

individual who contravenes this requirement commits a

criminal offence, the maximum penalty for which is 50

penalty units ($9,000) or imprisonment for 1 year, or both.128

125 See, for example, Corporations Act 2001 (Cth), Sch 3, item 116CA, 116CC, 116CE, 116DA, 116EA, 116FA, 116FC. 126

Corporations Act 2001 (Cth), s 1312(1). 127 Corporations Act 2001 (Cth), s 311. 128

Corporations Act 2001 (Cth), Sch 3, item 105.

104

The maximum penalty for a body corporate is 250 penalty

units ($45,000).129

131. Thus, in terms of monetary penalties the existing penalties under the

FW(RO) Act are higher than those under the Corporations Act 2001

(Cth). Further, because the penalties under the FW(RO) Act are civil

penalties rather than criminal offences they are easier to obtain in

court. Accordingly, it is not recommended that the existing civil

penalties under the FW(RO) Act be made into criminal offences.

Rather, the maximum civil penalties should be increased to 200 penalty

units for contraventions by individuals and 1000 penalty units for

contraventions by bodies corporate. The reason for the recommended

increase is that the existing penalties appear to have had little effect at

encouraging auditors to perform their functions. Further, a maximum

fine of $10,800 for an auditor is, objectively, very low. Consideration

should be given to increasing the penalties under the Corporations Act

2001 (Cth).

Recommendation 13

Auditors of reporting units be required to be registered with the registered

organisations regulator. A person be entitled to be registered if the person is

either (a) a registered company auditor or (b) if the registered organisations

regulator is satisfied that the person has the required accounting qualifications

and is a fit and proper person. The registered organisations regulator be

empowered to suspend or cancel registration if satisfied that the person is (a) not

a fit and proper person or (b) has failed to comply with the duties of an auditor

under the Fair Work (Registered Organisations) Act 2009 (Cth).

129 Corporations Act 2001 (Cth), s 1312(1)

105

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(a) there was an absence of records of committee of management

meetings;

(b) contested allegations were made about what occurred at

meetings, including whether certain conduct was approved by

the relevant governing body;

(c) parts of minutes said to be erroneous were confirmed at later

meetings without being corrected; and

(d) certain matters had not been recorded in the minutes at the

direction of the union Secretary.

133. Although registered organisations are required to keep a number of

records, including its membership register131 and financial records132

for a minimum period of seven years, there is no requirement in

relation to the keeping of minutes. Nor is there any requirement in

s 141 of the FW(RO) Act that the rules of an organisation must require

minute books to be kept.

134. The Discussion Paper invited submissions about whether provision

should be made in the FW(RO) Act with respect to the obligations of

registered organisations to make and keep minutes of committee of

management meetings, and if so, what form any amendments should

take. The Discussion Paper also made reference to the fact that the

Fair Work (Registered Organisations) Bill 2014 [No 2] (Cth) included

131 Fair Work (Registered Organisations) Act 2009 (Cth), s 230(1)(a). 132 Fair Work (Registered Organisations) Act 2009 (Cth), s 252.

107

a provision to amend s 141(1)(b)(ii) of the FW(RO) Act to include a

requirement that rules of an organisation must provide for:133

(iia) the keeping of minute books in which are recorded proceedings and resolutions of meetings of committees of management of the organisation and its branches.

135. A number of submissions were received on this topic. Regard was also

had to submissions on this topic in the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2] (Cth) and its

predecessors.

136. There were few cogent arguments against some kind of legislative

requirement that registered organisations keep minutes of committee of

management meetings.

137. In submissions to the inquiry by the Senate Education and

Employment Legislation Committee into the Fair Work (Registered

Organisations) Amendment Bill 2013 (Cth), the Australian Nursing and

Midwifery Federation submitted that the requirement was too onerous,

and that sensitive matters were often deliberately not recorded.134 A

blanket requirement to keep minutes would encourage a lack of

transparency with more ‘off the record discussions’ and consequently

reduced accountability.

138. The flaw in that submission is the assumption that any provision would

be highly prescriptive about the matters that should be recorded. A

133

Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), Sch 2, item 19. 134 Australian Nursing and Midwifery Federation, Submission to the Senate Education and Employment References Committee Inquiry into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), January 2014, p 5.

108

requirement to keep minutes recording the proceedings and resolutions

of committee of management meetings should not prove too onerous.

139. In its submissions to the same inquiry, the ACTU pointed out that there

is no comparable provision in the replaceable rules contained in the

Corporations Act 2001 (Cth) requiring companies to keep minutes.135

That is true but misleading. The reason there is nothing in the

replaceable rules is because s 251A creates a number of statutory

obligations on all companies to keep minutes. Breach of s 251A is a

criminal offence of strict liability carrying a maximum penalty of 10

penalty units ($1,800), or 3 months imprisonment or both.136

140. There are obvious reasons why registered organisations should make

and keep minutes of committee of management meetings. Committees

of management make numerous operational and financial decisions. It

is therefore essential that the meetings in which those decisions are

taken are properly recorded.

141. In addition or as an alternative to keeping minutes, the Discussion

Paper raised whether registered organisations should be required to

keep digital audio recordings of committee of management meetings to

avoid the disputes that have arisen in relation the HSU and the ETU.

This option is not preferred for a number of reasons. First, it is overly

prescriptive and is not a requirement imposed on companies.

Secondly, as noted in the submission of the Employment Law

135 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee Inquiry into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 17. 136

Corporations Act 2001 (Cth), Sch 3, item 71.

109

Committee of the Law Society of New South Wales, this method is

open to interference by the person with control of the recording device.

Thirdly, requiring an audio recording, as opposed to written minutes,

might inhibit the free flow of discussion at meetings.

142. As to the form which a requirement to keep minutes should take, the

Victorian Automobile Chamber of Commerce made the important

point that rule changes are costly and time consuming for registered

organisations:137

While in principle VACC is not opposed to this requirement, VACC found during the process of drafting rule changes to satisfy the former government’s amendments, many of our rules required multiple rewrites because they were drafted decades ago. VACC’s Constitution and Rules already address this matter and, if further change is required, it will be a further time consuming and costly process. Our rules require an extraordinary meeting of members (EGM) to endorse rule changes. Notification and postage alone to all members is costly and, having had two EGMs in 2013, members are fatigued with the process and somewhat suspicious of ongoing changes to the Constitution and Rules.

143. A simpler and easier way of requiring organisations and branches to

keep minutes is to impose a direct statutory obligation to keep minutes

- along the lines imposed under s 251A of the Corporations Act 2001

(Cth). In order to ensure compliance, the provision should be a civil

penalty provision.

144. In addition, registered organisations and branches should be required to

keep documents and papers that are necessary to understand the

minutes. Commonly, minutes of committee of management meetings

record resolutions or decisions, particularly in relation to financial

137 Victorian Automobile Chamber of Commerce, Submission of the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p. 6.

110

matters, that are incapable of being understood without reference to

these documents. These documents may already be required to be kept

under s 252 of the FW(RO) Act, but it is considered desirable to make

this explicit.

Recommendation 16

A new civil penalty provision be introduced to the Fair Work (Registered

Organisations) Act 2009 (Cth) requiring organisations and branches to make

and keep minutes recording the proceedings and resolutions of committee of

management meetings. Documents and papers that are necessary to refer to in

order to understand the effect of the minutes also be kept. The documents be

retained for a minimum of 7 years. The minutes and associated documents be

available upon request by members of the organisation free of charge.

Financial records

145. Currently, s 252 of the FW(RO) Act requires reporting units to keep

certain financial records for a minimum period of seven years.

However, there are no consequences for a reporting unit that fails to

comply with these obligations. There seems no reason why this

provision, like the other record keeping requirements imposed by s 230

of the FW(RO) Act, should not be a civil penalty provision.

Recommendation 17

The obligation to keep financial records in s 252 of the Fair Work (Registered

Organisations) Act 2009 (Cth) be amended to be made a civil penalty provision.

111

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152. In June 2014, the Commission called for, and received a number of,

submissions into the adequacy of current protections for trade union

‘whistleblowers.’138 It organised an academic dialogue on 28 July

2014 as part of its policy consultation process at which the issue of

protection for ‘whistleblowers’ was one of the topics for discussion.

Counsel assisting made detailed submissions on the topic in 2014.139

The Commission received further submissions on the topic in response

to the Discussion Paper which canvassed potential areas for reform in

respect of the protected disclosures regime which currently exists in

the FW(RO) Act.140 Those submissions underpin the discussion

below.

Existing protected disclosure regime

153. Part 4A of chapter 11 of the FW(RO) Act is entitled ‘Protection for

Whistleblowers’.

154. Section 337A defines circumstances when a disclosure of information

by a person (‘the discloser’) qualifies for protection. There are

numerous requirements that apply:

138 Issues Paper 1: Whistleblower Protections, 13/6/14; See Chamber of Commerce and Industry WA Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14; New South Wales Police Force Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14; Carolyn Summers Submission in response to Issues Paper 1: Whistleblower Protections undated (received 20/8/14); Kylee Brehaut Submission in response to Issues Paper 1: Whistleblower Protections, 1/9/14; Stuart Vaccaneo, Submission in response to Issues Paper 1: Whistleblower Protections, undated (received 14/7/14). 139

Submissions of Counsel Assisting, 31/10/14, ch 19.2. 140 Australian Industry Group Law Reform Submissions, 21/8/15, p 7; Associate Professor Louise Floyd Law Reform Submissions, 21/8/15, p 3, Attachment E; Master Builders Australia Law Reform Submissions, 21/8/15, p 21-24; Victoria Police Law Reform Submissions, 10/9/15, pp 17-20.

113

(a) The discloser must be an officer, employee or member of an

organisation or branch.

(b) The disclosure must be made to one of:

(i) a member, the General Manager or member of staff

of the Fair Work Commission;

(ii) the Director or an inspector of the Fair Work

Building Inspectorate; or

(iii) a member of staff of the Office of the Fair Work

Ombudsman.

(c) The discloser must give the person’s name before making the

disclosure.

(d) The discloser must have reasonable grounds to suspect the

information indicates that the organisation or branch, or an

officer or employee of the organisation or branch, has or may

have contravened the FW Act or the FW(RO) Act.

(e) The discloser makes the disclosure in good faith.

155. Section 337B provides that if a person makes a disclosure that qualifies

for protection, the person is not subject to any civil or criminal liability

for making the disclosure. Nor can any contractual or other remedy or

right be exercised against the person.

114

156. In addition to this protection, s 337C creates a criminal offence of

victimising a whistleblower. In broad terms, a person must not

intentionally cause, or intentionally or reckless threaten to cause,

detriment to a person because the person made a disclosure that

qualifies for protection. Officers and employees of an organisation

involved in a contravention of s 337C by the organisation are also

criminally liable. The maximum penalty is 25 penalty units ($4,500)

or imprisonment for 6 months, or both.

157. Section 337D provides a victim with a right to compensation for

damage suffered as the result of victimisation.

158. Below, recommendations are made in relation to three main aspects of

the regime. They are (1) the class of persons who can make a

protected disclosure, (2) the class of persons who can receive a

protected disclosure and their obligations in dealing with a protected

disclosure and (3) the remedies available for adverse action.

Persons who can make a protected disclosure

159. The class of persons who can make a protected disclosure is too

narrow. Consistently with the Public Interest Disclosure Act 2013

(Cth)141 - which allows current and former public officials to make a

disclosure - former officers, employees and members of a registered

141 See Public Interest Disclosure Act 2013 (Cth), s 69.

115

organisation should be permitted to make a protected disclosure.

Numerous submissions were made in support of this approach.142

160. The disclosure regime in the Corporations Act 2001 (Cth) allows

disclosure by a person who has a contract for the supply of services or

goods to company, or an employee of such a person. Consistently with

this disclosure regime, protected disclosures should be permitted from

persons contracting for goods or services, or otherwise dealing, with a

registered organisation or branch. Again, a number of submissions

were made in support of this approach.143

161. Should the class of persons who can make a protected disclosure be

extended to members of the public generally, or members of the public

but only in relation to suspected criminal offences? Both Master

Builders Australia144 and Australian Industry Group opposed the

expansion of the whistleblower provisions to include the public. Ai

Group submitted that:145

[s]uch extremely wide whistleblower protections do not currently apply under other relevant laws such as the Corporations Act 2001 and the Public Interest Disclosure Act 2013.

142 Victorian Government, Submission in Response to Issues Papers, August 2014, p 13-15; Master Builders Australia Law Reform Submissions, 21/8/15, p 21; Victoria Police Law Reform Submissions, 10/9/15, p 17; Australian Industry Group Law Reform Submissions, 21/8/15, p 7. 143

Victorian Government, Submission in Response to Issues Papers, August 2014, p 13-15, 23; Master Builders Australia Law Reform Submissions, 21/8/15, p 21; Victoria Police Law Reform Submissions, 10/9/15, p 17; Australian Industry Group Law Reform Submissions, 21/8/15, p 7. 144

Master Builders Australia Law Reform Submissions, 21/8/15, p 21. 145 Australian Industry Group Law Reform Submissions, 21/8/15, p 7.

116

162. Victoria Police submitted that if the class of protected disclosers was

extended to members of the public making a disclosure about a

suspected criminal offence, it would be necessary to extend the scope

of the subject matters about which a disclosure can be made.146

Further, Victoria Police submitted that:147

[t]here are some offence provisions in the Registered Organisations Act, but they do not relate to the types of criminal activities identified by Victoria Police that involve trade unions, their officials or officers, such as the making and receiving of corrupt payments, fraud offences, blackmail and coercion and drug offences.

163. It is not recommended that the class of persons who can make a

protected disclosure be expanded to include members of the public

generally, or specifically in relation to criminal offences. Insofar as a

member of the public has a complaint that involves criminal conduct,

the criminal law can be invoked to provide members of the public with

protection.

Recommendation 18

The categories of persons who can make a protected disclosure under s 337A(a)

of the Fair Work (Registered Organisations) Act 2009 (Cth) be expanded to

include:

(a) a former officer, employee or member of an organisation or branch; and

(b) a person contracting for the supply of goods or services, or otherwise

dealing with an organisation or branch of an organisation (or an officer

or employee of an organisation or branch on behalf of the organisation

or branch); and

(c) an officer of employee of a person mentioned in (b).

146 Victoria Police Law Reform Submissions, 10/9/15, p 18. 147 Victoria Police Law Reform Submissions, 10/9/15, p 19.

117

Persons entitled to receive a protected disclosure

164. Section 26 of the Public Interest Disclosure Act 2013 (Cth) allows a

protected disclosure to any person, other than a foreign public official.

In the context of corporations, s 1317AA(1) of the Corporations Act

2001 (Cth) permits ASIC, a company’s auditor, a director, secretary or

senior manager of the company, or a person authorised by the company

to receive a protected disclosure.

165. A particular issue about which the Commission received conflicting

submissions is whether State or Federal police officers should be

entitled to receive a protected disclosure, or at least some protected

disclosures.148

166. In response to the question about whether State and Federal police

should be authorised to receive protected disclosures under the

FW(RO) Act, Victoria Police submitted that:149

Since the Registered Organisations Act primarily relates to industrial law, it may not be appropriate to make amendments to the Registered Organisations Act provisions extending the types of conduct that is protected to cover criminal offences, particularly those contrary to state law. However, as indicated above, conduct that relates to breaches of the Registered Organisations Act and the Fair Work Act may also be information about possible criminal conduct.

148 See, for example, Joel Silver Submission in response to Issues Papers, undated (received 14/7/14), p 3; New South Wales Police Force Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14; Victoria Police Law Reform Submissions, 10/9/15, p 18. 149

Victoria Police Law Reform Submission, 10/9/15, p 18.

118

167. Victoria Police also submitted that:

(a) Under s 335C(2)(b) of the Fair Work (Registered

Organisations) Act 2009 (Cth) the General Manager or staff

of the FWC may refer information acquired in the course of

an investigation about criminal conduct to the Australian

Federal Police or other state or territory police forces,

provided ‘disclosure is likely to assist in the administration or

enforcement of a law of the Commonwealth or a State or

Territory’;150 and

(b) it may not be appropriate for Victoria Police to receive

disclosures in its own right, but through an effective referral

mechanism.151

168. In a similar vein, Master Builders Australia submitted that the single

regulator for registered organisations should receive the relevant

disclosures and that, if those disclosures reveal criminal conduct, the

regulator should refer the matters to the police.152

169. The NSW Police Force submitted that:153

It is not appropriate for NSW Police Force officers to be named recipients to receive protected disclosures under the Act as police are primarily concerned with investigating complaints of criminal conduct and should

150 Victoria Police Law Reform Submissions, 10/9/15, p 18. 151 Victoria Police Law Reform Submissions, 10/9/15, p 19. 152

Master Builders Australia Law Reform Submissions, 21/8/15, p 22. 153 New South Wales Police Force Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14.

119

not deal with complaints about possible breaches of the Act (unless they involve allegations that a crime or other offence has been committed).

170. What about even broader disclosures? As noted, under the Public

Interest Disclosure Act 2013 (Cth), disclosures are permitted to any

third party, except foreign public officials. This would include, for

example, journalists.

171. The Australia Labor Party has announced that, in relation to registered

organisations, it proposes to extend the existing protections so that

whistleblowers will be protected from adverse action if they disclose

‘to any third party (including the media), as long as they first raised the

matter with one of the Fair Work Regulators and the union itself’.154

To limit whistleblower protections to situations where the

whilstleblower is first required to notify the union would deprive the

whilstleblower provisions of any real value.

172. In the context of public sector disclosures there is arguably a real need

to allow protected disclosures to be made to persons other than

government or statutory authorities. In many cases, there may be a real

risk that, if information adverse to government is disclosed to a

government authority, the relevant agency will do nothing about it

because it will not want to embarrass the government.

173. However, that risk is reduced in the context where the information

disclosed concerns the conduct of registered organisations and their

officials and the persons receiving protected disclosures are

154 Australian Labor Party, ‘Fact Sheet: Better Union Governance’, released 7/12/15, p 3.

120

independent statutory authorities.155 In the context of registered

organisations, expanding the class of persons to include the media also

risks increasing the chance of defamatory or exaggerated claims being

made as part of the internal disputes within trade unions.

174. Rather than extending the class of persons who can receive a protected

disclosure, it is recommended that additional measures be introduced

to safeguard against the possibility of regulatory inaction or

information leakage. To that end, it is recommended that, in

accordance with similar provisions in the Public Interest Disclosure

Act 2013 (Cth)156 the regulatory authorities permitted to receive a

protected disclosure be subject to an obligation to undertake an

investigation in relation to a protected disclosure within a prescribed

time period.

Recommendation 19

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended to

require the regulatory authorities entitled to receive a protected disclosure to

investigate the disclosure within a specified period.

Remedies for adverse action

175. There are a number of defects with the existing remedies available for

adverse action taken against whistleblowers.

155 This is another matter that reinforces the need for an independent regulator of registered organisations. 156

See Public Interest Disclosure Act 2013 (Cth), Pt 3.

121

176. First, despite submissions to the contrary from the Ai Group157 and

Master Builders Australia,158 the criminal penalties for breach of

s 337C are too low. In comparison, the maximum penalty for reprisal

action taken against a person who makes a protected disclosure under

the Public Interest Disclosure Act 2013 (Cth) is imprisonment for two

years, or a fine of 120 penalty units ($21,600) or both. The Australian

Labor Party has proposed to increase the penalties under the FW(RO)

Act to match the penalties available under the Public Interest

Disclosure Act 2013 (Cth).159 This is a sensible reform.160

177. Secondly, the offence under s 337C of the FW(RO) Act (and also the

Corporations Act 2001 (Cth)) is considerably narrower in scope than

the offence of taking or threatening reprisal action under the Public

Interest Disclosure Act 2013 (Cth). Section 337C should be replaced

with the broader offence of taking or threating reprisal action.

178. Thirdly, currently a person who engages in adverse action against a

whistleblower (for example, a Secretary or officer of an organisation)

can still continue to hold office. Persons who victimise whistleblowers

have no place in managing registered organisations. Section 212 of the

FW(RO) Act should be amended to provide that a person convicted of

157 Australian Industry Group Law Reform Submissions, 21/8/15, p 7. 158 Master Builders Australia Law Reform Submissions, 21/8/15, p 23. 159

Australian Labor Party, ‘Fact Sheet: Better Union Governance’, released 7/12/15, pp 2-3. 160 See also Chamber of Commerce and Industry WA Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14, p 3.

122

an offence against s 337C is automatically disqualified from holding

office in an organisation or branch of an organisation.161

179. Finally, as was noted in the Discussion Paper, there is, in contrast with

the Public Interest Disclosure Act 2013 (Cth),162 no specific provision

made for reinstatement of a victim whose employment is terminated as

part of reprisal action, nor is there a provision entitling the court to

give appropriate mandatory injunctions to prevent reprisal action.

Through a complex set of provisions of the FW Act, a person whose

employment was terminated as a result of making a protected

disclosure may be entitled to seek a remedy under the general

provisions of the FW Act concerning ‘adverse action’, including

reinstatement.163 However, it is recommended to put the issue beyond

any doubt. It is also recommended to adopt the broad remedial

provisions found in the Public Interest Disclosure Act 2013 (Cth).

Recommendation 20

Section 337C of the Fair Work (Registered Organisations) Act 2009 (Cth) be

repealed and replaced with a provision in similar terms to s 19 of the Public

Interest Disclosure Act 2013 (Cth) prohibiting reprisal action against

whistleblowers. This would lead to an increase in the existing maximum penalty

for reprisal to two years’ imprisonment, or a fine of 120 penalty units, or both.

161 See Australian Industry Group Law Reform Submissions, 21/8/15, p 7; Master Builders Australia Law Reform Submissions, 21/8/15, p 23; Chamber of Commerce and Industry WA Submission in response to Issues Paper 1: Whistleblower Protections, 11/7/14, p 4. 162

See ss 15 (injunctions, apologies and other orders) and 16 (reinstatement). 163 Fair Work Act 2009 (Cth), ss 340(1)(a), 341(1)(b), 341(1)(c), 341(2), 342(1), 539(1), 545(1), 545(2)(c).

123

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124

182. One issue concerning s 190 is whether it only prohibits an organisation

or branch rendering assistance to one candidate over another in an

election for an office or position in that organisation or branch (the

narrow construction), or whether it applies also to a different

organisation or branch (the broad construction).

183. In Chapter 2.2 of the Interim Report, the view was expressed that, as a

matter of statutory construction, the broad construction of s 190 was

clearly preferable.164 As was noted in the Interim Report:165

Parliament could easily have inserted words of limitation to confine the reach of s 190. It did not.

184. Further, it was noted it was desirable to amend s 190 to provide as

follows:166

An organisation or branch commits an offence if it uses, or allows to be used, its property or resources to help a candidate against another candidate in an election under this Part (in respect of any organisation or branch) for an office or position.

185. The submissions to the Commission generally supported the

amendment to s 190 proposed in the Interim Report.167 However, the

164 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014) Vol 1, ch 2.2, pp 64-65. 165

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 2.2, p 64 [15]. 166 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 2.2, p 65. 167

Association Forum Pty Ltd Law Reform Submissions, 4/9/15, p 3; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 16; Master Builders Australia Law Reform Submissions, 21/8/15, p 16.

125

Employment Law Committee of the Law Society of New South Wales

was against any amendment.168

Recommendation 23

Section 190 of the Fair Work (Registered Organisations) Act 2009 (Cth) be

amended to prohibit an organisation or branch using, or allowing to be used, its

property or resources to help a candidate in an election for office in any

registered organisation or branch.

This recommendation is reflected in the model legislative provisions in

Appendix 1 of this Volume of the Report.

Use of union funds as political donations or for political expenditure

186. The Discussion Paper raised for consideration whether restrictions

should be placed on the use of an organisation’s funds for the purposes

of making political donations or incurring political expenditure, and in

particular whether organisations should be required to make political

donations or expenditure only from a separate fund containing

voluntary contributions raised from members specifically for political

purposes.169

168 Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, pp 4-5. 169

The Discussion Paper traced briefly the history in Australia of restricting trade unions from making political donations, at least unless the donation was made out of a separate fund to which no member of the union could be required to contribute: Discussion Paper, pp 35-36.

126

187. The reasons for raising this issue were twofold. First, political

donations are capable of being used by senior officials in a union,

particularly the union Secretary, to establish patronage and influence.

The dangers associated with an ‘all powerful’ union Secretary have

already been discussed. Secondly, given that the eligibility rules for

registered organisations must not discriminate between persons on the

basis of political opinion,170 and that many individuals join a union not

to engage in political activities but to obtain better working conditions,

arguably individual members should decide whether to contribute

funds to a political party, rather than the union executive.

188. Some submissions were in favour of restricting the use of funds for

political purposes.171 Master Builders Australia172 advocated a system

similar to that which applies in the United Kingdom, whereby trade

unions can expend money for political objects but only if:

(a) the furtherance of political objects is approved as an object of

the union at a ballot by a majority of members; and

(b) payments in furtherance of political objects are made out of a

separate fund, no member can be forced to contribute to the

separate fund and contributions to the fund cannot be made a

condition of membership.173

170 Fair Work (Registered Organisations) Act 2009 (Cth), s 142(1)(d). 171 Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 17; Master Builders Australia Law Reform Submissions, 21/8/15, pp 17-18. 172

Master Builders Australia Law Reform Submissions, 21/8/15, pp 18-19. 173 Trade Union and Labour Relations (Consolidation) Act 1992 (UK), s 71. These restrictions originated in the Trade Union Act 1913 (UK), which followed the decision of the

127

189. On the other hand, the Associations Forum Pty Ltd submitted that it

was up to the elected officials of an organisation to decide to expend

money in the furtherance of political objects.174

190. Despite the attractiveness of the United Kingdom model in preventing

union members being compelled to contribute money to a political

cause they do not support, there are several matters that militate against

adopting similar legislation federally.

191. In the first place, although restrictions similar to those that currently

apply in the United Kingdom have been enacted previously in a

number of Australian States,175 restrictions of this kind have not been

applied to organisations registered under Commonwealth legislation.

Secondly, as the Discussion Paper noted, there is a cogent argument

that registered organisations, just like corporations and other legal

persons, should be free to spend their funds for political purposes. The

officers of such organisations are democratically accountable to the

members and, if the majority of members are unhappy with the

decisions taken concerning political donations and expenditure, the

officers can be voted out of office at the next election. Thirdly, there

may be arguments that the United Kingdom model infringes the

freedom of political communication which has been implied from the

Constitution. In relation to this point, although in 1999 the Full Court

of the Supreme Court of Western Australia rejected this argument in

House of Lords in Osborne v Amalgamated Society of Railway Servants [1910] AC 87 preventing trade unions registered under the Trade Union Act 1871 (UK) from using their funds for political purposes.

174 Associations Forum Pty Ltd Law Reform Submissions, 4/9/14, p 3. 175 See the legislation cited in Discussion Paper, p 36.

128

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satisfied that the rules of the organisation comply with the

requirements of the Act in relation to the conduct of elections and that

elections will be conducted under the rules of the organisation and in a

manner that will afford voting members an adequate opportunity for

voting without intimidation.179

195. In 2014 and 2015, the Commission received a number of submissions

about whether s 186 remains appropriate, and whether any

amendments to that provision are desirable. Both the Ai Group and the

CFMEU submitted that no change to s 186 was appropriate, and that

the exemption system allows organisations to conduct their own

elections in a cost-effective way in accordance with the requirements

of the legislation.180 The CFMEU submission concluded that ‘[t]here

is no valid reason from the perspective of the Union and the members

it represents, to alter a system that is working effectively.’181

196. Other submissions received, however, argued that the current regime

was defective. Master Builders Australia supported the current regime

but subject to an additional requirement that the exemption should not

be available to a registered organisation that has breached ‘any of the

provisions of the law relating to registered organisations.’182 Stuart

Vaccaneo, a former Executive Vice-President of the Queensland

District Branch of the Mining and Energy Division of the CFMEU,

179 Fair Work (Registered Organisations) Act 2009 (Cth), s 186. 180 Slater & Gordon on behalf of Construction, Forestry, Mining and Energy Union Submission in Response to Issues Paper 3: Funding of Trade Union Elections, 1/8/14, p 1; Australian Industry Group, Submission in Response to Issues Papers 1-3, 11/7/14, p 11. 181

Slater & Gordon on behalf of Construction, Forestry, Mining and Energy Union Submission in Response to Issues Paper 3: Funding of Trade Union Elections, 1/8/14, p 39. 182

Master Builders Australia Submission in Response to Issues Paper 3: Funding of Trade Union Elections, 11/7/14, pp 2, 4.

130

argued that the current regime was inappropriate because of the

absence of provisions dealing with how unions with exemptions handle

complaints about the conduct of elections, and the absence of any

requirement for unions with exemptions to produce a post-election

report as the AEC is required to do.183 In short, the submission was

made that the current system allows a complete lack of independent

scrutiny in respect of elections. The Employment Law Committee of

the Law Society of New South Wales submitted that the exemption

provisions should be repealed, but if this is not done, then the

requirement to provide a post-election report should be extended to the

alternative person who conducts the election.184

197. Subsequently to the receipt of submissions in 2015, there have been

considerable developments in relation to this topic. On 30 October

2015, Chris Enright, Director of the Regulatory Compliance Branch,

acting on behalf of the General Manager of the Fair Work

Commission, revoked the exemption granted to the Queensland

District Branch of Mining and Energy Division of the CFMEU which

had been granted in 1996 and remained in force since that time.185

That decision canvassed a number of matters including the history and

operation of the exemption in s 186. At the time of writing this Report,

the decision is subject to appeal to the Fair Work Commission.

183 Stuart Vaccaneo Submission in Response to Issues Paper 3: Funding of Trade Union Elections, undated (received 11/7/14), p 1. 184

Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, p 6. 185 Queensland District Branch of the Mining and Energy Division of the Construction, Forestry, Mining and Energy Union [2015] FWCD 7109.

131

198. In light of that decision and the pending appeal, it is not considered

appropriate to make any recommendations concerning the repeal of

ss 182(2), 183 and 186 (and consequently ss 184 and 185) of the

FW(RO) Act. If the appeal is unsuccessful, then arguably the

processes for revocation of an exemption under the FW(RO) Act are

capable of operating effectively, subject to the matter identified

immediately below. If the appeal is successful, then there may be a

range of matters that Parliament would need to give consideration to

concerning the conduct of union elections. These are not the only

possibilities.

199. However, an important matter noted in the decision referred to above

was the following:186

Elections conducted by organisations or branches with AEC exemptions are not subject to review by any external body. Essentially, the only review mechanism for AEC exemptions is the power to revoke in s 186(2) of the [FW(RO) Act].

200. If the exemption in s 186 is to remain it is desirable that the FW(RO)

Act be amended to require an organisation or branch that has been

granted an exemption to lodge a report with the Registered

Organisations Commission, similar to the report required to be lodged

by the Australian Electoral Commission under s 197. This will at least

ensure that there is some oversight of elections conducted by

organisations and branches.

186 Queensland District Branch of the Mining and Energy Division of the Construction, Forestry, Mining and Energy Union [2015] FWCD 7109 at [12].

132

Recommendation 24

No recommendation is made to repeal ss 182(2), 183-186 of the Fair Work

(Registered Organisations) Act 2009 (Cth) at this time. On the assumption that

those sections remain, that Act be amended to require an organisation or branch

that has an exemption under s 186 to lodge a report with the registered

organisations regulator after the completion of an election conducted pursuant to

the exemption. The report should include details about how the election was

conducted, whether any complaints were received and how those complaints

have been addressed.

133

134

APPENDIX A

Mark Hardacre

1. Michael Williamson was for some years General Secretary of the HSU

NSW Branch. By all accounts he was a domineering and powerful

individual who wielded significant influence over others and was an

autocratic and authoritarian leader.

2. The evidence of Mark Hardacre about Michael Williamson’s treatment

of him and Katrina Vernon following the 1995 HSU NSW Union

elections was particularly confronting both in the ruthlessness of

Michael Williamson’s treatment of them and the lengths to which he

went to seek to remove from the Union Mark Hardacre and Katrina

Vernon - elected officials he felt were opposed to his interests.

3. The background to the 1995 elections is as follows. Mark Hardacre

and Katrina Vernon ran on a ticket in opposition to Michael

Williamson in the 1995 HSU NSW election.1 Michael Williamson

was ultimately elected State Secretary. Michael Williamson’s

candidates for the offices of Assistant Secretary were defeated and

Mark Hardacre and Katrina Vernon were each elected Assistant

Secretary.2

1 Hardacre MFI-1, 16/6/14, p 19. 2 Mark Hardacre, witness statement, 16/6/14, paras 127-140.

135

4. Thereafter commenced a campaign of bullying, isolation and terror

directed towards Mark Hardacre and Katrina Vernon, apparently

spearheaded by Michael Williamson.

5. Mark Hardacre gave evidence that, inter alia:

(a) Mark Hardacre and Katrina Vernon were seated in a

‘demeaning’ work environment, and were denied benefits to

which the outgoing officers were entitled - including to a car

and office. Following the election, the outgoing Assistant

Secretaries were immediately hired as consultants and kept

their cars and offices. In that way, in effect, they kept their

jobs as de facto Assistant Secretaries;3

(b) Mark Hardacre and Katrina Vernon were isolated, at the

direction of Michael Williamson, were not given any work,

and were denied access to the weekly Labor Council

delegation and to the ALP Annual Conference held annually

in the Sydney Town Hall;4

(c) Katrina Vernon ultimately suffered from a breakdown and

successfully bought a workers’ compensation claim against

the Union;5

(d) Katrina Vernon was made redundant from the Union on the

basis of a report Michael Williamson had commissioned

3 Mark Hardacre, witness statement, 16/6/14, para 37; Hardacre, 16/6/14, T:543.14-23. 4 Mark Hardacre, witness statement, 16/6/14, paras 37-40. 5

Mark Hardacre, witness statement, 16/6/14, para 41.

136

which recommended that one or both Assistant Secretary

positions be abolished. Mark Hardacre gave evidence to the

effect that this report was contrived and engineered to achieve

this outcome. Mark Hardacre said that he saw a document on

a photocopying machine which revealed that Katrina Vernon

was paid a redundancy payment of $88,000. Mark Hardacre

described this as ‘one way [Michael] Williamson removed his

opponents.’6 Michael Williamson approached Mark Hardacre

about leaving the Union in exchange for a substantial amount

of money, but he declined. After Katrina Vernon left, Mark

Hardacre was isolated and had no-one to talk to. Mark

Hardacre said that this treatment persisted for the balance of

his four year term. He said of his experience:7

It was total containment and isolation. I could not get out of the office to visit Union Members. [Michael] Williamson would arrange for the organisers to go out there to members saying that [Katrina] Vernon and I were useless in our roles as executive officials because we were never out with members. [Michael] Williamson had direct supervision and control over those officers and he also put this proposition to the State Council, which fully supported him.

(e) Executive Council meetings were held once a month on

Mondays, and the Council meetings the following Wednesday

were ‘very daunting’ for Mark Hardacre as ‘[n]ormally [he]

would be set up to have to explain [his] conduct.’ He gave

evidence that at these meetings he would be accused of

breaching union rules, allegations which he would have to

answer because the next step would be removal from his

6 Mark Hardacre, witness statement, 16/6/14, para 47. 7 Mark Hardacre, witness statement, 16/6/14, para 54.

137

office. On one occasion Michael Williamson moved a motion

against him for being defiant in breach of the Union rules. He

had to get legal support to fight those charges from the

Council.8

6. In 1999 Mark Hardacre was again part of a ticket contesting the HREA

elections. In the middle of the election campaign, Mark Hardacre, his

wife and three others (two of whom were on Mark Hardacre’s ticket)

were sued in defamation. Mark Hardacre and his wife each had to pay

about $20,000 to meet the legal costs they incurred and had to borrow

against their house to do so. The proceedings were eventually settled.9

7. Michael Williamson won that election in ‘one of the biggest union

landslides in history.’10 Mark Hardacre gave evidence that he still has

concerns about how Michael Williamson won the election, and noted

that it was normal to get about 300 or 400 votes in each day but that on

one day during the 1999 elections, some 2,500 votes came in which

was unheard of. Mark Hardacre also gave evidence about a printing

press purchased by the HREA in 1999 to which no-one but Michael

Williamson and Cheryl McMillan had access. He is not aware of

whether ballot papers were printed off for the 1999 elections but is

aware that there were occasions on which people were recorded as

having voted twice without correction.11

8 Mark Hardacre, witness statement, 16/6/14, para 58. 9 Mark Hardacre, 16/6/14, T:560.33. 10

Mark Hardacre, witness statement, 16/6/14, para 83. 11 Mark Hardacre, witness statement, 16/6/14, paras 83, 85.

138

8. Michael Williamson ruthlessly bullied Mark Hardacre and Katrina

Vernon, and used the members’ funds to do so (by commencing legal

proceedings against them with members’ money and paying out

substantial amounts of money to remove his enemies from the

Union).12

Katrina Hart

9. More than a decade after Mark Hardacre’s experience, Katrina Hart,

the President of one of HSU NSW’s largest sub-branches, was

similarly marginalised by those whose conduct she questioned.

10. Intercepted phone calls tendered to the Commission demonstrated that

Michael Williamson, who was at this point on leave because of serious

allegations concerning his conduct - conspiring with senior officers of

the union to defeat Katrina Hart’s requests for transparency and

accountability.13

Officers and employees of Victoria No. 1 Branch

11. In 2013, in yet another branch of the troubled HSU, allegations of

bullying and intimidation of whistleblowers again resurfaced, this time

concerning the Victoria No. 1 Branch under the control of Diana

Asmar and her General Manager, Kimberley Kitching. The

Commission heard from a number of witnesses: Leonie Flynn,14 Peggy

12 See Christopher Brown, witness statement, 29/8/14, para 96-97. 13 Hayes MFI-1, 26/9/14, T:3:28-30; Hayes MFI-2, 26/9/14, T:11.19-21. 14

Leonie Flynn, witness statement, 25/8/14, paras 16-100, 202-207.

139

Lee15 and Robert McCubbin. Each spoke of the conduct of Diana

Asmar and her supporters when they raised concerns about misconduct

by branch officers and employees.

Brian Fitzpatrick

12. The adverse consequences that affect whistleblowers was not limited to

the HSU. The CFMEU’s treatment of persons who gave evidence to

the Commission is a case in point. Many of these persons were made

the subject of false and irrelevant accusations and character slurs. In

relation to its own officers those who speak out are marginalised and

abused. Brian Fitzpatrick is a case in point.16

13. Brian Fitzpatrick was employed by the NSW Branch of the CFMEU

for some 25 years as both an organiser, or coordinator of teams of

organisers.17 In March 2013 Brian Fitzpatrick discovered that

companies operated by George Alex (see Chapter 7.2 which examines

the relationship between George Alex and the CFMEU in detail) had

not been paying employees their entitlements.18

14. After making enquiries and following the matter up with George Alex,

On 27 March 2013, Brian Fitzpatrick received a telephone call from

15 Pik ki (Peggy) Lee, witness statement, 25/8/14, paras 41, 60-64, 84-92. 16 See Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.5. 17

Brian Fitzpatrick, witness statement, 14/7/14, para 9. 18 Brian Fitzpatrick, witness statement, 14/7/14, para 44.

140

Darren Greenfield, another organiser of the NSW Branch of the

CFMEU threatening to kill him and telling him that he was ‘dead.’19

15. When the matter was reporting to Brian Parker, he responded with

indifference and the matter was not properly or promptly investigated.

16. On 12 April 2013, a Committee of Management meeting was held at

which a discussion took place, not about the death threat, but about a

union official calling the police about another official.20 Brian

Fitzpatrick had been invited to attend the meeting as a visitor, but was

told to leave the room during the relevant discussion.21

17. In and after May 2013 Brian Fitzpatrick continued to pursue George

Alex about his outstanding entitlements to workers. Thereafter

followed a sustained campaign within the NSW Branch to force Brian

Fitzpatrick out of the Union. He was demoted and many of his

responsibilities were taken away.22 He was vilified and threatened

with dismissal.23 He was eventually offered an amount in the order of

$300,000 to leave the Union.24 Brian Fitzpatrick agreed to leave the

union with 12 months’ pay and a car after being persuaded by a long-

19 Brian Fitzpatrick, witness statement, 14/7/14, para 61. 20 Fitzpatrick MFI-1, 15/7/14, Vol. 1, p 27. 21

Brian Fitzpatrick, 15/7/14, T:33.4-8. 22 Brian Fitzpatrick, 15/7/14, T:37.39-41. 23

Brian Fitzpatrick, witness statement, 14/7/14, p 179; Fitzpatrick MFI-I, 15/7/14, p 229. 24 Brian Fitzpatrick, witness statement, 14/7/14, para 117.

141

time union representative based in Melbourne, Frank O’Grady, to do

so.25

Jose ‘Mario’ Barrios

18. The treatment of Jose ‘Mario’ Barrios is also noteworthy. He was

summoned to give evidence to the Commission and was compelled by

law to attend and answer questions about a matter that he had reported

to the police.

19. Mario Barrios had not sought out the Commission and was not

working with it. Nevertheless, Brian Parker (the most senior CFMEU

officer in New South Wales) branded Mario Barrios as a ‘dog’ who he

wanted to ‘bash’. He said that that everyone in the Union now hated

him, because he had given honest answers under compulsion. 26

David Hanna

20. David Hanna was the President of the CFMEU Queensland

Construction Workers’ Divisional Branch and President of the

Construction and General Division of the CFMEU. He resigned from

these positions effective 30 July 2015.27 In the evidence heard by this

25 Fitzpatrick MFI-1, 15/7/14, pp 232-237. 26 Evidence in relation to the experience of Mario Barrios is set out in the Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.5, paras 28-48. 27

David Hanna, 18/9/15, T:645.26-36. See CFMEU’s annual returns for 2014 available at https://www.fwc.gov.au/documents/documents/organisations/registered-orgs/105N/105n-AR2014-75.pdf.

142

inquiry, he is the most senior union official to have fallen out with his

union. Before the BLF Qld merged with the CFMEU Qld, he was the

State Secretary of the BLF. After the merger he was President of the

CFMEU.

21. The findings about the conduct of David Hanna in respect of Cornubia

House are set out at Chapter 8.1 of Volume 4 of this Report. His role

in the destruction of CFMEU and BLF documents is described in

Chapter 8.2 of Volume 4 of this Report.

22. Separately to the evidence before the Commission about Cornubia

House, David Hanna gave evidence about the circumstances in which

he left the Union.

23. Michael Ravbar is and was at all relevant times the Secretary of the

CFMEU Construction and General Division, Queensland Northern

Territory Divisional Branch and Secretary of the CFMEU Industrial

Union of Employees, Queensland.

24. In 10 June 2015 Michael Ravbar laid charges against David Hanna in

accordance with the CFMEU Construction and General Rules.28

Michael Ravbar alleged that David Hanna had, in or about April 2015,

engaged in ‘gross misbehaviour’ and ‘gross neglect of duty’ by, inter

alia, procuring $3,000 from certain employers to the BLF Charity

Foundation Pty Ltd for the purpose of the BLF Charity making

payments to assist with IVF treatment for the partner of a CFMEU

organiser.

28 CFMEU DD MFI-26, 20/10/15, pp 3-6.

143

25. On 19 June 2015, a motion was circulated among the members of the

CFMEU National Executive Committee to appoint a person to

investigate the subject matter of the charges against David Hanna with

a view to the preparation of a report to the National Executive

Committee.29 Leo Skourdoumbis was appointed, and conducted an

investigation and reported to the CFMEU National Executive.

26. Leo Skourdoumbis concluded in his report that he believed that David

Hanna had acted in a seriously inappropriate manner. He stated that in

his view it was appropriate, at the least, for David Hanna to be

censured and reprimanded.30 David Hanna resigned from the Union on

30 July 2015. He addressed the circumstances of his resignation in his

evidence in the following excerpt: 31

…at the time when that report come [sic] out, the relationship between myself and Michael Ravbar was past the word of toxic, if there could be another - you know, it was - you know, we wouldn’t be able to continue together. You know, I wouldn’t be able to refrain myself around him, so I had a view for best interests of the Union - I also had some, you know, health issues with my back, so I took the view, in the best interests of the Union and for my own health and family that I would resign and I did so.

27. David Hanna also gave evidence about a discussion he had with Leo

Skourdoumbis during the investigation in which Leo Skourdoumbis

says ‘[t]hose National officials, Michael O’Connor included, they want

you looked after in whatever way possible.’32

29 CFMEU DD MFI-26, 20/10/15, pp 9, 16-18. 30 CFMEU DD MFI-25, 16/10/15, p 7. 31

David Hanna, 22/9/15, T:95.31-39. 32 Document Disposal Case Study MFI-5, 22/9/15.

144

28. David Hanna gave evidence about the importance of being ‘looked

after’ by the National officials, saying:33

My understanding from the discussions that I had before giving my resignation was that no-one would stand in my way from finding other employment. The issue - when you work for a Union and you leave, whether you leave on good terms or bad terms, if you leave on good terms, you normally - you know, you’re not too stressed about finding another job, but when you leave on bad terms, and particularly in Queensland, with the terms - the hatred between Michael and I, I underline “hatred”, it would be very hard for me to have continued employment in Queensland. So I wanted to ensure that no-one would stand in my way for other employment. I wasn’t guaranteed employment but it was certainly that no-one would - you wouldn’t be on the black-ban list.

Q. What does that mean, the black-ban list?

A. That, you know, every time you go for a job, “You’re too hot to handle. We don’t want you”, you know.

Q. Did you understand that when you left, the National officials still wanted to look after you in whatever way possible?

A. In terms of - yes, in terms of whatever way possible, like, if I was having problems with Michael standing in my way of getting a job, that they would have talks.

29. David Hanna’s evidence about the ‘black-ban list’ and his belief that it

was within Michael Ravbar’s power to stop him obtaining employment

in Queensland after his career with the Union is illuminating. It

explains why many officials and employees are reluctant to blow the

whistle on corruption for fear of leaving the Union on ‘bad’ terms.

33 David Hanna, 22/9/15, T:96.5-29.

145

Jimmy Kendrovski

30. Jimmy Kendrovski was a part owner of Elite Access Scaffolding

(NSW) Pty Ltd. He was called to the Commission to give evidence

about payments by companies associated with George Alex to Brian

Parker and Darren Greenfield of the CFMEU NSW (see Chapter 7.2 of

Volume 3 of this Report).

31. At the time he gave evidence before the Commission, Jimmy

Kendrovski was serving a custodial sentence. In his evidence he said

that he was the victim of an assault in gaol after he had been served

with his summons and shortly prior to the day appointed for him to

give evidence.34

32. During his evidence Jimmy Kendrovski showed signs of significant

discomfort. When he was asked questions about whether he had seen

union officials receive cash payments there were often lengthy pauses,

sometimes combined with a lowering of his head towards his lap.

33. He refused to comment on whether the aggressor had said anything to

him about him giving evidence to the Commission, and explained that

refusal by saying ‘because I have a wife and three kids outside on their

own and I just can’t comment on that’.35

34. At one point in his evidence, in answer to a question about whether he

felt unable to give truthful evidence because of the recent assault on

34 Jimmy Kendrovski, 1/9/14, T:105.13. 35 Jimmy Kendrovski, 1/9/14, T:106.6.

146

him, Jimmy Kendrovski said ‘I am being as truthful as I can.’36 When

later asked to explain that answer, he said that he was telling the

Commission and counsel assisting as much as he truthfully could

having regard to the fears for his safety and that of his family.37 The

examination then continued as follows:38

Q: If you didn’t have those fears, might you be saying something else?

A: I can’t comment.

Q: Do I take it from that, that the answer is, “Yes”?

A: I just can’t comment. If you were in my position, where I am at the moment - I can’t comment on that.

35. It was apparent that Jimmy Kendrovski was, due to concerns over his

safety and that of his family, unable to provide the Commission with

truthful answers to the questions he was being asked in relation to what

he had seen and heard in relation to the payment of the cash withdrawn

for ‘union payments’.

36. Thus Jimmy Kendrovski did not give truthful evidence before the

Commission out of fear for him and his family’s safety.

Paul Sinclair

37. Paul Sinclair was the Assistant Secretary of the ETU NSW, a position

he had held since July 2007. Since July 2011 he also held the elected

36 Jimmy Kendrovksi, 1/9/14, T:106:16. 37 Jimmy Kendrovski, 1/9/14, T107.18. 38

Jimmy Kendrovski, 1/9/14, T:107.24-30.

147

position of Organiser in the Electrical Division of the CEPU NSW.39

Paul Sinclair gave evidence that he had been a member of the ETU

NSW for 28 years, and a member of the Officers’ Fund for 25 years.40

His duties included being the minute taker for all of the minutes of

Council meetings.

38. On 27 April 2015 and 5 June 2015 Paul Sinclair gave evidence before

the Commission, predominately concerning his recollection of whether

the ALP Loan was discussed at the State Council meeting in December

2010. Contrary to every other member of the State Council’s

recollection, he did not recall, and nor did he record, the ALP Loan

being discussed at the meeting.41

39. In connection with the topics covered in the ETU NSW case study,

issues arose concerning the expenditure of the ETU NSW’s election

fund - the Officers’ Fund. Paul Sinclair was one of the trustees of the

Officers’ Fund and a signatory to the account. Paul Sinclair gave

evidence that at every election (held quadrennially), the Officers’ Fund

invited him to run on its ticket.42

40. On 5 June 2015 Paul Sinclair gave evidence that three days prior to his

giving evidence, he had ceased to be a member of the Officers Fund43

because the Officers Fund had withdrawn support for him to run on its

39 Paul Sinclair, witness statement, 27/4/15, para 4. 40 Paul Sinclair, 5/6/15, T:855.11. 41

Paul Sinclair, witness statement, 27/4/14, paras 33-34. 42 Paul Sinclair, 5/6/15, T:855.16-17. 43

Paul Sinclair, 5/6/15, T:854.31.

148

ticket.44 He gave evidence that his reputation around the office had

changed ‘significantly’ since the earlier occasion on which he gave

evidence before the Commission.45 Specifically he gave evidence as

follows:46

Q. So has your reception around the office or your dealings with people around the office changed since you gave evidence before the Commission?

A. Significantly.

Q. In what respect?

A. They don’t - I no longer get allocated any work. I don’t get communicated. No-one talks to me - or rarely talks to me.

Q. Has that been a dramatic change - before you gave evidence and after you gave evidence?

A. Most definitely.

Q. When you say you’re not being allocated work, what do you mean by that?

A. Well, the responsibilities I had before I was invited, or, well, before I was called to this hearing was that I had my

responsibilities as the Assistant Secretary in regards to the day-to-day operations, running of the office, the likes of that. I don’t get involved or I’m not involved in any of those decision-making processes now. I effectively sit in my office.

Q. Has that been the case since you gave evidence to this

Commission on 27 April 2015?

A. Yes.

Q. Was the change sudden?

A. Yes.

44 Paul Sinclair, 5/6/15, T:854.34, 854.37-39. 45 Paul Sinclair, 5/6/15, T:855.42-45. 46

Paul Sinclair, 5/6/15, T:855.42-857.21.

149

Q. Is this the position: before you gave evidence you were

performing your duties in the ordinary way that you had done for many years?

A. Correct.

Q. And then, after you gave evidence, there was a sudden change?

A. Yes.

Q. Have you made any protest or complaint to anyone about this?

A. Who am I going to talk to?

Q. Is the answer no, you haven’t made any complaint or protest?

A. As I said, who am I going to talk to? You know, I was replaced - I don’t know - some three weeks ago now: I’m no longer required to attend the Executive meetings; no longer required to take the minutes of the Executive meetings. They will take their own minutes in future. That was the decision of the Secretary. I have no control over that.

Q. You are the Assistant Secretary, are you not?

A. I am until at least the declaration of the 2015 ballot.

Q. Are you going to stand as Assistant Secretary in the impending elections?

A. As I sit here today, I’ve made no firm decision about my future. I have up until the second week in July to make that decision.

Q. But if you did stand for Assistant Secretary, you would have to do it, as it were, on your own?

A. Correct.

Q. Using your own resources?

A. Correct.

Q. Will you have any access to moneys in the Officers Fund

account?

A. I’ve made a request for the reimbursement of that money. No decision had been made as yet.

150

41. Paul Sinclair agreed that it was probably a fair summation to say that

he was being ‘frozen out’.47

42. Paul Sinclair is no longer the Assistant Secretary of the ETU, NSW

Branch. As a consequence of the ETU NSW Branch election held in

August 2015, Paul Sinclair was succeeded by Dave McKinley.48

Katherine Jackson

43. The most controversial and well-known whistleblower of misconduct

by union officials is Katherine Jackson. Whatever else may be said

about Katherine Jackson (see Chapters 5.1 and 5.2), she exposed

corruption on the part of Michael Williamson and Craig Thomson, and

suffered adverse treatment because of that.

44. For example, after commenting publicly on allegations against Craig

Thomson for misuse of his credit card, Katherine Jackson awoke two

days later to a shovel on her doorstep.49

45. She was the subject of all sorts of verbal abuse, including obscene and

racist abuse, and a deluge of media articles making allegations against

her. This was a powerful demonstration of the extent to which

whistleblowers who expose serious corruption may be the subject of

reprisals of many sorts from their opponents in the organisation, and

supporters of those whose conduct the whistleblowing has exposed.

47 Paul Sinclair, 5/6/15, T:858:22. 48 ETU, ETU & CEPU Quadrennial Election Results, http://www.etunsw.asn.au/general-trade-manufacturing-and-mining/etu-cepu-quadrennial-election-results, accessed 10/12/15. 49

Katherine Jackson, witness statement, 18/6/14, para 196.

151

46. The problems that have plagued the HSU in recent years have been

extensively documented in Chapter 5.2 of Volume 2 of this Report.

That chapter considers the lawless culture in which misappropriation

and corruption by Michael Williamson, Craig Thomson and Katherine

Jackson was allowed to flourish.

Robert Kernohan

47. Robert Kernohan was a member of the AWU Vic who was appalled by

the making of redundancy payments to Bruce Wilson and others while

they were under internal investigation for fraud. He made attempts to

uncover other abuses within the AWU. He went to the police about his

fraud allegations. He began to experience being treated with silence,

being elbowed or nudged in corridors, receiving abusive anonymous

telephone calls, having his office trashed, receiving hate mail and other

unpleasant experiences.50

50 See Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 3.2, pp 233-236, paras 289-294.

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CHAPTER 3

REGULATION OF UNION OFFICIALS

Subject Paragraph

A - INTRODUCTION 1

B - DUTIES OF UNION OFFICERS TO THEIR UNION 7

Statutory duties of union officers 7

Appropriateness of corporate governance model for trade unions:

submissions received

22

Appropriateness of corporate governance model: consideration 27

Are union officers subject to the duties in the Corporations Act

2001 (Cth)?

32

Meaning of ‘officer’ 39

Limitation of statutory duties to those in relation to financial

management

49

Good faith duty 64

Civil penalties for breach of statutory duties 76

153

Subject Paragraph

Criminal penalties for breach of statutory duties 117

Indemnity for civil and criminal penalties 132

Disclosure of material personal interests of officers 139

Requirement of officers in a position of conflict not to participate

in decision-making

149

Enforcement of officers’ duties by members 152

C - STATUTORY DUTIES IN RESPECT OF COURT

ORDERS

162

The problem 162

Remedies under the Fair Work (Registered Organisations) Act

2009 (Cth)

163

D - DISQUALIFICATION OF UNION OFFICERS 167

Existing disqualification regime 167

Defects in the current regime 171

Options for reform: ‘fit and proper person’ qualification 179

Options for reform: banning orders 182

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A - INTRODUCTION

1. This Chapter considers the regulation of union officials.

2. As appears from the discussion in this Chapter, a number of the case

studies considered by the Commission raised significant issues about

the scope and effectiveness of the existing law concerning the duties of

union officers. For example, the existing law appears to have done

nothing to prevent the apparent egregious misappropriations of NUW

assets through abuse of credit cards and the like which Derrick Belan,

his brother and their niece may have perpetrated.1 The same is true of

the unrelated misappropriations of HSU assets carried out through

many techniques by Michael Williamson, Craig Thomson and

Katherine Jackson. It is also true of the misappropriations of TWU

assets via the wrongful acquisition of expensive cars and a false claim

to redundancy which may have been organised by James McGiveron

and Richard Burton. That apparent misappropriation, which TWU

officials may have approved, though carried out within a very short

period of time, was large: over $600,000. Further, the existing law did

not stop Dean Mighell, Branch Secretary of the Victorian Divisional

Branch of the Electrical Energy and Services Division of the CEPU,

from wasting union funds in litigation against his political enemies

which may have been in abuse of process.

3. The balance of the Chapter is divided into three parts.

1 See Report, Vol 2, ch 4.

155

4. The first part, which is the largest, examines the duties of union

officials to their union. It examines the following issues:

(a) whether the officers of trade unions should be subject to

statutory duties and, if so, what statutory duties they should

be subject to;

(b) the appropriate penalties for breach of statutory duties by

officers of registered organisations;

(c) whether it is appropriate to impose criminal penalties for the

most egregious breaches of duty by officers of registered

organisations;

(d) the indemnification of officers of registered organisations for

penalties imposed personally on officers;

(e) the disclosure of material personal interests by officers of

registered organisations; and

(f) the remedies available to members of a registered

organisation to enforce the duties imposed on officers of the

organisation.

5. The second part deals with the statutory duties of union officers and

employees in relation to obeying court orders.

6. The third part deals with the disqualification of persons from holding

office in a registered organisation.

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B - DUTIES OF UNION OFFICERS TO THEIR UNION

Statutory duties of union officers

7. A threshold question that arose out of detailed submissions made to the

Commission by the TWU is whether the officers of trade unions should

be subject to statutory regulation at all.

8. In short, those submissions argued that trade unions, unlike

corporations, are not-for-profit organisations that operate

democratically: ‘a union is a collective which is the expression of the

majority of its members’.2 According to the TWU submission, once

this critical difference between a corporation and trade union is

recognised:3

[I]t becomes apparent that the control and regulation of the union be in the hands of the members rather than placed in the hand of regulators, governments and others who are not members of the union.

9. This submission was made in support of the proposition that there was

no need for greater regulation of trade unions and their officials.4 This

in turn was made in support of an even broader submission that the

‘fundamental distinction between union and corporation … means that

entirely different regulatory systems need to be established for

unions.’5

2 Submissions of the TWU, 14/11/14, para 70. 3 Submissions of the TWU, 14/11/14, para 70 (emphasis added). 4

Submissions of the TWU, 14/11/14, para 61. 5 Submissions of the TWU, 14/11/14, para 22.

157

10. The ‘entirely different regulatory systems’ which need to be

established for trade unions were not specified in the TWU submission.

However, it may be inferred from the TWU’s earlier submission that

the ‘control and regulation of the union be in the hands of the

members’ that the TWU envisaged no external regulation at all,

leaving the members of the union to regulate themselves. Although

not expressly stating as much, the TWU’s submission appears to

envisage a return to the early years of the 20th century when trade

unions were subject to minimal regulation under the Australian

equivalents of the Trade Union Act 1871 (UK).

11. Those who are opposed to statutory regulation of trade unions and their

officials often suggest that particular regulation would be inconsistent

with Australia’s international legal obligations under the International

Labour Organisation (ILO) Convention (No 87) concerning Freedom

of Association and Protection of the Right to Organise.6 However,

there are at least two difficulties with that argument. First, ILO

Convention No 87, like any other treaty that has not been expressly

implemented by Parliament, does not form part of Australian law.7

Secondly, the ILO has recognised the right of States to enact statutory

provisions in relation to trade unions that are eligible to become

registered and which obtain a range of benefits by virtue of

registration.8 Further, the ILO has also recognised the ability of States

6 San Francisco, 9 July 1948 ([1974] ATS 3). Australia ratified the convention on 28 February 1973 and it entered into force for Australia on 28 February 1974. 7

See, eg, Chow Hung Ching v The King (1948) 77 CLR 449 at 478; Bradley v The Commonwealth (1973) 128 CLR 557 at 582; Minster for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 286-287, 298, 303-304, 315. 8

See International Labour Organization, Freedom of Association: Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO (International Labour Office, 5th (revised) ed, 2006), para 306.

158

to enact measures for the protection of members and measures of

supervision over administration to prevent abuses and protect the

members of the trade union from mismanagement of their funds.9

12. Another argument in favour of abandoning statutory regulation of trade

unions officers is that given the substantial changes in Australia’s

industrial relations system from the 1990s onwards the original

justification for that regulation no longer exists.

13. Contrary to the TWU’s argument, there are clear and convincing

arguments in favour of maintaining statutory duties upon trade union

officers backed by appropriate sanctions that can be requested by an

independent regulator.

14. First, the existence of an appropriate statutory sanction acts as an

incentive for union officers to comply with their existing general law

duties to their members. Australian courts, drawing an analogy

between the officers of trade unions and directors of companies, have

repeatedly held that union officers are fiduciaries10 and have general

law duties analogous to those owed by company directors.11 While the

scope of these general law duties has not been exhaustively stated, the

general law duties on union officers include:

9 See International Labour Organization, Freedom of Association: Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO (International Labour Office, 5th (revised) ed, 2006), paras 369, 489. 10

Carling v Platt (1953) 80 CAR 283 at 292-293 per Dunphy J (dissenting), 306-7 per McIntyre J; Allen v Townsend (1977) 31 FLR 431 at 483 per Evatt and Northrop JJ; Stephenson v Squires (unreported, Federal Court of Australia, Sweeney J, 19 June 1980); Jess v Scott (1984) 3 FCR 263 at 287 per Gray J (FC); Ludwig v Harris (1991) 30 FCR 377 at 379 per Beaumont J (Black CJ agreeing); Robertson v State Public Sector Services Federation (1993) 49 IR 356 at 363 per French J. 11

Allen v Townsend (1977) 31 FLR 431 at 483-484 per Evatt and Northrop JJ.

159

(a) a duty to avoid a conflict of interest between the officer’s

interest and duty;12

(b) a duty not to make any secret profit out of the officer’s

position;13

(c) a duty to exercise the officer’s powers bona fide and for a

proper purpose;14 and

(d) a duty to exercise the officer’s powers for purposes honestly

and reasonably believed to be in the best interests of the

members of the union as a whole.15

15. In addition, the ability of an independent regulator to seek the

imposition of penalties helps meet the problem of enforcement.

Generally,16 a union officer’s duties are owed to the union itself, so

that the union is the proper plaintiff to take action to enforce those

duties.17 The practical reality is that the prospect of civil action by a

12

Carling v Platt (1953) 80 CAR 283 at 292-293 per Dunphy J (dissenting), 306-7 per McIntyre J. 13

Carling v Platt (1953) 80 CAR 283 at 292-293 per Dunphy J (dissenting), 306-7 per McIntyre J. 14 Allen v Townsend (1977) 31 FLR 431 at 483-487 per Evatt and Northrop JJ. 15

Ludwig v Harris (1991) 30 FCR 377 at 379 per Beaumont J (Black CJ agreeing). 16 Carling v Platt (1953) 80 CAR 283 at 292-293 per Dunphy J (dissenting), 306-7 per McIntyre J; Allen v Townsend (1977) 31 FLR 431 at 483 per Evatt and Northrop JJ; Stephenson v Squires (unreported, Federal Court of Australia, Sweeney J, 19 June 1980); Jess v Scott (1984) 3 FCR 263 at 287 per Gray J (FC); Ludwig v Harris (1991) 30 FCR 377 at 379 per Beaumont J (Black CJ agreeing); Robertson v State Public Sector Services Federation (1993) 49 IR 356 at 363 per French J. 17

Bailey v Krantz (1984) 55 ALR 345 at 356; Tanner v Darroch (1986) 12 FCR 235 at 253. See generally, Foss v Harbottle (1843) 2 Hare 461; 67 ER 189.

160

union against an officer of the union whilst that officer is in charge of

the union is remote.

16. Secondly, a union registered under the FW(RO) Act is an incorporated

body. By force of s 27 of the FW(RO) Act a registered union is a body

corporate, has perpetual succession, is capable of owning and dealing

with property in its own name and is capable of suing and being sued.

Similar provisions have existed federally since 1904. By virtue of a

registered union’s independent legal existence,18 its members are not

liable for the union’s debts, unless they independently agree to

indemnify the union.19 With the benefits of incorporation come the

burdens of increased regulation on those who conduct the affairs of the

organisation.

17. Thirdly, associations that are incorporated under State law are subject

to legal regulation not dissimilar to that applying to corporations. In

Victoria, the office holders of incorporated associations are subject to

duties very similar to those imposed on directors of companies under

the Corporations Act 2001 (Cth).20 In South Australia, there are

criminal penalties for officers of incorporated associations who breach

their duty to act with reasonable care and diligence, their duty not to

misuse information and their duty not to misuse their position.21 In

18 Williams v Hursey (1959) 103 CLR 30 at 52. 19 Salomon v Salomon & Co [1897] 2 AC 22. It has been said that trade unions are not endowed with ‘one of the main benefits of incorporation - limited liability’: A Forsyth, ‘Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model’ (2000) 13 AJLL 1 at 13. However, this misunderstands the concept of limited liability. The liabilities of a corporation are not limited. Rather, it is the members of the corporation whose liability to contribute to the corporation is limited. 20

Associations Incorporation Reform Act 2012 (Vic), ss 83-85. 21 Associations Incorporation Act 1985 (SA), s 39A.

161

New South Wales, there are criminal penalties for committee members

of an incorporated association who dishonestly misuse their position or

information obtained as a committee member.22 Thus, even if

registered employee organisations were thought to be analogous to

small incorporated associations, it would be expected their officers

would be subject to statutory regulation.

18. Fourthly, there are important differences between the relationship

among the officers of a trade union and their members and the

relationship among the officers of the typical incorporated association

and its members. Union officers occupy an important position of trust

and confidence vis-à-vis their members, particularly in relation to an

area critical to a member’s financial affairs - employment. In addition,

many trade unions in modern Australia are large organisations with

substantial assets. Union officers have control of substantial sums of

‘members’ money’. Control of someone else’s money can create a

strong temptation to misapply it. This supports the need for statutory

regulation of union officers.

19. Fifthly, the statutory rights and privileges conferred on registered

employee organisations and their officials under the FW Act23 justifies

stringent statutory regulation. As one commentator has put it:

‘[U]nions have traditionally accepted this level of regulation as the

22 Associations Incorporation Act 2009 (NSW), ss 32-33. 23 See Chapter 1 of this Volume.

162

price to be paid for the substantial benefits that they have obtained

from participation in the formal industrial relations framework.’24

20. Sixthly, in addition to these privileges, trade unions have the additional

privilege of tax exempt status.25 This too generates a significant public

interest in regulating trade unions and their officers.

21. The majority of submissions received by the Commission in relation to

this issue did not cavil with the proposition that the officers of

registered employee organisations should be subject to statutory

regulation. The more controversial question, as discussed below, is the

appropriate model for that regulatory framework.

Appropriateness of corporate governance model for trade unions: submissions received

22. The central tenet in the submissions advanced by the TWU,

summarised above, is that there is a ‘fundamental difference’ between

companies and trade unions, the former being formed solely to make a

profit and the latter being formed solely to benefit their members. A

related tenet is that there is a difference in functions between trade

union officers and company directors. The argument is that this

difference in purpose and function means that the regulatory regime

that applies to union officers must be different from that which exists

under the Corporations Act 2001 (Cth) in relation to company

directors.

24 A Forsyth, ‘Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model’ (2000) 13 AJLL 1 at 2. 25

See Chapter 1of this Volume, paras 80-81.

163

23. A similar submission was made by the SDA. The SDA submitted that

attempting to equate registered organisations and corporations ‘evinces

unawareness of the history character and purposes for which

organisations are registered and conducted.’26 The submission went

on:27

The elements of trust and responsibility are (to say the least) not less for officials of registered organisations than for directors of companies but they are different.

24. The ACTU advanced this argument in more detail in its submissions to

the Senate Education and Employment Legislation Committee

concerning the Fair Work (Registered Organisations) Amendment Bill

2013:28

A trend in the mode of regulation of registered unions in Australia is to attempt to adopt some elements of corporate regulation into the scheme for regulating unions … Corporate regulation of course is directed toward the protection of the economic interests of investors and creditors (and, to an extent, consumers), and serves a different purpose than [sic] the protection of the interests of union members.

There are some aspects of good governance that are universal (such as honesty, openness and accountability) and some lessons have been learned from regulation (including self-regulation) of other types of entity.

While the rhetoric of ‘regulate unions like corporations’ has some superficial appeal, in reality it is based on a false-equivalence [sic]. Unions are different to [sic] corporations (and to charities and clubs) and Australia rightly regulates each type of entity differently.

Unions do not believe that it is appropriate that unions be regulated in the same way as corporations because the nature of the rights and interests

26 Shop, Distributive and Allied Employees Association Law Reform Submissions, 27/8/15, para 25. 27

Shop, Distributive and Allied Employees Association Law Reform Submissions, 27/8/15, para 26. 28 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee on the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, pp 5-6.

164

that union members have in their union and its activities are [sic] not the same as the economic interests that shareholders have in companies.

We also not [sic] that in corporate regulation, the regulatory regime, investigatory powers and maximum penalties need to be sufficient to cover all types of corporations, including the largest multi-billion businesses and largest and most complicated corporate structures and transactions. In contrast, registered organisations are relatively small, simple organisations with non-commercial purposes.

25. The ACTU made a similar submission to the Senate Education and

Employment Legislation Committee reporting on the Fair Work

(Registered Organisations) Amendment Bill 2014 [No 2]:29

The policy objective of regulating Registered Organisations like corporations becomes increasingly problematic the further the analogy is pressed.

Most corporations are formed for the purpose of generating profit. The members of such a corporation are its shareholders - persons or indeed other corporations that invest their finances in the hope and expectation of a financial return. The obligation upon company directors to act in the best interests of the corporation and its members is an obligation directed to prudent financial management and commercial risk assessment so as to guard against members [sic] funds or return on investment being compromised through careless business decisions or, in an extreme case, fraud. The reasons corporations are regulated the way they are regulated is because they have significant economic power in financial markets, in asset holdings and in the labour market - they directly determine citzens [sic] financial fortunes.

26. On the other hand, a number of other submissions were received which

supported a corporate governance model being applied to the officers

of registered organisations.30 Boral, for example, submitted that the

29 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 19. 30

See, eg, Housing Industry Association Pty Ltd Law Reform Submissions, 21/8/15, pp 4-6; Institute of Public Affairs Law Reform Submission, August 2015, pp 6-8; Grace Collier Submission in response to Issues Paper 2: Duties of Union Officials, 10/7/14; Associations Forum Pty Ltd Law Reform Submissions, 4/9/15, p 1 (Grace Collier submitted that trade union officials should have higher and greater obligations to members than the directors of publicly listed companies have to their shareholders); Carolyn Summers Submission in

165

role that union officials play within trade unions is analogous to that

played by directors within corporations and there should be a

harmonisation of union officials’ duties with those of company

directors.31

Appropriateness of corporate governance model: consideration

27. It is obvious that there is a strong analogy between the officers of

registered organisations and company directors. The analogy has

already been drawn, repeatedly, in the case law.32 Both manage the

affairs of a corporate organisation. Both are responsible for acting in

the best interests of the members of the organisation. Both may be

described, in a practical sense, as being in charge of other people’s

money, with all the responsibilities and temptations that arise from that

state of affairs. Both are fiduciaries.

28. The real issue is the extent to which the analogy is inapt. Accordingly,

there is considerable danger when considering possible changes to the

duties of unions officers with reference to a ‘corporate governance

model’ of adopting a broad ‘all or nothing approach’ without having

response to Issues Paper 2: Duties of Union Officials, undated (received 20/8/2014), p 3 (Carolyn Summers submitted that the fiduciary duties of executive members of a committee of management should be defined similarly to those of a company director); Boral Law Reform Submissions, 2015; Victoria Police Law Reform Submissions,10/9/15, p 26; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 18 (the Australian Chamber of Commerce and Industry submitted that officers of trade unions be subject to statutory regulation and existing regulation be strengthened with regard to transparency and disclosure obligations); Institute of Public Affairs Law Reform Submissions, August 2015, p 2; New South Wales Government, Policy Submission, August 2014, p 2. 31

Boral Law Reform Submissions, 2014, p 1; Boral Law Reform Submissions, 2015, pp 9, 14. 32 See the cases cited in footnote 10 above.

166

regard to the detail. An approach that denies the equivalence of unions

and companies and then concludes therefore there should be no

changes to the statutory duties imposed on union officers is an illogical

and unthinking approach. It is necessary to consider carefully the

differences between the current statutory duties imposed on the officers

of registered organisations and those imposed on company directors.

29. The main statutory duties on officers of registered organisations are set

out in Parts 2 and 3 of Chapter 9 of the FW(RO) Act. Those

provisions replicate the duties introduced into the Workplace Relations

Act 1996 (Cth) in 2002 by the Workplace Relations (Registration and

Accountability of Organisations) Act 2002 (Cth).

30. The duties in Part 2 are based very heavily on the equivalent duties

imposed on company directors by the Corporations Act 2001 (Cth).

However, there are some critical differences. Those critical

differences, which are discussed further below, are as follows:

(a) The statutory form of the duties imposed on the officers of

registered organisations is limited to only those powers and

duties related to the financial management of the organisation

or branch.33

(b) The statutory duty upon the officers of a registered

organisation to act in good faith is only to act in good faith in

33

Fair Work (Registered Organisations) Act 2009 (Cth), s 283. This limitation does not appear in the Corporations Act 2001 (Cth). Statutory duties are also imposed on certain Commonwealth officials by the Public Governance, Performance and Accountability Act 2013 (Cth) in similar terms to those set out in the Corporations Act 2001 (Cth): see ss 25-29. The duties in the Public Governance, Performance and Accountability Act 2013 (Cth) are not limited in the way as those in the Fair Work (Registered Organisations) Act 2009 (Cth).

167

what they believe to be in the interests of the organisation,

rather than in what is objectively the best interests of the

organisation.34

(c) The maximum civil penalties in relation to breaches by the

officers of registered organisations are smaller to a very

remarkable degree than the corresponding maximum civil

penalties for breaches by company directors. The maximum

civil penalty that may be imposed on an officer of a registered

organisation for breach of the statutory duties under ss 285-288 of the FW(RO) Act is $10,800. The maximum civil

penalty that may be imposed on a company director for

equivalent conduct is $200,000.

(d) Officers of a registered organisation are not subject to

possible criminal penalties for dishonest breaches of their

statutory duties. The directors of companies are.35

(e) In contrast to the position under the Corporations Act 2001

(Cth), there are no provisions of the FW(RO) Act prohibiting

a registered organisation from indemnifying its officers for

civil penalties imposed for breach of duty.

(f) The FW(RO) Act does not contain provisions equivalent to

ss 191-196 of the Corporations Act 2001 (Cth) which require

the disclosure by company directors of material personal

interests, and restrict the directors of public companies from

34 Fair Work (Registered Organisations) Act 2009 (Cth), s 286. Compare Corporations Act 2001 (Cth), s 181. 35

Corporations Act 2001 (Cth), s 184.

168

voting on matters in which they have material personal

interests. As noted in Chapter 2, s 148B of the FW(RO) Act

does require organisations to have rules requiring the

disclosure of certain material personal interests.

31. There is an important point that should be emphasised immediately.

Apart from the matter identified in paragraph 30(f), where there are

certain differences between private and public companies, the

additional requirements that apply in respect of companies apply to all

companies whether for profit or not-for-profit, whether big or small.

That is, the directors of small companies (often persons related by

blood or marriage) and the (many) directors of companies having not-for-profit and charitable purposes are all subject to the increased

penalties and the possibility of criminal sanctions.

Are union officers subject to the duties in the Corporations Act 2001 (Cth)?

32. Before analysing in more detail the differences between the duties

imposed on the officers of registered organisations under the FW(RO)

Act and the duties imposed on officers of companies under the

Corporations Act 2001 (Cth), there is a preliminary point.

33. In Health Services Union v Jackson (No 4),36 Tracey J, accepting the

argument of the HSU, expressed the view that the officers of trade

unions were subject to the provisions in ss 180-182 of the

Corporations Act 2001 (Cth). If this were correct, the debate about the

36 [2015] FCA 865.

169

differences between the FW(RO) Act and the Corporations Act 2001

(Cth) would be academic.

34. His Honour’s reasoning37 was that ss 180-182 (and for that matter

ss 183-184) of the Corporations Act 2001 (Cth) apply to ‘officers’ of a

‘corporation’. ‘Corporation’ is defined to include ‘any body corporate

(whether incorporated in this jurisdiction or elsewhere)’. By operation

of s 27 of the FW(RO) Act, registered organisations are bodies

corporate. ‘Officer’ is defined to include a person who makes, or

participates in making, decisions that affect the whole, or a substantial

part of the business of the corporation. Accordingly, senior officers of

a trade union would be ‘officers’ of a ‘corporation’.

35. However, it appears that Tracey J was not taken by the HSU to s 190A

of the Corporations Act 2001 (Cth). That section provides that

Division 1 of Part 2D.1 of the Corporations Act 2001 (Cth), which

includes ss 180-184 of the Corporations Act 2001 (Cth):

does not apply to an act or omission by a director or other officer or employee of a corporation that is a registrable Australian body unless the act or omission occurred in connection with:

(a) the body carrying on business outside its place of origin; or

(b) an act that the body does or proposed to do outside its place of origin; or

(c) a decision by the body whether or not to do or refrain from doing outside its place of origin.

36. ‘Registrable Australian body’ includes a body corporate which is not a

company, an exempt public authority or a corporation sole.38 An

37 [2015] FCA 865 at [55]-[59]. 38 Corporations Act 2001 (Cth), s 9.

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organisation registered under the FW(RO) Act is thus a ‘registrable

Australian body’. The ‘place of origin’ of a body registered under the

FW(RO) Act is the place of the body’s incorporation, which would

presumably be Australia.39

37. Accordingly, it would seem that the effect of s 190A is that the duties

in ss 180-184 of the Corporations Act 2001 (Cth) only apply to

conduct of the officers of a registered organisation if the conduct

occurs in connection with:

(a) the carrying on of business by registered organisation outside

Australia;

(b) an act that the registered organisation does or proposes to do

outside Australia; or

(c) a decision by the registered organisation whether or not to do

or refrain from doing something outside of Australia.

38. Some registered organisations will not do anything outside Australia,

in which case the duties in the Corporations Act 2001 (Cth) will not

apply. However, some other registered organisations - for example,

the Maritime Union of Australia - may engage in a variety of conduct

outside of Australia. In those cases, the officers of the organisation

would be subject to ss 180-184 of the Corporations Act 2001 (Cth) and

in particular criminal liability pursuant to s 184.

39 An alternative may be the State where the head office of the organisation is located.

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Meaning of ‘officer’

39. An initial issue is the scope of the persons subject to statutory duties

contained in ss 285-288 of the FW(RO) Act. Those duties are confined

to ‘officers’ of registered organisations and the branches of registered

organisations.

40. ‘Officer’ is defined in s 6 of the FW(RO) Act as a person who holds an

‘office’ in an organisation or branch. ‘Office’ is currently defined in

s 9 of the FW(RO) Act as follows:40

(1) In this Act, office, in relation to an organisation or a branch of an organisation means:

(a) an office of president, vice president, secretary or assistant secretary of the organisation or branch; or

(b) the office of a voting member of a collective body of the organisation or branch, being a collective body that has power in relation to any of the following functions:

(i) the management of the affairs of the

organisation or branch;

(ii) the determination of policy for the organisation or branch;

(iii) the making, alteration or rescission of rules of the organisation or branch;

(iv) the enforcement of rules of the organisation or branch, or the performance of functions in relation to the enforcement of such rules; or

(c) an office the holder of which is, under the rules of the organisation or branch, entitled to participate directly in any of the functions referred to in subparagraphs (b)(i) and (iv), other than an office the holder of which

40 See also Fair Work Act 2009 (Cth), s 12 which contains an analogous definition of ‘office’ in an industrial organisation.

172

participates only in accordance with directions given by a collective body or another person for the purpose of implementing:

(i) existing policy of the organisation or branch; or

(ii) decisions concerning the organisation or

branch; or

(d) an office the holder of which is, under the rules of the organisation or branch, entitled to participate directly in any of the functions referred to in subparagraphs (b)(ii) and (iii); or

(e) the office of a person holding (whether as trustee or otherwise) property:

(i) of the organisation or branch; or

(ii) in which the organisation or branch has a

beneficial interest.

41. This definition of ‘office’ is also relevant when considering the

circumstances in which a person will be disqualified from holding

‘office’ in a registered organisation.41

42. In submissions to the Commission in response to the Issues Paper,

Master Builders Australia drew attention to the fact that appointed staff

who determine policy will not hold ‘office’ unless the rules of the

organisation expressly provide that they are entitled to exercise that

function.42 They argued that the definition of ‘office’ should be

clarified to include any person involved in the management or control

of a registered organisation.

41 See para 167 and following. 42 Master Builders Australia Submissions in response to Issues paper 2: Duties of Union Officials, 11/7/2014, Attachment B, Submission on Strengthening Corporate Governance of Industrially Registered Organisations - Introducing a New Fit and proper Person Test, 26/8/13, p 10.

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43. In contrast, the Australian Industry Group was opposed to any

amendment to the definition of ‘office’ stating that any such

amendment would create ‘numerous complications’, although the

submission did not state what the numerous complications were.43 It

also submitted that officers are typically elected and are appropriately

differentiated from unelected employees.44 This submission suggested

that the definition of ‘office’ ought not to be expanded to unelected

employees of a registered organisation.

44. The difficulty with excluding unelected officials from the definition of

‘officer’ is that, as was stated in the March 2013 report to the ACTU

Executive by the Independent Panel on Best Practice for Union

Governance:45

… employees of a union or branch may have decision-making roles and responsibilities despite the fact that such employees have no voting rights.

45. The Independent Panel reflected this fact by making a number of

governance recommendations with reference to both officers of a

registered organisations but also relevant employees with decision-making responsibilities.46

43 Australian Industry Group Law Reform Submissions, 21/8/15, p 8. 44 Australian Industry Group Law Reform Submissions, 21/8/15, p 8. 45

Independent Panel on Best Practice for Union Governance, Report to the ACTU Executive to Invite Comment and Discussion, March 2013, p 54. 46 Independent Panel on Best Practice for Union Governance, Report to the ACTU Executive to Invite Comment and Discussion, March 2013, pp 53-56.

174

46. By way of comparison, the definition of ‘officer’ of a corporation in

s 9 of the Corporations Act 2001 (Cth) in addition to number of

specified positions (for example, director, secretary) includes a person:

(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii) who has the capacity to affect significantly the corporation's financial standing; or

(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).

47. Thus, the definition focuses on substance, rather than form. It is

important to capture in the definition of ‘office’ those senior

employees who, although not elected, in fact have management roles

and decision-making responsibilities within a registered organisation or

a branch of a registered organisation and thus to ensure that they are

also held to the same levels of accountability as elected officers. It is

recommended that the definition of ‘office’ be amended to include

additional provisions capturing such persons.

48. A further proposal which has been put forward to the Commission is to

the effect that the definition of office should be deleted and a definition

of ‘officer’ inserted. In this respect it has been submitted that that the

definition of an officer be based on ‘an objective assessment of the

position, responsibilities and role held’.47 The current definition of

‘office’ seems to address the responsibilities and roles and this

submission seems to overlook that a definition of ‘officer’ is already

set out in s 6 of the FW(RO) Act.

47 Associations Forum Pty Ltd Law Reform Submission, 4/9/15, p 5.

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Recommendation 25

The definition of ‘office’ in s 9 of Fair Work (Registered Organisations) Act

2009 (Cth) be amended to include, in addition:

(a) an office of financial compliance officer of the organisation or branch;

(b) an office of a person who makes, or participates in making, decisions

that affect the whole or a substantial part, of the organisation or branch;

(c) an office of a person who has the capacity to affect significantly the

financial standing of the organisation or branch; and

(d) an office of a person in accordance with whose instructions or wishes

the members of the committee of management of the organisation or

branch are accustomed to act (excluding advice given by the person in

the proper performance of functions attaching to the person’s

professional capacity or their business relationship with the organisation

or branch).

Limitation of statutory duties to those in relation to financial management

49. Section 283 of the FW(RO) Act provides as follows:

This Part [ss 282-293] only applies in relation to officers and employees of an organisation or a branch of an organisation to the extent that it relates to the exercise of powers or duties of those officers and employees related to the financial management of the organisation or branch.

Section 283 was originally introduced to the Workplace Relations Act

1996 (Cth) in the Workplace Relations (Registration and

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Accountability of Organisations) Act 2002 (Cth) and has remained

unchanged.

50. Submissions received from Master Builders Australia, the Associations

Forum and the State of Victoria supported the repeal of s 283 of the

FW(RO) Act.48 The Employment Law Committee of the Law Society

of New South Wales neither supported nor opposed the suggestion that

s 283 be repealed.49 However, the Committee submitted that there was

no need for any definition of ‘financial management’ in s 283.50

51. Several issues arise in relation to this section.

52. First, the section confuses the operation of the statutory duties imposed

by ss 285-288 of the FW(RO) Act and the general law duties that are

owed by officers of registered organisations.

53. Section 283 limits the scope of the statutory duties imposed by ss 285-288 of the FW(RO) Act. However, subject to one exception, these

statutory duties are expressly stated51 to be in addition to the existing

equitable and common law duties imposed on the officers of registered

organisations. The exception is that the statutory ‘business judgment

rule’ defence in s 285(2) of the FW(RO) Act is also a defence to the

equitable and common law duties to take reasonable care.

48 Submissions of the Government of Victoria, 28/10/14, p 38; Master Builders Australia Law Reform Submissions, 21/8/15, p 26; Associations Forum Pty Ltd Law Reform Submission, 4/9/15, p 4. 49

Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, p 8. 50 Law Society of New South Wales, Employment Law Committee Law Reform Submissions, 21/8/15, p 8. 51

Fair Work (Registered Organisations) Act 2009 (Cth), s 291.

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54. The general law duties - a number of which are collected in

paragraph 14 above - are almost identical to the statutory duties. Yet

the general law duties are not limited to powers and duties ‘related to

the financial management’ of the registered organisation, but extend

across the entire field of possible activity by officers of the

organisation.

55. It is thus very difficult to understand what legitimate purpose s 283 of

the FW(RO) Act could be thought to have. There are a several reasons

why general law duties may be enacted in statutory form. They

include the following:

(a) Enactment of statutory duties simplifies the law and makes

the law able to be more easily understood.

(b) Penalties (whether civil or criminal) for breach of the

statutory duties indicate society’s disapproval of the conduct

in breach of duty.

(c) Penalties (whether civil or criminal) for breach of the

statutory duties act as a deterrent and encourage the proper

performance of the general law duties.

(d) The ability of an independent statutory regulator to take

action further encourages the performance of the general law

duties.

56. The inclusion of s 283 of the FW(RO) Act serves none of these

purposes. Rather, it would seem that its only purpose is to prevent

officers of registered organisations from being exposed to action by an

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independent regulator in relation to certain types of breaches of duty.

The obvious implication is that breaches of duty by officers in relation

to matters other than those ‘in relation to financial management’ are

unimportant.

57. Secondly, there is no definition of ‘financial management’ set out in

the FW(RO) Act. On a narrow view, only decisions about the actual

management of the finances of a registered organisation are caught by

the section. That would give the statutory duties in ss 285-288 of the

FW(RO) Act a fairly restricted operation. On a broader view,

decisions that have an effect, whether direct or indirect, on the finances

of a registered organisation will be caught. On the current drafting of

s 283, one difficulty with the broader construction is that if it were

accepted it would tend to render s 283 otiose because many decisions

will have an effect on an organisation’s financial position.

58. The problems with the current provision were exposed in the Industry

2020, Building Industry 2000 and IR 21 case studies considered in

2014.52 Submissions by counsel assisting were to the effect that the

conduct by union officers in deciding to host certain events as Building

Industry 2000 (in the case of the CFMEU), Industry 2020 (in the case

of the AWU) or IR21 events (in the case of the NUW) rather than as

union events was conduct in relation to the financial management of

the union.53

52 Royal Commission into Trade Union and Governance, Interim Report (2014), Vol 1, chs 3.3, 3.4, 3.5 respectively. 53

Royal Commission into Trade Union and Governance, Interim Report (2014), Vol 1, ch 3.3, p 377 [124]; ch 3.4, p 419 [103]; ch 3.5, pp 474-475 [123].

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59. However, counsel for Cesar Melhelm argued that conduct in deciding

to host certain events as Industry 2020 events rather than AWU events

was not conduct ‘in relation to the financial management’ of the AWU.

The submission was to the effect that a decision about how to raise

funds was not in relation to the management of funds.54 Given the

uncertainty, the Interim Report did not make any findings as to

whether conduct of this nature was or was not ‘in relation to financial

management’. However, the uncertainty illustrates that reform of

s 283 of the FW(RO) Act is desirable.

60. Thirdly, conduct by officers which may have no direct relation to the

financial management of the organisation may have a very significant

financial effect on its financial position. For example, the conduct of

union officials which amounts to contraventions of laws or breach of

court orders may lead to the imposition of significant penalties or fines

for contempt. The legal costs of proceedings defending this conduct

and the imposition of fines and penalties could substantially diminish

the assets of the relevant union. It seems peculiar that union officers’

statutory duties to the union should not extend to conduct that has an

adverse financial effect on the union.

61. Fourthly, conduct by officers which has no relation to the financial

management of the union may be such an egregious breach of fiduciary

duty that there is a public interest in the officer being liable to pay a

penalty so as to deter future wrongdoing by other officers. For

example, a union official who uses his or her position to obtain a

personal benefit (for example, the provision of free building work)

54 See Royal Commission into Trade Union and Governance, Interim Report (2014), Vol 1, ch 3.3, p 383 [138].

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which could not be obtained by the union arguably cannot breach s 287

of the FW(RO) Act because the officer’s conduct does not relate to the

financial management of the union. Although, depending on the

particular circumstances, it may be that the official is criminally liable

for receiving a secret commission, that will not always be the case.

62. Fifthly, the statutory duties imposed on officers of State registered

organisations in New South Wales, Queensland and Western Australia,

are not limited to matters relating to financial management:

(a) In New South Wales,55 officers are subject to criminal

penalties for acting dishonestly in the exercise of their powers

or the discharge of their duties, with an intention to defraud.

They are also subject to criminal penalties for breaches of the

equivalent of s 287 of the FW(RO) Act up to a maximum of

100 penalty units. There is no provision equivalent to s 283.

(b) In Queensland,56 officers of State registered organisations are

subject to very substantial criminal liability, including

imprisonment for up to five years and a penalty of 3,091

penalty units ($340,010), for breaches of the duties equivalent

to those imposed by ss 285 and 286 of the FW(RO) Act.

There is no provision equivalent to s 283 of the FW(RO) Act.

(c) In Western Australia,57 ‘financial officials’ of State registered

organisations are subject to duties equivalent to those

55 Industrial Relations Act 1996 (NSW), ss 267-268. 56 Industrial Relations Act 1999 (Qld), ss 527-528. 57

Industrial Relations Act 1979 (WA), s 74.

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imposed by ss 285, 287 and 288 of the FW(RO) Act.

‘Financial officials’ are officers of the organisation entitled to

participate directly in the financial management of the

organisation. There is no provision equivalent to s 283 of the

FW(RO) Act.

63. For the reasons above, it is recommended that s 283 of the FW(RO)

Act be repealed to bring the statutory duties on the officers of

registered organisations into line with the duties imposed on those

officers by the general law.

Recommendation 26

Section 283 of Fair Work (Registered Organisations) Act 2009 (Cth) be

repealed to align the statutory duties of officers of registered organisations with

their general law duties.

Good faith duty

64. Section 286 of the FW(RO) Act imposes a duty of good faith on

officers of registered organisations. This section provides that:

286 Good faith—civil obligations

(1) An officer of an organisation or a branch must exercise his or her powers and discharge his or her duties:

(a) in good faith in what he or she believes to be the best interests of the organisation; and

(b) for a proper purpose.

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(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

[Emphasis added]

65. The effect of the italicised words is that an officer of a registered

organisation could only ever breach the duty in s 286(1)(a) of the

FW(RO) Act if the officer did not subjectively believe that what he or

she was doing was in the best interests of the organisation.58 The

italicised words have the further consequence that proof of a

contravention of s 286(1)(a) of the FW(RO) Act will require proof that

the officer did not have a particular subjective belief. Except in

egregious cases, that will often pose a considerable practical challenge.

It may arise in relation to some of the expenditures made by Derrick

Belan on himself at the cost of the NUW when those expenditures

come to be fully investigated.59

66. The comparable duty under s 181(1) of the Corporations Act 2001

(Cth) obliges officers of a corporation to exercise their powers and

discharge their duties ‘in good faith in the best interests of the

corporation’ and ‘for a proper purpose’. Significantly, the language

does not include the words ‘what he or she believes to be’.

67. The language of s 181(1), the structure of the Corporations Act 2001

(Cth) and the section’s legislative history60 point inexorably to the

conclusion that the statutory duty is not satisfied merely because an

officer has a subjective belief that what was done was in the best

58 See, eg, General Manager of the Fair Work Commission v Thomson (No 3) [2015] FCA 1001 at [27], [39], [47]. 59

See Report, Vol 2, ch 4. 60 See Ford, Austin and Ramsay’s Principles of Corporations Law (LexisNexis, October 2015, looseleaf), [8.065], [8.065.6], [8.070.3].

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interests of the corporation. During the Parliamentary debates

concerning the introduction of s 181(1) of the Corporations Act 2001

(Cth), the Labor opposition successfully amended the Corporate Law

Economic Reform Program Bill 1998 (Cth) to remove the additional

words that are presently contained in s 286 of the FW(RO) Act in order

to turn a subjective test into an objective test.61 There are many cases

to the effect that the section imports an objective standard that has

regard to what a comparable person having the same knowledge and

skills as the officer would reasonably have done in the circumstances.62

68. However, more recently some confusion has been sown in this area,

particularly by the decision in Bell Group Ltd (in liq) v Westpac

Banking Corporation, where a range of different views were expressed

about the equivalent general law duty on directors. At first instance,

Owen J expressed the view that the general law duty to act in the best

interests of the corporation has both subjective and objective elements,

that it is largely subjective but that there may be a breach of duty even

if the director believes it is in the best interests of the corporation if it is

a decision no reasonable director could judge to be in the bests in the

corporation.63 On appeal, a variety of views were expressed. Lee AJA

indicated that the general law duty would usually be satisfied if the

61 Commonwealth, Senate, Parliamentary Debates (Hansard), 13 October 1999, pp 9622-9624 (Senator Conroy). 62

See, eg, ASIC v Sydney Investment House Equities Pty Ltd (2008) 69 ACSR 1 at 12 [34], 14 [41] per Hamilton J; Mernda Developments Pty Ltd v Alamanda Property Investments No 2 Pty Ltd (2011) 86 ACSR 277 at 286 [32]-[33] per curiam (VCA); Re Idylic Solutions Pty Ltd [2012] NSWSC 1276 at [1487] per Ward J; ASIC v Australian Property Custodian Holdings Ltd (No 3) [2013] FCA 1342 at [612] per Murphy J. See generally, Ford, Austin and Ramsay’s Principles of Corporations Law (LexisNexis, October 2015, looseleaf), [8.065], [8.065.6], [8.070.3], [8.100] and [8.140]. 63

Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 38 WAR 1 at [4619].

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director subjectively thought the decision was in the best interests of

the corporation, but there would be a breach if the conduct was plainly

unreasonable or irrational.64 Drummond AJA, at the same time as

approving Owen J’s conclusion, said that the test was purely

subjective.65 Carr AJA appeared to accept Owen J’s conclusion.66

69. An obvious reason for adopting the wording of s 181(1) of the

Corporations Act 2001 (Cth) rather than the wording of s 286(1) of the

FW(RO) Act was stated more than 130 years ago by Bowen LJ:67

Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational.

70. A similar point was made by the Companies and Securities Advisory

Committee when it was asked by the Minister for Financial Services

and Regulation to review s 181(1)(a) of the Corporations Act 2001

(Cth) after its enactment. The Committee stated:68

The language of s 181(1)(a) is consistent with the common law test of acting in the best interests of the company, which contains an objective element. A subjective belief, while necessary, does not suffice. By contrast, the original formulation, namely “in good faith in what they believe to be in the best interests of the corporation”, may have permitted directors to act on the basis of eccentric or irrational beliefs. This purely subjective test would therefore be inappropriate.

64 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [923]. 65 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [1988]-[1995]. 66

Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [2795]-[2796]. 67 Hutton v West Cork Railway Co (1883) 23 Ch D 654 at 671. 68

Companies and Securities Advisory Committee, Report to the Minister for Financial Services and Regulation on Sections 181 and 189 of the Corporations Law, October 2000, p 2.

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71. Various submissions to the Commission in relation to this issue

support the removal of the purely subjective test currently found in the

FW(RO) Act.69

72. One significant argument in support of the difference between s 286 of

the FW(RO) Act and the analogous duty in s 181 of the Corporations

Act 2001 (Cth) is that registered organisations, particularly trade

unions, have a range of different and possibly competing interests and

that it would not be possible for officers to act so as to promote the

interests of all of the members.70 Accordingly, it would often not be

possible to make any assessment of what was objectively in the best

interests of the organisation, and so inappropriate to impose a duty on

the officers of registered organisations to act in what is objectively the

best interests of the organisation.

73. Master Builders Australia submitted, in effect, that in the context of

industrial organisations an objective approach to s 286 of the FW(RO)

Act is unworkable and that s 286 of the FW(RO) Act should be

repealed in its entirety and replaced with a statutory rendering of a

fiduciary’s duties.71

74. There is considerable force to the argument that an assessment of what

is in the best interests of an organisation is not readily susceptible of a

single objective answer. There is less force to the argument that this is

more of a problem in relation to industrial organisations. For example

69 Associations Forum Pty Ltd Law Reform Submission, 4/9/15, p 5; Housing Industry Association Pty Ltd Law Reform Submissions, 21/8/15, pp 4-5; Boral Law Reform Submissions, 2014, pp 28-29; Boral Law Reform Submissions, 2015, p 15. 70

Master Builders Australia Law Reform Submissions, 21/8/15, pp 26-27. 71 Master Builders Australia Law Reform Submissions, 21/8/15, pp 26-27.

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there are many cases where the directors of a company will have to

make decisions balancing the competing interests of different classes

of members. In such cases, the duty to act in the best interests of the

company (which ordinarily means the members as a whole) requires

directors to act fairly between the various classes of member.72 The

general law in relation to trade union officials is to the same effect.73

75. An approach that balances the need to avoid a purely subjective

standard at the same as recognising the difficulties of a court imposing

what it thinks to be in the best interests of the organisation is to require

the officer’s belief to be held honestly and reasonably. This is the

general law formulation of the duty on union officers,74 and is

consistent with the cases that have interpreted s 181(1) of the

Corporations Act 2001 (Cth) referred to above.75 Under this test, it is

not enough that the officer holds a particular view. It must be a view

which a person in the same position as the officer, having the same

knowledge and skills, could reasonably have formed.

Recommendation 27

Section 286(1)(a) of the Fair Work (Registered Organisations) Act 2009 (Cth)

be amended by inserting the words ‘honestly and reasonably’ before the word

‘believes’.

72

Mills v Mills (1938) 60 CLR 150 at 164 per Latham CJ; Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 835 per Lord Wilberforce. 73 Allen v Townsend (1977) 31 FLR 431 at 486 per Evatt and Northrop JJ. 74

Ludwig v Harris (1991) 30 FCR 377 at 379 per Beaumont J (Black CJ agreeing). 75 See the cases cited in footnote 62 above.

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Civil penalties for breach of statutory duties

76. The duties created by ss 285-288 of the FW(RO) Act are civil penalty

provisions.76 The consequence is that the General Manager of the

FWC may apply to the Federal Court for the imposition of a pecuniary

penalty for contravention of those provisions.

77. Presently, the maximum penalty for a contravention of a civil penalty

provision is 300 penalty units for a body corporate and 60 penalty units

‘in any other case’.77 Currently, a penalty unit is $180.78

Consequently, the current maximum penalty that can be imposed on an

officer of a registered organisation for breach of one of the duties in

ss 285-288 of the FW(RO) Act is $10,800.79

78. This penalty may be contrasted with s 1317G(1) of the Corporations

Act 2001 (Cth) which imposes a maximum civil penalty of $200,000

for contraventions of the equivalent directors’ duties that:

(a) materially prejudice the interests of the corporation, or its

members; or

(b) materially prejudice the corporation’s ability to pay its

creditors; or

76 Fair Work (Registered Organisations) Act 2009 (Cth), s 305. 77 Fair Work (Registered Organisations) Act 2009 (Cth), s 306. 78

Crimes Act 1914 (Cth), s 4AA. From 1 July 2018, the amount is subject to annual CPI indexation. 79 A body corporate that is involved in a contravention by an officer of an organisation (which obviously cannot be the organisation itself) is subject to a maximum civil penalty of 300 penalty units, which is equivalent to $54,000.

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(c) is serious.

No pecuniary penalty is payable if the contravention does not fall

within one of those three classes.

79. The difference between the maximum penalties is stark. The directors

of not-for-profit companies are subject to a maximum possible penalty

of $200,000 for breach of their duties. Yet the officers of a registered

trade union are subject to a maximum penalty of only $10,800 for the

same conduct.

80. Since 2013, the current Federal government has attempted three times

to introduce legislation increasing the maximum penalties for breach of

ss 285-288 of the FW(RO) Act.80 The most recent attempt to increase

the penalties was set out in the Fair Work (Registered Organisations)

Amendment Bill 2014 [No 2] (Cth), which was introduced to the House

of Representative on 19 March 2015. On 17 August 2015 the Senate

negatived the Bill. That Bill proposed amending the penalties for

breach of ss 285-288 of the FW(RO) Act to provide for a maximum

penalty of:

(a) 1,200 penalty units (currently $216,000) for a ‘serious

contravention’ of those sections; and

80 Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), Fair Work (Registered Organisations) Amendment Bill 2014 (Cth) and the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth) have each proposed increasing the maximum pecuniary penalties for breach of ss 285-288 of the Fair Work (Registered Organisations) Act 2009 (Cth).

189

(b) 100 penalty units (currently $18,000) for all other breaches of

those sections by officers.81

81. A ‘serious contravention’ was defined in the Bill82 as a contravention

that:

(a) materially prejudices the interests of the organisation or

branch, or members of the organisation or branch; or

(b) materially prejudices the ability of the organisation or branch

to pay its creditors; or

(c) is serious.

The definition of serious contravention was based on s 1317G(1)(b) of

the Corporations Act 2001 (Cth).

82. More recently, the Australian Labor Party has, notwithstanding its

repeated opposition to the various Bills referred to above, adopted a

policy that, subject to one important matter, is very similar to the

current government’s proposal. The Australian Labor Party’s policy is

to increase the existing penalties to $216,000 for serious breaches by

paid officers of their statutory duties. A ‘serious’ breach will include a

breach that ‘materially prejudices’ the interest of the organisation or its

81 See Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), Sch 2, Part 1, items 149-162. 82

See Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), Sch 2, Part 1, item 4.

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members.83 The important distinction is, of course, that the increased

penalties will only apply to paid officials of the organisation.

83. The Commission received a number of submissions supporting the

introduction of higher penalties for breaches of ss 285-288 of the

FW(RO) Act.84

84. The MUA however, has argued (although not in submissions to the

Commission) that the increase in penalties proposed by the Federal

government is ‘manifestly unfair’.85 The ACTU has also argued that

the proposed maximum penalties are ‘excessive’.86 It has also

criticised the fact that because the proposed maximum penalties in

relation to registered organisations are expressed in terms of penalty

units, the proposed maximum penalty in relation to breaches by

officers of registered organisations is in fact greater than those

penalties imposed on company directors.87 It has also argued that the

83 Australian Labor Party, ‘Fact Sheet: Better Union Governance’, released 7/12/15, pp 1-2. 84 Boral Law Reform Submissions, 2015, p 18; Master Builders Australia Law Reform Submissions, 21/8/15, p 28; Grace Collier Submission in response to Issues Paper 2: Duties of Union Officials, 10/7/2014, p 2; Institute of Public Affairs Law Reform Submissions, August 2015, pp 6-7. 85

Maritime Union of Australia, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 9. 86

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 17. 87

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 16; Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 11.

191

proposed definition of ‘serious contravention’ is not well-suited to

registered organisations and is, in part, circular.88

85. The Australian Industry Group had previously expressed concerns

similar to the ACTU. They suggested that there be a maximum civil

penalty of 200 penalty units (or $36,000) for an individual who

contravenes ss 285-288 of the FW(RO) Act.89

86. The various submissions raise two main issues. First, should the civil

penalties for breach of ss 285-288 be increased? Secondly, if so,

should the civil penalties be brought in line with the penalties imposed

on directors of corporations? If not, how else should the existing

maximum penalties be altered?

87. In relation to the first issue, it is difficult to see how, objectively, a

maximum penalty of $10,800 imposes much of a deterrent to officers

who breach their duties, or is much of a punishment. It must be

recalled that courts rarely, if ever, impose the maximum penalty. By

way of comparison, the secretaries of many large unions are paid in

excess of $150,000 per year, with some - such as Michael Williamson

and Katherine Jackson - paid well in excess.

88. Of course, it is true that a union or other registered organisation that

suffers damage as a result of a breach of statutory duty may seek to

88 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 17. 89

Australian Industry Group, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), pp 14-15.

192

recover that damage from the officer.90 But the recovery of

compensation is directed at restoring the union or registered

organisation to the position it should have been in, rather than seeking

to punish the wrongdoer and seeking to deter further wrongdoing.

89. Put shortly, the existing civil penalties under the FW(RO) Act for

breaches of ss 285-288 of the FW(RO) Act are manifestly inadequate

to act as an effective deterrent. They are manifestly inadequate to

protect members of organisations from improper conduct by officers.

They are manifestly inadequate to mark society’s disapproval of the

conduct concerned. They are utterly derisory. They should be

increased. It must be remembered that the present suggestion is only

that the maximum possible penalty be increased. The amount of

penalty actually awarded in each case will be determined by a court

after close consideration of all relevant facts.

90. The leads to the second issue. Should the penalties be aligned

generally with those in the Corporations Act 2001 (Cth)?

91. There appear to be two main, and interlinked, arguments why the

penalties should not mirror those in the Corporations Act 2001 (Cth).

92. The first is that registered organisations are different from corporations

and that it is therefore not appropriate for the penalties to be the same.

The main relevant differences identified by the ACTU are:91

90 Fair Work (Registered Organisations) Act 2009 (Cth), s 307. 91 See the extracts from the submissions quoted in paras 24-25 above.

193

(a) Corporations are formed for the purpose of generating profit

and the reason that they are regulated is because they can

directly determine the ‘financial fortunes’ of members. In

contrast, unions are not formed to generate profit for members

and the interests of union members in their union are different

from the financial interests of shareholders in their company;

(b) The Corporations Act 2001 (Cth) needs to cover the whole

range of corporations including multi-billion dollar

businesses. In contrast, registered organisations are

‘relatively small, simple organisations with non-commercial

purposes’.

93. The second argument is that, unlike corporations, many employee and

employer organisations are run solely by volunteers for the benefit of

members, and the imposition of substantial penalties on officers of

those organisations might deter individuals from taking up office in

such organisations.

94. The first argument does not withstand scrutiny.

95. First, not all companies are formed to generate profit. There are a

number of not-for-profit companies, companies having charitable

purposes and mutual companies limited by guarantee which are not

directed to deriving profit for their members. Yet they are all subject

to the same regulation under the Corporations Act 2001 (Cth).

96. Secondly, far from all registered organisations are ‘relatively small,

simple organisations’. Large national unions, such as the CFMEU,

MUA and the AWU, have substantial assets. They have many

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thousands of members. They operate branches across different

jurisdictions. They employ large numbers of employees. They

generate tens of millions in membership dues annually. They generate

millions in commercial enterprise and agreements with third parties.

They are trading corporations in the constitutional sense. They are big

businesses.

97. Thirdly, whilst the interest that union members have in their union is

different from the interest that shareholders have in a company it is no

less important. Arguably it is more important. In the main, workers

join a union because the union provides, in return for the membership

dues paid, many services that are essential to the workers’ livelihoods

and working conditions and some services that are beneficial for

workers who fall on evil days. Union officials are fiduciaries. They

must act for the benefit of the members.

98. The second argument does not fare much better.

99. First, the penalties are only available for wrongdoing. Honest and

diligent officers have nothing to fear. In relation to the possibility of

liability for negligence, s 285(2) of the FW(RO) Act provides a very

broad business judgment defence.

100. Secondly, the penalties are maximum penalties, not minimum penalties.

101. Thirdly, many employee organisations at least are not run by

volunteers but by officers who receive substantial salaries.

102. Fourthly, not-for-profit and charitable corporations can also be run by

volunteers. It is has not been suggested to the Commission that the

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obligations under the Corporations Act 2001 (Cth) have had a chilling

effect on the charity and not-for-profit sector.

103. Fifthly, officers of State registered organisations in Queensland are

already subject to criminal penalties of up to 5 years imprisonment or a

penalty of $340,010 for breaches of the duties equivalent to those in

ss 285-286 of the FW(RO) Act. It was not suggested that this penalty

had deterred honest individuals from participating in the affairs of

Queensland registered organisations.

104. In short, the distinctions between corporations and registered

organisations are, in relation to the question of civil penalties, either

false or employed to lead to misleading conclusions. Registered

organisations are not the same as corporations. But in determining

what maximum civil penalties should be available for breaches of the

same duties there is no relevant difference.

105. Further, any residual concern about the effect of substantial penalties

can be accommodated by adopting a differential maximum penalty

regime.

106. One type of regime would be to have different maximum penalties

depending on the size of the organisation. However, as noted in the

Discussion Paper, there are considerable practical difficulties with such

an approach.92

107. The other type of regime is to have different maximum penalties

depending on the gravity of the contravention involved. Such a regime

92 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, p 53.

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should alleviate any remaining concern that officers of organisations

would be unduly deterred from standing for office by the potential for

heavy penalties being imposed for honest and trivial breaches of

duty.93 This differential regime is the approach in the Corporations

Act 2001 (Cth) and is the current approach proposed by the Federal

government.

108. The differential regime proposed by the Australian Labor Party, which

only applies higher penalties to paid officers, is not recommended.

Why should an unpaid officer who misappropriates funds be

automatically subject to a lesser maximum penalty? An unpaid officer

who dishonestly misappropriates a substantial amount of members’

funds may be deserving of a substantially greater penalty than a paid

officer who negligently wastes a much smaller amount. Furthermore,

whether or not an officer is paid is merely one matter that should be

considered the gravity or seriousness of the conduct involved. It is

recommended that this be left to the courts to determine on a case by

case basis.

109. At this point, two criticisms of the proposals in the Fair Work

(Registered Organisations) Amendment Bill 2014 [No 2] (Cth) should

be discussed.

110. The first criticism, made by the ACTU, is that the government’s

current proposals will mean that the officers of registered organisations

are subject to greater penalties than company directors. That is so for

two reasons. First, because the proposed amendments to the FW(RO)

Act are made with reference to ‘penalty units’ rather than a fixed

93 See Master Builders Australia Law Reform Submissions, 21/8/15, p 28.

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amount of $200,000, officers of a registered organisations are subject

to potentially greater penalties. Secondly, under the Corporations Act

2001 (Cth), unless the breach of duty falls into one of the relevant

classes of more serious contravention, the director is not liable to any

penalty. In contrast, under the proposed reforms to the FW(RO) Act,

officers will be subject to a maximum penalty of 100 penalty units for

contraventions of ss 285-288 of the FW(RO) Act that are not serious.

111. The second criticism, made by the ACTU and the Australian Industry

Group, is that the definition of ‘serious contravention’ (set out in para

81 above) is inappropriate. The ACTU’s submission to the Senate

Education and Employment Legislation Committee on the Fair Work

(Registered Organisations) Amendment Bill 2013 (Cth) (which is

relevantly identical to the most recently rejected Bill) on this topic was

as follows:94

[T]he provision does not translate well into the sphere of regulating registered organisations. The first limb (“a serious contravention is … a contravention that materially prejudices the interests of the organisation or branch, or the members of the organisations or branch”) is problematic because its function in the Corporations Act is to address conduct which impinges in the capacity of the company to achieve profit for the company and deliver a financial return to shareholders (i.e. “members” of the Company). These are not the bases of association that underpins unionism. The second limb (“a serious contravention is … a contravention that materially prejudices the ability of the organisation or branch to pay its creditors”) has little relevance where registered organisations are under no general obligation to generate profit or indeed remain solvent. The third limb is [sic] (“a serious contravention is … a contravention that is serious”) is circular in this context given the result and function the definition serves - is the necessary implication the legislature intends to impose penalties of 100 or 500 penalty units for contraventions that a Court would not regard as serious?

94 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 17.

198

112. There is considerable force to the ACTU’s first criticism, so far as it

goes. There is no obvious justification for subjecting the officers of

registered organisations to greater maximum penalties than officers of

corporations.

113. However, an obvious solution to the different maximum penalties is to

amend the Corporations Act 2001 (Cth) so that the civil penalties in

s 1317G are not made with reference to a fixed amount. The

maximum amount of $200,000 in s 1317G(1) of the Corporations Act

2001 (Cth) has remained unchanged since 2002. Since 2002, the value

of a penalty unit has increased from $110 to $180 largely reflecting

increases in the consumer price index. Most penalties in

Commonwealth legislation are fixed with reference to penalty units.

114. In relation to the criticism about the two levels of penalty proposed

under the FW(RO) Act, the ACTU’s criticism also has force. If a court

does not consider the contravention ‘serious’ it is unlikely that the

court will impose a penalty anywhere close to 100 penalty units.

Further, it is precisely in relation to this kind of conduct (non-serious

breaches) that the registered organisations regulator would be expected

not to commenced proceedings but to use its proposed power to obtain

an enforceable undertaking.

115. The ACTU’s criticisms of the definition of ‘serious contravention’ are

less cogent. The first and second limbs are perfectly capable of ready

application to registered organisations. The policy proposed by the

Australian Labor Party recognises this in respect of the first limb.

Further, the third limb in substance is not circular. Instead, it means

that if the Court concludes that a contravention is serious for reasons

other than those specified in the first and second limbs the Court may

199

impose a civil penalty. A contravention might be serious for a number

of reasons, for example:

(a) because the contravention was dishonest, reckless or grossly

negligent;

(b) because the contravention was negligent and led to significant

loss or damage to the organisation; or

(c) because a particular contravention was part of a repeated

pattern or course of conduct.

116. Rather than seeking to state prescriptively the circumstances when a

contravention may be serious it is considered better to leave the matter

to the courts to determine on a case by case basis.

Recommendation 28

The civil penalties for contravention of ss 285-288 of the Fair Work (Registered

Organisations) Act 2009 (Cth) be substantially increased. A distinction should

be drawn between a ‘serious contravention’ and other contraventions. The

maximum penalty for a ‘serious contravention’ should be 1,200 penalty units

(currently $216,000) with no penalty for a contravention that is not a ‘serious

contravention’. No distinction should be drawn between paid officers and

volunteers. ‘Serious contravention’ should be defined as proposed in the Fair

Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth).

Consideration also be given to amending the Corporations Act 2001 (Cth) to

specify the maximum penalty for breaches of directors’ duties by reference to

1,200 penalty units rather than the fixed amount of $200,000.

200

Criminal penalties for breach of statutory duties

117. A further important difference between the duties under the FW(RO)

Act and the Corporations Act 2001 (Cth) relates to the sanctions for

breach of these duties. Unlike the position under s 184 of the

Corporations Act 2001 (Cth), there are no provisions in the FW(RO)

Act that make dishonest or reckless breaches of ss 286, 287 or 288 of

the FW(RO) Act a criminal offence. The maximum penalty for an

officer who is convicted of an offence under s 184 of the Corporations

Act 2001 (Cth) is five years imprisonment or 2,000 penalty units

($360,000) or both.95

118. Since 2013, the current Federal government has attempted three times

to introduce provisions to the FW(RO) modelled on s 184 of the

Corporations Act 2001 (Cth).96 The most recent attempt was set out in

the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2]

(Cth). That bill proposed the introduction of a new s 290A to the

FW(RO) Act. In substance, the proposed amendment would expose an

officer of a registered organisation who intentionally or recklessly

breaches his or her statutory duties under ss 286-288 of the

Corporations Act 2001 (Cth) to criminal sanctions. On 17 August

2015 the Bill was defeated in the Senate.

119. Although the Commission did not receive many submissions on this

topic, all those received supported the introduction of criminal

95 Corporations Act 2001 (Cth), Sch 3, item 30. 96 Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), Fair Work (Registered Organisations) Amendment Bill 2014 (Cth) and the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth) have each proposed the introduction of criminal penalties.

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penalties for certain breaches of statutory duties by officers of

registered organisations.97

120. However, in its submission in response to the Issues Papers, the

Australian Industry Group expressed its view that it was not necessary

to introduce criminal offences into the FW(RO) Act.98 A number of

reasons were given:

(a) Criminal liability for recklessness was too great a burden on

the many unpaid volunteers who are officers of registered

organisations.

(b) Criminal offences would operate as a major disincentive to

existing voluntary officers of registered organisations

continuing in their roles, and would deter other people from

holding office.

(c) There are existing criminal law offences (for example, fraud

and theft) that already apply.

97 Boral Law Reform Submissions, 2015, pp 22-23; Master Builders Australia Law Reform Submissions, 21/8/15, pp 28-29; Joel Silver, Submission in Response to Issues Papers, undated (received 14/7/14), p 7. 98

Australian Industry Group, Submissions in Response to Issues Papers 1-3, 11/7/14, p 10.

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121. In its submissions in relation to the Fair Work (Registered

Organisations) Amendment Bill 2013 (Cth), the ACTU said in relation

to proposed s 290A:99

Whilst we recognise that the conduct that would amount to breaches of the proposed duties are sufficiently serious to attract criminal sanctions, we question whether the amendments would add any value to the existing legal framework.

122. The ACTU went on to make two arguments. First, that it was ‘self

evident that there is no parallel between the nature of the power

exercised by corporations and the power exercised by unions’100 and

hence if criminal penalties were appropriate for corporations they are

not appropriate for unions. Secondly, the ACTU argued that the

criminal offences created by s 184 of the Corporations Act 2001 (Cth)

are in fact inappropriate vis-à-vis corporations and accordingly should

not be extended to registered organisations. In short, the ACTU argued

that ‘it is the regulation of corporations, not registered organisations,

that is out of step.’101

99 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 18. 100

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 20. 101

Australian Council of Trade Unions, Submission to the Senate Standing Legislation Committee on Education and Employment on the Fair Work (Registered Organisations) Amendment Bill 2013, 22/11/13, p 28.

203

123. The ACTU again advanced this submission in response to the Fair

Work (Registered Organisations) Amendment Bill 2014 [No 2]

(Cth):102

We have made the case in previous submissions that specialised statutory offences for conduct that is already punishable by the criminal law is an entirely unnecessary addition to the Act, that the corresponding provisions in the Corporations Act have been likewise criticised.

124. The submission continued:103

The matters concerning the HSU provide concrete evidence that that [sic] such criminal matters are capable of being pursued using criminal law. It is true that the penalty of $25,000 plus a compensation order of $5,650 ultimately imposed upon Thomson after his appeal was less than that which might have been expected by some observers. This is because only theft charges survived the appeal. The findings on the charges of obtaining a financial advantage by deception were set aside on appeal essentially because the Police [sic] had incorrectly particularised the “financial advantage”…

125. The last point in the ACTU’s submission immediately highlights one

of the weaknesses in relying solely on specific State law criminal

offences. The State laws dealing with fraud and theft are highly

complex. For example, in New South Wales,104 there are different

offences with differing elements of larceny, larceny by a bailee,

larceny by a servant, embezzlement by a servant and fraud. The

offences differ between jurisdictions. The existence of a standalone

general criminal offence for serious breaches of officers’ duties can be

a useful weapon in punishing and deterring wrongdoing.

102 Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 12. 103

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), 30/6/15, p 12. 104

Crimes Act 1900 (NSW), ss 116, 125, 156, 157, 192E.

204

126. A further argument by the ACTU against the introduction of criminal

penalties has been put thus:105

In relation to companies, the public sector regulator ASIC has not been much attracted to the use of criminal proceedings. No doubt the very high standards of proof attaching to such proceedings have been a factor in this.

127. This argument is not made out factually. Statistics provided to the

Commission by ASIC in relation to prosecutions for offences against

s 184 of the Corporations Act 2001 (Cth) show that since 2002, ASIC

has instituted 102 criminal prosecutions, 79 of which resulted in the

offence being proved. Of these 79 successful prosecutions, there were

45 in which a term of imprisonment was imposed.

128. The argument that the imposition of criminal penalties would operate

as a major disincentive for individuals to act in employer or employee

organisations must also be rejected.

129. There can be no serious suggestion that the introduction of criminal

penalties for dishonest or reckless breaches of ss 286-288 of the

FW(RO) Act will deter honest and diligent individuals from

volunteering to participate in employee or employer organisations.

Under the Criminal Code (Cth) ‘recklessness’ requires the accused to

be aware of a substantial risk of a result or circumstance occurring, and

105 Independent Panel on Best Practice for Union Governance, Report to the ACTU Executive to Invite Comment and Discussion, March 2013, p 31. See also Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 27.

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in the circumstances known to the accused it must be unjustifiable to

take that risk.106 That is a relatively demanding standard.

130. Further, any provision based on s 184 of the Corporations Act 2001

(Cth) would only apply to those individuals who are dishonest or

reckless in their breaches of duty. Most rational observers would agree

that there is no place for dishonest or reckless persons in the affairs of

registered organisations. Significantly, s 184 of the Corporations Act

2001 (Cth) does not apply in relation to an officer’s duty to take due

skill and care, so that persons who are merely negligent (even grossly

negligent) cannot be criminally liable.

131. Overall, it is recommended that provisions modelled principally on

s 184 of the Corporations Act 2001 (Cth) be introduced into the

FW(RO) Act. As s 184(1) of the Corporations Act 2001 (Cth) is

currently drafted, it is not clear what, if anything, the word

‘intentionally’ adds in the phrase ‘intentionally dishonest’, particularly

when regard is had to the fact that under the Criminal Code (Cth),

dishonesty usually means dishonest according to the standards of

ordinary people, and known by the defendant to be dishonest according

to the standards of ordinary people.

106 Criminal Code (Cth), s 5.4.

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Recommendation 29

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended by

introducing a new s 290A that imposes criminal liability on officers of

registered organisations or branches who dishonestly or recklessly breach the

statutory duties imposed on them by ss 286-288 of the Fair Work Registered

Organisations Act 2009 (Cth).

The section be modelled principally on s 184 of the Corporations Act 2001

(Cth), except that the reference in s 184(1) to ‘intentionally dishonest’ should be

replaced by ‘dishonest’. The maximum penalty should be the same as that

under the Corporations Act 2001 (Cth), being 2,000 penalty units ($360,000) or

five years’ imprisonment, or both.

Indemnity for civil and criminal penalties

132. In a relatively recent decision concerning the imposition of civil

penalties against CFMEU officials for contraventions of right of entry

provisions, Flick J noted in relation to the penalty to be imposed on the

individuals concerned that:107

A penalty, if it were to be paid or reimbursed by an employing union, would cease to act as a deterrent to the contravening “individual”. An “individual” so reimbursed could act with impunity in full knowledge that his employing union conferred what could be seen as a licence for him to continue his past transgressions.

133. Accordingly, Flick J made an order requiring the CFMEU officials

concerned to pay the penalties imposed for contraventions of the

FW Act personally.

107 Director of the Fair Work Building Industry Inspectorate v Bragdon (No 2) [2015] FCA 998 at [26].

207

134. In a subsequent decision, Jessup J refused to make such an order in

relation to another CFMEU official on the basis that such an order

would be difficult to enforce.108

135. Currently, there are no provisions in the FW(RO) Act that prohibit

organisations exempting, indemnifying or reimbursing their officers

for penalties imposed for breach of duty or other contraventions of the

FW Act or the FW(RO) Act or for fines incurred during their activities

undertaken into connection with the registered organisation. The

consequence of such reimbursement is that penalties imposed on

individual have no deterrent effect.

136. Provisions prohibiting companies indemnifying their officers for

liabilities are found in ss 199A-199C of the Corporations Act 2001

(Cth).109 Section 199A of the Corporations Act 2001 (Cth) prohibits a

company exempting or indemnifying a company director or officer

from various liabilities, including pecuniary penalties for breach of

duty. Contravention of s 199A of the Corporations Act 2001 (Cth) is a

criminal offence of strict liability.110 The maximum fine is a paltry

five penalty units ($900) for a contravention by an individual and 25

penalty units ($4,500) for a contravention by a body corporate.111

Section 199B of the Corporations Act 2001 (Cth) prevents a company

from paying insurance premiums for an insurance contract against a

liability arising out of conduct involving a wilful breach of duty in

108

Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1173 at [37]-[40]. 109 For consideration of the scope of these provisions see P Herzfeld, ‘Still a troublesome area: Legislative and common law restrictions on indemnity and insurance arrangements effected by companies on behalf of officers and employees’ (2009) 27 C&SLJ 267. 110

Corporations Act 2001 (Cth), s 1311(1), (5), (6). 111 Corporations Act 2001 (Cth), s 1311(1), (5).

208

relation to the company, or a contravention of ss 182 or 183 of the

Corporations Act 2001 (Cth). It too is an offence of strict liability,

with a similar paltry penalty.112 Section 199C of the Corporations Act

2001 (Cth) provides that nothing in ss 199A or 199B authorises

anything that would otherwise be unlawful and anything the purports

to indemnify or insure a person against a liability is void to the extent it

contravenes ss 199A or 199B.

137. The principle behind ss 199A-199C of the Corporations Act 2001

(Cth) is straightforward. If company directors are entitled to be

indemnified for civil penalties imposed on them for breach of their

duties to the company or for other breaches the penalties will not have

much of a deterrent effect, particularly where the directors in question,

or other directors sympathetic to them, control the board.

138. Clearly, as Flick J pointed out, the same policy argument applies in the

context of registered organisations. If an officer of a registered

organisation subject to a civil penalty for contravention of a provision

of the FW Act or the FW(RO) Act can have the benefit of an

indemnity, the deterrent effect of the penalty is substantially lessened if

not extinguished. Similarly, if an official fined for contempt is

indemnified by the union no consequences are felt personally by the

official. More generally, members’ funds should not be used, whether

directly or indirectly, to pay for breaches of the law by union officials.

112 Corporations Act 2001 (Cth), Sch 3, item 34.

209

Recommendation 30

New s 293A be introduced to the Fair Work (Registered Organisations) Act

2009 (Cth) prohibiting an organisation or a branch of an organisation (or any

related entity of the organisation or branch including any State registered

organisation or branch) from indemnifying, paying or reimbursing an officer of

the organisation or branch for any fine or civil penalty imposed on the officer

for conduct in connection with the organisation or branch.

The provision may usefully be based on ss 199A-199C of the Corporations Act

2001 (Cth). Contravention should be a criminal offence of strict liability. An

organisation that contravenes the provision should be subject to a maximum

penalty of 500 penalty units ($90,000) and every officer involved in a

contravention should be subject to a maximum penalty of 100 penalty units

($18,000). Consideration should be given to reviewing the penalties under

ss 199A and 199B of the Corporations Act 2001 (Cth).

Disclosure of material personal interests of officers

139. The FW(RO) Act was amended in 2012113 to introduce new obligations

in s 148B of the FW(RO) Act in relation to the disclosure of material

personal interests by officers of organisations. Section 148B of the

FW(RO) Act came into operation on 1 January 2014.

140. Relevantly, s 148B of the FW(RO) Act requires that the rules of a

registered organisation or branch of a registered organisation must

require:

113 Fair Work (Registered Organisations) Amendment Act 2012 (Cth).

210

(a) disclosure by each officer of the organisation (or branch) to

the organisation (or branch) of any material personal interest

in a matter than relates to the affairs of the organisation (or

branch) that the officer has or acquires, or a relative of the

officer has or acquires;114 and

(b) disclosure to the members of the organisation (or branch) of

any interests disclosed by officers under the rules.115

141. This provision was introduced by an Australian Labor Party

government as part of its response to the well-publicised misconduct

by officers within the HSU. The requirement of officers to disclose

material personal interests has obvious sense. It is important that those

who are making decisions in an organisation or branch are aware of

any matters that may potentially influence others in the decisions they

make.

142. Section 148B of the FW(RO) Act differs in a number of respects from

a provision in the Corporations Act 2001 (Cth) which is comparable

but not equivalent. Section 191(1) of the Corporations Act 2001 (Cth)

requires a director of a company who has a material personal interest in

a matter that relates to the affairs of the company to give the other

directors notice of the interest, unless one of the various exceptions in

s 191(2) applies. Directors are permitted to give standing notice of an

114 Fair Work (Registered Organisations) Act 2009 (Cth), s 148B(1), (2). 115 Fair Work (Registered Organisations) Act 2009 (Cth), s 148B(4), (5).

211

interest.116 Contravention of s 191(1) is a criminal offence, punishable

by imprisonment for three months, or ten penalty units or both.117

143. The obvious differences between s 148B of the FW(RO) Act and

s 191(1) of the Corporations Act 2001 (Cth) include the following.

(a) Disclosure under s 148B of the FW(RO) Act applies to all

‘officers’, whereas s 191(1) of the Corporations Act 2001

(Cth) applies only to directors.

(b) Disclosure under s 148B of the FW(RO) Act must be made to

the organisation or branch (it is not clear to whom disclosure

is in fact made), and any disclosure of material personal

interests to the organisation or branch must then be made to

members. Disclosure under s 191 of the Corporations Act

2001 (Cth) only requires disclosure to the directors, not to the

members.

(c) Under s 148B of the FW(RO) Act an officer must disclose

material personal interests of relatives.

(d) Contravention of s 191(1) of the Corporations Act 2001 (Cth)

is a criminal offence. In contrast, the mechanisms for

external enforcement of the rules that must be established by

s 148B of the FW(RO) Act in relation to the disclosure of

interests by officers are limited. As explained in Chapter 2 of

116 Corporations Act 2001 (Cth), s 192. 117 Corporations Act 2001 (Cth), Sch 3, item 32.

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this Volume,118 the ability of the General Manager to enforce

rules requiring an individual to do anything is limited.

144. The last matter substantially undermines the effectiveness of the

disclosure requirements.

145. The Fair Work (Registered Organisations) Bill 2013 (Cth) would have

recast the disclosure obligations on officers as a civil penalty provision

(with a maximum penalty of 1,200 penalty units for a serious

contravention and 100 penalty units otherwise).119 However, the

Senate Education and Employment Legislation Committee

recommended, after considering the submissions of a number of

parties, that disclosure should only be required of those officers whose

duties relate to the financial management of organisations.120 The

Senate committee was persuaded that:121

…the disclosure regime in relation to material personal interests proposed by the bill may create unnecessary administrative burdens for officers, some of whom are volunteers. The bill should be amended to ensure that the disclosure regime in the bill is consistent with the requirements in the Corporations Act 2001.

146. The Senate Committee was also persuaded that the disclosure

requirement should have a list of exceptions similar to those in

s 191(2) of the Corporations Act 2001 (Cth), and not require the

disclosure of the material personal interests of an officer’s relatives.

118 See Chapter 2 of this Volume, para 57. 119 Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), Sch 2, Part 1, item 166 (s 293C). 120

The Senate, Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment Bill 2013, December 2013, pp 10-11. 121

The Senate, Education and Employment Legislation Committee, Fair Work (Registered Organisations) Amendment Bill 2013, December 2013, p 10.

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147. The most recent form of the Bill - the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2] - limits the proposed duty

to disclose to only those officers of an organisation whose duties relate

to the ‘financial management’ of the organisation or branch.122 The

Bill also contains exceptions similar to those found in s 191(2) of the

Corporations Act 2001 (Cth). It does not require the disclosure of the

material personal interests of an officer’s relatives.

148. A balance clearly needs to be struck. On the one hand, there are the

objectives of transparency and disclosure. On the other hand there is

the possibility of a regime imposing too great an administrative

burdens on individuals in registered organisations. Bearing this is

mind, it would seem prudent for the disclosure regime to have the

following features:

(a) There should be a requirement on an officer of an

organisation or branch (i) who is a member of the committee

of management or (ii) whose duties relate to financial

management to disclose material personal interests which

they have or acquire that relate to the affairs of the

organisation or branch.

(b) The duty to disclose should also extend to material personal

interests which the relatives of an officer have or acquire that

relate to the affairs of the organisation or branch. A particular

problem within some trade unions - for example, the HSU

122 Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), Sch 2, Part 1, item 166 (s 293C).

214

(the Williamsons) and the NUW (the Belans) - is that the

union is run, at least in part, as a ‘family affair’.

(c) The disclosure should be made to the committee of

management of the organisation or branch. Officers should

be permitted to give ‘standing disclosures’ in similar terms to

those proposed in s 293D of the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2]. Exceptions to

the obligation to disclose based on s 191(2) of the

Corporations Act 2001 (Cth)123 should also be permitted.

(d) An officer that fails to disclose should be subject to a civil

penalty. The proposed penalties in the Fair Work (Registered

Organisations) Amendment Bill 2014 [No 2] seem excessive

having regard to the purpose of disclosure, and the fact that

officers are under statutory obligations under ss 286-288 of

the FW(RO) Act. Further, it does not seem necessary to draw

a distinction in this respect between serious and non-serious

contraventions. A maximum civil penalty of 100 penalty

units ($18,000) seems appropriate.

(e) The organisation or branch should be required to record

disclosures made by officers in the minutes of the committee

of management.

123 See proposed s 293C(4) of the Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth).

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Recommendation 31

Section 148B of the Fair Work (Registered Organisations) Act 2009 (Cth) be

repealed and replaced with a civil penalty regime that, broadly speaking,

requires officers of registered organisations and branches of registered

organisations to disclose material personal interests that they, or their relatives,

have or acquire in relation to the affairs of the organisation or branch. Key

features of a suggested regime are set out in the body of the report.

Consideration should also be given to increasing the penalty for contravention

of s 191 of the Corporations Act 2001 (Cth).

Requirement of officers in a position of conflict not to participate in decision-making

149. Subject to certain exceptions, s 195(1) of the Corporations Act 2001

(Cth) makes it an offence for directors of a public company who have a

disclosable124 personal interest in a matter that is being considered at a

director’s meeting to be present at the meeting while that matter is

being considered, or to vote on the matter. There are two exceptions:

(1) the non-interested directors may give the director approval, or (2)

ASIC may grant approval. The offence is one of strict liability.125 The

maximum penalty is a paltry five penalty units.126

150. Section 195(1) of the Corporations Act 2001 (Cth) seeks to protect the

members of a public company by seeking to ensure that those directors

who have a potential relevant conflict of interest in a matter are not

124 That is, a personal interest that must be disclosed under s 191. 125 Corporations Act 2001 (Cth), s 195(1B). 126

Corporations Act 2001 (Cth), Sch 3, item 33.

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involved in decision-making. The same rationale applies in respect of

employer and employee organisations.

151. The Fair Work (Registered Organisations) Amendment Bill 2014

[No 2] (Cth) proposed to introduce a new s 293F equivalent to s 195 of

the Corporations Act 2001 (Cth). Subject to the question of penalty, it

is recommended that the provision be adopted (albeit amended to

include any disclosable material personal that an officer’s relative has).

The maximum proposed penalty in the Bill was 1,200 penalty units for

a serious contravention and 100 penalty units otherwise. Having

regard to the purpose of s 195(1), which is to seek to avoid more

serious breaches of duty such as the duties set out in ss 286-288 of the

FW(RO) Act, the proposed penalty appears excessive. A maximum

penalty of 100 penalty units is more appropriate.

Recommendation 32

A provision similar to s 195 of the Corporations Act 2001 (Cth) be introduced to

the Fair Work (Registered Organisations) Act 2009 that, in broad terms,

prevents officers of an organisation or branch who have a disclosable material

interest in a matter from being present during any deliberation, or being

involved in any decision, about the matter. The provision should be a civil

penalty provision with a maximum penalty of 100 penalty units.

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Enforcement of officers’ duties by members

152. There is authority that generally union officers owe their duties to the

union itself, rather than to the members as a whole.127 Of course, in

some circumstances union officials will owe additional duties to a sub-class of members, and as discussed in Volume 4, Chapter 10.2 of the

Report, there are some circumstances in which union officials owe

duties to the members as a whole. The consequence of the general rule

is that the union may be regarded as the proper plaintiff to bring any

proceeding against an officer for breach of his or her fiduciary duties.

When the union is the proper plaintiff a member of the union who

endeavoured to sue an officer on behalf of an organisation would,

unless one of the narrow exceptions to the so-called ‘rule in Foss v

Harbottle’128 applied, fail.129

153. In relation to the statutory duties, a registered organisation may bring a

proceeding seeking compensation as a result of an officer’s breach of

statutory duty.130 In addition, pursuant to s 310(1) of the FW(RO) Act,

the General Manager of the FWC or ‘some other person authorised in

writing by the General Manager’ may bring civil penalty proceedings

in relation to conduct in contravention of the civil penalty provisions of

the Act (which relevantly includes officers’ duties) or a proceeding to

recover compensation for the organisation. This means that, at least in

127 Carling v Platt (1953) 80 CAR 283 at 292 per Dunphy J (dissenting), 306 per McIntyre J; Scott v Jess (1984) 3 FCR 263 at 287 per Gray J. Cf Allen v Townsend (1977) 31 FLR 431 at 483 per Evatt and Northrop JJ. 128

Foss v Harbottle (1846) 2 Hare 461; 67 ER 189. 129 See Bailey v Krantz (1984) 55 ALR 345 at 356 per Gray J; Tanner v Darroch (1986) 12 FCR 235 at 253 per Gray J. 130

Fair Work (Registered Organisations) Act 2009 (Cth), s 310(3).

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theory, a member could apply to the General Manager of the FWC

under s 310(1) of the FW(RO) Act to be authorised to bring civil

penalty proceedings against an officer who has breached duties to the

organisation. However, s 310(1) of the FW(RO) Act does not provide

any guidance for when the General Manager should grant authorisation

and the provision is framed in terms of a discretion rather than a duty.

The Commission is not aware that the General Manager has granted an

authorisation.

154. A further difficulty arises. Section 329 of the FW(RO) Act states that

a person who is a party to a proceeding in a matter arising under the

FW(RO) Act must not be ordered to pay costs unless the person

instituted the proceedings vexatiously or without reasonable cause.

Thus, even if a member was granted authorisation under s 310(1) of the

FW(RO) Act, a member will not be able to recover the legal costs of

commencing proceedings.

155. The result is that currently the members of registered organisations

have extremely limited avenues of recovering from the organisation

compensation for breaches of officers’ duties. The absence of a

mechanism by which members can take action on behalf of a registered

organisation has an undesirable consequence. That consequence is that

even if a powerful officer of an organisation (for example, the

secretary) may breach his or her duty to the registered organisation, no

action may be taken against that officer, either at all or not until a long

time after the conduct occurred when it will be more difficult to

establish what occurred. This is because the proper person to bring any

action will be the registered organisation itself and whilst the officer

remains in office there is little or no prospect of that occurring. Even

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after the officer has left, legal action is not certain against the former

officer, who may have close associations with the other officers of the

organisation.

156. The conduct of the committee of management of the NUW NSW in

releasing its former secretary, Derrick Belan, from liability is a good

example of the unlikelihood of a union taking against a former

secretary, unless forced to by bad publicity.

157. Submissions to the Commission suggested that a possible solution131 to

this problem would be to introduce provisions similar to ss 236 and

237 of the Corporations Act 2001 (Cth) enabling a ‘derivative action’

to be commenced i.e. an action commenced by a member of the

organisation on behalf of the organisation.

158. Sections 236 and 237 of the Corporations Act 2001 (Cth) enable a

member, former member, person entitled to be a member, officer or

former officer of a company to apply to the Supreme Court or Federal

Court for leave to bring a proceeding on behalf of an organisation. The

Court must grant leave if satisfied that certain conditions, which

operate as safeguards against frivolous or vexatious claims, are

established.132 A proceeding is then commenced in the name of the

registered organisation.

131 On this topic see Victorian Government, Submission in Response to Issues Papers, August 2014, pp 20-21; Boral Law Reform Submission, 2015, pp 43-44. 132

Corporations Act 2001 (Cth), s 237(2).

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159. Applying these provisions by analogy to registered organisations, a

Court would only grant leave if satisfied that:

(a) it is probable that the organisation would not otherwise bring

the proceedings;

(b) the applicant is acting in good faith;

(c) there is a serious question to be tried;

(d) allowing the application is in the best interests of the

registered organisation; and

(e) appropriate notice has been given to the registered

organisation.

160. Master Builders Australia has expressed support for provisions of this

nature, provided the class of persons who could bring the application is

limited to a current or former member.133 It would also seem

appropriate that a current or former officer of the organisation, or one

of its branches, should be able to seek leave to take action.

161. In its submissions, Boral raised an issue about costs. Boral submitted

that if provision was made for this kind of ‘derivative action’,

provision would need to be made concerning the costs of the action as

union members bringing the action on behalf of the organisation are

unlikely to have the financial capacity to fund the proceeding

133 Master Builders Law Reform Submission, 21/8/15, p 31.

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themselves.134 Boral further submitted that this problem could be

alleviated by introducing a provision equivalent to s 242 of the

Corporations Act 2001 (Cth) allowing the Court to order the

applicant’s costs to be paid by the organisation or by a party to the

proceeding (for example, an officer of the organisation). Master

Builders Australia agreed with this proposal.135

Recommendation 33

New provisions, modelled on ss 236-242 of the Corporations Act 2001 (Cth), be

introduced to the Fair Work (Registered Organisations) Act 2009 (Cth) allowing

a current or former member or current or former officer of a registered

organisation or branch of the organisation to apply to a State Supreme Court or

the Federal Court for leave to bring, or intervene in, a proceeding on behalf of a

registered organisation.

C - STATUTORY DUTIES IN RESPECT OF COURT ORDERS

The problem

162. One important matter that arose in relation to the Boral and Hindmarsh

case studies concerning the CFMEU was conduct undertaken by union

officials in breach of court orders and orders of the Fair Work

134 Boral Law Reform Submission, 2014, pp 43-44; Boral Law Reform Submissions, 2015, pp 26-27. 135

Master Builders Australia Law reform Submission, 21/8/15, p 31.

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Commission. In the Interim Report, the following view was expressed

in respect of the CFMEU’s conduct in relation to Boral:136

A legal system which does not provide swift protection against the type of conduct which Boral alleges it has suffered at the hands of the CFMEU, and which does not have a mechanism for the swift enforcement of court orders, is fundamentally defective. The defects are so great as to make it easy for those whose goal is to defy the rule of law. The defects reveal a huge problems for the Australian state and its numerous federal, State and Territory emanations. The defying of the Victorian Supreme Court’s injunctions for nearly two years, and the procedural history outlined above, will make the Australian legal system an international laughing stock. A new form of ‘sovereign risk’ is emerging - for investors will not invest in countries where their legal rights receive no protection in practice. At least so far as the courts are concerned, it may be appropriate for consideration to be given to procedures which ensure the swift determination of contempt applications, complemented where necessary by appropriate court rules and legislation.

Remedies under the Fair Work (Registered Organisations) Act 2009 (Cth)

163. As discussed in Chapter 2.1 of the Interim Report and in more detail in

Chapter 8.3 of Volume 4 of this Report, Part 3 of Chapter 9 of the

FW(RO) Act contains various provisions137 prohibiting officers and

employee of organisations from knowingly or recklessly contravening,

or being involved in a contravention of, orders made by the Federal

Court or the Fair Work Commission under the FW Act or the FW(RO)

Act. Breach is a civil penalty provision. The maximum penalty is 60

penalty units ($10,800).

164. There are two obvious defects in the current regime.

136 Royal Commission into Trade Union Governance Corruption, Interim Report (2014), Vol 2, ch 8.2, pp 1114-1115. 137

Fair Work (Registered Organisations) Act 2009 (Cth), ss 297-303.

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165. First, there is a lacuna in the provisions because they do not capture

orders made by the Federal Circuit Court, which is empowered to grant

a variety of orders under the FW Act.

166. Secondly, the penalties are far too low. It is fundamental to Australia’s

legal system that court orders be obeyed. The obvious purpose of

Part 3 of Chapter 9 of the FW (RO) Act is to penalise officers and

employees who fail to obey court orders, and to deter future breaches.

The maximum penalties for breach of the provisions in Part 3 of

Chapter 9 should be increased to 1,200 penalty units ($216,000) to

align with the recommendations in Chapter 2 concerning the increase

in penalties in relation to other breaches of officers’ duties. Since

every knowing or reckless contravention of a court order is serious, it

is not recommended that there be any distinction between serious and

non-serious contraventions.

Recommendation 34

The provisions in Part 3 of Chapter 9 of the Fair Work (Registered

Organisations Act 2009 (Cth) (ss 297-303A) concerning breach of orders be

amended to include orders made by the Federal Circuit Court.

Recommendation 35

The maximum penalty for breach of the provisions in Part 3 of Chapter 9 of the

Fair Work (Registered Organisations Act 2009 (Cth) be increased to 1,200

penalty units.

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D - DISQUALIFICATION OF UNION OFFICERS

Existing disqualification regime

167. The current disqualification regime for officers of registered

organisations is set out in Part 4 of Chapter 7 of the FW(RO) Act

(ss 210-220). It is relatively limited. The key provision is s 215 of the

FW(RO) Act which relevantly provides:

(a) A person ‘convicted of a prescribed offence’ is ineligible to

be a candidate, or to be elected, or to hold an ‘office’ in an

organisation, unless the conviction and any term of

imprisonment was more than five years ago (or such other

reduced period as may be determined by the Federal Court

under ss 216 or 217 of the FW(RO) Act), or the person

obtains leave of the Federal Court under ss 216 or 217 of the

FW(RO) Act.

(b) Where a person who holds an ‘office’ in an organisation is

‘convicted of a prescribed offence’, the person ceases to hold

office 28 days after the conviction, unless the person obtains

leave of the Federal Court under ss 216 or 217 of the FW(RO)

Act.

168. Although there is an automatic disqualification in s 215(2) of the

FW(RO) Act upon conviction for a prescribed offence, there is no

prescribed sanction for a person who continues to act in the office after

automatic disqualification takes effect. However, the Federal Court

can grant a declaration that a person has ceased to hold an office in an

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organisation,138 and make such orders as it considers appropriate to

give effect to a declaration that a person is not eligible or has ceased to

be an officeholder.139

169. ‘Prescribed offence’ is defined in s 212 of the FW(RO) Act as follows:

(a) an offence under a law of the Commonwealth, a State or

Territory, or another country, involving fraud or dishonesty and punishable on conviction by imprisonment for a period of 3 months or more; or

(b) an offence against section 51, 72, 105, 185, 191, subsection 193(2), section 194, 195, 199 or subsection 202(5);140 or

(c) any other offence in relation to the formation, registration or management of an association or organisation; or

(d) any other offence under a law of the Commonwealth, a State or Territory, or another country, involving the intentional use of violence towards another person, the intentional causing of death or injury to another person or the intentional damaging or destruction of property.

170. However, this is cut down by s 213 of the FW(RO) Act, which

relevantly provides that:

(a) a person is not ‘convicted of a prescribed offence’ if the

person is convicted summarily of one of the offences

mentioned in para (c) of the definition; and

(b) a person is not ‘convicted of a prescribed offence’ referred to

in para (d) of the definition unless the person was sentenced

to a term of imprisonment for the offence and the person

138 Fair Work (Registered Organisations) Act 2009 (Cth), s 215(5). 139 Fair Work (Registered Organisations) Act 2009 (Cth), s 219(1). 140

These provisions all relate to the conduct of elections of registered organisations.

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served, or is serving, a term of imprisonment or the sentence

was suspended.

Defects in the current regime

171. One obvious lacuna in the current provisions in the FW(RO) Act is that

there is no prescribed consequence for a person who continues in an

office after disqualification. In contrast, s 206A(1) of the Corporations

Act 2001 (Cth) specifies that a person who is disqualified from

managing corporations and continues so to act commits a criminal

offence of strict liability. The maximum penalty is 50 penalty units or

imprisonment for one year, or both.141 Given the gravity of the

conduct this is surprisingly low. An equivalent provision should be

introduced into the FW(RO) Act. The maximum penalty should be

increased to 100 penalty units or imprisonment for two years, or both.

172. The Commission received a range of submissions identifying a number

of defects, apart from this lacuna, with the current disqualification

regime under the FW(RO) Act.142

141 Corporations Act 2001 (Cth), Sch 3, item 49. 142 Australian Industry Group Law Reform Submissions, 21/8/15, pp 8-9; Boral Law Reform Submissions, 2015, pp 19-21; Housing Industry Association Law Reform Submissions, 21/8/15, p 8; Master Builders Australia Law Reform Submissions, 21/8/15, p 23.

227

173. One defect is that the list of prescribed offences is relatively narrow,

with the result that officers of registered organisations who have

committed significant criminal offences can still continue to hold

office. For example, the definition of ‘prescribed offence’ does not

include:

(a) contempt of court or other administration of justice offences;

(b) the offence of trespass to land or any other offences relating

to entry onto premises;

(c) indictable offences not involving dishonesty, for example the

cartel provisions in the Competition and Consumer Act (2010)

(Cth) or obstructing a Commonwealth public official under

s 149.1 of the Criminal Code (Cth); or

(d) blackmail or extortion offences under State law, which do not

necessarily involve fraud or dishonesty.143

174. It is anomalous that the definition of prescribed offence does not

include a general category of serious offence. It is recommended that

the definition of prescribed offence should be amended to include any

offence under a law of the Commonwealth, State or Territory

punishable on conviction by a maximum penalty of imprisonment for

life or a period of 5 years or more.

143 See for example Crimes Act 1958 (Vic), s 87; Crimes Act 1900 (NSW), s 249K; and Criminal Code (Qld), s 359. See for example, analysis in the Interim Report in relation to the Crimes Act 1958 (Vic): Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.2, p 1100; analysis in relation to Criminal Code (Qld), s 359, Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.7, pp 1475-1476.

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175. Secondly, at present, para (c) of the definition of ‘prescribed offence’ is

largely redundant. The current FW(RO) Act creates few, if any,

offences that would fall within that paragraph. An officer of a

registered organisation found to have breached his or her statutory

duties under ss 285-288 of the FW(RO) Act and who has been required

to pay a civil penalty would still be entitled to hold office within the

organisation, because there is currently no criminal offence for

breaching any of these provisions.

176. Thirdly, a number of submissions to the Commission raised concerns

that trade union officials who have had their right of entry permits

revoked or denied on the basis that they are not fit and proper persons

for the purposes of s 512 of the FW Act nevertheless continue to be

involved in a management or decision-making or other official role for

a trade union.144

177. Fourthly, there is no mechanism under the current provisions of the

FW(RO) Act to disqualify officials who repeatedly act in contravention

of the FW Act, particularly the provisions that relate to right of entry

privileges conferred upon trade union officials.

178. Overall, a key defect of the current regime is that the FW(RO) Act

only provides for automatic disqualification. Naturally enough for an

automatic disqualification regime, it is confined to circumstances

where an officer is convicted of certain offences. The consequence,

amongst other things, is that officers of organisations who repeatedly

contravene civil penalty provisions of the FW Act, the FW(RO) Act

144 Housing Industry Association Pty Ltd Law Reform Submission, 21/8/15, p 8; Master Builders Australia Law Reform Submissions, 21/8/15, pp 32-33.

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and court orders made in relation to such provisions, are still entitled to

hold office within a registered organisation. Examples of repeated

contraventions of the law in the building and construction industry,

particularly by officers of the CFMEU, are considered in Chapter 8 of

this Volume.

Options for reform: ‘fit and proper person’ qualification

179. One reform option was suggested by Master Builders Australia. It

proposed that in addition to the existing disqualification regime, an

additional ‘fit and proper person test’ should be introduced as a

qualification for persons intending to stand for office in a registered

organisation.145 As part of this regime, a candidate for office would

provide the Fair Work Commission with a declaration attesting to

certain matters including that he or she was a person of ‘good

character’.

180. Registered organisations act through their officers. The officers of

employee organisations have significant statutory rights and privileges.

They play an important part in the fabric of Australian politics. Their

role as fiduciaries requires them to maintain the highest standards of

propriety. It is therefore right that the officers of registered

organisations should be seen to be ‘fit and proper’.146

145 Master Builders Australia, Submission on Strengthening Corporate Governance of Industrially Registered Organisations - Introducing a New Fit and Proper Person Test, 26 August 2013, pp 11-13, attachment B to the Master Builders Submission in response to Issues Paper 2: Duties of Union Officials, 11/7/2014. 146

See Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 11, p 100.

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181. However, imposing a ‘fit and proper’ person test as a ground for

qualification for office, as opposed to disqualification from office,

would have a number of difficulties. Chiefly it would require an

assessment to be made, presumably by the regulator, of the fitness for

office of a person in advance of a person taking up office. Apart from

anything else, such a requirement would be administratively

burdensome and expensive not only for the regulator, but also for

registered organisations and persons standing for office. It is not

recommended.

Options for reform: banning orders

182. Rather than imposing a qualification requirement for officer of

organisations, an alternative would be to amend the current

disqualification regime in the FW(RO) Act to allow the relevant

regulator to make an application to a court for an order banning a

person from holding office in a registered organisation or branch for a

period of time.

183. These powers exist in the Corporations Act 2001 (Cth) in respect of

company directors. Pursuant to ss 206C-206EEA of the Corporations

Act 2001 (Cth), ASIC has the power to apply to a State Supreme Court

or the Federal Court for orders disqualifying a person from managing a

corporation for a period the Court thinks just. ASIC may apply in a

range of circumstances including where:

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(a) a declaration has been made that the person has contravened a

civil penalty provision;147 or

(b) the person has at least twice been an officer of a body

corporate that has contravened the Corporations Act 2001

(Cth) while the person was an officer and each time the

person failed to take reasonable steps to prevent the

contravention;148 or

(c) the person has at least twice contravened the Corporations

Act 2001 (Cth) while the person was an officer of a body

corporate.149

184. In addition to the ability to apply to a court for a banning order ASIC

also has the power under s 206F of the Corporations Act 2001 (Cth) to

issue a banning notice of up to five years if certain conditions are

met.150 Before issuing such a notice, ASIC must give the person an

opportunity to be heard on why they should not be disqualified.151

185. Submissions to the Commission on this topic were generally in support

of the introduction of a provision allowing the regulator to apply for a

147 Corporations Act 2001 (Cth), s 206C. 148 Corporations Act 2001 (Cth), s 206E(1)(a)(i). 149

Corporations Act 2001 (Cth), s 206E(1)(a)(ii). 150 Namely, where the person concerned has been an officer of two or more corporations and whilst the person was an officer, or within 12 months after the person ceased to be an officer, the corporations were wound up because they were unable to pay their debts. 151

Corporations Act 2001 (Cth), s 206F(1)(b).

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banning order.152 The State of Victoria submitted that there should be

the ability to disqualify officials who have ‘consistently or seriously

ignored his or her legal obligations’.153

186. The Fair Work (Registered Organisations) Amendment Bill 2014

[No 2] (Cth) proposed the introduction of a new s 307A to the FW(RO)

Act which would have allowed the relevant regulator to apply to the

Federal Court for an order disqualifying a person from holding office

in a registered organisation. It was proposed that the Federal Court

could make such an order if the person had contravened a civil penalty

provision and the Court was satisfied that the disqualification was

justified.154

187. The ACTU previously argued that the provision proposed was ‘ill

suited to regulation of registered organisations’.155 The thrust of the

argument appears to be that there are certain civil penalty provisions

imposed on officers of registered organisations under the FW(RO) Act

that should not lead to disqualification including:156

152 Boral Law Reform Submissions, 2015, pp 19-21; Australian Industry Group Law Reform Submissions, 21/8/15, p 8; Master Builders Australia Law Reform Submissions, 21/8/15, pp 34-35; State of Victoria Submissions in Response to Issues Papers, August 2014, p 21. 153

State of Victoria Submissions in Response to Issues Papers, August 2014, p 21. 154 Fair Work (Registered Organisations) Amendment Bill 2014 [No 2] (Cth), item 209. 155

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, p 32. 156

Australian Council of Trade Unions, Submission to the Senate Education and Employment Legislation Committee into the Fair Work (Registered Organisations) Amendment Bill 2013 (Cth), 22/11/13, pp 32-33.

233

(a) an officer knowingly or recklessly making false or misleading

statements about membership or resignation (ss 175, 176 of

the FW(RO) Act);

(b) an officer knowingly or recklessly making false or misleading

statements in relation to the accounts or financial statements

provided to members (s 267 of the FW(RO) Act); and

(c) an officer knowingly or recklessly failing to comply with a

court order (ss 299, 300 of the FW(RO) Act).

188. These are precisely the kinds of contraventions that should lead to the

prospect of disqualification: the first two contraventions are species of

fraud and the third is contempt. The Commission’s inquiries have

revealed a worrying and recurring phenomenon, particularly within the

CFMEU, of union officials deliberately disobeying court orders or

causing the union to disobey court orders. Officials who deliberately

flout the law should not be in charge of registered organisations.

189. Subject to specific situations where the registered organisations

regulator should be entitled to disqualify an officer because of certain

easily verifiable objective matters,157 it is preferable that the power to

ban be conferred on a court. First, any decision by the regulator would

be subject to judicial review and the reviewing court would be able to

review the jurisdictional facts supporting the regulator’s decision. In

practice, this would often lead to increased delays, cost and expense.

Secondly, the judicial process provides a greater safeguard against the

157 See Chapter 2, recommendation 8 of this Volume.

234

possibility of the power being misused. Thirdly, ASIC only has the

power to issue a banning notice in limited circumstances.

190. Having regard to the problems identified by the Commission, the

Federal Court should be permitted to make an order disqualifying a

person from holding an office within a registered organisation or

branch if:

(a) the person:

(i) has or has been found to have contravened a civil

remedy provision of the FW Act, or a civil penalty

provision of the FW(RO) Act or the Work Health

and Safety Act 2011 (Cth);

(ii) has been found liable for contempt;

(iii) has been at least twice an officer of a registered

organisation that has, or has been found to have,

contravened a provision of the FW Act or the

FW(RO) Act or has been found liable for contempt

while the person was an officer and each time the

person failed to take reasonable steps to prevent the

contravention or the contempt;

(iv) has, or has been found to have, at least twice

contravened a provision of the FW Act or the

FW(RO) Act; or

235

(v) is otherwise not a fit and proper person to hold

office within a registered organisation or branch; and

the Court is satisfied that the disqualification is justified.

Recommendation 36

The definition of ‘prescribed offence’ in s 212 of the Fair Work (Registered

Organisations) Act 2009 (Cth) be amended to include an offence under a law of

the Commonwealth, a State or Territory, or another country, which is punishable

on conviction by a maximum penalty of imprisonment for life or 5 years or

more.

Recommendation 37

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended to make

it a criminal offence for a person who is disqualified from holding office in a

registered organisation to continue to hold an office. The offence should be an

offence of strict liability with a maximum penalty of 100 penalty units or

imprisonment for two years, or both.

Recommendation 38

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended by

inserting a new provision giving the Federal Court jurisdiction, upon the

application of the registered organisations regulator, to disqualify a person from

holding any office in a registered organisation for a period of time the court

considers appropriate. The court should be permitted to make such an order if

the conditions set out in paragraph 190 are satisfied.

236

CHAPTER 4

CORRUPTING BENEFITS

Subject Paragraph

A - INTRODUCTION 1

Reasons for outlawing corrupting benefits 6

B - EXISTING LAWS REGULATING CORRUPTING

BENEFITS

11

Blackmail and extortion 12

Secret or corrupt commissions 14

Overseas approach 19

C - INADEQUACY OF EXISTING LEGAL FRAMEWORK 29

D - REFORM TO EXISTING LEGAL FRAMEWORK 42

Disclosure of benefits made to registered organisations 44

Corrupting benefits offence in relation to officers of registered

organisations

53

237

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238

Chapter concludes that the payments were not made by

employers completely voluntarily for legitimate purposes.

They were made to secure industrial peace from, or to keep

favour with, the MUA. In some cases the payments had to be

made repeatedly.

(c) Chapter 6.2 of Volume 3 of the Report deals with Halafihi

Kivalu, who was formerly a senior official and long-term

employee of the ACT Branch of the Construction, Forestry,

Mining and Energy Union (CFMEU). During the course of

hearings in Canberra in July 2014, Halafihi Kivalu conceded

receiving approximately $100,000 from two employers. He

contends that these payments were gifts. Following his

giving evidence a number of other employers came forward

and made allegations concerning payments that they had

made to Halafihi Kivalu. After the hearings Halafihi Kivalu

was charged. The matter is presently before the criminal

courts of the ACT. Accordingly no conclusions were

expressed in this Report concerning the lawfulness of Halafihi

Kivalu’s conduct.

(d) Chapter 7.2 of Volume 3 deals with the affairs of George

Alex and Darren Greenfield. The principal issue addressed in

Chapter 7.2 is whether cash payments were made to Darren

Greenfield, an organiser with the CFMEU NSW, for

favouring businesses associated with George Alex and Joseph

Antoun. During 2013 regular cash withdrawals of $2,500

were made from a bank account held by a scaffolding

business called ‘Elite’. These payments were referred to

239

within Elite as ‘Union payments’. A substantial body of

documentary evidence, principally text messages between

George Alex and others, demonstrates that cash payments in

the amount of $2,500 were made by George Alex and Joseph

Antoun to Darren Greenfield.

(e) Chapter 7.3 of Volume 3 of the Report deals with donations

and enterprise agreement. The central issue in this Chapter is

whether the CFMEU NSW improperly obtained or managed

donations from various companies. It has been found that a

number of persons including persons within the CFMEU

NSW may have committed a number of criminal offences

against the Charitable Fundraising Act 1991 (NSW). This

Report and all relevant materials have been referred to the

Minister ministering the Charitable Fundraising Act 1991

(NSW) in order that consideration be given to conducting an

inquiry pursuing to Division 1 of Part 3 of that Act into all of

the CFMEU NSW’s practices concerning charitable

fundraising.

(f) Chapter 7.4 of Volume 3 of the Report examines the payment

in 2006 by the Thiess Hochtief Joint Venture operating the

Epping to Chatswood Rail Project of $100,000 to the

Building Trades Group Drug & Alcohol Committee. In truth,

this was a disguised payment to the CFMEU NSW. The

finding is that the payment may have been a secret

commission in contravention of s 249B of the Crimes Act

1900 (NSW).

240

(g) Chapter 8.1 of Volume 3 of the Report makes findings that in

2013, David Hanna, then Secretary of the Builders’

Labourers’ Divisional Branch of the CFMEU in Queensland,

received free work and materials in relation to his house at

Cornubia from Adam Moore and Mathew McAllum, then

employees of Mirvac. The finding made is that each of David

Hanna, Adam Moore and Mathew McAllum may have

committed criminal offences against the Criminal Code 1899

(Qld).

(h) Chapter 10.2 of Volume 4 of the Report makes findings that

in 2010, the Australian Workers’ Union (AWU) Vic Branch

and Cleanevent entered into an arrangement pursuant to

which Cleanevent would make a payment of $25,000 per

annum for three years to the AWU, in exchange for the

AWU’s agreement to extend the operation of a Workchoices-era enterprise agreement beyond its nominal expiry date. The

agreement to make the payment was recorded in a side letter

that was not disclosed to the National Office of the AWU or

to Cleanevent employees. The finding made was that Cesar

Melhem and the AWU may have committed criminal

offences of soliciting corrupt commissions in contravention of

s 176 of the Crimes Act 1958 (Vic).

(i) Chapter 10.3 of Volume 4 of the Report concerns an

agreement by the Thiess John Holland joint venture to make

payments of $100,000 per year plus GST to the AWU Vic

Branch over the life of a road construction project. The

payments were made in accordance with falsified invoices

241

that disguised the payments as being in respect of services

that were, for the most part, not delivered by the AWU Vic

Branch. The finding made was that Cesar Melhem and the

AWU, and John Holland Pty Ltd and Julian Rzesniowiecki,

may have committed criminal offences in relation to corrupt

commissions in contravention of s 176 of the Crimes Act

1958 (Vic).

(j) Chapter 10.5 of Volume 4 of the Report concerns three

payments made by ACI of about $160,000 between 2003 and

2005 described as being made in respect of ‘Paid Education

Leave’, and further payments of $5,400 between 2008 and

2012 described as being made in respect of ‘Membership

yearly fees’. Findings are made in respect of the former

payments that Cesar Melhem and the AWU, and Mike

Gilhome, may have committed criminal offences in relation

to corrupt commissions in contravention of s 176 of the

Crimes Act 1958 (Vic).

(k) Chapter 10.6 of Volume 4 of the Report concerns six

payments of $4000 made to the AWU in 2003-2004 by

Chiquita Mushrooms. The finding was that these payments

may have been corrupt commissions procured by Frank Leo

and the AWU and offered by Chiquita Mushrooms in

contravention of s 176 of the Crimes Act 1958 (Vic).

3. These case studies - which involved different unions in different states

at different times - throw up two recurring and often overlapping

patterns of conduct:

242

(a) A person - usually an employer of workers - makes, offers or

agrees to make a payment or provide a benefit to a union,

union official or to an entity associated with a union, in order:

(i) to avoid expressly or impliedly threatened conduct

by a union or union official which, if it occurred,

would be harmful to the person; or

(ii) to obtain a favour for the person in connection with

the union’s affairs.

(b) A union official obtains or solicits a payment or other benefit

for himself or herself, or the union or an entity associated

with the union, in return for which the union official agrees:

(i) not to engage in threatened conduct which if it

occurred would be detrimental to the person -

usually an employer - from whom the payment is

obtained or solicited; or

(ii) to provide the person making or agreeing to the

payment or benefit with a favour in connection with

the union’s affairs.

4. The legal characterisation of such payments or benefits given or

received depends on the particular circumstances of the case. Some

can be described, at least in ordinary language, as ‘bribes’, others as

‘secret commissions’, others as ‘blackmail money’, others still as

payments for industrial peace.

243

5. These payments all have a tendency to ‘corrupt’ a union official, in the

sense that they have a tendency to cause a union official to exercise

improperly the official’s duties and powers, or have a tendency to

cause a union official to act unlawfully. For the purposes of this

Chapter, it is convenient to describe all such payments and benefits as

‘corrupting benefits’. Commonly, the benefit will be in the form of a

payment of money. However, particularly in the construction industry,

benefits can be provided in kind, such as the provisions of free building

work or materials.

Reasons for outlawing corrupting benefits

6. At this point, it is worth summarising briefly a number of reasons why

a democratic society claiming to be governed by the rule of law should

adopt measures that seek to eliminate the giving and receiving of

corrupting benefits.

7. First, the making of corrupting payments increases the cost of

employers and other persons doing business, which consequently:

(a) where the cost of the payment is simply passed on, leads to an

increase in prices for consumers; or

(b) where the cost of the payment cannot be passed on, acts as

competitive disadvantage for the business making the

payment.

These payments are inherently anti-competitive.

244

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245

benefit might in some circumstances give rise to a fraud-type criminal

offence such as obtaining financial advantage by deception. However,

the main relevant criminal laws are those concerning blackmail and

secret commissions. There are also relevant rules of civil law.

Blackmail and extortion

12. Each State and Territory has legislation outlawing blackmail or

extortion. For present purposes these are synonymous.1 Although that

legislation varies between jurisdictions, in substance it criminalises the

making of an unwarranted demand with menaces. Thus, where a union

official demands a payment or other benefit with menaces, which may

include an express or implied threat of adverse action, the union

official may commit the criminal offence of blackmail or extortion, if

the demand is unwarranted.

13. Apart from the criminal liability, there is also considerable overseas

authority that a person who threatens to do an unlawful act and thereby

intimidates another into doing some act which causes that other person

loss (e.g. making a payment) may be civilly liable for damages for the

tort of two-party intimidation.2 It does not appear to have been

resolved whether such an action is available in Australia, although in

1

Criminal Code 2002 (ACT), s 342 (blackmail); Crimes Act 1900 (NSW), s 249K (blackmail); Criminal Code (NT), s 228 (blackmail and extortion); Criminal Code (Qld), s 415 (extortion); Criminal Law Consolidation Act 1935 (SA), s 172 (blackmail); Criminal Code (Tas), s 241 (blackmail); Crimes Act 1958 (Vic), s 87 (blackmail); Criminal Code (WA), ss 397-398 (demanding property with threats with intent to extort or gain). 2

Rookes v Barnard [1964] AC 1129 at 1182-1183 and 1205; D & C Builders v Rees [1966] 2 QB 617 (CA) at 625; Huljich v Hall [1973] 2 NZLR 279 at 285. See generally H Carty, An Analysis of the Economic Torts (OUP, 2nd ed, 2010), pp 157-158.

246

2014 the Victorian Court of Appeal reaffirmed the existence of the tort

of three-party intimidation in Australian law.3 Even if such a civil

action for two-party intimidation did exist in Australia, instances of

litigation are likely to be relatively uncommon: a person intimidated

into making a payment or conferring a benefit is usually unlikely to

have the inclination to commence legal action against the person doing

the intimidating.

Secret or corrupt commissions

14. Each of the States and Territories have laws criminalising the giving or

taking of what are variously described as secret commissions, corrupt

commissions, corrupt benefits, corrupt rewards or bribes.4 Until 2000,

there was also a separate Secret Commissions Act 1905 (Cth) but that

was repealed and replaced with more modern provisions dealing with

‘corrupting benefits’ in the Criminal Code (Cth).5 However, the

provisions in the Criminal Code (Cth) only deal with bribery of

Commonwealth public officials and foreign public officials.

3

Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd (2014) 318 ALR 107 at [59] (VCA). 4

Criminal Code 2002 (ACT), ss 356-357 (bribes and corrupting benefits); Crimes Act 1900 (NSW), s 249B (corrupt commissions or rewards); Criminal Code (NT), s 236 (secret commissions); Criminal Code (Qld), ss 442B-BA (secret commissions); Criminal Law Consolidation Act 1935 (SA), ss 150 (bribes); Criminal Code (Tas), s 266(1) (secret commissions); Crimes Act 1958 (Vic), s 176 (secret commissions); Criminal Code (WA), ss 529-530 (corrupt rewards). 5

For an overview of the reasons for this change, see the Explanatory Memorandum to the Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Bill 1999 (Cth).

247

15. Unfortunately, the laws differ from jurisdiction to jurisdiction.

Maximum penalties range from 3 years in the Northern Territory to 21

years in Tasmania.

16. The laws in New South Wales, Queensland, Victoria and Western

Australia are similar. They apply in respect of ‘agents’. A typical

example is s 249B of the Crimes Act 1900 (NSW), which relevantly

provides:

249B Corrupt commissions or rewards

(1) If any agent corruptly receives or solicits (or corruptly agrees to receive or solicit) from another person for the agent or for anyone else any benefit:

(a) as an inducement or reward for or otherwise on account of:

(i) doing or not doing something, or having done or not having done something, or

(ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person,

in relation to the affairs or business of the agent’s principal, or

(b) the receipt or any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal,

the agent is liable to imprisonment for 7 years.

(2) If any person corruptly gives or offers to give to any agent, or to any other person with the consent or at the request of any agent, any benefit:

(a) as an inducement or reward for or otherwise on account of the agent’s:

248

(i) doing or not doing something, or having done or not having done something, or

(ii) showing or not showing, or having shown or not having shown, favour or disfavour to any person,

in relation to the affairs or business of the agent’s principal, or

(b) the receipt or any expectation of which would in any way tend to influence the agent to show, or not to show, favour or disfavour to any person in relation to the affairs or business of the agent’s principal,

the firstmentioned person is liable to imprisonment for 7 years.

17. In some circumstances, a union official will be an ‘agent’ within the

meaning of the statutes.6 The solicitation or receipt of the payment by

a union official which would tend to cause the official to exercise his

or her duties improperly may give rise to criminal liability under these

provisions. Likewise, the payment by an employer may give rise to

criminal liability on the part of the employer.

18. Turning to civil remedies, the solicitation or receipt of bribes or secret

commissions by a union officer involving a breach of the officer’s

fiduciary duty will expose the officer to claims for compensation, or to

an obligation to account, and in some circumstances also an obligation

to hold the bribe or commission on trust for the fiduciary’s principal.7

Where an employer induces a union official to breach his or her

fiduciary duty, or knowingly assists the union official to breach his or

6 See R v Gallagher [1986] VR 219 (CA); R v Gallagher (1987) 29 A Crim R 33 (CA). 7 See generally Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [188]-[193], [569]-[584] per curiam.

249

her fiduciary duty as part of a dishonest and fraudulent scheme, the

employer may be civilly liable to the union.8

Overseas approach

19. It is also useful to summarise briefly the approach taken to corrupting

benefits in some comparable foreign jurisdictions.

20. Both New Zealand9 and Canada10 have similar laws to those in the

Australian jurisdictions outlawing blackmail/extortion and secret

commissions.

21. Until relatively recently, the United Kingdom had laws similar to those

in the various Australian jurisdictions. Blackmail was, and still is,

outlawed by s 21 of the Theft Act 1968 (UK). Bribery of public

officials was prohibited by the Public Bodies Corrupt Practices Act

1889 (UK). And The Prevention of Corruption Act 1906 (UK)

prohibited the giving and receiving of secret commissions to ‘agents’

in very similar terms to the current laws applying in the various

Australian jurisdictions.

8 See generally Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 2.1, pp 44-45 paras 19-20 and particularly Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 (FC) at 356-357 [242]-[246] per curiam and Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609 (CA) at [3], [6], [140] (Leeming JA, Barrett, Gleeson JJA agreeing). 9

Secret Commissions Act 1910 (NZ); Crimes Act 1961 (NZ), s 237 (blackmail). 10 Criminal Code (Can), ss 346 (extortion), 426 (secret commissions).

250

22. However, in 2010, the United Kingdom dramatically reformed its

bribery laws introducing a single Act, the Bribery Act 2010 (UK), to

deal with bribery in both the private and public sector. That Act

commenced from 1 July 2011 and repealed both the Public Bodies

Corrupt Practices Act 1889 (UK) and The Prevention of Corruption

Act 1906 (UK). A significant justification was that the existing

criminal laws had not been seriously updated for over a century, were

complex and potentially difficult to apply.

23. The Bribery Act 2010 (UK) introduced two general bribery offences.

Broadly speaking, one involved bribing another person and the other

involved receiving a bribe. In general terms, the legislation abandoned

the previous model of requiring an agent and principal relationship in

favour of a model based on an intention to induce the improper

exercise of a ‘relevant function or activity’. The expression ‘relevant

function or activity’ is defined broadly and includes functions in

connection with business or employment or performed by or on behalf

of a body of persons.

24. The United States too has a variety of general laws prohibiting

blackmail, extortion and bribery. In addition, the United States has

specific provisions intended to prevent corrupt payments by employers

to ‘labor organizations’.

251

25. The Taft-Hartley Act11 makes it a crime, among other things, for an

employer:

to pay, lend, or deliver or agree to pay, lend, or deliver, any money or other thing of value -

… (2) to any labor organization, or any officer or employee thereof, which represents, seeks to represent or would admit to membership, any of the employees of such employer who are employed in an industry affecting commerce…

26. There are a number of exceptions to the prohibition including

payments or other benefits:

(a) to a person who is also employed by the employer for work

done by that person;

(b) in satisfaction of a judgment or settlement;

(c) with respect to the sale or purchase of an article or

commodity at the prevailing market price in the regular

course of business;

(d) deducted from the wages of employees in payment of

membership dues of the labor organization, provided that the

employer has a written assignment of the wages from the

employee; and

(e) to a variety of trust and worker entitlement funds.

11 29 USC § 186(a).

252

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253

(BLF) and State Secretary of the Victorian Branch of the

BLF, and various other officials of the BLF had received

secret commissions in the form of work done, and materials

provided, in relation to the construction of various beach

houses.12 Norman Gallagher was subsequently tried and

convicted,13 as were a number of building developers who

had provided the work and materials. On the findings in

Volume 4 of this Report, there are clear factual similarities

between those events and the construction of a house for

David Hanna, the Secretary of the BLF in Queensland.

(b) The 1992 Gyles Royal Commission found a number of

corrupt or improper payments made by employers and others

to officials associated with the New South Wales Branch of

the Building Workers’ Industrial Union.14

(c) In 2003, the Cole Royal Commission also identified several

instances of employers making improper payments to or at

the direction of unions which were described as donations.15

In many instances donations were made to maintain industrial

harmony or achieve industrial objectives. These donations

12 Royal Commission into the Activities of the Australian Building Construction Employees’ and Builders’ Labourers’ Federation, Report (1982), pp 31-36, 246-251, 274-275. 13

His first conviction was overturned by the Victorian Court of Appeal and a new trial was ordered: R v Gallagher [1986] VR 219. At his second trial, he was convicted again, and his application for leave to appeal against conviction was dismissed: R v Gallagher (1987) 29 A Crim R 33 (CA). 14

See Royal Commission into Productivity in the Building Industry in New South Wales, Report of the Hearings Part II Illegal Activities (1992), ch 2, pp 37-68. 15 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 9, pp 221-228.

254

were either made for the direct benefit of the union (for

example, for the purposes of a union picnic day16) or for the

benefit of a third party (for example, a bereavement fund for

families of deceased workers or a charity17 ). Some of these

payments were disguised through the use of false invoices

and false contracts. The Cole Royal Commission also

identified the purchase of ‘casual tickets’ on building sites in

Western Australia whereby a builder would make payments

to a union for ‘casual tickets’ in the hope of avoiding

impliedly threatened unlawful industrial action.18 Payments

for ‘casual tickets’ were payments to a union notionally to

pay for persons to join the union in circumstances where the

persons had not joined the union. Again, there are parallels

with the matters considered in Chapters 10.2 and 10.9 of

Volume 4 of this Report.

31. Why has the existing legal framework not proved especially effective

at deterring corrupting benefits? There are several reasons.

32. First, the substantive criminal laws relating to secret commissions

differ significantly between jurisdictions both in terms of the elements

of the offence and the penalties. Moreover, the substantive criminal

16 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 9, pp 226-227; Vol 13, pp 239-250, 253-254. 17

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 9, p 204; Vol 13, p 262. 18 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 3, p 207; Vol 7, pp 237-238, 245-246, 311-312.

255

laws in many jurisdictions do not apply well to officers of registered

organisations.

33. One issue is that the provisions in many jurisdictions turn on the

identification of an ‘agent’ and ‘principal’ and the principal’s ‘affairs

or business’. Although these terms are capable of application to

registered organisations, they are not well suited to that purpose.

Further, a union official may be at the same time an agent for the

union, an agent for the members of the union as a whole, and an agent

for some sub-class of the members of the union.19 This can lead to

confusion as to who the official’s principal is for the purposes of a

charge, and the scope of the principal’s ‘affairs or business’.

34. Another difficulty is that there is a conflict of authority between

Victoria and Queensland on the one hand20 and New South Wales and

Western Australia on the other21 about the meaning of the word

‘corruptly’ in the various sections. In the latter two jurisdictions, it has

been said that in addition to the payment being made or received with

various mental elements, the payment must be ‘corrupt’ according to

ordinary concepts. That adds further complexity to the operation of the

provisions.

19 R v Gallagher [1986] VR 219 (FC). 20 R v Gallagher [1986] VR 219 (FC); R v Nuttall [2010] QCA 64. 21

R v Turner (2001) 25 WAR 258; Mehajer v R [2014] NSWCCA 167.

256

35. Another complexity with the provisions was highlighted in Victoria

Police’s submissions in response to the Discussion Paper:22

… [T]o establish an [sic] SC [secret commission] offence, it is necessary for the agent to receive the SC without the authority of the principal. For example, where union officials, particularly at senior ranks, receive gifts and benefits from companies, it could be a possible defence that this was not ‘secret’, as everyone at the ‘union’ received a benefit.

36. Where the official is an agent for the member or a sub-class of the

members, there may also be complexities if it is alleged that some, but

not all of the members, were aware of the payment.

37. Secondly, the investigation of blackmail, extortion and secret

commission offences is inherently difficult. Blackmailers do not report

their crimes to police. Nor, generally, do those being blackmailed.

They fear the repercussions that will occur if they report the matter to

authorities. Both those who pay and those who receive secret

commissions have an interest in keeping the payment secret. Further,

there is a general culture of silence within many unions which means

that individuals fear reporting corruption. Without individuals who are

willing to assist the police, it is difficult for prosecutions to be

instituted.

38. Further, as Victoria Police noted in its submissions to the

Commission:23

There is also a large disincentive for companies who have been coerced into making corrupt payments, as the price of industrial peace, to come

22 Victoria Police Law Reform Submissions, 10/9/15, p 15, para 1.2.14. 23 Victoria Police Law Reform Submissions, 10/9/15, p 16, para 1.2.2.

257

forward and take action against the union or union official who have demanded the payment. When companies take such action, it takes a long time before any penalties are meted out to those responsible. Companies take pragmatic decisions to succumb to demands made, rather than face costly and prolonged civil proceedings or continuous work stoppages.

39. Thirdly, employers and unions are adept at disguising corrupt

payments or benefits as membership fees, donations or payments for

services. Chapters 7.4, 10.2, 10.3, 10.5, 10.7, 10.8, 10.9 and 10.10

provide useful examples. Again, this adds to the challenge of

investigating and prosecuting existing criminal laws. Currently, the

Fair Work (Registered Organisations) Act 2009 (Cth) (FW(RO) Act)

does not require unions to disclose separately donations and other

payments made by employers to the union. Trade unions which are

affiliated with a registered political party are presently required to

lodge annual returns with the Australian Electoral Commission

disclosing payments from persons, where the total amount received is

in excess of $13,000.24

40. Fourthly, traditionally at least there appears to have been a reluctance

on the part of police to become involved with ‘industrial relations’

matters.

41. Fifthly, particularly in the construction industry where delays or

stoppages to a project can have a financially crippling effect, and can

have it almost instantaneously, the cost to a business of making a

payment to a union or union official will often be much less than the

cost of refusing to make the payment. Accordingly, in the absence of

any real likelihood that the business will be exposed to a criminal

24 See Commonwealth Electoral Act 1918 (Cth), s 314AEA. The disclosure threshold specified in the legislation is $10,000 but it increases each year with inflation.

258

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Disclosure of benefits made to registered organisations

44. One relatively simple mechanism that may help to discourage the

making and receiving of corrupting benefits is increased disclosure in

relation to payments to unions. As was observed in the Final Report of

the Cole Royal Commission:25

Union representatives would be less likely to suggest or promise that industrial unrest or some other adverse consequence would be averted if a ‘donation’ is made to the union if they know that such donations must be included in statements of the organisation that might be scrutinised by a third party. Clients and contractors would be more likely to resist inappropriate demands for payments if they know that such payments will come to the attention of a regulatory body.

45. The Discussion Paper sought submissions on whether registered

organisations, and any relevant entities, should be required to disclose

publicly information in respect of all payments to them exceeding a

monetary threshold.

25 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 1, p 132.

260

46. In their submissions to the Commission, both the Australia Industry

Group and Master Builders Australia supported recommendations 145

and 147 of the Final Report of the Cole Royal Commission.26 Those

recommendations were as follows:27

Recommendation 145

The Building and Construction Industry Improvement Act require registered organisations, as soon as practicable after the end of each financial year, to lodge with the Industrial Registrar a statement showing the following particulars in relation to each donation exceeding $500 received by the organisation during that financial year:

(a) the amount of the donation;

(b) the purpose for which the donation was made; and

(c) the name and address of the person who made the donation.

Recommendation 147

The Building and Construction Industry Improvement Act require clients, head contractors and subcontractors to promptly notify the Australian Building and Construction Commission of any request or demand that a donation exceeding $500 be made to, or at the direction of, a registered organisation or an official, employee, delegate or member of a registered organisation.

47. Recommendation 148 was that substantial civil penalties apply where

it is proved that a person failed to comply with their disclosure

obligations.

26 Australian Industry Group Law Reform Submissions, 21/8/15, p 11; Master Builders Australia Law Reform Submissions, 21/8/15, pp 44-45 27

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 1, pp 132-3.

261

48. Despite supporting a provision requiring the disclosure of donations,

the Australian Industry Group argued strongly that it was not

appropriate to require public disclosure of all payments made to

registered organisations above a monetary threshold. It argued that this

put employer organisations at a competitive disadvantage if they had to

disclose their pricing or payments made under commercially sensitive

agreements.28

49. Another related argument is that disclosure of all payments to

registered organisations would be administratively burdensome. For

example, if the disclosure threshold was set too low, it would require

disclosure of many membership contributions to an organisation.

Further, if organisations were required to disclose all payments the

usefulness of the disclosure for exposing inappropriate payments

would be limited.

50. On the other hand, the obvious difficulty with any proposal to limit

disclosure to donations only is that, as various case studies considered

by the Commission demonstrate, unions and employers have a

proclivity to disguise what are truly donations as membership

payments for persons who are not members or payments for services

that are never provided or that are provided at an inflated price or that

are undesired.

51. The Australian Labor Party has recently announced its policy in

relation to ‘Better Union Governance’ which includes the reduction of

the disclosure threshold under the Commonwealth Electoral Act 1918

28 Australian Industry Group Law Reform Submissions, 21/8/15, pp 11-12.

262

(Cth) from $13,000 to $1,000. It is not clear, but it would appear to

involve disclosure by registered political parties as well as entities

associated with those parties (which would include many but not all

trade unions) of all payments made to them over $1,000. Discussion

here of that proposal would go well beyond the Commission’s Terms

of Reference.

52. However, a $1,000 threshold appears sensible at least in relation to

loans, grants and donations. Having regard to the consideration

identified in paragraph 49, it is recommended that a higher disclosure

threshold be imposed for payments other than loans, grants or

donations. The disclosure should be in the form of a financial

disclosure statement considered in Chapter 2.

Recommendation 39

The Fair Work (Registered Organisations) Act 2009 (Cth) be amended to

require reporting units to lodge an audited financial disclosure statement (see

Recommendation 10) providing details in respect of (a) loans, grants and

donations (including in-kind donations) made to reporting units in excess of

$1,000 and (b) other payments made to reporting units in excess of $10,000.

Corrupting benefits offence in relation to officers of registered organisations

53. The Discussion Paper raised for consideration the introduction of

Commonwealth criminal provisions outlawing the giving or receiving

of benefits that corrupt union officials, with significant penalties both

for those who give such payments and those who solicit such

263

payments.29 A suggested possible approach was to adapt, to the

particular context of registered organisations, State laws concerning

secret and corrupt commissions along with existing Commonwealth

criminal laws prohibiting the bribery of foreign public officials30 and

the giving and receiving of corrupting benefits in relation to

Commonwealth public officials.31

54. Given the widely varying State criminal laws concerning secret

commissions, and the potential complexities identified with applying

those laws to officers of registered organisations, it is recommended

that the Federal Parliament enact a standalone corrupting benefits

provision in the Fair Work Act 2009 (Cth)32 in relation to officers of

registered organisations. As with current laws, the provision would

criminalise both the giving of a corrupting benefit and the soliciting or

receiving of a corrupting benefit. The provision would ensure that

there is a uniform, clear and relatively simple regime applying

throughout Australia.

55. What penalty for contravention would act as an effective deterrent?

Having regard to the size of some of the companies involved in making

corrupting payments, it would have to be substantial. The penalties for

those who bribe foreign public officials provide a useful guide. An

individual found guilty of the offence is liable to imprisonment for ten

29 Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, p 98. 30

See, eg, Criminal Code (Cth), s 70.2. 31 See, eg, Criminal Code (Cth), s 142.1. 32

It would seem appropriate to include the provision in a new Part 3-7 of the Fair Work Act 2009 (Cth).

264

years, or a fine not exceeding 10,000 penalty units (currently $1.8

million). A body corporate found guilty of the offence is liable to a

fine which is the greater of:33

(a) 100,000 penalty units ($18 million);

(b) where the value of the benefit provided can be determined,

three times the value of the benefit; and

(c) where the value of the benefit provided cannot be determined,

ten percent of the annual turnover of the body corporate.

56. In the Discussion Paper, it was suggested that it might be appropriate

to introduce a specific defence to a person who gives or receives a

benefit under duress. Further reflection suggests that that is

unnecessary. The general defence of duress available under the

Criminal Code (Cth) would apply.34

57. In drafting any such offence, it would be prudent, given the divergence

as to its meaning in the existing authorities, to avoid using the word

‘corruptly’ in the elements of the offence, and to state expressly what

fault element is required to establish the offence. A provision for

consideration is set out in Appendix 1 to this Volume of the Report.

33 Criminal Code (Cth), s 70.2(5). 34 Criminal Code (Cth), ss 2.2(2), 10.2.

265

Recommendation 40

Legislation be enacted amending the Fair Work Act 2009 (Cth) to include a

provision criminalising the giving or receiving of corrupting benefits in relation

to officers of registered organisations, with a maximum term of imprisonment of

ten years.

This recommendation is reflected in the model legislative provisions in

Appendix 1 to this Volume of the Report.

Prohibition on payments by employers to employee organisations or their officials

58. Introducing disclosure requirements and improving the clarity of

existing criminal laws are measures which are unlikely, on their own,

to have a significant effect in discouraging or preventing the giving and

taking of corrupting benefits. The provision of corrupt payments and

other benefits by employers to unions or union officials has been a

recurring problem in Australia that has been identified by successive

Royal Commissions over more than 30 years. It is insidious. It is

immensely damaging. Not only is the criminal activity involved

longstanding. It is also clandestine because both employers and union

officials have an interest in keeping it quiet.

59. A broader approach is recommended which takes account of these

facts.

60. Seeking simply to prohibit payments made or received with a

particular intention has consequent difficulties of investigation and

266

proof. Instead it is recommended that, subject to certain exceptions, all

payments by employers to a relevant union or officials of that union be

outlawed. The employers covered are those employing persons who:

(a) are members of the relevant union and whose industrial

interests the union is entitled to represent; or

(b) are entitled to be members of the relevant union and whose

industrial interests the union is entitled to represent.

61. What are the justifications for this approach? They include the

following:

(a) History shows that there has been a particular problem of

employers giving bribes and secret commissions to unions

and union officials. The material before the Commission

shows that that problem is continuing.

(b) Even with a clearer corrupting benefits provision, the

difficulties of investigation and proof will remain.

(c) Outside certain specific categories of payment there are few,

if any, legitimate reasons why employers should make

payments to unions or union officials.

(d) A blanket prohibition (except for certain categories of

payment) will be easier to police and enforce.

267

62. It is recommended that the prohibition be a criminal offence, albeit

with a lower penalty than the corrupting benefits offence. The

corrupting benefits offence would be available where it can be shown

that a person, which may be someone other than an employer, has

intended to bribe or obtain a favour from a union official, or where an

official solicits a bribe. The prohibition on employer payments would

not require any proof of an intention to bribe. Accordingly, a lower

penalty is appropriate.

63. Obviously, there would need to be categories of permissible payment

or benefit. The Taft-Hartley Act in the United States, considered

above, provides a useful starting place. In principle, the categories of

permissible benefits in the Australian union context would include:

(a) deductions from employee wages to pay membership dues for

persons who are genuinely members of the union (i.e. have

already signed up to be members of the union);

(b) genuine wage claim payments i.e. payments to a union

receiving the payment solely as agent for a group of

employees in settlement of a claim or dispute between the

employees and the employer;

(c) payments to a union to be used solely for a charitable or

benevolent purpose;

(d) genuine payments for goods or services provided by the union

in the ordinary course of business at the prevailing market

price; and

268

(e) payments made pursuant to a court order, judgment or award.

There may be other categories of legitimate payment.

64. It would also be necessary to adopt strict safeguards to ensure that

employers and unions could not circumvent the restrictions, for

example, by disguising a bribe as a charitable donation which finds its

way into union coffers.

65. Currently, reporting units are required to include a note in their annual

general purpose financial report concerning their wage claims activity

for the year.35 However, given that unions are collecting money on

behalf of workers it would seem appropriate that there be additional

accounting requirements similar to those imposed in relation to trust

accounts.

66. Similarly, there is current legislation in many States and Territories

regulating the collection of charitable monies, and preventing the

person collecting the monies from misusing it.36 However, Chapter 7.3

of this Report identified numerous possible breaches of the relevant

New South Wales legislation by the CFMEU. It may, therefore, be

prudent to introduce to the FW(RO) Act provisions dealing with how

charitable monies are dealt with by registered organisations.

35 This is as a consequence of the reporting guidelines issued under s 255 of the FW(RO) Act: see Fair Work Commission, Reporting guidelines for the purposes of section 253, 13/6/14, pp 7-8. 36

Charitable Collections Act 2003 (ACT); Charitable Fundraising Act 1991 (NSW); Collections Act 1966 (Qld); Collections for Charitable Purposes Act 1939 (SA); Collections for Charities Act 2001 (Tas); Fundraising Appeals Act 1998 (Vic); Charitable Collections Act 1946 (WA).

269

67. It is not intended to deal comprehensively or prescriptively with the

safeguards that would need to be introduced. Rather, it is intended

simply to raise for consideration the proposition that safeguards would

be needed.

Recommendation 41

Legislation be enacted amending the Fair Work Act 2009 (Cth) making it a

criminal offence for an employer to provide, offer or promise to provide any

payment or benefit to an employee organisation or its officials. Certain

legitimate categories of payment should be permitted, subject to strict

safeguards. An equivalent criminal offence should apply to any person

soliciting, receiving or agreeing to receive a prohibited payment or benefit. A

two year maximum term of imprisonment should apply to the commission of

these offences.

This recommendation is reflected in the model legislative provisions in

Appendix 1 to this Volume of the Report.

270

CHAPTER 5

REGULATION OF RELEVANT ENTITIES

Subject Paragraph

A - INTRODUCTION 1

B - DISCLOSURE OF FINANCIAL RELATIONSHIPS

BETWEEN UNIONS AND RELEVANT ENTITIES

7

C - REGULATION OF RELEVANT ENTITIES

GENERALLY

14

D - ELECTION FUNDS 18

Prohibition of any compulsion on employees to contribute to an

election fund

23

Basic regulation of election funds 33

E - WORKER ENTITLEMENT FUNDS 47

Regulation under Corporations Act 2001 (Cth) 54

Fringe benefits tax exemption 59

Problems with existing regulation 63

271

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272

union. These are often described as ‘fighting funds’ or

‘election funds’ and will be referred to as election funds;

(b) funds established for the purpose of funding redundancies for

employees in an industry including members of the union

(redundancy funds), or funding the payment of other worker

entitlements such as sick leave, which may be classed

together as worker entitlement funds;

(c) funds established for the purpose of providing training to

members of a union or employees more generally (training

funds) or providing welfare services (welfare funds);

(d) schemes established to provide insurance, typically sickness

and/or accident insurance, to employees in an industry

including union members (employee insurance schemes);

(e) industry superannuation funds;

(f) charities established to assist union members and employees

more generally (for example, by providing welfare services or

drug and alcohol treatment services); and

(g) other generic accounts, associations or funds.

3. Several potential issues can arise in relation to relevant entities.

4. One issue is that a number of unions promote forms of enterprise

agreements that require employers to make payments to certain

273

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274

union’s finances, and has the potential to concentrate power in the

hands of a few union officials at the expense of the committee of

management.

8. Some provisions in the Fair Work (Registered Organisations) Act 2009

(Cth) (FW(RO) Act) seek to ensure proper accountability and

transparency of related party transactions.

9. The first provision is s 253. It requires that the general purpose

financial accounts prepared by reporting units2 must comply with the

Australian Accounting Standards. Those standards include standards

requiring:

(a) the preparation of consolidated financial statements;3

(b) the disclosure of interests in other entities;4 and

(c) related party disclosures.5

10. One problem revealed by the financial reports considered during the

course of public hearings was that many were not prepared on a

consolidated basis. They provided only the most basic of information

about related party transactions. Often the relationships between a

2 As discussed in Chapter 2, a ‘reporting unit’ is a registered organisation (if the organisation is not divided into branches) or a branch of a registered organisation. 3

Australian Accounting Standards Board, AASB 10: Consolidated Financial Statements, July 2015. 4 Australian Accounting Standards Board, AASB 12: Disclosure of Interests in Other Entities, August 2015. 5

Australian Accounting Standards Board, AASB 124: Related Party Disclosures, July 2015.

275

union and trusts controlled by the union were not disclosed at all. The

income from the trust was simply included in miscellaneous income.

11. To ensure that the financial reports are as useful as possible, it is

recommended that consideration be given, in consultation with the

Australian Accounting Standards Board, to amending the FW(RO) Act

to require:

(a) reporting units to prepare their financial reports on a

consolidated basis (i.e. the reporting unit report on a

consolidated basis including its controlled entities); and

(b) reporting units to prepare separate financial statements for

their controlled entities.

12. The second measure in the FW(RO) Act that seeks to ensure proper

accountability and transparency of related party transactions is s 148C,

which was introduced in 2012. It requires the rules of an organisation

and branch to require disclosure to the members of either or both of the

following:

(a) the amount of each payment made by the organisation or

branch to a ‘related party’ or a ‘declared person or body’; or

(b) the total amount of the payments made by the organisation or

branch to a ‘related party’ or a ‘declared person or body’.

13. As a practical matter, most reporting units will comply with these

obligations by including the relevant related party disclosures in their

276

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277

15. The first class consists of the respective laws that govern the specific

legal structure employed, such as:

(a) the Corporations Act 2001 (Cth) in respect of companies

registered under that Act;

(b) trustee legislation in each State or Territory and equitable

principle in in respect of trusts;

(c) the Superannuation (Industry) Supervision Act 1993 (Cth)

and equitable principle in respect of superannuation funds;

(d) the financial services provisions of the Corporations Act 2001

(Cth) and the provisions of the Insurance Act 1973 (Cth) in

respect of employee insurance schemes;

(e) incorporated associations legislation in each State or Territory

in respect of incorporated associations; and

(f) common law and equitable principles concerning contract and

equitable principles concerning trusts in respect of

unincorporated associations.

16. The second class of laws consists of the FW(RO) Act (or other State-based industrial relations legislation) to the extent that the provisions in

that Act (or those Acts) are relevant.

17. It is apparent that the laws within the first class vary so widely - from

those that impose very significant regulation to those which impose

278

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279

(contributors) contributing money to a fund controlled by one or more

individuals who hold elected office within the union or aspire to do so.

The primary purpose of the election fund is to fund future election

campaigns for offices within the union. However, as a result of the

fact that in many unions contested ballots are uncommon, money in the

fund tends to accumulate and be used for other purposes.

20. The Interim Report identified a number of key problems in relation to

the use and operation of election funds by various unions.11 In

summary:

(a) There is commonly insufficient disclosure of the sources of

revenue for election funds both to contributors and to voters

in union elections.

(b) There is commonly insufficient disclosure of the activities

and expenditure of election funds to contributors and to voters

in union elections.

(c) There is a lack of clarity in the legal status of contributions to

an election fund and the entitlement (if any) which

contributors have to the money in the fund.

(d) Money is used for purposes unconnected with the purpose for

which the election fund was formed, with little knowledge of

or oversight over the use of the money.

11 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 4.1, pp 516-517.

280

(e) In a number of cases, it is questionable whether contributors’

decisions to contribute are truly voluntary, particularly where

contributions by union employees are automatically deducted

pursuant to the terms of contributors’ employment contracts

with the union.

(f) Incumbent union officers are able to entrench their positions

by the establishment of a substantial election fund, funded

through the use of automatic payroll deductions, conferring a

disproportionate advantage on incumbents, over and above

the benefit of incumbency itself.

(g) There appears to be a lack of governance and record-keeping

in relation to a number of union election funds.

21. The election fund operated in connection with the NUW NSW

Branch12 provides a useful example of the problems. That campaign

fund was funded by deductions from the wages of union officials.

Transfers were made from the NUW NSW Branch to an account styled

the ‘Derrick Belan Team Account’ from which withdrawals were

made, despite there being no contested election at the Branch between

2002 and 2014. Payments made from the campaign funds instead went

to fund the costs of a breakaway union in Queensland, a car for Derrick

Belan, and unidentified cash withdrawals. Following closure of the

account, the balance was withdrawn, and further deductions on account

of campaign fund contributions from union staff were eventually kept

in cash in Derrick Belan’s personal possession. They were not

12 Vol 2, ch 4, paras 165-207.

281

accounted for in any way. There was no constitutive document

explaining the purposes and setting out the rules of the fund. There

were no records of any oral agreement dealing with those matters. It

was unclear whether the arrangements were to be seen as contractual,

agency or trust arrangements.

22. These problems with election funds have the potential to affect

adversely the democratic processes of the union. In many unions,

employees of the union are compelled to contribute to an election fund,

which in practice is commonly controlled by the Secretary. Over time

the Secretary accumulates a substantial war chest that the Secretary can

use to further his or her influence within the union. The election fund

thus operates to reinforce the power and influence of the current

Secretary. Further, because of the lack of transparency and oversight

associated with election funds, members of the union do not know who

is funding a particular candidate in an election and where the

candidate’s allegiances may lie as a result of funds received.

Prohibition of any compulsion on employees to contribute to an election fund

23. As was noted in the Discussion Paper, there is nothing wrong with

members of an employee or employer organisation joining together to

pool resources to fund a particular candidate or ticket of candidates in

an election. However, any steps taken with the effect of legally or

practically compelling contributions infringe basic principles of

freedom of association.

282

24. As to legal compulsion, s 326 of the Fair Work Act 2009 (Cth) (FW

Act) prohibits certain unreasonable payments and deductions from an

employee’s salary that are for the benefit of the employer, or a party

related to the employer. Given that the employer is the union, and the

election fund is (deliberately) not related to the union, the provision is

unlikely to prohibit terms requiring union employees to make

payments to an election fund.

25. A further problem with any arrangement by which employees of the

union are legally required to contribute to an election fund arises from

s 190 of the FW(RO) Act. Any direct diversion of an organisation’s

funds for the purposes of the election of a particular candidate is

outlawed by s 190. Yet, if the current management of an organisation

mandates in employment contracts between the union and its

employees that some part of the employees’ salaries must be paid to

the election fund, then the management have achieved indirectly what

they cannot do directly. By the use of their powers, the union officials

have caused the union to enter into a particular contract providing for a

benefit to be provided to an election fund. Arguably, this is an

improper exercise of powers to achieve a result that is prohibited by

s 190, and would be a breach of the official’s duties under ss 286 and

287 of the FW(RO) Act.

26. In its submissions to the Commission, the Shop, Distributive & Allied

Employees Association (SDA) attacked this reasoning on the basis that

the funds diverted were not the organisation’s funds, but the wages of

the employee.13 However, this ignores that the union officials

13 Shop, Distributive & Allied Employees Association Law Reform Submissions, 27/8/15, para 19.

283

negotiating with the employee have a power to influence, if not set,

those wages and it is the union officials who have caused the union to

enter into a particular contract the practical effect of which is to divert

union funds to an election fund via the device of a payment to the

employee.

27. The Discussion Paper canvassed two measures to address these issues.

One was prohibiting the use of direct debit and other similar

arrangements whereby contributions are automatically deducted from

the salary or wages payable to the employees of an organisation. The

other was prohibiting any condition of employment requiring an

employee of an organisation to contribute to an election fund.

28. The SDA attacked both options on the basis that such measures would

prevent employees of registered organisations from making

contributions to a mutual fund for the re-election of those employees.14

The proposals were said to be a ‘denial of the right of employees

identified by reference to their membership in or employment by a

registered organisation of employees’.15 The submission continued

that the proposals if enacted:16

could be reasonably seen to mark the first step in a successive legislative progression to banning all employers from transacting any deductions authorised by any employees where those deductions are to be made to a trade union of which they are members.

14 Shop, Distributive & Allied Employees Association Law Reform Submissions, 27/8/15, para 14. 15

Shop, Distributive & Allied Employees Association Law Reform Submissions, 27/8/15, para 14. 16 Shop, Distributive & Allied Employees Association Law Reform Submissions, 27/8/15, para 15.

284

29. These submissions proceed on a false premise. There was,17 and is, no

suggestion that employees should be prohibited from contributing to a

mutual fund. Rather, the suggestion is that measures should be

implemented to seek to ensure voluntariness of contributions.

30. The second option - prohibiting any condition of employment

requiring an employee of an organisation to contribute to an election

fund - is preferable and could be achieved by an amendment to s 326

of the FW Act. Direct debit arrangements can be a convenient way of

employees making genuine contributions to a cause they believe in,

provided they are entered into voluntarily and independently of a

contract of employment. Accordingly, they should not be prohibited.

31. Apart from legal compulsion, there is also the question of practical

compulsion. Often a contribution is voluntary as a matter of theory,

but an employee is left with little, if any, real choice. It will be a rare

union employee, who is presented on the first day of a work with a

form by the union Secretary asking for regular contributions to the

‘fighting fund’ and who is told that everyone else contributes to the

fighting fund, who does not agree to make contributions.

32. Section 344(e) of the FW Act deals with this issue to some extent by

preventing an employer from exerting ‘undue influence’ or ‘undue

pressure’ on an employee in relation to a decision by the employee to

agree, or not agree, to a deduction from amounts payable to the

employee in relation to the performance of work. However, that

provision only protects against ‘undue’ pressure which appears to

17 See Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, 19/5/15, para 259.

285

connote inappropriate, excessive or disproportionate pressure.18 The

difficulty with amending this provision so that it refers only to

‘influence’ or ‘pressure’ is that it would arguably stop any solicitation

of payments by employees to an election fund, thereby potentially

outlawing election funds altogether. The preferable solution

concerning practical compulsion is to introduce basic governance

requirements for election funds. If election funds are operated

properly, and not used for the personal benefit of particular union

officials, the prospect of practical compulsion is likely to be

considerably reduced.

Recommendation 43

The Fair Work Act 2009 (Cth) be amended to prohibit any term of a modern

award, enterprise agreement or contract of employment permitting an employer

to deduct, or requiring an employee to pay, from an employee’s salary an

amount to be paid towards an election fund.

Basic regulation of election funds

33. Apart from the issue of voluntariness of contributions, the other

problems previously identified have the potential to affect adversely

the democratic governance of unions. As discussed in Chapter 1,

office holders in employee organisations are capable of exercising

substantial power, not only in relation to their members but in the

broader political environment. In addition, they exercise substantial

statutory powers under the FW Act. Accordingly, there is a significant

18 See Australian Federation of Air Pilots v Jetstar Airways Pty Ltd [2014] FCA 15 at [13].

286

public interest in ensuring free and fair elections within employee

organisations (and for that matter employer organisations), ensuring

that there is no possibility of corruption or undue influence arising

from donations and electoral expenditure, and ensuring that election

funds are not misused.

34. It is generally accepted that an important element of a free and fair

election process is that voters in the election are fully informed about

the sources of funds and the expenditure incurred in election

campaigns. Legislation has been introduced at both State and

Commonwealth levels that attempts to regulate political donations and

expenditures in State and Commonwealth elections.19 The legislation

varies between jurisdictions but there are common elements. These

include:

(a) caps on the amounts of political donations which can be made

to candidates and parties;

(b) caps on the amount of political expenditure which can be

made by candidates, parties and third parties, usually during a

period prior to the election;

(c) a requirement that donations be paid into, and expenditure be

paid out of, specially established campaign accounts; and

19 See eg, Commonwealth Electoral Act 1918 (Cth), Part XX; Electoral Act 1992 (ACT), Part 14; Election Funding, Expenditure and Disclosures Act 1981 (NSW); Electoral Act 2002 (Vic), Part 12; Electoral Act 1907 (WA), Part VI. Until relatively recently, Queensland had detailed election funding laws, but these were substantially repealed under the former Newman Government: see Electoral Act 1992 (Qld), Part 11.

287

(d) requirements that political donations and political expenditure

be publicly disclosed.

35. Not all of these requirements are appropriate in respect of elections for

officers in registered organisations. On the present evidence, there is

no obvious need for caps on the amounts of donations and

expenditures. However, some of the measures, with adaptations,

would assist in tackling the various issues identified above.

36. The Discussion Paper set out a possible regime which would have

required all donations and electoral expenditure in connection with

elections for office in a registered organisation or branch to be

channelled through regulated campaign accounts.20 Those accounts

would have been subject to certain operating and disclosure

requirements designed to inform contributors and voters, and ensure

appropriate minimum levels of governance. The effect of the proposal

was indirectly to regulate and improve the governance of election

funds, which are currently operated through a multitude of different

legal structures, by requiring them to be operated through regulated

campaign accounts. At the same time it would have improved the

transparency and accountability of union elections.

37. A difficulty with the proposal identified in the Discussion Paper was

that by seeking indirectly to regulate election funds by requiring all

donations and electoral expenditure to pass through regulated

campaign accounts, a range of reporting and administrative

requirements (for example, disclosure of donations and expenditure)

20 Royal Commission into Trade Union Governance and Corruption, Discussion Paper Options for Law Reform, 19/5/15, ch 3.5, pp 34-37.

288

would also have been imposed on individual candidates and groups of

candidates in elections for registered organisations. While those

requirements may be necessary in State and Commonwealth elections,

arguably they could have a disproportionately burdensome effect on

individual candidates in elections for office in a registered

organisation. In some ways, those requirements could have had the

perverse effect of discouraging individual candidates from standing

against well-resourced incumbents.

38. More recently, the Australian Labor Party has proposed subjecting

union elections managed by the Australian Electoral Commission to

the same electoral funding laws in relation to the disclosure of

donations and electoral expenditure as apply to Federal elections.21

The proposal would require any entity, however constituted, associated

with candidates in such elections to disclose publicly the total value of

payments made, receipts and debts each year, and the particulars of

debts and donations, exceeding the disclosure threshold. Candidates

would also be required to make similar disclosures. The proposal also

envisages a reduction in the current disclosure threshold from $13,000

to $1,000.

39. This proposal rightly recognises the importance of transparency in

elections in registered organisations. One weakness with the proposal

is that, as discussed in Chapter 2 of this Volume, a number of elections

in registered organisations are not conducted by the Australian

Electoral Commission because the organisation or branch has an

exemption under s 186 of the FW(RO) Act. Another issue is the same

21 Australian Labor Party, Fact Sheet: Better Union Governance, released 7/12/15, p 3.

289

as the one discussed above i.e. the disclosure requirements, particularly

if the disclosure threshold were reduced to $1,000, may be

disproportionately burdensome and adversely affect individual

candidates.

40. The Commission favour a more limited approach, which is to:

(a) focus on the existing problems with election funds (however

constituted) and subject them to minimum governance

requirements, and ensure that both contributors and voters are

aware of their activities; and

(b) consult with registered organisations and their members about

the effects of broader disclosure requirements on candidates.

41. More specifically, it is recommended that election funds (however

constituted) associated with a registered organisation or branch of such

an organisation be regulated as follows:

(a) Election funds that meet certain minimum requirements

should be entitled to be registered.

(b) Among the requirements to be satisfied in order to be

registered, there must be a document setting out how the

election fund is to operate, the purposes for which the fund

may be used, and the circumstances in which contributors are

entitled to a return or refund of their contributions.

290

(c) A registered election fund must also have a separate bank

account (an election account) maintained solely to receive

contributions made for the purpose of funding current or

future election campaigns and to pay electoral expenditure in

connection with elections for office in a registered

organisation or branch.

(d) Election funds that are not registered would not be permitted

to receive election donations or make electoral expenditure in

connection with elections for office in any registered

organisation or branch.

(e) Registered election funds would be required to lodge regular

returns with the registered organisations regulator disclosing

the activities of the election account, including donations and

expenditures. Those returns would be available to

contributors to the fund and also to members of the

organisation or branch with which the election fund is

associated.

42. One issue raised in the Discussion Paper was whether laws regulating

the funding of elections in registered organisations have the potential

to collide with the freedom of political communication which is

implied from the Constitution.

43. The content of that freedom was recently recast by four members of

the High Court in McCloy v State of New South Wales.22 In that case it

22 (2015) 325 ALR 15.

291

was said that the test to be applied in deciding whether a law is invalid

for infringing the freedom was as follows:23

(a) Question 1 is - does the law effectively burden the freedom

of political communication on governmental and political

matters in its terms, operation or effect? If ‘no’, then the law

does not exceed the implied limitation and the enquiry as to

validity ends.

(b) If ‘yes’ to question 1, question 2 is - are the purpose of the

law and the means adopted to achieve that purpose legitimate,

in the sense that they are compatible with the maintenance of

the constitutionally prescribed system of representative

government? If the answer to question 2 is ‘no’, then the law

exceeds the implied limitation and the enquiry as to validity

ends.

(c) If ‘yes’ to question 2, question 3 is - is the law reasonably

appropriate and adapted to advance that legitimate object?

This question involves what was described as ‘proportionality

testing’ to determine whether the restriction which the

provision imposes on the freedom is justified. The

proportionality test involves consideration of the extent of the

burden effected by the impugned provision on the freedom.

There are three stages to the test - these are the enquiries as to

whether the law is justified as suitable, necessary and

adequate in its balance in the following senses:

23 (2015) 325 ALR 15 at [2] per French CJ, Kiefel, Bell and Keane JJ.

292

(i) suitable - as having a rational connection to the

purpose of the provision;

(ii) necessary - in the sense that there is no obvious and

compelling alternative, reasonably practicable means

of achieving the same purpose which has a less

restrictive effect on the freedom; and

(iii) adequate in its balance - a criterion requiring a value

judgment, consistently with the limits of the judicial

function, describing the balance between the

importance of the purpose served by the restrictive

measure and the extent of the restriction it imposes

on the freedom.

If the measure does not meet these criteria of proportionality

testing, then the answer to question 3 will be ‘no’ and the

measure will exceed the implied limitation on legislative

power.

44. Applying this test, it is difficult to see how imposing certain minimum

governance requirements on election funds, and requiring those

election funds to disclose their activities to contributors and members

of the organisation could be thought effectively to burden the freedom

of political communication on governmental and political matters.

However, on the High Court’s existing authorities almost every law

will fail the test set out in question 1 above.

293

45. In relation to the test in question 2, the purposes of:

(a) improving governance of election funds; and

(b) improving transparency in relation to donations and election

spending in connection with elections in registered

organisations;

are properly regarded as being legitimate. Among other things,

improved governance seeks to avoid the misuse of funds. Increased

transparency seeks to avoid the possibility of undue influence or

corruption in elections by shining a light onto the flow of money from

election funds to candidates, and from persons to election funds to

candidates.

46. As to the test in question 3, it is considered that the model identified

above is a suitable, necessary and balanced way of addressing the

problems identified.

294

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295

49. The Commission considered some worker entitlement funds in detail,

including:

(a) the Building Employees Redundancy Trust (BERT) Fund, a

redundancy fund covering the Queensland construction

industry which is primarily associated with the Construction,

Forestry, Mining and Energy Union (CFMEU);24

(b) the Protect Scheme, which operates a redundancy fund for

electrical trades employees in Victoria;25 and

(c) Incolink, which operates a number of redundancy funds and

sick leave schemes for construction industry employees in

Victoria and Tasmania.26

50. There are a number of other such funds. For example, the Australian

Construction Industry Trust (ACIRT) is a large redundancy fund for

construction industry employees in New South Wales.

51. The basic structure of these funds is typically as follows:

(a) Pursuant to enterprise agreements negotiated with a particular

union, employers make regular payments on behalf of

workers into a particular worker entitlement fund.

24 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 5.2, pp 777-852. 25

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 5.3, pp 853-896. 26

Vol 4, ch 11 of this Report.

296

(b) The fund will commonly provide a financial benefit to the

industry parties. As a result the union negotiating enterprise

agreements will have a strong incentive to require the

employer to make contributions to a particular fund.

(c) Under the rules of the relevant fund, employees will be

entitled to receive certain benefits (for example, sick leave or

redundancy pay) if certain conditions are satisfied.

(d) The rules of the fund will be set out in a trust deed entered

into between the corporate trustee and the industry parties.

These trust deed can be, and often is, amended from time to

time.

52. Collectively, worker entitlement funds in the construction industry

hold around $2 billion in assets under management:

(a) As at 30 June 2015, Incolink managed in excess of

$714 million in investment assets in its various redundancy

funds with worker entitlements of $577 million.27

(b) As at 30 June 2015, ACIRT had total assets of $594 million.28

(c) The Protect Severance Scheme considered in the Interim

Report held assets in excess of $245 million as at 30 June

2013.29

27 Vol 4, ch 11, para 3 of this Report. 28 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 1.

297

(d) The BERT funds considered in the Interim Report held over

$130 million in assets as at 30 June 2013.30

(e) As at 31 July 2015, the Metal and Electrical Redundancy

Trust (MERT) held over $125 million in assets.31

(f) As at 30 June 2015, the Contracting Industry Redundancy

Trust (CIRT) held over $67 million in assets.32

53. Despite their size, worker entitlement funds, unlike superannuation

funds, have very little specific legislation regulating their activities.

The main relevant laws are summarised below.

Regulation under Corporations Act 2001 (Cth)

54. As noted above, most worker entitlement funds are operated by

corporate trustees. They will be subject to the ordinary provisions of

the Corporations Act 2001 (Cth) regulating companies. They will also

be subject to the terms of the trust deed. However, subject to the

possible effect of the Fringe Benefits Tax Assessment Act 1983 (Cth)

discussed below, there is no restriction on the terms of the trust deed.

Many worker entitlement funds - ACIRT being a notable exception -

distribute the profit of the funds to industry parties.

29 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, p 861. 30

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, p 789. 31

Mechanical and Electrical Redundancy Trust (MERT) Annual Report for the year ended 30/6/15, p 13. 32 CIRT Redundancy Scheme, 2015 Members Annual Report, p 6.

298

55. A worker entitlement fund is generally considered a managed

investment scheme under the definition in s 9 of the Corporations Act

2001 (Cth), and an interest in the fund is a financial product for the

purposes of Chapter 7 of the Corporations Act 2001 (Cth).33 Further,

subject to any relief by way of class order, a worker entitlement fund

would ordinarily be required to be registered under s 601ED of the

Corporations Act 2001 (Cth).

56. Thus, subject to any relief by way of class order:

(a) Pursuant to s 601ED a worker entitlement fund would need to

be registered, and the corporate trustee would need to hold an

Australian Financial Services Licence (AFSL). Together,

this would subject the corporate trustee of the fund to a range

of additional requirements including:

(i) requirements to have a compliance plan and

compliance committee;

(ii) capital requirements;

(iii) audit requirements;

(iv) an obligation to maintain certain competence

requirements and ensure that its representatives were

adequately trained and competent; and

33 Corporations Act 2001 (Cth), s 764A(1)(b), (ba).

299

(v) a requirement to ensure responsible officers are of

good fame and character.

(b) Sections 992A and 992AA, which contain prohibitions on the

hawking of certain financial products and interests in a

managed investment scheme, would apply.

(c) The corporate trustee, as an AFSL holder, would be required

to provide a variety of disclosures under Part 7.7 of the

Corporations Act 2001 (Cth). In addition, Part 7.9 of the

Corporations Act 2001 (Cth) would apply, requiring among

other things a Product Disclosure Statement (PDS) to be

provided to persons acquiring an interest in the fund before

they acquire their interests.

57. However, Class Order [CO 02/314] made by the Australian Securities

and Investments Commission (ASIC) exempts worker entitlement

funds from these requirements. More particularly, that class order

exempts ‘a person who operates or promotes’ a certain type of scheme

from the operation of ss 601ED, 992A, 992AA and Part 7.9 of the

Corporations Act 2001 (Cth), and the requirement to hold an AFSL.

The type of scheme referred to is one which involves:

[m]aking offers for the issue of an interest in, or making recommendations to acquire an interest in, or making offers to arrange the issue of interests in, or operating a scheme to which employers may make, or are required by an award or agreement to make, contributions where the primary objective of the scheme is to fund redundancy entitlements and other entitlements incidental to employment, for employees of the employers

58. The class order is due to terminate on 1 October 2016. Recently, ASIC

released a consultation paper indicating that it proposed to remake

300

Class Order [CO 02/314] to extend its relief until 1 October 2017

pending the release of this Final Report.34 That consultation paper

usefully summarised the history of the class order:35

Relief was initially provided on an interim basis on 25 May 2000, pending a public consultation process and finalisation of our approach to regulating such funds. After considering preliminary comments, we formed the view that the regulation of these funds may be an issue of law reform rather than through the use of ASIC powers, and relief continue pending Government consideration of the issue.

Fringe benefits tax exemption

59. Worker entitlement funds are subject to a kind of regulation pursuant

to provisions of the Fringe Benefits Tax Assessment Act 1986 (Cth).

60. Employer contributions to a worker entitlement fund may be ‘fringe

benefits’ within the meaning of the Fringe Benefits Tax Assessment Act

1986 (Cth).36 If so, unless an exemption applies, the employer paying

the contributions will be liable to pay Fringe Benefits Tax (FBT). At

the same time, when a worker receives a payment from the fund, the

payment may be taxed in the worker’s hands as ordinary income or as

an employment termination payment. To avoid the possibility of

double taxation, s 58PA of the Fringe Benefits Tax Assessment Act

1986 (Cth) provides that an employer contribution will be exempt from

34 Australian Securities and Investments Commission, Consultation Paper 238: Remaking ASIC class order on employee redundancy funds: [C0 02/314], 4 September 2015, p 8 [15]-[16]. 35

Australian Securities and Investments Commission, Consultation Paper 238: Remaking ASIC class order on employee redundancy funds: [C0 02/314], 4 September 2015, p 8 [14]. 36 Although at least in some circumstances the contributions may not be fringe benefits: FCT v Indooroopilly Children Services (Qld) Pty Ltd (2007) 158 FCR 325 (FC) at [36]-[38] per Edmonds J (Stone and Allsop JJ agreeing).

301

FBT if the contribution is made to an ‘approved worker entitlement

fund’.

61. A fund may apply to the Commissioner of Taxation to be approved as

an ‘approved worker entitlement fund’ provided the fund satisfies

certain basic governance requirements and the fund’s constituting

documents limit the uses to which contributions to the fund and the

income of the fund may be used.37

62. Thus, although these provisions do not impose any direct regulation on

worker entitlement funds, the fact that the FBT exemption is

contingent on satisfying the requirements in the Fringe Benefits Tax

Assessment Act 1986 (Cth) imposes a form of practical regulation on

many worker entitlement funds.

Problems with existing regulation

63. There are a number of problems with the existing regulatory

framework surrounding worker entitlement funds.

64. First, the startling consequence of Class Order [CO 02/314], which

was initially intended to operate as an interim measure, is that worker

entitlement funds are not subject to any mandatory disclosure

requirements. For example:

37 See Fringe Benefits Tax Assessment Act 1986 (Cth), s 58PB(4).

302

(a) There is no requirement on worker entitlement funds to

disclose the commissions and other payments made by the

fund to unions and employer organisations.

(b) There is no required disclosure of the amounts deducted by

the funds by way of fees and charges.

(c) There is no requirement to explain to workers the

circumstances in which they will, or will not, be entitled to a

payment from the fund.

65. Further, there is no statutory requirement on worker entitlement funds

to provide annual reports or accounts to persons with an interest in the

fund.

66. Secondly, another consequence of Class Order [CO 02/314] is that the

entities operating worker entitlement funds are not subject to the

requirement in s 601FC(1)(d) of the Corporations Act 2001 (Cth) to

treat members38 (for example, workers) who hold interests of the same

class equally and those who hold interests of different classes fairly.

The BERT case study illustrates the potential for worker entitlement

funds under current law to give preferential treatment to union

members over non-union members with the aim of generating union

membership.39 In circumstances where there is no difference of

interest between union and non-union members of the funds, there is

no justification for differential treatment.

38 Meaning persons who have a right to benefits produced by the scheme: Corporations Act 2001 (Cth), s 9. 39

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 5.2.

303

67. Thirdly, apart from ACIRT, worker entitlement funds invariably

distribute the income generated on contributions received to industry

parties (for example, unions and employer organisations) to be used for

purposes they see fit.

68. There are a number of reasons why this is a problem.

69. One reason is that there is an inherent unfairness in taking

contributions paid by employers on behalf of employees, generating

substantial income from those contributions, and then distributing the

money to other persons in circumstances where many employees will

never receive the benefit, either directly or indirectly, of the income

generated. The point is starkly illustrated by the submission by

ElecNet (Aust) Pty Ltd (ElecNet), the trustee of the Protect Severance

Scheme, that:40

Approved worker entitlement funds, such as Protect, do not share the purpose of managed investment schemes: producing maximum financial benefits for members of the scheme. Their aim is to protect workers’ entitlement to ensure workers’ financial security when faced with the insolvency of employers and cycles in the economy. Workers have no entitlement to financial benefits above the return of amounts contributed to the fund for them by their employer.

It may be accepted that the purpose of a worker entitlement fund is to

secure the payment of entitlements. Consequently such funds might

prudently adopt a risk adverse investment strategy. However, it does

not follow that, because the generation of income is not the purpose of

the fund, workers should not be entitled to any return which is made on

the contributions. In fact, it is contrary to the underlying premise of

40 ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 13 (emphasis added).

304

such a fund - to operate solely for the benefit of employees - that the

income should be used to benefit others.

70. It is also worth making the point that apart from ‘genuine redundancy

accounts’,41 most so-called redundancy funds are not limited to making

a payment in circumstances of genuine redundancy: workers (or their

estates) are commonly entitled to a benefit when they cease

employment, retire, reach a particular age or die. Thus, the

contributions paid by employers are, in effect, a deferred entitlement of

the employees on whose behalf the contributions are made. The

consequence of the circumstances revealed in ElecNet’s submission is

that worker entitlements are subject to the effect of inflation, thereby

reducing their value in real terms, whilst all returns generated from

those entitlements are skimmed off to be used by unions and employer

organisations.

71. Another problem is that the very substantial revenue flows to unions

generate significant conflicts of interest and potential breaches of

fiduciary duty on the part of unions and union officials negotiating

enterprise agreements. The reasons for this are dealt with at length in

earlier Volumes of this report.42 In short, the union and union officials

owe a duty to act in the interests of union member employees when

negotiating enterprise agreements. At the same time, there is a

41 These are accounts established by funds which are only paid out in case of a genuine redundancy. Unlike many other payments made to a worker in consequence of termination of employment, ‘genuine redundancy payments’ are tax-free up to a certain amount: see Income Tax Assessment Act 1997 (Cth), ss 83-170, 83-175 and TR 2009/2. 42

See Vol 3, chs 6.6 (CFMEU ACT), chs 7.1, 7.6 (CFMEU NSW), Vol 4, ch 10.4 (AWU, Paid Education Leave), for a discussion of the problems, not limited to redundancy or other worker entitlement funds.

305

significant potential and incentive for the union to act in its own

interests to generate revenue.

72. The substantial revenue flows to unions also lead to a greater potential

for coercive conduct by unions who seek to compel employers in

enterprise negotiations to contribute to funds from which the union will

derive a financial benefit. Circumstances in which this has occurred

are explored in the case studies relating to Universal Cranes43 and the

ACT CFMEU.44

73. Fourthly, as explained in detail in the Chapter of this Report

concerning Incolink,45 although on a proper construction of s 58PB of

the Fringe Benefits Tax Assessment Act 1986 (Cth) ‘approved worker

entitlement funds’ are not permitted to distribute income to persons

other than to the employers who make contributions and the employees

on whose behalf those contributions are made, many ‘approved worker

entitlement funds’ avoid this limitation in practice.46 They do this by

treating the income generated in a prior financial year as capital, and

they then distribute the capital to industry parties.

74. The Commissioner of Taxation has given his imprimatur to this state of

affairs. On one view the Commissioner is adopting an open

interpretation of an ambiguous statutory provision. The preferable

43 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.7. 44

See Vol 3, ch 6.3 of this Report. 45 Vol 4, ch 11 of this Report. 46

ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), pp 11-12.

306

view is that the Commissioner is maladministering the law. Either

way, the law needs clarification.

75. Fifthly, the absence of any requirement for one or more independent

directors on the board of directors of companies operating worker

entitlement funds can lead to significant deadlocks where, as is

commonly the case, unions and employer organisations have equal

representation. The deadlock in the board of BERT provides a good

example of the dysfunctional results that can arise in the absence of

independent directors.47

76. Sixthly, although the Fringe Benefits Tax Assessment Act 1986 (Cth)

has the effect of imposing some minimum governance requirements on

worker entitlement funds, these requirements are by no means

comprehensive. For example, there is no requirement that directors

and managers involved in the fund be of good fame and character.48

Another example is that, as exemplified in the Chapter concerning

Incolink,49 the absence of legislative provisions dealing specifically

with the forfeiture of workers’ interests leads in practice to the

substantial forfeiture of entitlements.

77. Seventhly, it is not usual to impose indirect regulation on an entity

through taxation legislation such as the Fringe Benefits Tax Assessment

Act 1986 (Cth).

47 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, pp 779-780. 48

Cf Corporations Act 2001 (Cth), s 913B(3)-(4). 49 Vol 4, ch 11 of this Report.

307

Options for reform: submissions

78. Many of the problems identified are not new. The Final Report of the

Cole Royal Commission made a number of recommendations

concerning redundancy funds, including recommendations that:50

Surpluses in redundancy funds either be credited to the employee members’ accounts to be payable only in the event of redundancy or, if funds held are sufficient to meet redundancy obligations, used to reduce any contributions required. The distribution of surpluses in accordance with this recommendation should be a prerequisite for a redundancy fund being prescribed as a fund exempt from fringe benefits tax.

Legislation be enacted to implement a uniform system of financial reporting, external auditing, actuarial assessment and annual reporting to a prudential authority for redundancy funds. The systems presently applying for superannuation and long service leave funds should be points of reference. Documents produced, in compliance with the legislation, be public documents. Compliance with those requirements should be a prerequisite for a redundancy fund being prescribed as a fund exempt from fringe benefits tax.

79. The Discussion Paper invited submissions on three possible options for

reform. They were:

(a) revocation or amendment of Class Order [CO 02/314];

(b) amendment of the conditions in s 58PB(4) of the Fringe

Benefits Tax Assessment Act 1986 (Cth); and

(c) introduction of specific legislation subjecting worker

entitlement funds to governance, supervision and reporting

requirements overseen by an appropriate regulator.

50 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 10, ch 13, pp 287-288, recommendations 168-170.

308

80. The Commission received helpful submissions on these issues from

Australian Industry Group, ACIRT, Master Builders Australia and

ElecNet, along with broader submissions from Incolink. Submissions

were also received from BERT Pty Ltd, but they were later withdrawn.

Given that withdrawal, those submissions are not referred to.

81. Neither ACIRT nor ElecNet supported the revocation of Class Order

[CO 02/314], which would require worker entitlement funds to be

regulated as managed investment schemes and corporate trustees

operating the funds to hold AFSLs. In short, ElecNet submitted that

this would impose unnecessary governance and administrative burdens

without any compensating advantage.51

82. ACIRT’s submission adopted a more nuanced view. It, like ElecNet,

argued that requiring redundancy funds to comply with all of the

requirements of Chapters 5C and 7 of the Corporations Act 2001 (Cth)

would result in funds having to incur additional expense without

additional benefit to members.52

83. However, it supported improved disclosure by redundancy funds. In

particular, ACIRT submitted that redundancy funds should be required

to provide the following information to members and participating

employees:53

51 ElecNet Law Reform Submissions, undated (received 21/8/15), pp 12-14. 52 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 6. 53

Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 4.

309

(a) Information similar to, but not as detailed as, that required to

be included in a Product Disclosure Statement including:

(i) information about the nature of the redundancy fund;

(ii) significant risks and benefits associated with the

fund;

(iii) costs and amounts payable by way of fees;

(iv) commission and other payments made by the fund

(if any) including payment to employer

organisations and trade unions;

(v) general information about tax implications; and

(vi) information about how other information can be

obtained.

(b) Information about the governance arrangements of the fund’s

governing entity.

(c) An up-to-date copy of the fund’s constituting documents to be

provided on the fund’s website.

(d) The fund’s most recent financial statements, including any

auditor’s report, to be provided on the fund’s website.

310

84. ACIRT also noted that it is not possible in the context of a redundancy

fund to enrol members on an application form attached to a PDS before

contributions are received.54

85. As to the terms of s 58PB of the Fringe Benefits Tax Assessment Act

1986 (Cth), ACIRT did not believe there were grounds for making any

amendment to the provision.55 The Australian Industry Group

submitted that the ‘current FBT exemption is very important to

employers and Ai Group does not see a need for any changes to the

exemption.’56 ElecNet submitted that, given that the directors of the

trustees of employee benefit funds are already subject to specific duties

and obligations under the Corporations Act 2001 (Cth), it was neither

necessary nor appropriate to impose further conditions upon them

under the Fringe Benefits Tax Assessment Act 1986 (Cth).57

86. In relation to the broader question of specific statutory regulation of

employee benefit funds, the Australian Industry Group submitted that

its earlier proposals, referred to in the Discussion Paper,58 should be

adopted. Those proposals called for the introduction of specific

legislation similar to the superannuation laws, to be called the Worker

Entitlement Funds (Governance, Reporting and Supervision) Act

containing:

54 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 7. 55

Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 8. 56 Australian Industry Group Law Reform Submissions, 21/8/15, p 10. 57

ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 17. 58 Royal Commission into Trade Union Governance and Corruption, Discussion Paper Options for Law Reform, 19/5/15, pp 86-87 [294].

311

(a) provisions imposing duties on directors, trustees and officers

of worker entitlement funds;

(b) a ‘fit and proper person’ test for directors, trustees and

officers and a process for the removal of persons who fail the

test;

(c) regulatory oversight of worker entitlement funds by the

Australian Prudential Regulation Authority (APRA),

including reporting obligations to APRA;

(d) a prohibition on redundancy funds distributing any amount to

a member other than for the purpose of genuine redundancy;

(e) a prohibition on redundancy funds making distributions to a

sponsoring union and employer associations other than the

payment of reasonable fees to directors;

(f) a prohibition on redundancy funds making payments to

employees who are taking industrial action;

(g) a prohibition on funds discriminating between union members

and non-union members when providing any fund benefits;

(h) statutory privacy protection for information relating to

contributing employers and funds members;

(i) a prohibition on persons employed by funds carrying on

union business;

312

(j) a prohibition on funds paying unions for recruiting new

members; and

(k) penalties for breach of the legislation, modelled on the

Corporations Act 2001 (Cth).

87. ElecNet’s submission rejected the Australian Industry Group’s

proposals. It submitted that the proposals appear to be directed at

protecting workers’ contributions from potential fraud, and that it was

not aware of any such behaviour.59 A ‘fit and proper person’ test, it

was argued, would be more onerous than the existing ‘good fame and

character’ test that would apply to worker entitlement funds, but for

Class Order [CO 02/314].60 ElecNet dismissed the possibility of a

conflict of interest, arguing that there was no evidence that ‘members

of employee benefit funds are suffering any financial detriment’ as a

result of conflicts of interest.61 That submission is difficult to

understand. Clearly at least some employees are worse off by reason

of the fact that they do not receive income on their contributions which

is instead distributed, in part, to trade unions.

88. ACIRT noted that given that ‘employee entitlement funds now hold

around $2bn in assets … some degree of regulation may be appropriate

and even inevitable.’62 For that reason it is accepted that there should

be some specific regulation of funds. In those circumstances it saw

59 ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 19. 60 ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 20. 61

ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 21 (emphasis added). 62 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 2.

313

reduced managed investment and financial services type regulation as

appropriate.63 It was argued that it would not be appropriate to impose

the same level of regulation as on superannuation funds. ACIRT

argued that APRA would not be an appropriate regulator as the product

was in the nature of a managed investment rather than in the nature of

a product regulated prudentially by APRA.64 ACIRT supported the

introduction of standards for redundancy funds, including:65

(a) a requirement for an audit committee, and for the accounts to

audited by an independent auditor;

(b) a requirement for clear delegations of authority and

delineation of the respective roles of staff and officers; and

(c) a requirement for a sound management framework.

Options for reform: consideration

89. In 2003, Commissioner Cole noted the following in his Final Report:66

Redundancy funds have matured throughout Australia to become a significant component of the industry’s financial structure. Approximately $500 million is currently under management yet they function without any prudential control. The repercussions would be enormous should any of

63 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 8. 64

Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 8-9. 65 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 4. 66

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 10, ch 13, p 288.

314

these funds diminish or collapse for reasons of mismanagement, misappropriate or abuse. The opportunity for any of these events to occur is manifest.

90. In the 12 years since that report, worker entitlement funds (principally

but not exclusively redundancy funds) in the construction industry

have grown fourfold to around $2 billion. Having regard to the size of

the sector alone, prudence requires reconsideration of the current

regulatory environment. Combined with the problems identified

above, there is a compelling case for legislative reform.

91. The retention of Class Order [CO 02/314] after its sunset date is

inappropriate. It was designed as an interim measure pending broader

reform. It is in the interests of workers and employers that worker

entitlement funds be subject to certain mandatory disclosure

requirements. Having regard to the importance of the securing of

contributions by funds, officers and staff of entities operating worker

entitlement funds should, at a minimum, be persons of good fame and

character. At the same time, there is force in the arguments advanced

that revoking the Class Order and subjecting worker entitlement funds

to the full requirements of Chapter 5C and 7 of the Corporations Act

2001 (Cth) would amount to excessive regulation.

92. The current provisions of the Fringe Benefits Tax Assessment Act 1986

(Cth) also require amendment. For one thing, s 58PB(4)(d) needs

clarification.67 More generally, it is not appropriate to impose de facto

regulation through the Fringe Benefits Tax Assessment Act 1986 (Cth).

67 See Vol 4, ch 11 of this Report.

315

93. The preferable course is as follows:

(a) Introduce specific legislative provisions governing worker

entitlement funds, either in the Corporations Act 2001 (Cth)

or in a standalone Act.

(b) The legislation should entitle worker entitlement funds to

apply to ASIC to become registered, and contain a prohibition

on any person conducting or operating an unregistered worker

entitlement fund which has more than a minimum number of

members (say 50).

(c) A worker entitlement fund ought not be entitled to be

registered unless the entity operating the fund, its officers and

staff and the constituting documents (for example, the trust

deed) of the fund satisfy specified criteria. In order to remain

registered a fund would need to:

(i) comply with its constituting documents and provide

annual audited reports to ASIC;

(ii) adopt appropriate governance and capital adequacy

policies; and

(iii) ensure its officers and staff meet continuing training

and competence requirements.

316

(d) Registered funds should also be required to provide specified

disclosure:

(i) to contributing employers before a contributing

employer begins to make payments to the fund; and

(ii) to members as soon as practicable after a

contributing employer begins to make payments to

the fund on their behalf.

Registered funds should also provide ongoing disclosure of

relevant changes to the constitution or operation of the fund.

Annual reports should be provided to members and

contributing employers, and be made publicly available.

(e) The reference to ‘an approved worker entitlement fund’ in

s 58PA of the Fringe Benefits Tax Assessment Act 1986 (Cth)

should be replaced by reference to a registered worker

entitlement fund, and s 58PB should be repealed. The fringe

benefits tax exemption would still exist but it would require

the fund to remain registered.

(f) The legislation should exclude registered worker entitlement

funds from the operation of Chapters 5C and 7 of the

Corporations Act 2001 (Cth): they would instead be subject

to the specific legislative provisions. Accordingly,

Class Order [CO 02/314] should be revoked as unnecessary.

317

94. The reason for selecting ASIC as the reporting agency is that, although

worker entitlement funds have some characteristics similar to

insurance and superannuation funds - which are subject to detailed

prudential regulation by APRA - a worker entitlement fund is more

akin to a managed investment. Further, at least at this time, there does

not appear to be any demonstrated need for the very detailed prudential

control which is imposed on insurers and general superannuation

funds.

95. The precise terms of the criteria with which registered worker

entitlement funds would be required to comply should be a matter for

consultation. However, the following elements should be part of any

scheme:

(a) Officers and staff of the entity managing a registered worker

entitlement fund should be required to be persons of good

fame and character. This requirement is imposed on all

holders of an AFSL. It is a basic good governance

requirement.

(b) Corporate trustees of registered worker entitlement funds

should be required to have a minimum number of

independent directors. A number of redundancy funds

already do this. Again, this is a basic governance measure

directed to avoiding deadlocks, and conflicts of interest.

(c) The disclosure requirements should require disclosure of all

fees charged to a member’s account, along with a summary of

318

the circumstances in which a member will or will not be

entitled to a payment.

(d) The legislation should prohibit a fund discriminating as to the

benefits provided between persons of the same class. In

particular, a fund should not be permitted to discriminate

solely on the ground that a person is or is not a union

member.

(e) Registered worker entitlement funds should be subject to the

conditions presently stated in s 58PB(4) of the Fringe

Benefits Tax Assessment Act 1986 (Cth), subject to

clarification that prior year income cannot be distributed other

than for the prescribed purposes. After the payment of

necessary expenses to manage the fund (which would include

reasonable directors’ fees) all of the money of the fund should

be used solely for the purposes of benefiting employees, or if

there are surplus funds, returning those funds to employer

contributors. It is true that this will prevent redundancy funds

from making payments to unions and employer organisations,

which could use the money for legitimate purposes such as

training and welfare. However, unions and employer

organisations can and do establish separate training and

welfare funds that receive separate levy contributions under

enterprise agreements. The interest in avoiding conflicts of

interest and possible coercion as well as improving financial

transparency requires that funds not make any payment to a

union or employer organisation (or a related entity), other

319

than for the payment of reasonable directors’ fees or

reasonable expenses in administering the fund.

(f) The legislation should deal specifically with the forfeiture of

interests in a registered worker entitlement fund.68 The

provisions applying to lost and forfeited superannuation

accounts should provide a useful guide.

Recommendation 45

Legislation, either standalone or amending the Corporations Act 2001 (Cth), be

enacted dealing comprehensively with the governance, financial reporting and

financial disclosures required by worker entitlement funds. The legislation

should provide for registration of worker entitlement funds with the Australian

Securities and Investments Commission, and contain a prohibition on any

person carrying on or operating an unregistered worker entitlement fund above a

certain minimum number of persons. Key recommended features of the

legislative scheme are explained at paragraphs 93 and 95 above.

Recommendation 46

In consequence of the enactment of the above legislation, Class Order

[CO 02/314] not be extended. In further consequence, s 58PB of the Fringe

Benefits Tax Assessment Act 1986 (Cth) be repealed and the fringe benefits tax

exemption in s 58PA(a) be amended to refer to registered worker entitlement

funds.

68 See Vol 4, ch 11 of this Report.

320

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98. For present purposes, the significant issue exposed by the evidence is

that the unions involved in the income protection insurance schemes

examined by the Commission often received very substantial

commissions that were not disclosed properly, if at all, to the

participants (both employers and employees) involved in the schemes.

What changes, if any, are needed to the laws regulating the operation

of such schemes to ensure adequate disclosure?

Existing regulation

99. As with worker entitlement funds, entities involved in the group

purchase of insurance products or in the promotion of such schemes

would ordinarily be subject to the financial services licensing

requirements under the Corporations Act 2001 (Cth), particularly

insofar as those provisions apply to the provisions of financial product

advice, and possibly also the provisions concerning managed

investment schemes.

100. As is the case in relation to worker entitlement funds, there is a class

order, Class Order [CO 08/1], exempting group purchasing bodies

from this regulation provided the conditions in the class order are

satisfied.70 Relevantly, relief is provided for a body that arranges for

the issue of insurance or for a person to be covered by an existing

insurance policy, provided either (a) the person is independent and

received no financial benefit for arranging insurance (subject to limited

exceptions) or (b) arranging the cover is incidental to another

70 See Australian Securities and Investments Commission, Group purchasing bodies for insurance and risk product, Regulatory Guide 195, June 2010.

322

relationship between the body and the persons to be covered by the

insurance. In addition, in order to be entitled to relief under the class

order the group purchasing body must, as soon as practicable after it

has reason to believe that a person will receive financial services,

provide disclosure of any payments the body will receive from the

issuer of the insurance product or any person arranging the product.

101. The Class Order therefore may provide relief for a worker entitlement

fund that receives employer insurance premiums and uses those

contributions to purchase insurance coverage for its members.

102. However, as explained earlier in Chapter 7.6 of Volume 3 concerning

Coverforce, a trade union promoting a particular insurance scheme to

employers in return for commission will often not be entitled to rely on

Class Order [CO 08/1] because they will not be a group purchasing

body,71 nor will they satisfy the conditions for relief.

103. Further, as the analysis concerning Coverforce demonstrates, in the

usual case it is unlikely that the trade union will be merely providing a

referral service. This is because the union will do more than merely

refer the employer to the relevant insurance broker or insurer: it will

actively seek to agree upon a particular insurance product with the

employer, in return for which the union will receive an undisclosed

commission. In truth, in these circumstances unions are akin to

insurance brokers.

104. Consequently, the union will either need an AFSL or will need to be an

authorised representative of the holder of an ASFL. In either case, the

71 Although a union may be if it is the holder of policy.

323

trade union, or the AFSL holder which the union represents, will be

subject to a range of disclosure requirements under Chapter 7.7 of the

Corporations Act 2001 (Cth) (concerning the provisions of Financial

Services Guides) and Chapter 7.9 of the Corporations Act 2001 (Cth)

(concerning Product Disclosure Statements).

105. Thus, in many cases, if the existing laws under the Corporations Act

2001 (Cth) were applied, there would be disclosure of the remuneration

and benefits received by trade unions in connection with employee

insurance schemes.

106. The difficulty is that the provisions of Chapter 7 of the Corporations

Act 2001 (Cth) are extremely complex and consequently difficult to

enforce and apply. Further, Financial Services Guides and Product

Disclosure Statements are often very lengthy and complex documents

with critical information buried in a mass of detail.

107. In the Discussion Paper, submissions were invited on whether Class

Order [CO 08/1] should be revoked or amended. ElecNet submitted

that it should not be revoked, on the basis that it would not be

economical for most group purchasing bodies to obtain an AFSL or

register a management investment scheme.72 The Class Order extends

well beyond union associated employee insurance schemes. For

example, it applies to sporting associations and clubs purchasing group

insurance for players and members.

108. Having regard to the broad scope of Class Order [CO 08/1], it is not

appropriate to revoke or amend it.

72 ElecNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), pp 15-16.

324

109. The more suitable course is to introduce, whether by legislation or

regulation, provisions specifically dealing with disclosure to employers

of the nature and quantum of the pecuniary benefits received

(including amounts that can reasonably be expected to be received) by

unions from the operation of employee insurance schemes. The

quantum should include both the total amount received, but also the

proportion of the payment made by the employer that will be received

by the union. The benefits disclosed should include:

(a) direct cash payments to the union;

(b) direct cash payments to an entity related to the union or at the

direction of the union, or to any entity where the money, or

part of it, is eventually paid to the union;

(c) other financial benefits provided to the union, such as the

payment of insurance premiums on the union’s behalf;

(d) other financial benefits provided to an entity related to the

union, or to any entity where the value of the financial

benefit, or part of it, is transferred to the union; and

(e) financial benefits provided solely to union members (for

example, ambulance or health benefits).

The disclosure should be short, simple and would capture any form of

commission or fees.

325

Recommendation 47

Amendments be made to Chapter 7 of the Corporations Act 2001 (Cth), or

relevant regulations, requiring specific disclosure by registered organisations of

the direct and indirect pecuniary benefits obtained by them in connection with

employee insurance products. The detail and mechanism should be a matter of

consultation. In broad terms, the provisions should require:

(a) a branch of a registered organisation, and an officer of a branch of a

registered organisation,

(b) that arranges or promotes a particular insurance product providing

cover for employees of an employer, or refers an employer to a

person who arranges or provides such a product (whether in

enterprise bargaining or otherwise),

(c) to disclose in writing to the employer in no more than two pages the

nature and quantum of all direct and indirect pecuniary benefits that

the branch or any related entity receives or expects to receive, or

which are available only to the branch’s members, from the issuer

of the product, or any arranger or promoter, or any related entity.

110. It is important to emphasise that the disclosure envisaged by

Recommendation 47 is separate from any disclosure that occurs as part

of enterprise bargaining. Disclosure in that context is addressed in the

following Chapter of the Report.

326

CHAPTER 6

ENTERPRISE AGREEMENTS

Subject Paragraph

A - INTRODUCTION 1

B - TERMS REQUIRING CONTRIBUTIONS TO

EMPLOYEE BENEFIT FUNDS OR EMPLOYEE

INSURANCE SCHEMES

7

Introduction 7

Submissions received in response to the Discussion Paper 14

Options for reform 22

C - SUPERANNUATION FUNDS 32

Mandatory superannuation fund clauses 32

Default superannuation fund clauses 45

D - PATTERN BARGAINING 46

Introduction 46

327

Subject Paragraph

Current provisions relating to pattern bargaining 52

History of legislative attempts to address pattern bargaining 55

Options for reform - pattern bargaining 61

A - INTRODUCTION

1. This chapter examines certain issues concerning enterprise agreements

thrown up by the Commission’s inquiries.

2. The first issue was identified in Chapter 5.1 Many unions promote

forms of enterprise agreements that require employers to make

payments to certain funds, such as redundancy funds or other worker

entitlement funds, training funds, welfare funds and superannuation

funds in order to generate income for a union. For convenience these

funds, other than superannuation funds, are described in this Chapter as

employee benefit funds. There are similar clauses requiring

contributions to be made in respect of particular employee insurance

schemes.

3. These clauses can give rise to actual and potential conflicts of interest,

breaches of fiduciary duty and the potential for coercion. Part B of this

Chapter considers the most effective means of combatting these

problems.

1 See Chapter 5, paras 4, 71-72 of this Volume of the Report.

328

4. The second issue concerns clauses in enterprise agreements that require

superannuation contributions to be paid to a particular superannuation

fund. This issue is discussed in Part C of this Chapter.

5. The third, and final, issue considered in the Chapter is pattern

bargaining.

6. A number of the issues considered in this chapter were raised in the

Commission’s Discussion Paper. Relevant submissions were received

from various parties, and are referred to below where appropriate.

B - TERMS REQUIRING CONTRIBUTIONS TO EMPLOYEE BENEFIT

FUNDS OR EMPLOYEE INSURANCE SCHEMES

Introduction

7. The Commission’s inquiries have disclosed a number of examples of

enterprise agreements negotiated by a union containing provisions

requiring employers to make contributions to a particular employee

benefit fund or employee insurance scheme in which the union has a

pecuniary interest.2 This is not a new phenomenon. The Cole Royal

Commission identified the problem more than a decade ago.3 The

means by which the union benefits varies from case to case but may

2 See Vol 3, chs 6.6, 7.4 and 7.6 and Vol 4, ch 11 of this Report. See also Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, chs 5.2, 5.3, 6.2. 3

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 10.

329

include the payment of directors’ fees, commissions, trust distributions

or grants.

8. The income that flows to unions from the operation of these terms has

several potential consequences.

9. First, it may induce a union, and its officials and employees, to engage

in coercive conduct to compel employers to contribute to a fund from

which the union derives a benefit, or to agree to terms in an enterprise

agreement requiring such contribution. The Universal Cranes case

study provides an example of such conduct.4

10. Secondly, the income creates an actual or potential conflict of interest,

and can lead to breaches of fiduciary duty by union officials.5 The U-Plus/Coverforce and CSI case studies are examples of how such

conflicts arise.6

11. Thirdly, the predominance of clauses that benefit particular unions is

likely to diminish competition. Coercive conduct taken by employee

organisations to secure such clauses in enterprise agreements is akin to

the types of conduct prohibited by the exclusive dealing provisions in

the Competition and Consumer Act 2010 (Cth).

4 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.7. 5

See Volume 4, ch 10.2 of this Report for an explanation of why union officials and unions owe fiduciary duties to the members of the union on whose behalf they act in enterprise bargaining. 6

See Volume 3, chs 6.6, 7.6 of this Report.

330

12. The Discussion Paper considered a number of means by which these

problems could be addressed. These are considered further below. As

already noted, these issues are not new. In the context of the building

and construction industry, the Cole Royal Commission recommended

that:7

… there be full disclosure, in writing, of any direct or indirect financial benefit that may by derived by any negotiating party to an industrial agreement from any term sought in the enterprise bargaining agreement, such as commissions or other income.

13. The Building and Construction Industry Improvement Act 2005 (Cth)

was enacted to implement around 120 of the Cole Royal Commission’s

212 recommendations. This recommendation was not adopted.

Submissions received in response to the Discussion Paper

14. As noted, the Discussion Paper sought comment in relation to a

number of proposed measures to address the problems identified

above. Those measures included amendments to ss 172 and/or 194 of

the Fair Work Act 2009 (Cth) (FW Act) prohibiting an enterprise

agreement from containing terms requiring employers to make

payments:

(a) to any employee benefit fund;

(b) to a specific employee benefit fund, or to a fund or scheme

with reference to a specific employee benefit fund;

7 Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 10, ch 14, p 319, recommendation 171.

331

(c) to a specific employee benefit fund other than as a default;

(d) to an employee benefit fund in which an employee

organisation or official of an employee organisation

negotiating an enterprise agreement has an interest or from

which the employee organisation or its officials derives a

benefit; or

(e) to any employee benefit fund which is not an approved

employee benefit fund.

15. The Discussion Paper also addressed whether there should be a

requirement for employee organisations bargaining for an enterprise

agreement to disclose financial benefits, whether direct or indirect, that

would be derived by the employee organisation from the terms of a

proposed enterprise agreement, and the consequences of any breach of

that requirement.

16. The Australian Construction Industry Redundancy Trust (ACIRT),8

ElecNet (Aust) Pty Ltd in its capacity as trustee of the Protect

Severance Scheme Submissions (Protect),9 Master Builders

Australia,10 the Australian Chamber of Commerce and Industry,11 and

8 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), pp 9-10. 9

ElectNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), pp 17-21. 10 Master Builders Australia Law Reform Submissions, 21/8/15, pp 42-43. 11

Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, pp 29-30.

332

the Australian Industry Group12 each made submissions regarding the

issues referred to above.

17. ACIRT and Protect submitted that terms requiring employers to make

payments to any employee benefit fund, a specific fund or a fund other

than as a default should not be prohibited from inclusion in enterprise

agreements because these funds provide a number of benefits to

employees such as reliable access to funds in the event of employer

insolvencies, which in turn results in less dependence on the welfare

system and greater financial security for employees.13

18. Protect submitted that such a prohibition would effectively shift the

risk of conflicts of interest to employers. Because of the transitory

nature of employment in the building and construction industry in

particular and the high risk of employer insolvency, Protect submitted

that there would be ‘little or no benefit to employees or employers’

from prohibiting access to such funds.14

19. Moreover, Protect submitted that the suggestion that unions should not

receive benefits from the income generated by employee entitlement

funds misunderstands how those funds work, because, it said, there

12 Australian Industry Group Submissions in Response to Issues Paper 4: Relevant Entities, 22/8/14, pp 6, 12-13. 13

Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), pp 9-10; ElectNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), pp 17-21. 14

ElectNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), p 19.

333

would be administrative difficulties in managing funds so that income

from them was invested and allocated to member accounts.15

20. On the other hand, ACIRT submitted that it is inappropriate for unions

to derive a benefit other than for reasonable director’s fees.16 It did not

support the concept of restricting inclusion of terms in enterprise

agreements nominating particular funds outright, but supported the

concept of approved funds and disclosure requirements.17 Master

Builders Australia took a similar stance, supporting ‘disclosure rather

than prohibition’ and that ‘there should remain the ability for any

approved benefits fund to be nominated as a default fund in an

enterprise agreement’.18

21. The Australian Industry Group submitted (in the context of

recommending that there should be a separate Act regulating worker

entitlement funds) that enterprise agreement terms requiring payments

to funds that do not meet stringent governance, reporting and

supervision standards should be included as unlawful terms within

s 194 of the FW Act.19 It also submitted that terms requiring an

employer to pay for a particular income protection insurance product

should be unlawful if the insurance provider is paying substantial

commissions or fees to a union or an entity controlled or jointly

15 ElectNet Pty Ltd Law Reform Submissions, undated (received 21/8/15), pp 11-12. 16 Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), p 10. 17

Australian Construction Industry Redundancy Trust Pty Ltd Law Reform Submissions, undated (received 31/8/15), pp 10-11. 18 Master Builders Australia Law Reform Submissions, 21/8/15, pp 43-44. 19

Australian Industry Group Submissions in Response to Issues Paper 4: Relevant Entities, 22/8/14, p 6.

334

controlled by a union.20 It further submitted that a specific anti-coercion provision should be inserted into the FW Act prohibiting

coercion of an employer to contribute to an employee entitlement

fund.21 In addition, it argued that unions should be required to disclose

financial interests derived from the terms of any enterprise

agreements.22

Options for reform

22. The Commission has considered a number of options for dealing with

the problems identified earlier in this Chapter. Two observations may

be made at the outset. First, it is not suggested that clauses requiring

payments to employee benefit funds, or employee insurance schemes,

should be prohibited. Secondly, it is unlikely that any single

mechanism will avoid all of the problems already identified.

23. Having regard to the various competing submissions, three reforms to

the FW Act are recommended.

24. The first is to require an organisation that is a bargaining representative

to disclose all financial benefits, whether direct or indirect, that would

or could reasonably be expected to be derived by the organisation, an

officer of the organisation or a related entity as a direct or indirect

20 Australian Industry Group Submissions in Response to Issues Paper 4: Relevant Entities, 22/8/14, p 9. 21

Australian Industry Group Submissions in Response to Issues Paper 4: Relevant Entities, 22/8/14, p 6. 22 Australian Industry Group Submissions in Response to Issues Paper 4: Relevant Entities, 22/8/14, p 12.

335

consequence of the operation of the terms of a proposed enterprise

agreement. This would include fixed payments such as commissions

and directors fees as well as discretionary payments such as trust

distributions and grants.

25. Disclosure is a basic first step to avoid the conflicts of interest

discussed above. Further, it seeks to ensure that employees who are

asked to vote for an enterprise agreement are properly informed about

its effect.23

26. The duty of disclosure should extend to all employees proposed to be

covered by the agreement. The disclosure should be made in a written

document which contains specified information about the nature and

quantum of the pecuniary benefits. The disclosure document should be

short (for example, no more than 2 pages), simple and easy for a

layperson to understand.24 The disclosure document should be

provided to the employer and all other bargaining representatives in the

first instance and then form part of the material to which employees are

given access prior to voting on the agreement pursuant to s 180(2) of

the FW Act. The disclosure document should also be required to be

annexed to the enterprise agreement that is lodged with the Fair Work

Commission so that new employees are aware of the benefits flowing

to an employee (or employer) organisation.

27. As noted in Chapter 7.6, the CFMEU argued that a duty of disclosure

would be ungainly and make bargaining more complicated than it

23 See Fair Work Act 2009 (Cth), s 180(5). 24 The information provided should be similar to that discussed in Chapter 5, para 109 of this Volume.

336

already is. The proposed disclosure should not be particularly onerous

for organisations, particularly given the pattern nature of many

enterprise agreements.

28. The second recommendation is to amend s 194 of the FW Act to make

unlawful any term of an enterprise agreement requiring or permitting

contributions for the benefit of an employee to be made to any fund

(other than a superannuation fund)25 providing for, or for the payment

of, employee entitlements, training or welfare unless the fund is:

(a) a registered worker entitlement fund; or

(b) a registered charity.

This would include worker entitlement funds, training funds and

welfare funds.

29. The purpose of this recommendation is to reduce further the potential

for conflicts of interest and for coercion by ensuring that contributions

made to various funds intended to benefit employees are made to

entities that are subject to a degree of regulation. Registered worker

entitlement funds are discussed in Chapter 5, and are proposed to be

subject to regulation by ASIC. The practical consequence is that

training and welfare funds nominated in enterprise agreements would

need to be registered charities and subject to the oversight of the

Australian Charities and Not-for-Profits Commission.

25 The reasons for excluding superannuation funds is that s 194(h) of the Fair Work Act 2009 (Cth) already deals with unlawful terms in relation to superannuation funds.

337

30. The third recommendation is to introduce a specific civil remedy

provision prohibiting a person from organising or taking (or

threatening to organise or take) any action, other than protected

industrial action, with intent to coerce an employer to pay amounts to a

particular employee benefit fund, superannuation fund or employee

insurance scheme. The reason for recommending this specific

prohibition is that it is questionable whether the existing prohibitions

on coercion in the FW Act capture coercion which occurs outside the

enterprise bargaining process. Thus, s 343 of the FW Act prohibits

action done with an intent to coerce a person to exercise a ‘workplace

right’ in a particular way. A ‘workplace right’ includes participating in

the process of making an enterprise agreement.26 Accordingly, action

done to coerce an employer to agree to a particular term of an

enterprise agreement requiring contributions to a particular employee

benefit fund is prohibited. However, it is doubtful whether action

taken outside the enterprise bargaining process, for example, as part of

seeking to come to a ‘side deal’ between employer and union, would

be caught. The maximum penalty should be the same as for the other

forms of coercion.

31. The ongoing situation should be monitored to assess whether further

legislative reforms are required. Should there be a continuation of the

present position where unions derive substantial disguised income

from largely unregulated funds and schemes, it may be necessary to

consider a broader prohibition on permissible terms of enterprise

agreements.

26 Fair Work Act 2009 (Cth), s 341(2)(e).

338

Recommendation 48

The Fair Work Act 2009 (Cth) be amended to require an organisation that is a

bargaining representative to disclose all financial benefits, whether direct or

indirect, that would or could reasonably be expected to be derived by the

organisation, an officer of the organisation or a related entity as a direct or

indirect consequence of the operation of the terms of a proposed enterprise

agreement. A short, simple and clear disclosure document should be provided

to all employees before they vote for an enterprise agreement.

Recommendation 49

Section 194 of the Fair Work Act 2009 (Cth) be amended to make unlawful any

term of an enterprise agreement requiring or permitting contributions for the

benefit of an employee to be made to any fund (other than a superannuation

fund) providing for, or for the payment of, employee entitlements, training or

welfare unless the fund is:

(a) a registered worker entitlement fund (see Recommendation 45); or

(b) a registered charity.

339

Recommendation 50

A new civil remedy provision be added to the Fair Work Act 2009 (Cth)

prohibiting a person from organising or taking (or threatening to organise or

take) any action, other than protected industrial action, with intent to coerce an

employer to pay amounts to a particular employee benefit fund, superannuation

fund or employee insurance scheme.

C - SUPERANNUATION FUNDS

Mandatory superannuation fund clauses

32. The potential for coercive conduct and conflicts of interest in

enterprise bargaining identified in respect of employee benefit funds

also exists in respect of superannuation funds. Examples of this may

be found in the case studies examining TWU Super27 and LUCRF.28

33. Employees in Australia are generally entitled to choose their

superannuation fund. However, employees employed under a

collective agreement, enterprise agreement, State award or State

agreement are not always able to choose their superannuation fund. It

27 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.2. 28

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.3.

340

remains lawful for such agreements and awards to mandate the fund to

which employers must make contributions.29

34. In the Interim Report, the view was expressed that there were strong

reasons to repeal s 32C(6)(d) and (h) of the Superannuation Guarantee

(Administration Act) 1992 (Cth).30 After the Interim Report was

finalised but before its publication, the Final Report of the Financial

System (the Murray Report) was released. It included, among other

things, a recommendation that these provisions of s 32C, and others

that deny employees the ability to have a choice of fund, be repealed.31

The Government response to the Murray Report agreed to the repeal of

these provisions.32

35. The Murray Report concluded that there was no good reason why

some, but not other, employees should be denied a choice of

superannuation fund. The Commission invited any interested party to

make submissions to the contrary so that the Commission could be

properly informed of the arguments in favour of maintaining the status

quo.

36. Only two submissions were made identifying arguments in favour of

maintaining the status quo.

29

Superannuation Guarantee (Administration) Act 1992 (Cth), ss 32C(6), (6A), (6B), (7), (8). 30 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.1, p 898; ch 6.2, p 943. 31

Commonwealth, Financial System Inquiry, Final Report, November 2014, pp 131-132, Recommendation 12. 32 Australian Government, Improving Australia’s financial system: Government response to the Financial System Inquiry, 20/10/15, p 14.

341

37. The Australian Industry Group submitted that:33

In Ai Group’s experience, the main argument here is that employees in effect express their choice of fund when they vote to approve the agreement. The existing provisions are supported by many employers as administration costs are reduced.

38. The Retail Employees Superannuation Trust submitted that there

would be a number of adverse impacts associated with the removal of

the relevant sections of the Superannuation Guarantee

(Administration) Act 1992 (Cth) including:34

(a) potential transitional issues meaning that employers could be

required to make two payments for an employee. That is not

an argument against, but it is an argument for consequential

amendments to the FW Act to avoid such an outcome;

(b) time and cost spent by employers administering employees’

individual fund choices;

(c) additional compliance and audit costs;

(d) employers having to act as de facto advisers to assist an

employee’s choice; and

(e) reduction in the size of funds leading to a loss of the benefits

of scale, in turn leading to erosion of employee benefits,

including higher fees and less favourable insurance.

33 Australian Industry Group Law Reform Submissions, 21/8/15, p 11. 34 Retail Employees Superannuation Trust Law Reform Submissions, 20/8/15, pp 2-4.

342

39. The Retail Employees Superannuation Trust35 further submitted that

employees do not tend to exercise a choice of fund even where they

have the right to do so and if employees wished to have the ability to

exercise a choice of fund, it would be open to them to engage their

union representatives to negotiate suitable choice of fund rules in their

enterprise agreement. Accordingly, it was submitted that the removal

of the statutory provisions is unnecessary.

40. The arguments raised concerning the burden of administrative costs to

employers in administering employee default fund choices are

increasingly less relevant for the reasons identified in the Murray

Report.36 Additionally, suggestions that strong industry funds are more

likely to act in the interests of workers than commercial funds provided

no reason for forcing employees to participate in those funds if they

wish their money to be managed elsewhere.37

41. Other arguments against allowing choice of fund for all Australian

employees are outweighed by the benefits choice provides such as

increased competition and member engagement in the superannuation

system.

42. Two other arguments require consideration. The first is the contention

that the proposed amendments are unnecessary because employees are

35 Retail Employees Superannuation Trust Law Reform Submissions, 20/8/15, pp 2-4. 36 Commonwealth, Financial System Inquiry, Final Report, November 2014, p 320. 37

As to which, see Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.2, pp 926-927.

343

effectively exercising choice by voting for an enterprise agreement,38

or because it is open to them to raise their choice of fund requirements

during negotiations for an enterprise agreement. A related notion is

that the proposed amendments are unnecessary because many

employees do not, in fact, exercise their choice of fund rights.

43. These arguments are unsound. As to the first, the need for the tyranny

of the majority to prevail has not been established. Further, not every

employee votes on an enterprise agreement. In particular, employees

that commence employment on existing enterprise agreements, or on

greenfields agreements, will not have an opportunity to vote or to raise

any concerns regarding their choice of fund. As to the second, the

reality is that some employees do wish to exercise a choice in relation

to their super fund. The stories of Peter Bracegirdle39 and Katherine

Coles40 are examples of some that did, for sound reasons.

44. In short, none of the arguments made against freedom of choice are

compelling.

38 A similar argument was put forward by the TWU in relation to its industry fund: see Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.2, p 925. 39

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.2 (TWU Super Case Study). 40

Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 1, ch 6.3 (LUCRF Case Study).

344

Recommendation 51

Sections 32C(6), (6A), (6B), (7) and (8) of the Superannuation Guarantee

(Administration) Act 1992 (Cth) be repealed, and all other necessary

amendments be adopted to ensure all employees have freedom of choice of

superannuation fund.

Default superannuation fund clauses

45. The Discussion Paper raised for consideration whether unions (or

indeed other bargaining representatives) should be able to negotiate for

terms in an enterprise agreement which specify a specific default

superannuation fund with financial links with the union negotiating the

agreement. The potential for conflicts of interest and coercion are

similar to those considered in Part B. It is considered that

Recommendations 48 to 50 sufficiently address these issues.

D - PATTERN BARGAINING

Introduction

46. The CFMEU ACT case study41 revealed the operation in Canberra of

what one CFMEU organiser referred to as ‘the system’42: a process by

which the major contractors in a sector of the industry agree to

identical enterprise agreements, and the rest of the contractors are then

41 See Chapter 6, and in particular Chapters 6.3, 6.4, 6.5. 42 Lomax MFI-8, 7/10/15, p 8.4.

345

told that this is the industry enterprise agreement and that they need to

sign it. The agreements contain terms that confer financial benefits on

the CFMEU, and ‘jump up’ clauses that require subcontractors to pay

CFMEU enterprise agreements rates. Contractors who refuse to sign

are targeted by the CFMEU in different ways, by abuse of rights of

entry provisions, by using audit clauses in an existing enterprise

agreement, and by applying similar pressure to builders to engage only

‘preferred contractors’.43

47. None of the contractors who signed up to CFMEU enterprise

agreements who gave evidence said that they had particular desire to

do so. Most said they felt they did not have any practical choice.44 But

once they sign up, contractors tend to encourage the CFMEU to apply

such pressure to their competitors. The repeated instruction from one

participant in the bricklaying industry to a CFMEU official to

‘hammer’ a bricklayer without an enterprise agreement and who was

charging lower prices is an example.45 Encouragement of this nature

occurs because the contractors who sign up to CFMEU enterprise

agreements cannot compete with those who do not have such

agreements.

48. The CFMEU’s position in Canberra was summed up by the comment

of an organiser, in the presence of the Branch Assistant Secretary, to an

43 Similar arrangements featured in evidence before the Cole Royal Commission: Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 1, pp 27-28. 44

See for example Elias Taleb, 13/7/15, T:25.15-20; Pietro Marcantonio, witness statement, 16/7/15, para 7; Pietro Marcantonio, 16/7/15, T:321.21-322.4, 334.1-32; Adam McEvilly, witness statement, 29/7/15, para 6; Horace Watt, 30/7/15, T:1582.3-16, 1584.6-8. 45

Lomax MFI-6, 7/10/15.

346

industry participant: ‘without the EBA, you won’t be doing any work

on commercial sites’.46

49. The above features of the CFMEU conduct in the ACT are not

confined to that Branch of the union. For example, the Universal

Cranes47 case study involved similar issues.

50. The ‘system’ has many unsatisfactory features. Some are dealt with by

the existing law. Some (such as the benefits that flow to the CFMEU

under pattern enterprise agreements and anti-competitive aspects) are

dealt with in some of the recommendations to this report.

51. A fundamental part of the ‘system’ is industry wide pattern bargaining.

This is not a matter prohibited under the existing law. Nor was it

considered in the Discussion Paper. The Commission has considered

whether to make recommendations on this topic. Stopping industry

wide pattern bargaining would go a long way towards redressing the

unsatisfactory aspects of the construction industry referred to above.

However, for the reasons discussed in what follows, no

recommendation is made. This is not an endorsement of pattern

bargaining, but merely a recognition that abolishing it per se is too

radical a solution to the above problems.

46 O’Mara MFI-3A, 8/10/15, pp 3.23-4.4. 47 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, Ch 8.7.

347

Current provisions relating to pattern bargaining

52. Section 412(1) of the FW Act defines pattern bargaining as a course of

conduct by a bargaining representative for two or more proposed

enterprise agreements (covering separate employers) whereby an

endeavour is made to have common terms included in those enterprise

agreements. However, s 412(2) provides that conduct falls outside the

definition of pattern bargaining if the relevant bargaining

representative ‘is genuinely trying to reach an agreement’.

53. Whether a bargaining representative is genuinely trying to reach

agreement with a particular employer for the purposes of s 412(2)

depends on a number factors including whether the bargaining

representative is:

(a) demonstrating a preparedness to bargain for the agreement

taking into account the individual circumstances of that

employer, including in relation to the nominal expiry date of

the agreement;

(b) bargaining in a manner consistent with the terms of the

agreement being determined as far as possible by agreement

between that employer and its employees; and

(c) meeting the good faith bargaining requirements.48

48 Fair Work Act 2009 (Cth), s 412(3).

348

54. To engage in pattern bargaining is not prohibited by the FW Act. The

only consequences are as follows:

(a) Industrial action taken in support of an enterprise agreement

in respect of which a bargaining representative is engaging in

pattern bargaining cannot be protected industrial action.49

That action can therefore be the subject of a stop order under

s 418 of the FW Act as well as an action for common law

remedies.

(b) The Federal Court and Federal Circuit Court also have the

power to grant injunctive relief in respect of such action.50

History of legislative attempts to address pattern bargaining

55. Pattern bargaining was considered in some detail by the Cole Royal

Commission. It identified that, in areas of high union density within

the building and construction sector, the process of enterprise

bargaining contemplated by Workplace Relations Act 1996 (Cth) had

been ‘effectively circumvented and displaced by pattern bargaining

leading to pattern agreements’.51 The Cole Royal Commission

49 Fair Work Act 2009 (Cth), s 409(4). 50 Fair Work Act 2009 (Cth), s 422. 51

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 1, pp 27-28.

349

recommended that pattern bargaining in the construction industry be

prohibited.52

56. The Cole Royal Commission summarised the deleterious effects that

pattern bargaining has on productivity outcomes, and its fundamental

inconsistency with the shift to enterprise bargaining that was

introduced by the Keating Government (and which has been continued

under the FW Act):53

One form of centralised wage and condition fixation has been replaced by another. Initiative is stifled; the scope for creativity is denied. The reforms introduced by successive Governments, to make agreements struck at enterprise level the principal instruments whereby terms and conditions of employment are established, are circumvented and negated. The results have been detrimental to both workers and employers, to the industry and to the national economy.

The unions and the major contractors which negotiate pattern agreements perceive it to be in their best interests to adopt this method of determining wages and conditions in the industry. They have the economic and industrial strength to enforce their wishes on workers and their employers. Unless pattern bargaining is prohibited by legislation it will continue to be the principal means by which many important terms and conditions of employment are determined in the commercial sector of the industry.

57. An attempt to implement this recommendation was defeated in the

Senate.

58. In the ACT (and NSW) building and construction industry, pattern

agreements are sought by the CFMEU in each of the major trades.

Consistently with this, in 2014 the Productivity Commission noted in

its Draft Report on the Workplace Relations Framework that pattern

52 Royal Commission into the Building and Construction Industry, Final Report (2003), Recommendation 2, Vol 1, p 28. 53

Royal Commission into the Building and Construction Industry, Final Report (2003), Vol 1, p 28.

350

bargaining was ‘rife’ in Australia’s construction industry.54 However,

there is no evidence suggesting that pattern bargaining is a systemic

problem outside the construction industry.

59. The Productivity Commission stated that:55

Pattern bargaining is problematic where it is imposed by a party with excessive leverage. If pursued on a mutually convenient basis by employer and union, it can also be seen as a form of anti-competitive conduct. Moreover, as also noted by some participants, pattern bargaining can conflict with the WR system’s goal to develop agreements that reflect the circumstances of the enterprise and its employees…

… it is not per se, the presence of common features across bargaining agreements that is problematic, but the extent to which those common outcomes reflect the excessive power of one party over another, and an unwillingness to allow negotiation of some different set of conditions. (emphasis added)

60. The Productivity Commission also noted that in some circumstances

pattern agreements may not be disadvantageous or coercive but

desirable for both parties as they can reduce the costs of negotiating

enterprise agreements, reduce risk in large projects and provide

guidance for smaller enterprises.56 In industries that exhibit a truly

competitive market, and low barriers to entry, ‘the existence in

negotiations of very similar proposals from either side is unlikely to

represent the adverse aspect of pattern bargaining that should concern

public policy’.57 The Productivity Commission indicated that it is

54 Commonwealth of Australia, Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, p 561. 55

Commonwealth of Australia, Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, pp 561-562. 56

Commonwealth of Australia, Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, p 561. 57

Commonwealth of Australia, Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, p 563.

351

interested in exploring a ‘nuanced approach’ to pattern bargaining

which discriminates between pattern agreements where the

negotiations are genuine and those that are imposed through excessive

leverage, and has asked for further feedback on that topic pending its

final report.58

Options for reform - pattern bargaining

61. The comments of Commissioner Cole quoted above aptly describe

some of the problems with the type of pattern bargaining engaged in by

the CFMEU in the ACT. It undermines the point of the collective

bargaining provisions in the Act: that is, to facilitate bargaining at the

enterprise level. Such concerns are exacerbated by evidence that in at

least one case there were significant doubts about whether pattern

enterprise agreements lodged by the ACT CFMEU with Fair Work

Australia were approved by employees of the companies in question.59

62. Is the answer then to prohibit pattern bargaining? One difficulty with

abolishing pattern bargaining entirely is that some forms of pattern

bargaining may be less insidious than that adopted in the ACT building

and construction industry and can in some cases even be advantageous.

One example might be a multi-enterprise agreement in respect of a

major project. One would hesitate to impose on employers and

employees arbitrary obligations that their agreements be different

58 Commonwealth of Australia, Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, p 562. 59

See Vol 3, ch 6.3, paras 287-289, 299 (MPR Scaffolding).

352

simply for the sake of difference, or in the belief that such difference

necessarily creates productivity gains.

63. The true evil is an inequality of bargaining power that can lead to anti-competitive and unproductive outcomes, as when a powerful union like

the CFMEU presses for the same outcomes across an industry or range

of employers within an industry.

64. In the circumstances, no amendments to the existing provisions under

the FW Act relating to pattern bargaining are proposed.

353

354

CHAPTER 7

COMPETITION ISSUES

Subject Paragraph

A - INTRODUCTION 1

B - SECONDARY BOYCOTTS 5

Introduction 5

Penalties 9

Secondary boycotts engaged in for a market sharing purpose 15

Restraint on competitors of secondary boycott target 33

General obligation to report boycott activity? 40

Appropriate regulator 46

C - ANTI-COMPETIVE CONDUCT IN ENTERPRISE

BARGAINING

59

Introduction 59

Discussion 63

355

Subject

Conclusio

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356

accommodate the pay terms and conditions allowed for in

those EBAs). Chapter 6.5 of Volume 3 of the Report

considers whether such conduct amounted to seeking an

arrangement or understanding having the purpose or effect of

fixing, controlling or maintaining the price for services in

contravention of the cartel provisions of the Competition and

Consumer Act 2010 (Cth).1

(d) The CFMEU ACT case studies also revealed instances of

pattern EBAs containing provisions requiring employers to

procure training for their employees provided by a particular

training authority operated for the benefit of the union, or to

obtain income protection insurance for employees with an

particular provider. Chapter 6.6 of Volume 3 of the Report

considers whether this conduct amounted to possible

contraventions of the exclusive dealing provisions in s 47 of

the Competition and Consumer Act 2010 (Cth).

(e) The Chiquita Mushrooms case study, which is dealt with in

Chapter 10.6 of Volume 4 of the Report, revealed instances of

AWU EBAs containing provisions limiting the procurement

of contract labour by an employer to an identified provider, in

circumstances in which the employer received advice that

such a clause may contravene s 45E of what was then the

Trade Practices Act 1974 (Cth).

1 No findings were made in relation to these issues because on 1 September 2015 the Australian Competition and Consumer Commission commenced an investigation of this conduct. It is continuing. However, the evidence before the Commission does provide useful background for a consideration of the policy issues addressed in this Chapter.

357

3.

4.

SEC B -

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Many of the

the context

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358

45E and their related provisions are excepted from the operation of the

exclusion in s 51(2)(a) of the Competition and Consumer Act 2010

(Cth). That paragraph excludes contracts, arrangements or

understandings relating to remuneration, conditions of employment,

hours of work or working conditions of employees from the operation

of the anti-competitive provisions of Part IV of the Competition and

Consumer Act 2010 (Cth). The scope of this exclusion is considered

further in section C below.

7. The Boral case study, in particular, demonstrated the ability of trade

unions with significant member density across a particular industry to

inflict substantial damage by disrupting the processes of distribution

and supply to the target company, in contravention of ss 45D and 45E.

It raised a number of issues,3 which were canvassed in the Discussion

Paper.4

(a) Do the existing penalties for contravention of the secondary

boycott provisions provide an effective deterrent against the

relevant conduct, particularly when compared with penalties

for other contraventions of Part IV of the Competition and

Consumer Act 2010 (Cth)?

(b) Should secondary boycotts undertaken for a market sharing

purpose be explicitly outlawed as cartels?

3 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.2, pp 1106-1108. 4

Royal Commission into Trade Union Governance and Corruption, Discussion Paper - Options for Law Reform, Chapter 10.3, 19/5/15, pp 110-116.

359

(c) Should competitors of secondary boycott targets be precluded

from dealings which take advantage of the boycott?

(d) Should competitors of a secondary boycott target, or other

market participants, be required to report secondary boycott

conduct?

(e) Is the ACCC the appropriate regulator for investigation and

enforcement of secondary boycott contraventions involving

trade unions?

8. No submissions have been received from any unions in relation to

these issues. The submissions of the ACTU in relation to the Harper

Review and the Productivity Commission have been considered. In the

main, those submissions take the position that:

(a) Both ss 45D and 45E of the Competition and Consumer Act

2010 (Cth) are the products of flawed policy and should be

repealed.

(b) If not, ss 45E, 45EA and 51(2)(a) of the Competition and

Consumer Act 2010 (Cth) should be amended to exempt the

‘bargaining, making and approval of enterprise agreements or

proposed enterprise agreements’.5

5 Australian Council of Trade Unions, Competition Policy Review: ACTU Response to the Draft Report, November 2014, p 13; Australian Council of Trade Unions, Submissions to the Inquiry into the Workplace Relations Framework, March 2015, p 26.

360

Penalties

9. Both the Boral and Universal Cranes case studies suggest that the

existing penalties for contravention of ss 45D and 45E of the

Competition and Consumer Act 2010 (Cth) are ineffective to deter

conduct which has the potential to cause very substantial loss and has a

substantial anti-competitive effect.

10. The maximum penalty is $750,000 in respect of a body corporate.

Individuals are immune from pecuniary penalties in respect of

contraventions of the secondary boycott provisions.6

11. In respect of other anti-competitive contraventions by bodies corporate,

the maximum penalty is the greater of:7

(a) $10,000,000;

(b) if the Court can determine the value of the benefit that the

body corporate has obtained that is reasonably attributable to

the contravention - three times the value of that benefit; and

(c) if the Court cannot determine the value of that benefit - ten

per cent of the annual turnover of the body corporate during

6

Competition and Consumer Act 2010 (Cth), s 76(1A)(a), (2). Competition and Consumer Act 2010 (Cth), s 45DC also precludes action being taken against members or officers of organisations of employees under Competition and Consumer Act 2010 (Cth), ss 77 and 82, except in a representative capacity in respect of organisations that are not bodies corporate. 7

Competition and Consumer Act 2010 (Cth), s 76(1A)(b).

361

the period (the turnover period ) of 12 months ending at the

end of the month in which the contravention occurred.

12. The Competition Policy Review recommended that those penalties

should apply equally to breaches of ss 45D and 45E of the Competition

and Consumer Act 2010 (Cth), observing that there ‘no reason’ why

the maximum breaches should be lower than those for other breaches

of the competition law.8 Submissions to the Commission by the

Australian Competition and Consumer Commission (ACCC),

Australian Industry Group, Master Builders Australia and the

Australian Chamber of Commerce and Industry all supported this

approach.9 The ACCC observed that secondary boycott activity can

have a significant anti-competitive impact on markets in a similar

manner as contraventions of other Part IV provisions.10

13. The Australian Government supported this recommendation in its

response to the Competition Policy Review and is to draft legislation to

increase the maximum penalties for breach of the secondary boycott

provisions to the same levels as those applying to other breaches of the

competition law.11 The same recommendation in relation to ss 45E

8 Competition Policy Review, Final Report, March 2015, p 68, recommendation 36. 9 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 3; Australian Industry Group Law Reform Submissions, 21/8/15, p 13-14; Master Builders Australia Law Reform Submissions, 21/8/15, p 47; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 44. 10

Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 3. 11 Australian Government, Response to the Competition Policy Review, 24/11/15, p 29.

362

and 45EA has been noted, pending the outcome of the Productivity

Commission Review of the Workplace Relations Framework.12

14. The conduct exhibited in the case studies considered by the

Commission shows there is a real need for an effective deterrent

against secondary boycott conduct. There is no principled reason why

the penalties for contravention of the secondary boycott provisions

should be less than those that apply to the other provisions in Part IV

of the Competition and Consumer Act 2010 (Cth).

Recommendation 52

The Competition and Consumer Act 2010 (Cth) be amended so that the penalties

for breaches of ss 45D, 45DB, 45E and 45EA are the same as those that apply to

other provisions of Part IV of that Act.

Secondary boycotts engaged in for a market sharing purpose

15. The Interim Report considered the application of the cartel provisions

of the Competition and Consumer Act 2010 (Cth) in respect of the

CFMEU’s conduct concerning Boral and concluded that the CFMEU

may have contravened those provisions.

16. Boral, however, submitted that the cartel provisions of the Competition

and Consumer Act 2010 (Cth) should be clarified to remove any

existing doubt that cartel conduct includes breaches of ss 45D and 45E

of the Competition and Consumer Act 2010 (Cth) engaged in for the

12 Australian Government, Response to the Competition Policy Review, 24/11/15, p 30.

363

purpose of determining that a particular competitor or competitors will

or will not supply a particular customer or customers, ie, cartel conduct

would include secondary boycott conduct engaged in for a market

sharing purpose.13 These submissions are addressed in further detail

below.

17. The operation of the current cartel provisions of the Competition and

Consumer Act 2010 (Cth) is complex. The Competition Policy Review

recommended substantial amendments to the current provisions.

Those amendments specifically refer to market allocation conduct as

being cartel conduct, although they do not specifically address the

situation where the market allocation conduct is engaged in by a person

who is not a competitor of the market participants. The overriding

principle expressed in the Harper review, however, was that the cartel

provisions should operate in respect of conduct between competitors.14

18. The Commission received a number of submissions on this topic.

19. The Australian Chamber of Commerce and Industry supported the

inclusion of the secondary boycott prohibitions within the proscription

of cartel conduct. However, it submitted, noting the complexity of the

current provisions and the amendments recommended in the

13 That may involve engagement of other related provisions, for example Competition and Consumer Act 2010 (Cth), s 45DA. 14

Competition Policy Review, Final Report, March 2015, pp 58-59, recommendation 27; pp 363, 365.

364

Competition Policy Review, that care should be taken in drafting the

provisions to avoid the risk of unintended consequences.15

20. Master Builders Australia agreed in principle with such a proposal but

submitted that the design of the prohibition must be carefully crafted to

ensure that it does not affect those who are unknowingly involved in

secondary boycott conduct.16

21. Boral referred to evidence before the Commission to the effect that the

ban imposed by the CFMEU caused an understanding with Boral’s

customers, firstly that they would not acquire concrete from Boral, and

secondly that they would be allocated a particular class of suppliers,

being CFMEU-approved suppliers.17 Boral submitted that an

understanding of this nature is sufficient to engage the cartel provisions

in ss 44ZZRF and 44ZZRG of the Competition and Consumer Act

2010 (Cth). However, it said that to guard against uncertainties around

the competition requirement in s 44ZZRD of the Competition and

Consumer Act 2010 (Cth), the definition of cartel conduct should

expressly include conduct in contravention of ss 45D or 45E of the

Competition and Consumer Act 2010 (Cth), where that conduct can be

shown to be for a market sharing purpose.18 It argued that the relevant

purpose would involve determining that particular competitors will or

will not supply a particular customer or customers (and presumably

vice versa).

15 Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 44. 16

Master Builders Australia Law Reform Submissions, 21/8/15, p 47. 17 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.2, p 1098. 18

Boral Law Reform Submissions, 2015, p 54.

365

22. Boral argued that the advantages of this extension are the increased

penalties available, the ability to impose penalties on individuals, the

possibility of criminal sanctions, the availability of additional

investigative powers in respect of criminal conduct and the immunities

available to parties which will encourage them to come forward.19

23. The ACCC observed that secondary boycott conduct does not

generally involve contracts, arrangements and understandings between

competitors, and hence that the conduct does not readily fit within the

concept of a cartel.20 It may be taken that the ACCC does not

recommend an extension of the cartel conduct proscriptions to embrace

secondary boycott conduct engaged in for a market purpose.

24. However, the ACCC discussed the recommendation in the Competition

Policy Review that a concerted practice prohibition be introduced to s

45 of the Competition and Consumer Act 2010 (Cth) restricting

concerted practices by persons with other persons that have the

purpose, effect or likely effect of substantially lessening competition.21

The Competition Policy Review recommended such a provision in the

context of considering the existence and scope of price signalling

prohibitions, but recommended a provision of more general application

to replace those prohibitions.22 It did not, however, recommend that

the concerted practice provision be included within the cartel

19 Boral Law Reform Submissions, 2015, p 55. 20 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 4. 21

Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 4, citing Competition Policy Review, Final Report, March 2015, p 372, recommendation 29. 22

Competition Policy Review, Final Report, March 2015, pp 370-371, recommendation 29.

366

prohibitions, on the basis that criminal sanctions should be reserved for

contracts, arrangements and understandings between competitors.23

25. The ACCC made a further submission in relation to the scope of

ss 45D, 45DA and 45DB of the Competition and Consumer Act 2010

(Cth), all of which provide for a dual purpose and effect/likely effect

test for the conduct proscribed under those sections. An affected

person must establish that the relevant conduct was ‘engaged in for the

purpose, and would have or be likely to have the effect, of’ causing

substantial loss and damage, causing substantial lessening of

competition, or hindering trade and commerce between Australia and

overseas. The ACCC submits that these provisions create a high

threshold, whereas other provisions in Part IV of the Competition and

Consumer Act 2010 (Cth) require a purpose or effect/likely effect

test.24

26. Examining the question of whether secondary boycott conduct can be

brought within the cartel positions is complicated by the

recommendations of the Competition Policy Review. Substantial

changes to the cartel provisions were recommended to simplify their

language and also to incorporate the exclusionary provisions

legislation to the extent that that is not incorporated in the existing

cartel provisions in the Competition and Consumer Act 2010 (Cth).

23 Competition Policy Review, Final Report, March 2015, p 372, recommendation 29. 24 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 7; Section 46 is, of course, one provision which requires the establishment of purpose. Section 45E is another. However, even that provision does not require the establishment of purpose and effect/likely effect.

367

27. The Australian Government, in its response to the Competition Policy

Review, has supported the recommendations in respect of the cartel

conduct provisions.25 Exposure draft legislation is to be developed for

consultation with the public and the states and territories. It is not clear

from the Government’s response whether it adopts the preference in

the Competition Policy Review that the proscriptions on cartel conduct

are to be limited to conduct involving firms who are actual or likely

competitors.

28. What is evident from the legislation proposed in the Competition

Policy Review is that there is a requirement that each of the relevant

cartel provisions in the legislation operate to affect the conduct of one

party to the contract, arrangement or understanding by reference to a

competitor, which must be a competitor of the first party.26 The

secondary boycott provisions do not fit readily into the definition of

cartel conduct, under either the existing or the proposed versions of the

legislation, if the intention is to catch only the arrangement or

understanding between the union and the market participant.

Moreover, it would appear to be contrary to the policy position reached

by the Competition Policy Review.

29. But for the reasons set out in Chapter 8.2 of the Interim Report, there is

no reason why the cartel provisions would not apply to multi-party

arrangements or understandings pursuant to which each of the

competitor parties reached a consensus on the basis of communications

25 Australian Government, Response to the Competition Policy Review, 24/11/15, pp 23-24. 26 See Competition Policy Review, Final Report, March 2015, pp 58-59, recommendation 27; Appendix A, s 45B.

368

with the instigator of the arrangement or understanding.27 In particular,

several of the proposed cartel provisions recommended by the

Competition Policy Review concern matters such as restricting the

output of supply or acquisition, or allocating supply and/or acquisition

within a market, that would catch conduct of the type engaged in by

the CFMEU in relation to the Boral dispute and in the Australian

Capital Territory building industry, affecting as they did a number of

potential customers for the supply of building materials and services.

30. For the purpose of ensuring that arrangements of that nature are caught

by the cartel provisions, it is recommended that it be made explicit in

the legislation that to prove the existence of an arrangement or

understanding, it is not necessary to establish that there be

communication between each of the parties to the arrangement or

understanding, merely that they hold the same understanding. This is

probably already the law, but an amendment would increase clarity. It

would probably be necessary to make an amendment to the same effect

in relation to s 45.

31. A provision mechanism of this kind makes it unnecessary to consider

the alternative suggested by the ACCC concerning the proposed

proscription on concerted conduct.

32. The final matter for consideration is the operation of the purpose and

effect/likely effect test in s 45D(1)(b) of the Competition and

Consumer Act 2010 (Cth). There does not appear to be any principled

27 See Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.2, p 1097-1098, citing Australasian Meat Industry Employees Union v Meat & Allied Trades Federation of Australia (1991) 32 FCR 318 at 330.

369

reason why the bar for contravention of that section should be higher.

That is particularly so where there may be no real difference as a

matter of practicality between whether conduct is undertaken for the

relevant purpose and whether it is likely to have such an effect, as

those questions are necessarily interrelated.28 The same reasoning

applies to ss 45DA and 45DB of the Competition and Consumer Act

2010 (Cth).

Recommendation 53

The Competition and Consumer Act 2010 (Cth) be amended to clarify that to

prove the existence of an arrangement or understanding, it is not necessary to

establish that there be communication between each of the parties to the

arrangement or understanding, merely that they hold the same understanding.

Recommendation 54

Sections 45D(1)(b), 45DA(1)(b) and 45DB(1) of the Competition and Consumer

Act 2010 (Cth) be amended to provide that those sections are contravened where

the conduct is engaged in for the purpose, or would have or be likely to have the

effect, of causing the consequence identified in those sections.

Restraint on competitors of secondary boycott target

33. In its submissions to the Commission, Boral argued that the current

secondary boycott provisions were potentially defective in that there

was no specific provision making it unlawful for the competitors of the

28

Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 at 346 per Deane J.

370

‘target’ of a secondary boycott knowingly to supply a product or

service in substitute for a supply by the target. It supported an

amendment to the Competition and Consumer Act 2010 (Cth) so that a

competitor commits an offence if it engages in knowing supply. It says

that a specific offence directed at this conduct will act as a better

deterrent and create clarity and ease of prosecution, and ultimately

operate to destroy the effectiveness of boycott activity.29

34. On one view, there is nothing wrong with competitors of a target

taking advantage of the target’s disadvantaged position caused by the

boycott. Provided the target’s competitors do nothing to encourage or

facilitate the boycott, they should be at liberty to take advantage of

their competitor’s disadvantage. However, at least in some

circumstances a competitor’s decision to supply in substitution for the

target will facilitate the prolongation of the boycott and have an anti-competitive purpose. For example, in order to ensure the boycott

remains for as long as possible the competitor may increase production

to fill additional orders from acquirers who are ordinarily accustomed

to acquire goods from the target, or reduce its prices to secure

customers. In some circumstances such conduct could involve a

misuse of market power, but not invariably.

35. The ACCC did not support the extension of the secondary boycott

provisions to capture indirect involvement in a contravention by a

competitor of the target.30 In its view, the effect of ss 75B and 76 of

the Competition and Consumer Act 2010 (Cth) is that third parties that

29 Boral Law Reform Submissions, 2015, pp 63-64. 30 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 4.

371

are knowingly concerned in or a party to anti-competitive conduct are

currently within the scope of the Part IV contraventions.31

36. The Australian Chamber of Commerce and Industry advocated the

middle ground. It makes the point that the conduct that is sought to be

addressed involves the application of considerable duress upon the

parties involved. While conduct of third parties perpetuating the

conduct of the unions in this regard is to be condemned, care should be

taken to foster behaviour that sees such conduct reported to the

regulator, and that the focus should be on encouraging competitors to

come forward with evidence of boycott conduct, rather than

discouraging them.32 The Australian Chamber of Commerce and

Industry therefore supported a recommendation that would see persons

in competition with a secondary boycott target being prevented from

knowing supply unless they have notified the ACCC of their

knowledge of the boycott.33

37. Master Builders Australia also favoured this option. It says that a

notification requirement will cause the least operational disruption but

will provide the ACCC with information on which it may take action.34

38. In considering this issue it is necessary to seek to strike a balance

between ensuring that market participants are not unduly restricted in

31 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 4. 32

Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 46. 33 Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 47. 34

Master Builders Australia Law Reform Submissions, 21/8/15, p 47.

372

the market, and ensuring that union conduct that is fundamentally

destructive to competition is not allowed to proceed unhindered. The

Commission is not aware of any evidence of competitors of a boycott

target actively assisting in the perpetuation of the boycott. In the

absence of knowing involvement and assistance in boycott conduct by

a competitor within the meaning of s 75B of the Competition and

Consumer Act 2010 (Cth), there is no real warrant for introducing a

penalty on competitors for conduct that falls short of the requirements

of that section.

39. However, to require a competitor with knowledge of the existence of a

boycott to notify the relevant regulator before trading brings clear

investigative benefits. Additionally, the knowledge that the competitor

must notify before there can be any supply or acquisition offers

protection against any reprisals for reporting the conduct.

Accordingly, the second option strikes the right balance.

Contravention of such a provision should be a civil penalty provision.

In order to make out a contravention, it should be necessary to prove

that the competitor was aware of all of the elements of the primary

boycott contravention,35 and engaged in a transaction with that

knowledge and while the contravention was proceeding.

35 Yorke v Lucas (1985) 158 CLR 661.

373

Recommendation 55

The Competition and Consumer Act 2010 (Cth) be amended to provide that a

person in competition with the fourth person referred to in ss 45D or 45DA must

not knowingly engage in supply or acquisition of services to or from any third

persons referred to in those sections with knowledge of the contravention by the

first and second persons without first notifying the Australian Competition and

Consumer Commission. Contravention of the provision should be a civil

penalty provision.

General obligation to report boycott activity?

40. A number of submissions argued that there should be a broader

obligation to report secondary boycott activity.

41. The Australian Chamber of Commerce and Industry recommended

imposing a positive obligation to report secondary boycott behaviour

on persons approached to enter into an agreement arrangement or

understanding that contravenes ss 45D or 45E of the Competition and

Consumer Act 2010 (Cth).36

42. Boral made a similar submission in relation to both competitors and

suppliers/customers that are involved in secondary boycott activity.37

It submitted that, over the course of the ban on its products, Boral’s

customers likely feared repercussions if they were seen to be acting

36 Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 46. 37

Boral Law Reform Submissions, 2015, pp 63-64.

374

against the CFMEU.38 It argued that there should be direct obligations

and consequences for industry participants that fail to provide evidence

to the ACCC, subjecting those who fail to report secondary boycott

conduct to the same civil penalties as those that are involved in

contraventions of Part IV of the Competition and Consumer Act 2010

(Cth).

43. Boral contended that such an obligation would be consistent with the

policy approach adopted in other areas of Australian law where

conduct is difficult to detect by conventional law enforcement means,

such as the obligation on market participants to report suspected

breaches of the Australian Securities Exchange market integrity rules,39

or the obligation to report suspicious transactions to Australian

Transaction Reports and Analysis Centre under s 41 of the Anti-Money

Laundering and Counter-Terrorism Financing Act 2006 (Cth).40

44. Further, Boral submitted that encouragement could also be offered to

market participants to whom threats are made to participate in

secondary boycotts if the immunity policy presently implemented by

the ACCC for cartel conduct were extended to secondary boycotts.41

38 Boral Law Reform Submissions, 2015 (received 27/8/15), pp 56-58. 39 ASIC Market Integrity Rules (ASX Market) 2010 (Cth), rule 5.11.1, penalty for breach of which is $20,000. 40

Boral Law Reform Submissions, 2015 (received 27/8/15), pp 59-60. The maximum penalty for contravention of s 41 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) is $100,000 for a body corporate and $20,000 for a person other than a body corporate: s 175(4) and (5). 41

Boral Law Reform Submissions, 2015 (received 27/8/15), pp 60-62.

375

45. It is not recommended that a general obligation to report secondary

boycott activity be imposed for these reasons.

(a) In relation to individuals who are suppliers/customers and are

involved in the boycott, such persons are already likely to be

liable under s 45E of the Competition and Consumer Code

Act 2010 (Cth). Imposing a reporting obligation on them is

unlikely to have much effect. However, owing to the

difficulties of investigation in relation to secondary boycott

conduct, consideration might usefully be given by the ACCC

as to whether its immunity policy should extend to secondary

boycott conduct.

(b) In relation to individuals who are suppliers/customers who are

approached but refuse to be involved in a boycott, imposing a

penalty on them unless they report the boycott is a

disproportionate and potentially unfair result.

(c) The previous recommendation deals with competitors who

have knowledge of the boycott.

376

Recommendation 56

The Australian Competition and Consumer Commission give consideration to

whether its immunity policy in respect of the cartel provisions could usefully be

extended to secondary boycott conduct and conduct indirectly leading to a

secondary boycott.

Appropriate regulator

46. A final problem with the current regulatory regime is that the ACCC’s

record of prosecuting breaches of the secondary boycott provisions is

not extensive when compared with other contraventions of Part IV of

the Competition and Consumer Act 2010 (Cth).

47. One of the recommendations of the Harper Review was that the ACCC

should pursue secondary boycott cases with increased vigour:42

Some industry organisations, especially in building, construction and mining, believe that public enforcement of the secondary boycott provisions is inadequate, a point emphasised in the Interim Report of the Royal Commission into Trade Union Governance and Corruption. Timely and effective public enforcement serves as a deterrent to boycott activity and needs to exist both in regulatory culture and capability. The Panel believes that the ACCC should pursue secondary boycott cases with increased vigour, comparable to that which it applies in pursuing other contraventions of the competition law.

48. The Australian Government, in its response to the Harper review,

supported this recommendation.43

42 Competition Policy Review, Final Report, March 2015, p 67. 43 Australian Government, Response to the Competition Policy Review, 24/11/15, p 29.

377

49. As adverted to in the Interim Report, there may be a number of root

causes for lack of enforcement.44 They might include difficulties in

obtaining documentary evidence, lack of co-operation of witnesses

who may fear repercussions from giving evidence, the potential

overlap between the roles of a number of regulators and difficulties in

ensuring compliance with court orders made in relation to secondary

boycott conduct. Whatever the causes, the fact is that many secondary

boycotts arise in the industrial relations sphere and involve trade

unions. The ACCC may not be the best placed, or best resourced,

institution to investigate such contraventions.

50. The Commission received a number of submissions in response to the

Discussion Paper advocating the view that the building and

construction industry regulator be given concurrent jurisdiction in

relation to the investigation of boycott conduct.45

51. In particular, Boral argued that enforcement of the secondary boycott

provisions requires a regulator with industrial expertise and a proactive

approach to investigation of anti-competitive union conduct within the

building and construction industry.46 Boral agreed with Master

Builders Australia that, because secondary boycott conduct is often

accompanied by other unlawful conduct such as coercion and adverse

action in breach of the FW Act, it is practical and appropriate for there

44 Royal Commission into Trade Union Governance and Corruption, Interim Report (2014), Vol 2, ch 8.2, p 1107. 45

Australian Industry Group Law Reform Submissions, 21/8/15, pp 13-14; Australian Chamber of Commerce and Industry Law Reform Submissions, August 2015, p 47; Boral Law Reform Submissions, 2015, pp 65-67; Master Builders Australia Law Reform Submissions, 21/8/15, p 48. 46

Boral Law Reform Submissions, 2015, p 65.

378

to be means of investigating and enforcing all contraventions by the

same regulator.47 Master Builders Australia submitted that the

building industry regulator should have concurrent jurisdiction with the

ACCC as this will assist with timely enforcement and enable material

gathered in the course of a building industry investigation to be used in

relation to a range of contraventions. It submitted that the jurisdiction

of the building industry regulator should be confined to secondary

boycott conduct within the definition of ‘building work’ under the

proposed Building and Construction Industry (Improving Productivity)

Bill 2013 (Cth).48

52. The ACCC did not make a submission on whether it should remain as

the role regulator charged with enforcement of the secondary boycott

provisions. However, it submitted that secondary boycott and anti-competitive conduct are ‘enforcement priorities’ for the ACCC.49 It

pointed to the impediments to gathering evidence in relation to

contraventions of the secondary boycott provisions.50 It suggested a

number of improvements to its investigative powers, which

suggestions are considered in Chapter 8 of this Volume.

53. It has not been suggested that the ACCC should share its jurisdiction in

relation to secondary boycott conduct with the Fair Work regulators in

general. Nor is there any evidence suggesting that that is necessary.

However, there is evidence that the building and construction industry

47 Boral Law Reform Submissions, 2015, p 67. 48 Master Builders Australia Law Reform Submissions, 21/8/15, p 48. 49

Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 5. 50 Australian Competition & Consumer Commission Law Reform Submissions, undated (received 20/8/15), p 5.

379

requires more active regulation in relation to secondary boycotts, as it

does in relation to many other instances of unlawful conduct. The need

for a separate regulator is addressed in Chapter 8 of this Volume.

54. There are two arguments supporting a grant to the ACCC and the

proposed ABCC of concurrent power over secondary boycott conduct

in relation to building and construction.

(a) First, the ACCC does not appear to be well resourced to address

secondary boycott conduct. Much of the impediment appears to

arise from there being very few reports of boycott conduct made

to the ACCC, and difficulties in investigation.

(b) Secondly, the ABCC would be well placed to deal with boycott

conduct that occurs primarily in the building and construction

industry, because of its specialist involvement in that industry,

and because boycott conduct often involves, or is accompanied

by, conduct that contravenes the FW Act and other related

legislation that is not within the jurisdiction of the ACCC.

55. The latter consideration is a powerful one. There are obvious

efficiencies in a single regulator investigating and prosecuting a

number of contraventions arising from the one course of conduct.

Moreover, it is likely that in the course of investigating other, readily

apparent conduct such as blockades or right of entry contraventions,

boycott conduct might come to light. That is an advantage that the

ACCC would not have.

56. The Productivity Commission in its draft report concerning the

Workplace Relations Framework gave preliminary support to the

380

shared regulatory approach. However, it suggested that while both the

building and construction regulator and the ACCC should have

investigatory functions, the ACCC should retain the enforcement

function.51 It reserved its position pending receipt of further

submissions. For the reasons set out above, it will often occur that

secondary boycott conduct coincides with contraventions of the

FW Act and other industrial laws. To that end, it would seem to

promote efficiency for the building industry regulator to have

responsibility for enforcement of secondary boycott contraventions

within the scope of its jurisdiction.

57. By the same token, it is necessary for the ACCC to have concurrent

power, both because of its expertise in investigating breaches of

competition laws and because of the prospect of boycott provisions

occurring outside of the building industry jurisdiction of the ABCC.

Cooperation and consultation between the two regulators would

obviously be necessary.

58. Finally, the recommendation in the Competition Policy Review that the

ACCC report on complaints, investigations and outcomes of secondary

boycott activity is sensible, particularly as it will enable continued

monitoring of what, if any, changes are necessary to the ACCC’s

investigatory powers.

51 Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, pp 781-3.

381

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60. On its face, the exclusion is very broad. The policy rationale for

excluding conduct in the labour market from the operation of

competition laws is that the particular features of the labour market,

and in particular the traditional inequality of bargaining power as

between employers and employees, warrant permitting what is prima

facie anti-competitive conduct to avoid undesirable consequences such

as wage suppression, poor workplace health and safety and insecurity

of contract.

61. However, in light of the case studies identified above, in which

enterprise agreements included provisions that were likely to offend

ss 45E and 45EA, or s 47, or the cartel provisions in Part IV of the

Competition and Consumer Act 2010 (Cth), it is necessary to consider

whether such conduct should be exempted from the operation of that

Act. The policy justification for permitting price fixing, third line

forcing or other exclusive dealing in the context of an enterprise

agreement, particularly when there is only an indirect relationship

between that conduct and the terms and conditions of employment of

union members, is not readily apparent.

62. There are two main issues:

(a) Should s 51(2)(a) or other provisions of the Competition and

Consumer Act 2010 (Cth) be amended?

(b) Alternatively, should provision be made in the FW Act

precluding anti-competitive arrangements in the context of

enterprise agreements?

383

Discussion

63. As noted in Chapter 6.6 of Volume 3, the scope of s 51(2)(a) is

uncertain. A great deal of that uncertainty has been created by the

decision of the Full Court of the Federal Court in Australian Industry

Group v Fair Work Australia52 which held that an enterprise agreement

is not a contract, arrangement or understanding within the meaning of

the Competition and Consumer Act 2010 (Cth), and therefore is not

capable of offending s 45E of the Act.53

64. Much of that reasoning rests on the notion that as a creature of statute,

an enterprise agreement is not a consensual arrangement of the type

comprehended by the Competition and Consumer Act 2010 (Cth),54

and in any event, not one with an organisation of employees for the

purposes of s 45E. Presumably this is because, as a single or multi-enterprise agreement, the agreement applies to an organisation where

the organisation is covered by the agreement,55 but the agreement itself

is made between the employer and employees.56

65. There is an obvious superficiality to those conclusions, which were not

the product of detailed reasons (or in fact any reasons other than mere

assertion), when regard is had to the fact that an enterprise agreement

52 (2012) 205 FCR 339. 53 Australian Industry Group v Fair Work Australia (2012) 205 FCR 339 at [72]. 54

Australian Industry Group v Fair Work Australia (2012) 205 FCR 339 at [22]-[23]. 55 Fair Work Act 2009 (Cth), ss 52(1), 53(2), 201(2). 56

Fair Work Act 2009 (Cth), ss 172(2)(a), 172(3)(a). That reasoning does not apply to greenfields agreements, which must be between the employer and the union: ss 172(2)(b), (3)(b).

384

is the product of bargaining, employee organisations are commonly

bargaining representatives in negotiating such agreements, an

enterprise agreement operates to bind employee organisations covered

by it, and an enterprise agreement can contain terms governing the

relationship between employers and employee organisations.57

66. Further, applying the reasoning of the Full Court to s 51(2)(a) would

appear to narrow significantly the scope of the provision in an

unsatisfactory manner: if enterprise agreements are not contracts,

arrangements or understandings for the purposes of the Competition

and Consumer Act 2010 (Cth), the exception would not apply to them

notwithstanding that they relate to the remuneration, conditions of

employment, hours of work or working conditions of employees.

67. An alternative reading of s 51(2)(a) is that it operates in respect of ‘any

act done in relation to … the remuneration, conditions of employment,

hours of work or working conditions of employees’ regardless of

whether those acts relate to a contract, arrangement or understanding as

defined in the Competition and Consumer Act 2010 (Cth). On that

reading, s 51(2)(a) would apply to conduct leading to the inclusion of

terms in an enterprise agreement, provided the inclusion could be said

to be in relation to remuneration etc. However, as noted in Chapter 6.6

of Volume 3, a weakness in this argument is that in relation to the prior

version of s 51(2)(a) a majority of the Full Court of the Federal Court

held that the phrase ‘act done’ had a limited meaning and did not

include an act such an entering into an agreement.58 It was as a result

57 Fair Work Act 2009 (Cth), ss 51, 52, 53, 172(1)(b). 58 Ausfield Pty Ltd v Leyland Motor Corp of Australia Ltd (1977) 30 FLR 477 at 481-482.

385

of this decision that s 51(2)(a) was amended to make specific reference

to a ‘contract, arrangement or understanding’.

68. Further, the Full Court of the Federal Court in Adamson v New South

Wales Rugby League Club Limited59 suggested that the section is

limited to contracts, arrangements or understandings pertaining to

employment conditions. At first instance, Hill J had concluded that the

provision was directed at agreements or arrangements or acts done in

relation to them, but only to the extent that those agreements or

arrangements or provisions in them relate to employee conditions.’60

69. The Competition Policy Review considered that s 51(2)(a) was

problematic insofar as it removed from the operation of Part IV

provisions in awards and enterprise agreements that place restrictions

on employers engaging contract labour or on acquiring identified

goods or non-labour services. The Competition Policy Review

recommended that ss 45E and 45EA should be amended so that they

expressly apply to awards and industrial agreements, except to the

extent they deal with the remuneration, conditions of employment,

hours of work or working conditions of employees.61 It was accepted

that the addition of the qualifier would necessitate amendment to

s 51(2)(a). The Australian Government noted this recommendation, on

the basis that it was presently being considered as part of the

59 (1991) 31 FCR 242 at 263. 60 Adamson v New South Wales Rugby League Ltd (1991) 27 FCR 535 at 551. 61

Competition Policy Review, Final Report, March 2015, p 69, recommendation 37.

386

Productivity Commission Review of the Workplace Relations

Framework.62

70. For its part, the Productivity Commission has released a draft report in

its inquiry into the Workplace Relations Framework. At a broad level,

the draft report adhered to the notion that the industrial relations

system should be separate from competition regulation, for reasons of

efficiency as well as policy: the burden of subsuming employment

agreements and arrangements within the notification and authorisation

provisions of the Competition and Consumer Act 2010 (Cth) would

create significant compliance costs.63 The Productivity Commission

observed:64

While the Productivity Commission considers that the reach of competition laws should not be further expanded into the employment space, there is a case for increasing the prominence of competition policy principles in the framework of the WR system itself. Exclusion from competition laws should not preclude WR regulation being informed by principles of competition and efficiency — especially as this would also improve the consistency of regulations across labour and product markets, while still remaining separate. … A standalone WR framework that holistically accommodates these competing goals is preferable to a chimeric approach that attempts to shoehorn provisions from the CCA into WR issues.

71. Addressing the proposal of the Competition Policy Review that the

scope of ss 45E and 45EA be extended to include awards and

enterprise agreements, the Productivity Commission expressed the

preliminary view that concerns related to competitive constraints

imposed by enterprise agreements are better addressed by the

62 Australian Government, Response to the Competition Policy Review, 24/11/15, p 30. 63 Productivity Commission Inquiry into the Workplace Relations Framework: Draft Report August 2015, pp 776-777. 64

Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report August 2015, p 778.

387

mechanism of ss 186(4) and 194 of the FW Act which precludes

approval of an EBA that contains an unlawful term. It considered that

broader alterations such as amendments of the Competition and

Consumer Act 2010 (Cth) could create unintended consequences,65 and

would require the ACCC to involve itself in the workplace relations

system which could lead to unnecessary duplication.66

Conclusions

72. There is force to the views expressed by the Productivity Commission

insofar as it suggests that conduct in relation to enterprise bargaining

which has an anti-competitive effect or purpose is often more easily

dealt with in the FW Act. Ordinarily, particular anti-competitive

practices can be outlawed more easily, and with a lower risk of

unintended consequences, by amending s 194 of the FW Act to make

certain anti-competitive terms unlawful. The effect would be to

prevent such terms from being included in enterprise agreements.

73. One such example is the draft recommendation of the Productivity

Commission that terms that restrict the engagement of independent

contractors, labour hire and casual workers, or regulate the terms of

their engagement, should constitute unlawful terms under the

65 Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report August 2015, p 779. 66

Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report August 2015, p 780.

388

FW Act.67 The CFMEU ACT cases studies highlighted the anti-competitive nature of these clauses.

74. However, as a consequence of the decision in Australian Industry

Group v Fair Work Australia68 the interplay between competition law

and industrial relations laws is now unclear. It is necessary for

legislation to clarify that interaction.

75. It is considered that the simplest solution is simply to reverse the effect

of the decision, and to amend the Competition and Consumer Act 2010

(Cth) to make explicit that:

(a) an enterprise agreement under the FW Act is a contract,

arrangement or understanding for the purposes of the

Competition and Consumer Act 2010 (Cth); and

(b) an enterprise agreement that applies to an employer and an

employee organisation under the FW Act is a contract,

arrangement or understanding that an employer has with the

organisation of employees for the purposes of s 45E of the

Competition and Consumer Act 2010 (Cth).

76. This largely mirrors the approach suggested in the Competition Policy

Review, although it does not recommend any changes to s 51(2)(a)

itself on the ground that the legislature has already determined that

67 Productivity Commission Inquiry into the Workplace Relations Framework, Draft Report, August 2015, p 733. 68

(2012) 205 FCR 339.

389

conduct in contravention of s 45E is not subject to the exclusion in

s 51(2)(a).

Recommendation 59

The Competition and Consumer Act 2010 (Cth) be amended to make explicit that:

(a) an enterprise agreement under the Fair Work Act 2009 (Cth) is a

contract, arrangement or understanding for the purposes of the

Competition and Consumer Act 2010 (Cth); and

(b) an enterprise agreement that applies to an employer and an employee

organisation under the Fair Work Act 2009 (Cth) is a contract,

arrangement or understanding that an employer has with the

organisation of employees for the purposes of s 45E of the Competition

and Consumer Act 2010 (Cth).

390

CHAPTER 8

BUILDING AND CONSTRUCTION

Subject Paragraph

A - INTRODUCTION 1

B - THE CFMEU 5

Deregistration of the CFMEU 25

Legislative disqualification of officers 39

C - BACKGROUND TO THE AUSTRALIAN BUILDING

AND CONSTRUCTION COMMISSION

45

The Cole Royal Commission 48

The Building and Construction Industry Improvement Act 2005

(Cth)

50

Changes by the Labor Government 55

The proposed return to the ABCC 63

Office of the Fair Work Ombudsman and Fair Work Inspectors 67

391

Subject Paragraph

D - A SEPARATE, INDUSTRY SPECIFIC, REGULATOR 69

Introduction 69

Submissions opposing a separate regulator 72

Consideration 82

Conclusions 109

E - COMPULSORY INVESTIGATORY AND

INFORMATION GATHERING POWERS

113

Introduction 113

Compulsory examination powers of other regulators 117

Submissions 130

Assessment 143

F - INDUSTRY SPECIFIC INDUSTRIAL LAWS 156

Issues 156

Submissions 176

Conclusions 185

G - RICO 193

What is RICO? 194

392

Subject

Adoption

APPEND

INDUST

A - INTR

1.

2.

1 Report, V Interim Rep 2

Royal Co

n in Australia

DIX A - BUI

TRY LITIGA

RODUCTIO

A great dea

activities of

construction

Mining and

discloses sys

payments, ph

right of entr

and contemp

The issues

identified in

over the pas

Gyles Royal

2003. The

payments a

Vols 3 and 4; eport (2014), V

ommission into

a?

ILDING & C

ATION

ON

al of the evi

f unions wit

industry, a

Energy Unio

stemic corrup

hysical and v

ry permits, se

pt of court.1

identified a

n reports of t

st 40 years: t

l Commission

Winneke R

and bribes b

Royal Commi Vol 2, ch 8.

o the Building a

CONSTRUC

dence before

th coverage

and in partic

on (CFMEU

ption and un

verbal violen

econdary boy

are not new

three separat

the Winneke

n in 1992 an

Royal Comm

being taken

ission into Tra

and Constructi

CTION

e the Comm

of workers

cular the Co

U). The cond

nlawful condu

nce, threats, i

ycotts, breac

w. The sam

te Royal Com

e Royal Com

nd the Cole R

mission foun

n by memb

ade Union Gov

on Industry, F

Pa

mission conce

in the buil

onstruction,

duct that has

duct, includin

intimidation,

ches of fiduc

me issues ha

mmissions c

mmission in

Royal Comm

nd numerou

ers of the

vernance and C

Final Report (20

aragraph

201

erned the

lding and

Forestry,

s emerged

ng corrupt

, abuse of

ciary duty

ave been

conducted

1982, the

mission2 in

s corrupt

Builders

Corruption,

003).

393

3.

4.

3 Royal Co and Builde 4

Royal Co of the Hear 5

Royal C Vol 1, pp 5 6

See paras 7 See paras

Labourers F

widespread i

South Wale

improper and

similar findin

The continu

during the C

regulation of

The remaind

Par (a)

der

dea

Par (b)

hist

con

Par (c)

of

ind

ommission into ers’ Labourers’

ommission into rings Part II: I

Commission in 5-17.

s 5-44.

s 45-68.

Federation (B

illegal behav

es, including

d irregular p

ngs but not li

uing corrupti

Commission

f the building

der of the Ch

rt B deals

registered, a

aling with its

rt C provide

tory concer

nstruction ind

rt D addresse

a separate

dustry.8

o the Activities Federation, R

o Productivity Illegal Activitie

to the Buildin

BLF).3 The

viour within

g theft, ext

ayments.4 T

imited to New

ion and law

suggests a

g and constru

hapter is div

with the C

and other a

culture.6

es a brief ov

rning the r

dustry.7

es the argum

regulator fo

s of the Austra eport (1982), p

in the Building es (1992), Vol

ng and Constr

Gyles Roya

the construc

tortion, secr

The Cole Roy

w South Wal

wlessness tha

need to rev

uction industr

ided into six

CFMEU, wh

available leg

verview of t

egulation o

ments for and

or the buildi

lian Building C pp 31-36, 246-g Industry in N 4.

ruction Industr

al Commissi

ction industry

ret commiss

yal Commiss

les.5

at has been

visit, once a

ry.

x parts.

hether it sh

gislative opt

the recent l

of the build

d against the

ing and con

Construction E 251, 274-275.

New South Wa

ry, Final Repo

ion found

y in New

ions and

sion made

revealed

again, the

hould be

tions for

egislative

ding and

existence

nstruction

Employees’

ales, Report

ort (2003),

394

B - THE

5.

6.

8 See paras 9 See paras 10

See para 11 Racketee 12

See para 13 Royal C Vol 2, pt 8 14

Royal C Vol 2, ch 8

Par (d)

pow

bui

Par (e)

nec

Par (f)

sim

Org

E CFMEU

The activitie

Chapters in

Report.13 It

In the Interim

The ev number disrega

s 69-112.

s 113-155.

as 156-193.

er Influenced a

as 194-210.

Commission int .

Commission int 8.1, p 1008.

rt E considers

wers should b

lding and con

rt F addresse

cessary for th

rt G deals w

milar to the U

ganizations A

es of the CF

this Report

is appropriat

m Report the

vidence in rela r of CFMEU o ard for the rule

and Corrupt Or

to Trade Union

to Trade Union

s what inform

be available

nstruction in

s whether in

he building an

with proposal

United States R

Act,11 commo

FMEU have

(see Volum

te to make m

following co

ation to the C officials seek to of law.

rganizations A

n Governance a

n Governance a

mation gather

to the regul

ndustry.9

ndustry specif

nd constructi

ls to introdu

Racketeer Inf

only known a

been exam

mes 3 and 4

more detailed

omments wer

CFMEU case o conduct their

ct, 18 USC §§

and Corruption

and Corruption

ring and inve

lator in relati

fic industrial

ion industry.1

uce laws to

nfluenced and

as RICO.12

mined in man

4) and in the

comments he

re made:14

studies indica r affairs with a

1961-1968.

n, Interim Rep

n, Interim Rep

estigatory

ion to the

l laws are 10

Australia

d Corrupt

ny of the

e Interim

ere.

ates that a

a deliberate

port (2014),

port (2014),

395

7.

8.

L

9.

10.

That ev culture

(a)

(b)

(c)

The case s

conclusions.

The evidenc

or its offic

including th

Crimes Act

Law Consol

the Charitab

Policy Refor

The conduc

occurrence.

potential crim

officials of d

Nor is th

unrepresenta

Commission

taken agains

laws and con

vidence is sugg within the CFM

the law is t irrelevance, of particular

officials pre union;

the reputatio become the s

tudies consi

ce has reveal

ers against

e Criminal C

1958 (Vic),

idation Act

ble Fundrais

rm (Victoria)

ct identified

As the list

minal offenc

different bran

e conduct

ative. Appen

n staff provi

st building in

ntempt in the

gestive of the e MEU, under w

to be deliberat where it stands officials;

fer to lie rathe

ons of those w subjects of bas

idered in th

ed possible c

numerous p

Code (Cth),

the Crimina

1935 (SA), t

sing Act 19

Act 1995 (V

d in the C

in the previo

ces against n

nches across A

revealed

ndix A to th

iding details

ndustry parti

e period from

existence of a which:

tely evaded, o s in the way of

er than reveal

who speak out seless slurs and

his Report o

criminal offe

provisions o

the Crimes A

al Code 1899

the Corpora

991 (NSW)

Vic).

Commission

ous paragrap

numerous law

Australia.

in the Co

his Chapter i

s of 147 su

icipants for b

m 2000-2015

pervasive and

or crashed thro f achieving the

the truth and

about union w d vilification.

only reinfor

ences by the

of numerous

Act 1900 (N

9 (Qld), the

tions Act 20

and the Co

is not an

ph reveals, it

ws. It involv

ommission’s

s a table pre

uccessful pro

breaches of

5. In part, it

d unhealthy

ough as an e objectives

betray the

wrongdoing

rce those

e CFMEU

s statutes

NSW), the

Criminal

001 (Cth),

ompetition

isolated

t involves

ves senior

hearing

epared by

oceedings

industrial

t is based

396

11.

12.

13.

15 See, e.g. 75 at [76] Constructi Tracey J; D 672; Direc [20] per Fl 16

Master Officials, A

on a regular

the Fair W

provided to

appropriate p

law by build

schedule att

Master Build

In an atte

supplemente

Of course, it

relevant deci

However, it

CFMEU and

findings of b

officials. It

and construc

Numerous ju

the law by th

., Director of t ] per White J on, Forestry, Director of th ctor of the Fair

lick J.

Builders Austr Attachment A,

rly updated s

Work Buildin

the Federal

penalty to im

ding industry

tached to sub

ders Australia

empt to be

ed those sche

t is not poss

ision.

does paint

d its official

breaches of t

points to bo

ction industry

udges have c

he CFMEU a

the Fair Work J; Director of Mining and E e Fair Work B r Work Buildin

ralia, Submiss 11/7/2014.

schedule of c

ng Industry

l Court for

mpose in relat

y participant

bmissions to

a.16

e comprehen

edules with o

ible to asser

a picture o

l s. Of the 1

the law or c

oth repeated

y, and by the

commented o

and its disreg

Building Inspe f the Fair W Energy Union Building Indus

ng Inspectorate

sion in respons

cases prepare

Inspectorate

the purpose

tion to contra

s.15 It is als

o the Comm

nsive, Com

other publicly

t that Appen

f repeated c

147 cases in

ourt orders b

unlawful co

CFMEU in p

on the repea

ard for the la

ectorate v Step Work Building (No 2) [2015] stry Inspectora

e v Bragdon (N

se to Issues P

ed by the D

e that is c

s of determ

aventions of

so based on

mission receiv

mmission sta

y available d

ndix A captu

contravention

the list, 109

by the CFME

onduct in the

particular.

ated contrave

aw.

phenson (2014) Industry Insp ] FCA 407 at ate v Upton [2 No 2) [2015] F

aper 2: Duties

irector of

ommonly

mining the

industrial

a similar

ved from

aff have

decisions.

ures every

ns by the

9 involve

EU or its

e building

entions of

) 146 ALD pectorate v t [104] per 2015] FCA FCA 998 at

s of Union

397

14.

15.

16.

17 Director Energy Un 18

Director per Burnet 19 Director 75 at [76]-20

Director and Energy

The concept

the CFMEU

the union:18

There i its ideo has an The on does no activity

Another has

The Di has be legislat

Since 1 numero contrav CFMEU the exe

Yet another h

The pat been th schedul than th bespeak become

r, Fair Work B nion (No 2) [20

r, Fair Work B tt J.

r of the Fair W [77] per White

r of Fair Work y Union [2015

t of the rule

U.17 One judg

is ample evide ological fellow extensive hist ly reasonable c

ot understand o y imposed by th

observed:19

rector provide een dealt with tion. It is fair t

1999, the CFM ous occasions. ventions. … Th U to complian

rcise of rights

has stated:20

ttern of contrav he subject of co le paints, one w at. I am bound

ks an organisat e normalised.

Building Industr 015] FCA 407 a

Building Indus

Work Building e J.

k Building Ind ] FCA 1173 at

of law has b

ge has made

ence of signific w travellers. Th tory of contrav conclusion to b

or does not car he legislature a

d a schedule o h by courts

to describe the

MEU has had p . Many of th

he record indic nce with the req of entry.

vention which omment by the would have to d to say that t

tional culture i

ry Inspectorate at [103] per Tr

stry Inspectora

Industry Inspe

dustry Inspecto t [29] per Jessu

been describ

the followin

cant contraven he CFMEU, a ventions datin be drawn is th re for the legal and the courts.

of the occasion for non-contr CFMEU recor

penalties impo he court decis cates an attitud quirements of

emerges from e court on a nu say, a depressi the conduct ref

n which contra

e v Constructio racey J.

ate v Myles [20

ectorate v Step

orate v Constr up J.

ed as an ana

ng observatio

ntion by the CF as a holistic or ng back to at l hat the organisa

restrictions on

ns on which th raventions of rd as dismal.

osed on it by sions involved de of indiffere the legislation

m material such number of occa ing picture. Bu ferred to in th

aventions of th

on, Forestry, M

014] FCCA 14

phenson (2014)

ruction, Forest

athema to

ons about

FMEU and rganisation, least 1999. ation either

n industrial

he CFMEU f industrial

a court on d multiple ence by the n regarding

as this has asions. The ut it is more he schedule he law have

Mining and

429 at [45]

) 146 ALD

try, Mining

398

17.

18.

19.

21 A & L S 466 at [1

Constructi Tracey J; W (2009) 182 Energy Un JJ; Cozadin at [18] per Director, F Energy Un Inspectora per Gordon 1243 at [4 McDonald Mining an Director of Energy Un Industry In at [58]-[59 [2015] FCA 22

Product Vol 2, p 53 23

See fo

Constructi Work Build Work Bui Constructo (2014) 241 1380; Dire

There are m

dismal recor

In 2014, the

proceedings

2005, disclo

unions, and o

Apart from

numerous su

for breaches

Silvestri Pty Ltd 13]-[14] per G on, Forestry, Williams v Con

2 IR 327 (FCA nion & Ors (20 nos v Construc r Reithmuller

Fair Work Bui nion [2013] FC ate v Construct n J; Cozadinos

43] per Tracey d [2013] FCA 1 nd Energy Uni f Fair Work B

nion [2015] FC nspectorate v C 9] per Tracey A 614 at [22],

tivity Commis 30.

or example: D on, Forestry, M ding Industry I lding Industry ors (Victoria) P 1 IR 288; Broo

ector of the Fa

many other s

rd of complia

Productivity

brought by t

sing 169 pro

of those 108

non-compli

uccessful pro

of court ord

d v Constructio Gyles J and

Mining and E nstruction, For A) at [29] per Je 009) 189 IR 14

ction, Forestry, FM; Hogan v ilding Industry CA 846 at [35 tion, Forestry,

s v Constructio y J; Director 1431 at [73] pe ion & Ors (No

uilding Industr CA 353 at [96 Construction, F J; Director, F

[27] per Logan

sion Inquiry i

Director of t Mining and E Inspectorate v y Inspectorate Pty Ltd v Cons okfield Multiple

air Work Build

tatements of

ance with ind

y Commissio

the relevant

oceedings, 13

were brough

ance with i

oceedings ag

ders or conte

on, Forestry, M the cases re Energy Union restry, Mining

essup J; Draffin 45 (FCA) at [9 , Mining and E v Jarvis [2012]

y Inspectorate 5] per Collier Mining and E on, Forestry, M

of the Fair W er Barker J; G o 2) (2014) 24 ry Inspectorate

]-[97] per Tra Forestry, Minin Fair Work Buil n J.

into Public In

the Fair Wor Energy Union [ Cartledge [20 e v Cartledge

struction, Fore ex FSH Contra ding Industry

f judges reco

dustrial laws.2

n recorded a

building ind

31 of which

ht against the

industrial law

gainst the CF

empt of court

Mining and En ferred to ther (2008) 177 IR g and Energy U

n v Constructio 92] per Goldbe Energy Union & ] FMCA 189

v Constructio J; Director of Energy Union [ Mining and En

Work Building Grocon & Ors v 41 IR 288 at e v Constructio

cey J; Directo ng and Energy lding Industry

nfrastructure, I

rk Building I [2015] FCA 2 015] FCA 453 e (No 2) [20

estry, Mining a actor Pty Ltd v Inspectorate v

ording the C 21

as summary o

dustry regulat

were brough

e CFMEU.22

ws, there ha

FMEU or its

t.23 Moreov

nergy Union [2 rein; Stuart-M R 61 (FCA) a Union and Mat

on, Forestry, M erg, Jacobson a & Ors [2011] F at [20] per Bu on, Forestry, M

f the Fair Wor [2013] FCA 10 nergy Union [2 Industry Insp

v Construction [201] per Cav on, Forestry, M or of Fair Wor

y Union [2015 Inspectorate

Inquiry Repor

Industry Inspe 226; Director o and Director 015] FCA 85

and Energy Un v McDonald [2 v Construction

CFMEU’s

of penalty

tors since

ht against

ave been

s officials

ver, some

2008] FCA Mahoney v at [44] per ters (No 2)

Mining and and Tracey FMCA 284 urnett FM; Mining and

rk Building 014 at [46] 2013] FCA pectorate v n, Forestry,

vanough J; Mining and rk Building ] FCA 226

v Cradden

rt, 27/5/14,

ectorate v of the Fair of the Fair 1; Grocon nion (No 2)

2013] FCA n, Forestry,

399

20.

Mining an Energy Un Mining an Constructi 24

Matt Joh 25/5/13, operation/s 25

Michael untrue.

senior officia

court orders

Setka, the S

General Divi

In public he

Queensland

General Div

industrial di

Brisbane. H

Q.

A.

d Energy Unio nion (No 2) [20 nd Energy Un on, Forestry, M

hnston, CFME http://w story-e6frg6n6

Ravbar, 6/8/1

als of the uni

. According

State Secretar

ision of the C

earings in 20

and Norther

vision of th

sruptions inv

He gave the fo

You have no with official which I saw injuncting th

At the end o decision had they wanted back to the c think that p workers that These dispu there is alwa got to look was certainly

on [2012] FCA 011] FCA 557 nion (No 2) [ Mining and En

EU pledges to www.theaustrali -12266505171

14, T: 347.25-3

ion apparentl

g to press re

ry Victorian

CFMEU.24

014, Michae

rn Territory

he CFMEU,

volving the

ollowing evid

o issue, do yo ls of the CFM w on that foota hat sort of activ

of the day, I do d been made of d to send a pro company that t people have a

t he is with, to utes are very r ays a little bit o at the circums

y set up by the

A 966; Alfred ; Bovis Lend L 2009] FCA 6 ergy Union [20

continue milita ian.com.au/new 166, accessed 4

39. Incidental

ly see no diff

eports, this i

n Branch of

el Ravbar, S

Branch of

, was show

CFMEU on

dence:25

ou, as the Divi MEU engaging age, despite o vity?

on’t have a prob f the workforce otest, if they w they’re not hap

right, whethe o send a messa obust in the c of emotion and

stances of how company.

v Constructio Lease Pty Ltd v 650; and BHP 001] FCA 336.

ant operation, ws/cfmeu-pled 4/12/15.

ly, the last sen

fficulty with b

is the case w

the Construc

State Secretar

the Construc

wn video fo

a Hindmars

isional Branch in activities i orders having b

blem with that e not to return wanted to send ppy, I don’t thi

er it’s the offi age back to the construction in d passion in it,

w this all cam

on, Forestry, M v Construction P Steel (AIS) .

The Australia dges-to-continu

ntence of the a

breaching

with John

ction and

ary of the

ction and

ootage of

sh site in

h Secretary, in the kind been made

t, no. If the to work, if a message ink that - I

cial or the e company. ndustry and but you’ve me about. It

Mining and n, Forestry, Pty Ltd v

an (online), ue-militant-

answer was

400

21.

22.

23.

24.

26 Australia Industries 27

Royal C Vol 1, p 11

These comm

Merkel J onc

The rul that soc orders t rule of resort t comply

The conduct

echoes the

findings in t

following:27

Underly is a di

where t genuine pursued the law

There is a l

One sympto

officials. A

habitually lie

the disease i

rule of law.

What can be

an Industry Gr Union [2000] F

Commission in 1, para 22.

ments are en

ce observed:2

le of law in a

ciety, no matte that are to be f law in our so to courts to de y with the order

t of the CFM

findings of

the Final Re

ying much of t sregard or con the policy of th e enterprise ba d through indu w and legal insti

longstanding

om is regula

Another symp

e rather than

is that CFME

e done to cut

roup v Automo FCA 629 at [7

nto the Buildin

ntirely antith 26

democratic so er how powerfu observed and t ociety does no

termine their d rs made by the

MEU official

previous Ro

eport of the

the conduct of ntempt for the he law is to fos argaining. Ove ustrial conduct,

itutions.

g malignancy

ar disregard

ptom of the

n ‘betraying’

EU officials

out the malig

otive, Food, Me 9].

ng and Constr

hetical to th

ociety does no ul, to pick and those that are ot only require

disputes … it e courts in deter

ls considered

oyal Commi

Cole Royal

f unions, and in e law and its

ster individuali erwhelmingly, , rather than re

y or disease

for industri

disease is th

the union.

habitually sh

gnancy and c

etals, Engineer

ruction Industr

he rule of l

ot permit any m choose the law not. Maintena e that parties a

also requires t rmining those

d by the Com

issions. Am

Commission

n particular the institutions, p ism, freedom o industrial obj

eliance on neg

within the

ial laws by

hat CFMEU

Another sym

how contemp

cure the disea

ring, Printing

ry, Final Repo

law. As

member of ws or court ance of the are able to

that parties disputes.

mmission

mong the

n was the

e CFMEU, particularly of choice or ectives are

gotiation or

CFMEU.

CFMEU

U officials

mptom of

pt for the

ase?

& Kindred

ort (2003),

401

Deregistr

25.

26.

27.

28 Fair Wo 29 Fair Wo

ration of the

One way of c

There are tw

using the pr

legislation.

In relation t

person inter

Federal Cour

number of g

include the f

the (a)

ach

FW

Wo

the (b)

the

org

pro

inte

or

rk (Registered

rk (Registered

e CFMEU

combatting t

wo ways in wh

rocedure in

to the first

rested, or the

rt to cancel t

grounds upo

following:

organisatio

hievement o

W(RO) Act or

ork Act 2009

organisation

organisation

ganisation, h

otected indus

erfered with t

d Organisations

d Organisations

he disease w

hich the CFM

s 28 of the

possibility,

e Minister f

the registratio

n which an

n’s conduct

of Parliamen

r of an objec

(Cth) (FW A

n, or a subst

n or of a sec

has engaged

strial action)

the activities

s) Act 2009 (Ct

s) Act 2009 (Ct

would be to de

MEU could b

e FW(RO) A

s 28 permit

for Employm

on of an orga

application

has preven

nt's intentio

ct of the FW

Act);28

tantial numbe

ction or clas

in industria

that has pr

s of a ‘federa

th), s 28(1)(a).

th), s 28(1)(b).

eregister the

be deregistere

Act or (2) b

ts an organi

ment, to app

anisation. Th

can be mad

nted or hind

on in enac

W(RO) Act or

er of the me

ss of membe

al action (ot

revented, hin

al system emp

.

CFMEU.

ed: (1) by

by special

isation or

ply to the

here are a

de. They

dered the

cting the

r the Fair

embers of

ers of the

ther than

ndered or

mployer’;29

402

28.

29.

30 Fair Wo 31 See Fair 32

Fair Wo 33 Fair Wo

the (c)

the

org

mad

Cancellation

The Federal

an organisat

do so having

the action w

those matter

Deregistratio

consequence

the (a)

wou

the (b)

ben

Com

or i

rk (Registered

r Work (Registe

rk (Registered

rk (Registered

organisation

organisation

ganisation, ha

de under the

n of registrati

Court has a

ion’s registra

g regard to th

which has bee

s.

on under th

es, including

CFMEU wo

uld not cease

CFMEU an

nefit of any

mmission or

its members;

d Organisations

ered Organisa

d Organisations

d Organisations

n or a substa

n or of a sec

as or have fa

FW Act.30

on is not auto

fairly wide

ation if it co

he degree of

en taken agai

he FW(RO)

the followin

ould cease to

e to be an uni

nd its memb

y modern a

enterprise a 33

s) Act 2009 (Ct

tions) Act 2009

s) Act 2009 (Ct

s) Act 2009 (Ct

antial numbe

ction or clas

ailed to com

omatic once

discretion.31

onsiders that

f gravity of t

inst the orga

Act would

g:

o be a body

incorporated

bers would n

award, order

agreement tha

th), s 28(1)(d).

9 (Cth), ss 28(3

th), s 32(a).

th), s 32(c).

er of the me

ss of membe

mply with cou

a ground is m

But it cann

it would be

the matters r

anisation in r

d have a nu

corporate, al

association;

not be entitl

r of the Fa

at bound the

.

3), 28(4), 29.

embers of

ers of the

urt orders

made out.

not cancel

unjust to

raised and

relation to

umber of

lthough it 32

ed to the

air Work

e CFMEU

403

30.

31.

32.

34 Fair Wo 35 Fair Wo 36

Fair Wo 75. 37 Austral Commonw

the (c)

rep

agr

righ (d)

auto

Deregistratio

that the Com

The second

specific legis

precedent fo

enacted the

Registration)

(Cancellatio

(Cth). Those

the Austral

Labourers’

cancellation.

by the High

Both the Gy

addressed th

rk Act 2009 (C

rk Act 2009 (C

rk (Registered

ian Building wealth (1986) 1

CFMEU w

resentative

reements;34 an

ht of entry

omatically ex

on under the

mmonwealth w

possibility i

slation cance

or such actio

e Builders

) Act 1986 (

n of Registr

e enactments

lian Buildin

Federation,

. The consti

Court.37

yles Royal C

he question w

Cth), s 176.

Cth), s 516.

d Organisations

Construction 61 CLR 88.

would no l

in relation

nd

permits he

xpire.35

FW(RO) Ac

would acquir

s for the Co

elling the reg

on. In 1986

Labourers’

(Cth) and the

ration - Con

s had the effe

ng Construc

and provi

itutional vali

Commission

whether the C

s) Act 2009 (Ct

Employees’ &

longer be a

to the nego

eld by CFM

ct would not

re the CFME

ommonwealth

gistration of t

6, the Comm

’ Federatio

e Builders L

nsequential P

ect of cancell

ction Emplo

ding for th

dity of the le

and the Col

CFMEU or it

th), s 32(g). C

& Builders L

a default b

otiation of e

MEU officer

have the con

EU’s property

h Parliament

the CFMEU.

monwealth P

on (Cancell

abourers’ F

Provisions ) A

ling the regis

oyees’ and

he conseque

egislation wa

le Royal Com

ts predecesso

Cf Vol 3, ch 7.5

Labourers’ Fed

bargaining

enterprise

rs would

nsequence

y.36

t to enact

There is

Parliament

lation of

Federation

Act 1986

stration of

Builders

ences of

as upheld

mmission

ors should

5, paras 73-

deration v

404

33.

34.

35.

36.

38 Royal C Final Repo 39

Royal C Vol 11, pp

be deregister

Workers In

deregistered,

Commission

registration.3

For the reaso

registration o

First, in the

its members

organisation

act by its hum

may have a

been involve

Secondly, de

process.

Further, ther

of Australia

Amalgamati

FW(RO) Ac

would cease

likely that th

prove ineffec

ommission int ort, Vol 7, p xii

Commission in 95-96.

red. Commi

ndustrial U

,38 but th

ner Cole did 39

ons that follo

of the CFME

main, it is th

, that is unla

, just like a c

man agents.

disproportio

ed in illegal a

eregistration u

re is a real po

a ( MUA) w

on would fo

ct because th

e to exist as

he deregistrat

ctive.

o Productivity i.

nto the Buildin

issioner Gyle

Union (New

hat recomm

not recomme

ow, no recom

EU.

he conduct o

awful. It mu

company or a

Cancelling t

onate effect o

activity.

under the FW

ossibility that

will seek to

orestall canc

he effect of a

a registered

tion mechani

in the Buildin

ng and Constr

es recommen

w South W

mendation

end cancella

mmendation

of the officer

st be emphas

any other cor

the registratio

on union me

W(RO) Act is

t the CFMEU

amalgamate

ellation of r

amalgamation

d organisatio

ism under the

g Industry in N

ruction Industr

nded that the

Wales Bra

was not

ation of the C

is made to c

rs of the CFM

sised that a r

rporate body,

on of the wh

embers who

s a costly an

U and Maritim

e in the nea

registration u

n is that the

on. As a re

e FW(RO) A

New South Wa

ry, Final Repo

Building

anch) be

adopted.

CFMEU’s

cancel the

MEU, not

registered

, can only

hole union

have not

nd lengthy

me Union

ar future.

under the

CFMEU

esult, it is

Act would

ales (1992),

ort (2003),

405

37.

38.

Legislati

39.

40.

Of course,

enacted to d

some way, t

the new orga

involve the

already note

inevitably ne

had transferr

not amalgam

current offic

the CFMEU

All of these

combat the c

union.

ve disqualifi

Chapter 3

reforms to p

Federal Cour

a registered o

would apply

branches.

However, to

CFMEU, Co

prohibiting a

if amalgama

deal with the

to prevent the

anisation. H

cancellation

ed, it would

eed to deal w

red to the ne

mate with th

cials organisin

rose up out o

matters poin

culture of the

ication of of

of this Vol

ermit the reg

rt for an orde

organisation

y generally t

o deal with

ommonwealth

a class of CF

ation did oc

e transfer of

e existing CF

However, suc

n of the CF

d have ceas

with the form

ew organisati

e MUA, der

ng a new and

of the ashes o

nt to the conc

e CFMEU sh

fficers

lume examin

gistered orga

er disqualifyi

or branch. T

to all officer

the particul

h and State P

FMEU offici

ccur, special

members an

FMEU cultu

ch legislation

FMEU’s reg

sed to exist

mer officers

ion. And ev

registration w

d equally dan

of the BLF.

clusion that a

hould focus o

nes and rec

anisations reg

ing persons f

That recomm

rs of register

lar cultural

Parliaments c

ials determin

legislation

nd assets and

ure being rep

n would not,

gistration bec

t. Rather,

of the CFM

en if the CF

would not pr

ngerous unio

any targeted

on the offici

commends l

gulator to app

from holding

mendation, if

red organisa

problems w

could enact le

ned by the P

could be

d seek, in

plicated in

in terms,

cause, as

it would

MEU who

MEU did

revent its

on, just as

action to

ials of the

egislative

ply to the

g office in

accepted,

ations and

within the

egislation

Parliament

406

41.

42.

43.

40 Kariapp

from holding

specified per

Such a law

officers and

part by its of

pro (a)

gen

det

org

con

in p (b)

the

for

con

uni

An argumen

an exercise

As the law p

in relation

Parliament.

However, th

considering

was enacted

er v Wijesinha

g any office

riod of time.

would recog

that the cult

fficers. It wo

otect the me

nerally by d

ermined wer

ganisations t

nferred upon

particular, se

public from

the law w

ntrol of the C

on.

nt might be m

of judicial p

presently stan

to such l

he Privy Cou

similar legis

disqualifyin

a [1968] AC 71

in any regist

gnise that an

ture within a

ould:

mbers of th

disqualifying

re not fit an

that have th

registered or

eek to protect

m the consequ

ithin the CF

CFMEU rath

made that the

power, and t

nds, such an

egislation e

uncil rejected

lation from C

ng persons fo

7.

tered organis

n organisation

an organisati

he CFMEU

g persons w

nd proper pe

he range of

rganisations;

t the member

uences of the

FMEU by f

er than on th

e legislation

therefore co

argument co

enacted by

d an argume

Ceylon.40 In

ound by a Co

sation or bra

n can only a

ion is created

and the pub

whom the P

ersons to be

f statutory p

and

rs of the CFM

e culture of

focusing on

he membersh

would, if en

onstitutionally

ould only be

the Comm

ent of that ki

n that case, le

ommission o

anch for a

act by its

d in large

blic more

Parliament

e running

privileges

MEU and

disregard

those in

hip of the

nacted, be

y invalid.

available

monwealth

ind when

egislation

of Inquiry

407

44.

Recomm

For the p

the CFM

disqualify

and prope

for a spec

41

Kariapp Board). 42 Polyukh Fardon v A agreeing); CLR 350 Duncan v N 43

See, eg, curiam.

to have enga

argued that t

imposition o

Council reje

punishment

protection.41

The Privy Co

a number o

punishment

recognised in

mendation 60

urpose of see

MEU, conside

ying those of

er persons fr

cified period.

per v Wijesinh

hovich v The C Attorney-Gene Albarran v Co at [17] per G New South Wa

Clyne v New

aged in bribe

the legislatio

of punishmen

cted those ar

for crimina

ouncil’s reas

of occasions.

and disqualif

n other areas

0

eking to com

eration be g

fficers of the

om holding o

.

ha [1968] AC

Commonwealth eral (Qld) (200 ompanies Audi Gleeson CJ, Gu

ales (2015) 89 A

South Wales B

ery from hol

on was an exe

nt or a bill o

rguments, em

al guilt and

soning has be 42 More ge

fication for th

of the law.43

mbat the cultu

given to the

e CFMEU tha

office in any

717 at 732-7

h (1991) 172 04) 223 CLR 5 itors and Liqu ummow, Hayn

ALJR 462 at [4

Bar Associatio

ding parliam

ercise of judi

of pains and

mphasising th

d discipline

een approved

enerally, the

he protection 3

ure of disrega

enactment

at Parliamen

y registered o

738 per Sir Do

CLR 501 at 575 at [118] p idators Discip ne, Callinan, H

49]-[51] per cu

on (1960) 104

mentary office

icial power,

penalties. T

he difference

for the pu

d in the High

e distinction

n of the publi

ard for the la

of special le

nt considers a

organisation o

ouglas Menzie

537-538 per M per Gummow plinary Board ( Heydon and C

uriam.

CLR 186 at 20

e. It was

being the

The Privy

e between

urpose of

h Court on

between

ic is well-

aw within

egislation

are not fit

or branch

es (for the

Mason CJ; J (Hayne J (2007) 231 Crennan JJ;

01-202 per

408

C - BAC

CONSTR

45.

46.

47.

The Cole

48.

CKGROUND

RUCTION C

Parts D and

Construction

‘restoration’

The two mai

Is t (a)

the

Par

Wh (b)

the

ind

the

Par

In order to u

brief backgro

e Royal Com

The Cole Ro

2002. That

to ‘monitor

proceedings

industry] to

D TO TH

COMMISSI

d E of this C

n Commissio

.

in issues for c

there a need

building and

rt D.

hat informati

industrial

dustry have?

answer to t

rt E.

understand th

ound.

mmission

oyal Commis

report recom

conduct, t

to ensure a

industrial, cr

HE AUST

ION

Chapter conc

on and consid

consideration

for a separa

d constructio

on gathering

regulator of

This is an

the previous

hese key issu

sion handed

mmended the

o investigat

adherence [i

riminal and c

TRALIAN

cern the Au

der the merit

n are as follo

ate industrial

on industry?

g and investig

f the buildi

issue which

question. T

ues, it is nece

down its Fir

establishme

te and, if a

in the build

civil laws’ pe

BUILDING

stralian Buil

ts and deme

ows:

l regulator sp

This is cons

gatory powe

ing and con

arises irresp

This is cons

essary to set

rst Report on

ent of an inte

appropriate,

ding and con

ending the de

G AND

lding and

erits of its

pecific to

sidered in

ers should

nstruction

pective of

sidered in

out some

5 August

erim body

facilitate

nstruction

elivery of

409

49.

The Buil

50.

44 Royal C para 12. 45

Royal C Vol 1, pp 5 46

Royal C Vol 1, pp 1

the Commis

Taskforce

recommenda

Employment

Taskforce be

The Final R

widespread b

orders, inap

lawlessness

construction

Building and

monitor, inv

building and

lding and Co

To impleme

introduced t

2005 (Cth).

Australian B

Commission in

Commission in 5-13.

Commission in 156-157, recom

ssioner’s Fin

was establ

ation. It wa

t and Workp

ecame a perm

Report of the

breaches of

ppropriate us

and a cult

industry.45

d Constructio

vestigate and

d construction

onstruction In

ent those re

the Building

It establish

Building and

nto the Buildin

nto the Buildin

nto the Buildin mmendations 1

nal Report.44

lished in

as a separate

lace Relation

manent taskfo

e Cole Roya

industrial law

se of indus

ture of disr

It was re

on Commissi

enforce indu

n industry.46

Industry Imp

ecommendati

and Constr

hed a separat

d Constructi

ng and Constr

ng and Constr

ng and Constr 77-180.

The Interi

2002 on

e unit withi

ns. The Inter

orce in March

al Commissi

w, disregard

trial power,

regard for

ecommended

ion be establ

ustrial law in

provement Ac

ions, the C

uction Indus

te, industry s

ion Commis

ruction Industr

ruction Industr

ruction Industr

im Building

the basis

in the Depar

rim Building

h 2004.

ion made fin

of court and

, many exam

the law w

d that an A

lished with p

n connection

ct 2005 (Cth

Coalition Go

stry Improve

specific regu

ssion (ABCC

ry, First Repo

ry, Final Repo

ry, Final Repo

Industry

of this

rtment of

g Industry

ndings of

d tribunal

mples of

within the

Australian

powers to

n with the

h)

overnment

ement Act

ulator, the

C). The

ort, (2002),

ort (2003),

ort (2003),

410

51.

52.

47 Building 48 Building 49

Building 50 Building 51

Building

regulator w

industrial law

In addition,

2005 (Cth) im

unl (a)

rest

or r

coe (b)

con

are

agr

sup

disc (c)

Some found

compulsory

belief on re

document re

evidence or

g and Construc

g and Construc

g and Construc

g and Construc

g and Construc

was given p

w in connecti

the Building

mposed subs

awful indus

trictions on t

refusals to att

ercion in re

ntractors and

to perform;

reement; or

perannuation

crimination i

d it contro

examination

easonable gr

elevant to an

provide doc

ction Industry I

ction Industry I

ction Industry I

ction Industry I

ction Industry I

owers to m

ion with buil

g and Constr

stantial civil p

strial action,

the performa

tend for or pe

lation to th

d/or the dutie

; or to make

r to nomin

fund;49 and

in connection

versial that

n powers ena

rounds that

n investigati

cuments.51 F

Improvement A

Improvement A

Improvement A

Improvement A

Improvement A

monitor, inve

lding and con

ruction Indus

penalties for:

, including

ance of build

erform build

he engageme

es those emp

e, vary or ter

nate or pa

n with the bu

the Comm

abling him or

a person h

ion, to comp

Failure to co

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

estigate and

nstruction.47

stry Improve

:

bans, limita

ding work, o

ding work;48

ent of empl

ployees or co

rminate an e

ay to a

uilding indust

missioner w

r her, upon f

had informat

pel witnesse

omply was a

, s 10.

ss 36-38.

ss 43-44, 46.

s 45.

s 52(1).

d enforce

ement Act

ations or

or failures

loyees or

ontractors

enterprise

specified

try.50

was given

forming a

tion or a

s to give

a criminal

411

53.

54.

52 Building 53 Crimes A 54

Building 55 Building 56

Building 57 Building 58

Building

offence with

although a c

in respect of

corporate.53

the ground t

to a penalty

produced w

comply with

an investigat

The Comm

Building and

Commission

breaches of b

In addition,

2005 (Cth) e

Relations to

that were to

building con

a Commonw

g and Construc

Act 1914 (Cth)

g and Construc

g and Construc

g and Construc

g and Construc

g and Construc

h a maximu

court could im

f an individu

It was not a

that it might

y.54 Howe v

was not adm

h the require

ting officer.55

missioner wa

d Constructi

ner, empower

building laws

the Building

empowered

issue a ‘buil

o be observed

ntractors that

wealth or Terr

ction Industry I

, s 4B.

ction Industry I

ction Industry I

ction Industry I

ction Industry I

ction Industry I

um penalty

mpose a fine

ual and 150 p

an excuse fo

incriminate

ver the info

missible excep

ement, giving 5

as also emp

on Inspector

red to enter p

s.57

g and Constr

the Minister

lding code’ s

d in relation

were consti

ritory project

Improvement A

Improvement A

Improvement A

Improvement A

Improvement A

Improvement A

of six mo

e instead of u

penalty units

r a person to

that person

ormation, ev

pt in procee

g false inform

powered to

rs,56 who we

premises to i

ruction Indus

r for Employ

setting out st

n to building

tutional corp

t.58

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

Act 2005 (Cth),

nths impriso

up to 30 pen

s in respect o

o refuse to co

or expose th

vidence or d

edings for f

mation or ob

o appoint A

ere, together

investigate, i

stry Improve

yment and W

tandards of b

g work carrie

porations or

s 52(6).

s 53(1).

s 53(2).

s 57.

s 59.

s 27.

onment,52

nalty units

of a body

omply on

hat person

document

failure to

bstructing

Australian

r with the

inter alia,

ement Act

Workplace

behaviour

ed out by

involving

412

Changes

55.

56.

57.

59

M Wilc Industry, M 60 M Wilc Industry, M 61

M Wilc Industry, M 62

M Wilc Industry, M

by the Labo

In 2008 th

Wilcox QC t

Specialist D

Inspectorate

policy positi

abolish the A

Work Austra

The Wilcox

autonomous

Work Ombu

require wit

substantially

addition, the

specific pro

discriminatio

would apply

On 1 July 20

Relations Ac

cox QC, Tran March 2009.

cox QC, Tran March 2009, p

cox QC, Tran March 2009, pp

cox QC, Tran March 2009, p

or Governm

he Labor G

to prepare a

Division for

of Fair Wor

ion of the Au

ABCC and

alia’.

Report reco

Building an

udsman.60 I

tnesses to

y curtailed an

e report reco

ohibitions on

on on the bas

.62

009 the FW A

ct 1996 (Cth

nsition to the

nsition to the 6, recommend

nsition to the p 6-7, recomme

nsition to the 6, recommend

ment

overnment c

report on m

building an

rk Australia.5

ustralian Lab

replace it w

ommended th

nd Constructi

It was also

give eviden

nd subject to

ommended th

n unlawful

sis that the g

Act came int

h). The FW

Fair Work Ac

Fair Work A ation 1.

Fair Work A endations 3-4.

Fair Work A ation 2.

commissione

matters related

nd constructi 59 The report

bor Party at t

with a ‘Specia

hat ABCC be

ion Division

recommende

nce be ret

o a five year

he repeal of

industrial a

general prohib

to effect, rep

W Act amal

ct for the Bu

ct for the Bu

ct for the Bu

ct for the Bu

ed the Hon

d to the crea

ion work w

t was premis

the time whic

alist Divisio

e replaced by

of the Offic

ed that the

tained, thou

ar sunset per

the building

action, coerc

bitions in the

placing the W

lgamated go

ilding and Co

uilding and Co

uilding and Co

uilding and Co

n Murray

ation of a

within the

sed on the

ch was to

on of Fair

y a semi-ce of Fair

power to

ugh very

riod.61 In

g industry

cion and

e FW Act

Workplace

overnment

onstruction

onstruction

onstruction

onstruction

413

58.

59.

60.

63

Building Act 2012 (C 64 Fair Wo

agencies tha

new regulato

Ombudsman

In 2012, the

name of the

(Cth) to the

Act) and ma

The amendm

the Fair Wor

Director of

referred to a

recommenda

autonomous

However, ot

The industr

coercion and

effect was to

industrial ac

industry. Pr

the Building

for these co

were 1,000 p

penalty units

g and Construc Cth).

rk (Building In

at administer

ory bodies: th

n.

e Labor Gov

Building and

Fair Work

aking signific

ments include

rk Building I

the FWBII.

as Fair Wor

ation in the

part of the F

ther recomme

ry specific

d discriminat

o reduce dra

ction, coerci

rior to the ch

g and Constr

ontraventions

penalty units

s (then $22,0

ction Industry

ndustry) Act 20

red the work

he Fair Work

ernment intr

d Constructio

(Building In

cant amendm

ed abolishing

Industry Insp

The FWB

rk Building

Wilcox Rep

Fair Work Om

endations in

prohibitions

tion were rem

amatically the

ion and dis

anges, the m

ruction Indus

s in relation

(then $110,0

000) for indi

Improvement

012 (Cth), s 9.

kplace relati

k Commissio

roduced legis

on Industr y Im

ndustry) Act

ments.

g the ABCC

pectorate (FW

BII is commo

& Construct

port that the

mbudsman w

the Wilcox R

on unlawf

moved from t

e penalties a

scrimination

maximum pen

stry Improve

to building

000) for bod

ividuals. Un

Amendment (T

ions system

on and the F

slation63 chan

Improvement

2012 (Cth)

and replacin

WBII)64 head

only, but in

tion or FWB

e FWBII be

was rejected.

Report were

ful industria

the FW(BI) A

available for

within the

nalties availa

ement Act 20

industry pa

dies corporate

nder the FW

Transition to F

into two

Fair Work

nging the

t Act 2005

(FW(BI)

ng it with

ded by the

ncorrectly,

BC. The

e a semi-

accepted.

al action,

Act. The

unlawful

building

able under

005 (Cth)

articipants

e and 200

W Act, the

Fair Work)

414

61.

62.

65 Fair Wo 66 Fair Wo 67

Fair Wo 68 Fair Wo

maximum p

bodies corpo

Further, the

examination

abrogation

However, un

issued by th

designated

Tribunal, on

out in some

notice must

presidential

obtaining the

and are unsu

Further, ther

operation o

projects.67 F

will cease to

rk (Building In

rk (Building In

rk (Building In

rk (Building In

penalties wer

orate and 60 p

ere was a

powers.

of the priv

nder the FW

he Director o

presidential

n application

detail the gr

not be issue

member is

e information

uccessful, or a

re is an ‘In

of the comp

Finally, ther

exist from 1

ndustry) Act 20

ndustry) Act 20

ndustry) Act 20

ndustry) Act 20

re only 300

penalty units

significant

The penalti

vilege again

W(BI) Act, a

f the FWBII

member o

by the FWB

rounds of th

ed unless the

satisfied, in

n, documents

are inappropr

dependent A

pulsory exa

re is a sunse

1 June 2017 o

012 (Cth), s 45

012 (Cth), s 47

012 (Cth), ss 36

012 (Cth), s 46

penalty unit

s (then $6,600

curtailing

es for non-nst self-incr

an examinati

I. Instead, it

of the Adm

BII supporte

he application

Administrat

nter alia, th

s or evidence

riate.66

Assessor’ wh

amination po

et provision b

onwards.68

.

(1).

6B, 39.

.

ts (then $33

0) for individ

of the co

-compliance

rimination r

ion notice c

t must be iss

ministrative

ed by affidav

n.65 The exa

tive Appeals

hat other me

e have been a

ho can ‘turn

owers for p

by which th

3,000) for

duals.

ompulsory

and the

remained.

cannot be

sued by a

Appeals

vit setting

amination

s Tribunal

ethods of

attempted

n off’ the

particular

he powers

415

The prop

63.

64.

65.

69 Explanat Bill 2013 ( 70

Building 71 Commo November 72

Explana Bill 2013 (

posed return

The presen

Construction

Parliament

Representati

The Building

2013 (Cth) w

Construction

ABCC with

The Building

2013 (Cth)

Construction

definition of

goods to be u

sites (includ

may be perfo

indirect disru

supply of m

pick up the m

tory Memoran (Cth), p 50.

g and Construc

onwealth, Par 2013, p 265 (H

tory Memoran (Cth), p 6, para

n to the ABC

nt Federal

n Industr y (

in Novemb

ives but was r

g and Constr

was intended

n Industry Im

its earlier po

g and Constr

tried to e

n Industry Im

f ‘building w

used in work

ding any reso

ormed.70 Th

uption of ons

materials.71 T

manufacture

ndum, Building

ction Industry (

rliamentary D Hon Christoph

ndum, Building a 12.

CC

Government

(Improvin g P

er 2013.

rejected by th

ruction Indus

d ‘substantial

mprovement A

owers.69

ruction Indus

expand the

mprovement A

work’ to inc

k covered by

ources platfo

he expanded d

shore and off

That expande

of materials.

g and Construc

(Improving Pro

Debates (Hans her Pyne).

g and Construc

introduced

Productivity)

The Bill pa

he Senate on

str y ( Improv

lly [to] replic

Act 2005 (Cth

str y ( Improv

coverage o

Act 2005 (C

clude the tra

the definitio

orm) where

definition wa

ffshore projec

ed definition 72

ction Industry

oductivity) Bill

sard), House

ction Industry

d the Build

) Bill 2013

assed the H

n 17 August 2

ving Product

cate’ the Buil

h) and re-esta

ving Product

of the Build

Cth) by expan

ransport or s

on, directly to

the work is

as designed t

cts by interfe

n was not int

(Improving Pr

l 2013 (Cth), cl

of Represent

(Improving Pr

ding and

(Cth) to

House of

2015.

tivity) Bill

lding and

ablish the

tivity) Bill

ding and

nding the

supply of

o building

being or

to prevent

ering with

tended to

roductivity)

l 6(e).

tatives, 14

roductivity)

416

66.

Office of

67.

68.

73 Building 74 Fair Wo 75

Fair Wo 76 Fair Wo

The Bill als

picketing73

applied in re

participants.

(Improving

below.

f the Fair Wo

Finally, by w

the powers e

Work Buildi

FWBII, have

to ‘building

participants’

Fair Work In

form part of

Fair Work In

of the FW

awards and

Inspectors h

documents.76

comply is s

g and Construc

rk (Building In

rk Act 2009 (C

rk Act 2009 (C

so contained

and restorin

elation to un

Other aspe

Productivity)

ork Ombud

way of backg

exercised by

ing Inspecto

e the same p

matters’, wh

.74

nspectors are

f the Office o

nspectors are

Act and ‘fa

enterprise a

have the pow 6 An indivi

subject to a

ction Industry (

ndustry) Act 20

Cth), s 700.

Cth), s 712; see

d provisions

ng the highe

lawful indus

ects of the Bu

y) Bill 2013

sman and F

ground, it is

Fair Work In

rs, who are

powers as Fa

hich are mat

e appointed b

f the Fair W

e charged wi

air work ins

agreements).

wer to requir

dual who fai

maximum c

(Improving Pro

012 (Cth), s 59

e also s 709(d).

creating an

er penalties

strial activity

uilding and C

(Cth) will

air Work In

useful to bri

nspectors. T

appointed b

air Work Insp

tters involvin

by the Fair W

ork Ombuds

ith investigat

struments’ (f

Among thei

e a person t

ils, without r

civil penalty

oductivity) Bill

C.

offence of

that had p

y by building

Construction

be addresse

nspectors

riefly refer to

The reason is

by the Direct

pectors, albe

ng ‘building

Work Ombud

man.75 Very

ting possible

for example

ir powers, F

to produce r

reasonable e

y of 60 pena

l 2013 (Cth), cl

unlawful

previously

g industry

n Industry

ed further

o some of

s that Fair

tor of the

eit limited

g industry

sman and

y broadly,

breaches

, modern

Fair Work

ecords or

excuse, to

alty units

l 47(2).

417

D - A SE

Introduc

69.

70.

77 Fair Wo 78 Fair Wo 79

Submiss 80 New Sou 81

Boral La 82 Australia

(currently $

civil penalty

excuse that

person or exp

EPARATE,

ction

All federal g

supported th

investigating

participants

section C a

about (a) w

constituted,

significantly

Given that l

somewhat ac

separate, ind

State of Ne

Australian I

rk Act 2009 (C

rk Act 2009 (C

sions of the Go

uth Wales Gov

aw Reform Sub

an Industry Gr

10,800), and

y of 300 pen

production o

pose the pers

INDUSTRY

governments

he existence

g and enfo

in the buildi

above, there

what that bo

(c) what the

y, (d) what its

limited degre

cademic to c

dustry specif

ew South W

ndustry Gro

Cth), ss 539, 54

Cth), s 713(1).

vernment of V

vernment, Polic

bmissions, 201

oup Law Refor

d a body cor

nalty units (c

of the docum

son to penalty

Y SPECIFIC

since 2005, o

of a separa

orcing indus

ing and cons

have been

dy should b

scope of its

s powers shou

ee of politica

onsider the i

fic regulator.

Wales,79 the

oup,82 the Au

46.

Victoria, 28/10/

cy Submission,

5, p 50.

rm Submission

rporate is su

currently $54

ment may ten

y.78

C, REGULA

of both politi

ate body cha

strial laws

struction indu

significant p

be called, (b

s jurisdiction

uld be.

al consensus

issue of whet

. Submissio

State of Vi

ustralian Ch

/14, pp 70-71.

, August 2014,

ns, 21/8/15, pp

ubject to a m

4,000).77 It

nd to incrim

ATOR

ical persuasi

arged with

in connecti

ustries. As s

policy disag

b) how it s

n should be a

s, it might be

ther there sh

ons received

ictoria,80 B o

hamber of C

, pp 6-8.

p 12-13.

maximum

is not an

minate the

ions, have

a role of

ion with

set out in

greements

should be

and, most

e thought

hould be a

from the

oral,81 the

Commerce

418

71.

Submissi

72.

I

83 Australia pp 31-40. 84

Housing 85 Master B 86

Australia Legislation Productivi

and Industry

Australia85 w

specific regu

The ACTU,

issue to the C

to various

Construction

vigorously a

Those submi

ions opposin

The argume

ACTU in

Committee

position that

construction

ACTU made

Industr y ( Im

an Chamber o

g Industry Asso

Builders Austra

an Council of n Committee ty) Bill 2013 (C

y,83 the Housi

were all stron

ulator and the

CFMEU an

Commission

inquiries, pa

n Industry

advocating th

issions are co

ng a separate

ent against a

its submiss

on Educatio

t the imposit

industry is

e the point

mproving Pro

f Commerce a

ociation Pty Ltd

alia Law Refor

Trade Unions, into the B

Cth), 22/11/13

ing Industry A

ngly in favo

e restoration

nd AMWU d

. However,

articularly i

(Improving

he abolition

onsidered bel

e regulator

an industry s

sions to th

on and Emp

tion of spec

both unnece

that, becaus

oductivity) B

and Industry La

d Law Reform

rm Submission

, Submission to Building and , p 4, para 8.

Association8

ur of the ret

of the ABCC

did not make

each has put

n relation t

Productivity

of an indust

low.

specific regu

he Senate S

loyment. T

ial laws affe

essary and d

e the Buildi

Bill 2013 (Ct

aw Reform Su

Submissions,

ns, 21/8/15, p 4

o the Senate E Construction

84 and Master

tention of an

C.

e submission

t forward sub

to the Build

y) Bill 201

try specific r

ulator was pu

Standing Le

The ACTU

ecting worke

discriminator

ing and Con

th) does not

ubmissions, Au

21/8/15, pp 8-45.

Education and E n Industry (

r Builders

n industry

ns on this

bmissions

ding and

13 (Cth),

regulator.

ut by the

egislation

takes the

ers in the

ry.86 The

nstruction

in terms

ugust 2015,

-10.

Economics (Improving

419

j

73.

74.

75.

87 Australia Legislation Productivi 88

Australi Legislation Productivi 89

Australia Legislation Productivi 90

Australi Legislation Productivi

address crim

justified by c

The ACTU’s

There i constru time in had be existen Work A the regu promot

It contended

Act has broa

well-resourc

and impartia

The ACTU f

The A Constru by the activitie of work

an Council of n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

an Council of n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

minal conduc

criminal cond

s submission

is no need for uction industry n Australian hi een legislated

ce of such an i Act 2009 … co ulation of indu ting and securin

d that the Fair

ad investigati

ced agency th

al manner’.89

further subm

BCC, as it e uction Industry aggressive, co es. It focused o

kers and trade

Trade Unions, into the B

Cth), 22/11/13

Trade Unions, into the B

Cth), 22/11/13

Trade Unions, into the B

Cth), 22/11/13

Trade Unions, into the B

Cth), 22/11/13

ct, but rather

duct occurrin

n goes on to s

r a specialist st y. The creatio story that an i into existenc

nspectorate is onstitutes an ad ustrial relations ng compliance

r Work Omb

ive powers an

hat has carrie

itted:90

existed under y Improvemen oercive and bia overwhelmingl

e unions, thus

, Submission to Building and , p 4, para 10.

, Submission t Building and , p 5, para 11.

, Submission to Building and , p 5, para 11.

, Submission t Building and , p 5, para 12.

r industrial a

ng within the

state:88

tatutory regula on of the ABC industry-specif ce by the Fe

undesirable an dequate and ap s in Australia, e with industria

budsman esta

nd ‘has prov

ed out its fun

the former B t Act 2005 (C ased manner in ly on the inves

failing in its

o the Senate E Construction

o the Senate E Construction

o the Senate E Construction

o the Senate E Construction

activity, it c

industry.87

ator for the bu CC in 2005 wa fic industrial in ederal Parliam

nd unnecessary ppropriate fram including with al laws.

ablished unde

ven to be an a

nctions in an

BCII Act [Bu Cth)], distingui n which it carr stigation and p

primary oblig

Education and E n Industry (

Education and E n Industry (

Education and E n Industry (

Education and E n Industry (

cannot be

uilding and as the first nspectorate ment. The

y. The Fair mework for h respect to

er the FW

active and

n effective

ilding and ished itself ried out its prosecution gation as a

Economics (Improving

Economics (Improving

Economics (Improving

Economics (Improving

420

76.

77.

91 Australia Legislation Productivi 92

Austraila Infrastructu 93 Australia into the W

regulato signific underpa health a

The ACTU

existence o

construction

would impro

the Productiv

submitted th

increased sin

may be mor

ABCC’s coe

proposition t

A further lim

of maintainin

same legisla

into the Wor

Anothe fact tha enforcin the FW defined FWO.

an Council of n Committee ty) Bill 2013 (C

an Council of ure Inquiry, p 2

an Council of orkplace Relat

or to enforce cant and wide ayment or non and safety issu

also argued

of the ABC

industry nor

ove productiv

vity Commis

hat the rate of

nce the abolit

re directed t

ercive power

that a dedicat

mb of the AC

ng two separ

tion. It subm

rkplace Relat

er and perhaps at there are tw ng one set of i WBC is confine

d, its statutory

Trade Unions, into the B

Cth), 22/11/13

Trade Unions 22.

Trade Unions, tions Framewo

the law impar spread issues n-payment of es or sham con

that there w

CC led to

r was there an

vity.91 Relat

ssion Public

f industrial d

tion of the A

towards the

rs, they also

ted regulator

CTU’s oppo

rate regulator

mitted to the

tions Framew

more glaring wo separate and industrial laws ed in its role t

mandate is in

, Submission to Building and , p 5, para 13.

, Submission t

, Submission to rk, p 348.

rtially. It did v in the buildin wages and en ntracting.

was no credi

improved

ny evidence

ted to this po

Infrastructur

isputation do

BCC. 92 Wh

argument ag

appear to be

r has not achi

sition related

rs administer

Productivity

work that:93

issue of ineff d separately fu - the FWO an to laws applyin

virtually iden

o the Senate E Construction

to the Producti

o the Productiv

very little to a ng industry su ntitlements, oc

ible evidence

productivity

that its reintr

oint, in subm

re Inquiry, th

oes not appea

hilst these sub

gainst ‘resto

e directed tow

ieved results.

d to the inef

ring and enfo

y Commissio

ficiency and w unded, statutor nd the FWBC. ng to ‘building ntical terms to

Education and E n Industry (

ivity Commiss

vity Commissi

address the uch as the ccupational

e that the

y in the

roduction

missions to

he ACTU

ar to have

bmissions

oring’ the

wards the

.

fficiencies

orcing the

on Inquiry

waste is the ry agencies Although g work’ as

that of the

Economics (Improving

sion Public

ion Inquiry

421

78.

79.

94 Australia into the W 95

CFMEU the Buildin pp 1-2, par

The ACTU a

the FW ‘the enf the pro relation instrum perform carry ou to secu respons allowin more co

The con and ine constru capacity constru be disb

The CFMEU

on Educatio

before the l

building in

participants

statistical an

an Council of orkplace Relat

U, Submission t ng and Constru ras 1.6-1.7.

also contende

WBC has made forcement of th otection of wo n to the enfor ments, the FWB

m and has done ut this work... ure and enfo sibility to the F ng the FWO to

ompelling.

ntinued existen efficiency. Th uction industry y, powers and uction industry

anded and its o

U submitted t

on and Emp

law demand

dustry and

of that indu

nalysis of th

Trade Unions, tions Framewo

to the Senate E uction Industry

ed that:94

a policy deci he legal provis orkers while e rcement of em

BC has outsou e that on the ba The effect of t orce employee

FWO makes th o function as th

nce of the FWB ere is no reaso y. Nor is the

d resources to along with ev operation absor

to the Senate

ployment tha

that there b

no accom

ustry.95 The

he ABCC’s

, Submission to rk, pp 348-350

Education and y (Improving P

sion not to per sions relating to engaged in the mployee entitl urced this respo

asis that the FW this ‘policy’ de e entitlements he case for dis he sole federal

BC amounts to on for a secon ere any doubt o carry out al very other indu

rbed into the F

e Standing L

at principles

be no separ

mpanying law

e CFMEU a

investigatio

o the Productiv 0.

Economics Le Productivity) B

rform that role o conditions o eir work’]...

lements under onsibility to th WO is better e ecision by the s but to abd

sbanding the F labour inspect

o unnecessary d nd agency to ex t that the FW ll of its funct

ustry. The FW FWO.

Legislation C

s of equal

rate regulato

ws directed

also submitte

ons and pro

vity Commissi

egislation Com Bill 2013 (Cth)

e [securing f work and Instead, in r industrial he FWO to equipped to

FWBC not dicate that FWBC and torate even

duplication xist for the WO has the tion in the

WBC should

Committee

treatment

or for the

d at the

ed that a

osecutions

ion Inquiry

mmittee into ), 22/11/13,

422

80.

96 CFMEU the Buildin pp 7-8, par 97

CFMEU the Buildin p 7, para 4 98

CFMEU the Buildin p 7, paras 4 99

CFMEU the Buildin p 8, paras 4 100

CFMEU the Buildin p 19, para

revealed it to

stated:97

The fac concern was no direct th

The CFMEU

CFMEU refe

Court appare

its investigat

specific insp

‘abandoned

are establish

the workplac

U, Submission t ng and Constru ras 4.1-4.2, 4.7

U, Submission t ng and Constru .3.

U, Submission t ng and Constru 4.8-4.9 and p 1

U, Submission t ng and Constru 4.10-4.11.

U, Submission ng and Constru 9.2.

o be biased a

ct that the ov ned the alleged t accidental. I heir resources

U also asser

ferred to one

ently critical

tions.99 It ch

pectorate as

the fundame

hed - the pro

ce.’100

to the Senate E uction Industry 7-4.8.

to the Senate E uction Industry

to the Senate E uction Industry 10, para 4.17.

to the Senate E uction Industry

to the Senate E uction Industry

against the co

erwhelming m d conduct of tr It was the resu toward union-r

rted bias on

decision of

of the mann

haracterised

s ‘the conti

ental purpos

otection and e

Education and y (Improving P

Education and y (Improving P

Education and y (Improving P

Education and y (Improving P

Education and y (Improving P

onduct of uni

majority of the rade unions or ult of a policy d related matters

n the part of

the AIRC an

ner in which

the reintrodu

inuation of

se for which

enforcement

Economics Le Productivity) B

Economics Le Productivity) B

Economics Le Productivity) B

Economics Le Productivity) B

Economics Le Productivity) B

ions and wor

e ABCC’s inv r union membe decision of the s.

f the FWBI

nd one of th

the ABCC u

uction of an

flawed pol

h labour insp

t of workers’

egislation Com Bill 2013 (Cth)

egislation Com Bill 2013 (Cth)

egislation Com Bill 2013 (Cth)

egislation Com Bill 2013 (Cth)

egislation Com Bill 2013 (Cth)

rkers.96 It

vestigations ers/workers e ABCC to

II.98 The

he Federal

undertook

industry-licy’ that

pectorates

’ rights in

mmittee into ), 22/11/13,

mmittee into ), 22/11/13,

mmittee into ), 22/11/13,

mmittee into ), 22/11/13,

mmittee into ), 22/11/13,

423

81.

Consider

82.

Need

83.

84.

101 AMWU the Buildin 2013, p 7,

The AMWU

ration

The main ar

these. Firs

Secondly, th

regulator. T

unions and u

industry spe

below.

One conside

regulator is t

demonstrated

entrenched d

the country’

Given the h

construction

enforcing the

The suggest

be justified

misplaced in

U, Submission ng and Constru paras 29-35.

U made subm

rguments aga

st, there is

here are ine

Thirdly , theA

union officia

ecific regula

eration which

the high leve

d by Appen

disregard for

’s largest co

high level o

sector, it is d

e law within

ion that the

by crimina

n a number o

to the Senate E uction Industry

issions simil

ainst an indu

no need for

efficiencies

ABCC was,

als. Fourthly

ator. Each o

h supports t

el of unlawfu

ndix A to th

r both indust

onstruction u

of unlawful

desirable to h

that sector.

need for spe

al conduct o

of respects. I

Education and y (Improving P

ar to those of

ustry specific

r an industr

in having

and the FW

ly, it is discr

of these arg

the need for

ul conduct in

his Chapter.

trial and crim

union furthe

activity with

have a regula

ecific industr

occurring wi

It ignores the

Economics Le Productivity) Bi

f the CFMEU

c regulator se

ry specific r

an industry

WBII is, biase

riminatory to

guments is a

r an industry

n the industry

The susta

minal laws s

er supports t

hin the buil

ator tasked so

rial regulatio

ithin the in

e fact that a

egislation Com ill 2013 (Cth),

U.101

eem to be

regulator.

y specific

ed against

o have an

addressed

y specific

y. This is

ained and

shown by

the need.

lding and

olely with

on cannot

ndustry is

lot of the

mmittee into November

424

85.

86.

87.

102 M Wil Industry, M 103

Australi Legislation Productivi

criminal con

arises in the

occurs in th

constitutes

contraventio

laws. It also

assist police

criminal acti

Another mat

is that it led

that would

industry spec

Various eco

Econtech, ha

introduction

increased a

However, a

Wilcox Rep

including the

The various

Productivity

lcox QC, Tran March 2009, p

ian Council of n Committee ty) Bill 2013 (C

nduct for wh

e context of

he course of

a criminal

ns of industr

o ignores the

, through ref

ivity within th

tter that is of

to productivi

be a signifi

cific regulato

onomic repo

ave been adv

of the Build

aggregate p

2007 version

port102 and l

e ACTU.103

s claims an

Commission

nsition to the 46.

f Trade Unions into the B

Cth), 22/11/13

ich unions a

breaches of

f contravenin

contempt o

rial laws) and

e ability of a

ferrals and in

he industry.

ften advanced

ity improvem

ficant matter

or.

orts by Inde

vanced in su

ding Industry

productivity

n of those rep

later reports

nd counter c

n Public Infr

Fair Work A

s, Submission t Building and , pp 5-14.

and union off

industrial la

ng industrial

f orders of

d out of a cul

a dedicated i

nformation sh

d for the rest

ments. If that

supporting

ependent Ec

upport of the

y Taskforce

in the co

ports was he

have been

claims were

rastructure in

Act for the Bu

to the Senate E Construction

ficials are re

aws (either b

l laws, or b

f a court re

lture of defia

industrial reg

haring, in co

toration of th

t could be est

the existen

conomics, p

e proposition

and the ABC

onstruction

eavily criticis

criticised b

e considered

nquiry report

uilding and Co

Education and E n Industry (

esponsible

because it

because it

estraining

ance of all

gulator to

ombatting

he ABCC

tablished,

nce of an

previously

n that the

CC led to

industry.

sed in the

by others,

d by the

t which is

onstruction

Economics (Improving

425

88.

89.

90.

104 Produc Vol 2, pp 4 105

Produc Vol 2, pp 5 106

Produc Vol 2, p 53 107

Produc Vol 2, p 53 108

Produc Vol 2, p 53 109

Produc Vol 2, pp 5

the most com

topic at the t

One measu

Commission

working day

Relevantly

concluded, h

industry ove

to the opera

balance, it is

report also n

of [FWBII],

this’.108

The report a

was a cons

disputation w

confirmed by

ctivity Commis 498-551 and ap

ctivity Commis 535-541.

ctivity Commis 37.

ctivity Commis 38.

ctivity Commis 38.

ctivity Commis 536-537.

mprehensive

time of writin

ure of pro

n was Austral

ys lost due to

for present

having regard

er time that ‘a

ations of the

s likely that t

noted that day

, although ag

lso noted tha

iderably hig

within the co

y the Austra

ssion Inquiry ppendix 1.

ssion Inquiry

ssion Inquiry

ssion Inquiry

ssion Inquiry

ssion Inquiry

analysis ava

ng.104

ductivity co

lian Bureau o

industrial ac

t purposes,

d to the days

a direct conn

e ABCC app

the ABCC re

ys lost ‘nearl

gain one-off

at compared w

gher number

onstruction in

alian Bureau

into Public In

into Public In

into Public In

into Public In

into Public In

into Public In

ailable to the

onsidered b

of Statistics d

ction per 1,00

the Produ

s lost measur

nection of low

pears highly

educed indust

ly doubled a

f events may

with all indu

r of days lo

ndustry.109 T

of Statistics

nfrastructure, I

nfrastructure, I

nfrastructure, I

nfrastructure, I

nfrastructure, I

nfrastructure, I

e Commissio

by the Pro

data on the n

00 workers.10

uctivity Com

re for the con

wer industria

plausible’106

trial disputes

after the estab

y have contr

ustries genera

ost due to

Those figures

data present

Inquiry Repor

Inquiry Repor

Inquiry Repor

Inquiry Repor

Inquiry Repor

Inquiry Repor

on on this

oductivity

number of 05

mmission

nstruction

al disputes 6 and ‘on

s’.107 The

blishment

ributed to

ally, there

industrial

s are also

ted in the

rt, 27/5/14,

rt, 27/5/14,

rt, 27/5/14,

rt, 27/5/14,

rt, 27/5/14,

rt, 27/5/14,

426

91.

110 Produc Report, Au 111

Produc Vol 2, p 53 112

Produc Vol 2, p 53 113

See Pro Vol 2, pp Framework

Productivity

Relations F

construction

industrial ac

highest num

Productivity

that the num

substantially

1990s,111 and

Bureau of S

the apparent

However, th

capture the f

of reasons in

the (a)

incl

par

dist

acti

ctivity Commi ugust 2015, pp

ctivity Commis 35.

ctivity Commis 36.

oductivity Com 538-544; Pr k, Draft Repor

Commissio

Framework,

industry ha

tion of any i

mber, being

Commissio

mber of indus

y declined s

d further tha

tatistics, ‘set

economic im

e report also

full costs to b

ncluding:113

data from

lude industr

rtial work b

tinguish bet

ion);

ission Inquiry 661 and 665.

ssion Inquiry

ssion Inquiry

mmission Inquir roductivity Co rt, August 2015

on’s draft re

which show

d the highes

industry, and

second to

n did note i

strial dispute

ince the ver

at on the basi

t against the

mpacts of ind

noted that th

businesses fro

the Australia

rial actions

bans or se

tween prote

y into the Wo

into Public In

into Public In

ry into Public ommission In 5, pp 666-670.

eport concer

ws that fro

st average nu

d from 2010-

coal mining

in its Public

es in the con

ry high rate

is of the data

size of the c

dustrial dispu

he days lost m

om industria

an Bureau o

such as wo

condary bo

cted and u

orkplace Relat

nfrastructure, I

nfrastructure, I

Infrastructure, quiry into th

rning the W

om 2001-2

umber of day

-2014 had th

g.110 How

c Infrastructu

struction ind

es of the 19

a from the A

construction

utes are very l

measure is un

al activity for

of Statistics

ork-to-rule, g

ycotts (nor

unprotected

tions Framew

Inquiry Repor

Inquiry Repor

Inquiry Repor he Workplace

Workplace

2013, the

ys lost to

he second

ever, the

ure report

dustry has

970s and

Australian

industry,

low’.112

unlikely to

r a variety

does not

go-slows,

does it

industrial

work, Draft

rt, 27/5/14,

rt, 27/5/14,

rt, 27/5/14, Relations

427

92.

114 Produc Vol 2, p 54

the (b)

wor

stop

sma

wor

the (c)

the

wh

a su

thre (d)

stat

and

mu (e)

con

In terms o

productivity

follows:114

[N]otw and the to whic improv matter.

The Co and oth

ctivity Commis 43.

data only in

rking days

ppages amon

all number o

rk on a proje

cost of indu

working da

ere a short de

ubstantial pro

eats of actio

tistics yet th

d

uch of the

nstruction, is

f the claim

gains, the Pr

withstanding th e ABCC had n ch their impac vements in agg

ommission’s v her micro evid

ssion Inquiry

ncludes a dis

lost, the res

ng large wor

of employee

ect) might not

ustrial action

ays lost, pa

elay in relati

oductivity eff

n and aborte

hey may hav

construction

not affected

ms concernin

roductivity C

e likelihood th net positive pro cts did, or eve gregate constru

view is that giv dence, there is

into Public In

spute if it am

sult being th

rkforces, or l

es (not causi

t be counted

is not necess

articularly on

on to a time

ffect on the w

ed action are

ve a substant

n industry, p

by industrial

ng economi

Commission’

hat the [Build oductivity and en reasonably uction industry

ven the case s s no doubt tha

nfrastructure, I

mounts to 10

hat some br

longer stoppa

ing a stoppa

in the data;

sarily propor

n a construc

critical step

whole site;

e not reflect

tial productiv

particularly

l action.

ic modelling

s conclusion

ding Industry cost impacts, could, show u y productivity

studies, indust at local produ

Inquiry Repor

0 or more

rief work

ages by a

age of all

rtionate to

ction site

will have

ted in the

vity cost;

dwelling

g of the

ns were as

Taskforce] the degree up as large is another

try surveys uctivity has

rt, 27/5/14,

428

93.

94.

95.

115 Produc Vol 2, p 54 116

Produc Vol 2, p 49

been ad some b likely meticul Econom Industry constru materia regime

This is its natu arrange shaping datasets

The report w

the non-dw

extremely p

aggregate pr

The overall

summarised

[T]he m Buildin parts of entire in

These findin

on industria

industry regu

and survey r

ctivity Commis 44.

ctivity Commis 95.

dversely affect building sites, to have imp lously, the

mics] and other y Taskforce]/A uction product al aggregate ef

did not have a

neither surpris ure, it is hard ements, includ g workplace p

s and statistica

went on to ex

welling build

ositive outco

roductivity n

findings of

in this way:1

more stringent ng Industry Tas f the industry, ndustry.

ngs, particula

l disputes, s

ulator on pro

esults consid

ssion Inquiry

ssion Inquiry

ted by union and that the [B proved outco quantitative rs do not provi

ABCC regime ivity or that ffects. Indeed a large aggrega

sing, nor inimi d to isolate n ding industrial productivity, e al noise.

xplain how a

ding sector

ome’ - wou

umbers.115

f the report 116

IR regime com skforce … is li but these effec

arly those in r

support the c

oductivity gro

dered in the W

into Public In

into Public In

(and associate Building Indus omes. Howe results prov

ide credible ev e created a r

the removal d, the availabl ate impact.

ical to the need numerically th relations, fro especially give

a 5% product

- what wa

uld be nearly

in relation

mmencing with ikely to have in cts cannot be r

relation to th

continued ex

ounds. So, to

Wilcox Repor

nfrastructure, I

nfrastructure, I

ed employer) c stry Taskforce ever, when ided by [In

vidence that the resurgence in of the ABCC le date sugges

d for further re he effects of om all the oth en small and

tivity improv

as described

y indiscernib

to productiv

h the establishm ncreased produ robustly identif

he effect of th

xistence of a

oo, do the cas

rt:

Inquiry Repor

Inquiry Repor

conduct on e]/ABCC is scrutinised ndependent

e [Building aggregate C has had

sts that the

eform. By workplace her factors inadequate

vement in

d as ‘an

ble in the

vity were

ment of the uctivity for fied for the

he ABCC

a separate

se studies

rt, 27/5/14,

rt, 27/5/14,

429

96.

117 Grocon working d working d Project ove days or mo man hours M Wilcox March 200 118

M Wil Industry, M 119

M Wil Industry, M

Com (a)

Ene

und

Con

sho

disp

Sur (b)

the

par

ind

of t

200

an

an

beh

by

Moreover, th

imposing blo

n compared th days lost to ind days lost to in er 2001-2004 (

ore, 10 AIRC a lost due to ind QC, Transitio 09, pp 48-49, p

lcox QC, Tran March 2009, pp

lcox QC, Tran March 2009, p

mparisons pu

ergy Limited

dertaken bef

nstruction In

owed a mark

putation.117

rvey results

perception

rticipants we

dustrial harmo

the Building

05 (Cth), that

industry wat

industry mo

have suitably

those with w

he logic of e

ockades and

he QV Projec dustrial disput ndustrial dispu (254,460 man

applications) a dustrial action, on to the Fair W ara 5.62.

nsition to the p 49-54.

nsition to the 54.

ut forward b

d, both of

fore the com

ndustry Impro

ked reductio

obtained by

ns of a s

ere that the

ony and prod

g and Constr

t this was in p

tchdog, and t

onitor to ens

y,118 which ac

whom Mr Wil

events indica

d work stopp

ct in central ation) and the tation), and W hours lost due and the LNG T

3 stoppages of Work Act for th

Fair Work A

Fair Work A

by Grocon Pt

which comp

mmencement

ovement Act

on in lost tim

an employe

ignificant n

ere had bee

ductivity sinc

ruction Indus

part attributa

that it was im

sure that wo

ccorded with

lcox had con

ates that the

pages has a n

Melbourne ov e AXA project Woodside com e to industrial a

Train 5 project f 2 days or mor he Building an

Act for the Bu

Act for the Bu

ty Ltd and W

pared major

of the Buil

2005 (Cth)

me due to

er body indic

number of

en improvem

ce the comm

stry Improve

able to the pr

mportant that

orkers and e

h the views e

nsulted anecd

conduct of u

negative infl

ver 1999-2002 t over 2005-20 mpared the LN action, 17 stop

over 2005-20 re, 4 AIRC app nd Constructio

uilding and Co

uilding and Co

Woodside

r projects

lding and

and after,

industrial

cated that

industry

ments in

encement

ement Act

resence of

t there be

employers

expressed

dotally.119

unions in

luence on

2 (86/1156 007 (1/556 NG Train 4 ppages of 2

08 (27,424 plications): n Industry,

onstruction

onstruction

430

97.

120 See Vol 121 Produc Vol 2, p 53 122

Produc Vol 2, p 53

productivity

blocks suppl

work on the

schedule. T

delay and d

money, for

relatively sm

The costs as

may also be

period of a

with the cou

productivity

industry, is o

the commerc

work opport

agree to term

economically

no effect on

bottom line,

Having regar

no need for a

l 3, ch 6.3, para

ctivity Commis 39.

ctivity Commis 38.

. When a un

ly of goods

e site is not

The Commis

disruption on

example, d

mall project c

ssociated wi

e high.121 On

single day o

urse of condu

for individu

obvious. Mo

cial reputatio

tunities. In t

ms and condi

y efficient is

n the produc

there would

rd to all of th

an industry sp

a 152.

ssion Inquiry

ssion Inquiry

nion official c

or delivery

done in ac

ssion heard e

n building si

disruption of

can cost in th

th accelerati

nce such occ

or several da

uct that the un

ual projects,

oreover, delay

on of the con

that context,

itions in ente

s high.122 In

ctivity of a b

be little poin

he available m

pecific regul

into Public In

into Public In

causes emplo

of services t

cordance wi

evidence of

ites can cost

f a simple

he vicinity o

ion of works

casions (shou

ays) are mul

nions have a

and the build

ys are likely

ntractor, with

the pressure

rprise agreem

ndeed, if ind

building proj

nt in the unio

material, the

ator cannot b

nfrastructure, I

nfrastructure, I

oyees to stop

to a construc

ith the proje

the means b

t the project

concrete po

of $10,000-$1

s to overcom

uld they occ

ltiplied in ac

adopted, the i

ding and con

to result in d

h an impact

e on the con

ments that m

dustrial disrup

ject and the

ons engaging

argument tha

be sustained.

Inquiry Repor

Inquiry Repor

p work, or

ction site,

ect works

by which

t a lot of

our on a

15,000.120

me delays

cur over a

ccordance

impact on

nstruction

damage to

on future

ntractor to

may not be

ption had

erefore its

in it.

at there is

rt, 27/5/14,

rt, 27/5/14,

431

Efficiency

98.

99.

100.

101.

102.

y

The ACTU’

regulator lea

There is no

functions con

Further, a s

substantial e

though not p

squads addr

expertise is l

Moreover, h

separate fro

financial and

construction

objectives.

funds if there

Finally, a w

dispute resol

Wilcox inqu

’s contention

ads to ineffici

suggestion t

ncurrently w

separate ind

expertise and

perfect, analo

ressing diffe

likely to enco

having a build

om the Offi

d operational

industry

It also promo

e is a separat

well-resource

lution and en

uiry was to t

n that the e

iencies is also

that the Fair

with the FWB

dustry specif

familiarity w

ogue is the s

erent areas o

ourage efficie

ding and con

ice of the F

l independen

regulator’s

otes transpar

te body devo

ed separate

nforcement ou

the effect tha

existence of

o unsustainab

r Work Omb

II.

fic regulator

with the indu

separation of

of criminal

ency.

nstruction ind

Fair Work

nce in relatio

investigatio

rency and ac

ted to a parti

regulator ca

utcomes. Th

at during the

an industry

ble.

budsman exe

r is likely t

ustry. An app

f the police f

conduct. S

dustry regulat

Ombudsman

on to the buil

on and enf

ccountability

icular sector.

an assist in

he evidence b

e time of th

y specific

ercises its

to obtain

propriate,

force into

Specialist

tor that is

n ensures

lding and

forcement

of public

efficient

before the

e ABCC,

432

Bias

103.

104.

105.

123 Product Vol 2, p

Constructi 124 CFMEU the Buildin pp 7-8; AM into the B November 125

Lovewe

inspectors co

and the dispu

The third is

FWBII is, bi

The material

stat (a)

Com

of t

stat (b)

the

The first cat

upon was m

two other c

tivity Commis 550; M Wilc on Industry, M

U, Submission ng and Constru MWU, Submis Building and C

2013, paras 29

ell v O’Carroll

ould attend s

ute would be

sue that has

iased in its en

l said to supp

tements by m

mmission an

the way the A

tistics showin

ABCC again

tegory of ma

ade in an ex

ases relied u

ssion Inquiry R ox QC, Trans March 2009, p 1

to the Senate E uction Industry sion to the Sen Construction I 9-35.

(Spender ACJ

ites within an

e resolved soo

been raised

nforcement o

port this cont

members of t

nd judges wh

ABCC condu

ng that more

nst unions th

aterial is ver

tempore, an

upon, the A

Report: Public sition to the F 14, para 3.24.

Education and y (Improving P nate Education Industry (Impr

J, QUD 427/20

n hour of not

on thereafter

d is that the

of industrial l

ention consis

the Australia

hich are said

ucted proceed

proceedings

an against em

ry slight. O

d unpublishe

ABCC was su

c Infrastructure Fair Work Ac

Economics Le Productivity) B and Economic roving Produc

07, transcript,

tification of a

.123

ABCC was

laws against u

sts of:124

an Industrial

to be heavil

dings; and

s were comm

mployers.

One observati

ed, decision.1

uccessful or

e, No 71, 27 M ct for the Bu

egislation Com Bill 2013 (Cth) cs Legislation C ctivity) Bill 2

8 October 200

a dispute,

s, and the

unions.

Relations

ly critical

menced by

ion relied 125 In the

r partially

May 2014, uilding and

mmittee into ), 22/11/13, Committee 013 (Cth),

08).

433

106.

107.

Discrimin

108.

126 Re Mar [2008] FCA

successful.12

the existence

The second c

ABCC comm

does not esta

of the publis

a high level o

is suggestive

In any even

building indu

The Commo

relation to th

the Common

of the ABC

(Improvin g P

the independ

of the Ombu

available tha

nation

The final iss

building and

to this argum

‘the unequal

rtino [2007] AI A 1804.

26

None of th

e of an anti-u

category of m

menced mor

ablish that th

shed annual r

of success of

e of proceedin

nt, concerns

ustry regulat

onwealth Om

he investigati

nwealth Omb

CC’s powers

Productivity)

dence of the

udsman could

at would sugg

sue is an argu

d construction

ment is that

l treatment o

IRC 717; Duffy

he statement

union bias on

material is al

re proceeding

he ABCC wa

reports of the

f proceedings

ngs being bro

about the c

tor can be ad

mbudsman h

ive powers of

budsman hav

in the Bui

) Bill 2013 (

regulator in

d be expande

gest that this

ument that h

n industry is

the essence

of equals’, bu

fy v Constructio

ts comes even

n the part of th

so unpersuas

gs against un

as in fact bia

e ABCC and

s brought by

ought with a

conduct and

ddressed by in

has an expre

f the FWBII.

ve a role in ov

ilding and C

(Cth). If the

other respec

ed. There is

is necessary

having a sepa

discriminato

of discrimin

ut also ‘in th

on, Forestry, M

n close to est

he ABCC.

sive. The fac

nions than e

ased. A cons

d the FWBII

both regulat

proper basis

independenc

ndependent o

ess oversigh

. It was prop

verseeing the

Construction

ere is a conce

cts, the over

no material

.

arate regulato

ory. The sho

nation lies no

he equal trea

Mining and Ene

tablishing

ct that the

employers

sideration

discloses

tors. That

s.

ce of the

oversight.

ht role in

posed that

e exercise

Industry

ern about

sight role

presently

or for the

ort answer

ot only in

atment of

ergy Union

434

Conclusi

109.

110.

111.

127 See, eg,

those who a

outcome is

treatment of

of the fina

specialised l

professions

manner in w

demonstrate

case of the

special treatm

ions

For the reas

separate ind

industry. T

independent

Work Ombu

Apart from

discussed in

briefly be tou

The first issu

issue. The

incorrectly

somewhat c

, Austin v Com

are not equa

not the prod

f a particular

ancial servic

laws and the

are, likewise

which their

in detail the

building and

ment have alr

ons above, i

dustry-specifi

The reasons

regulator, an

udsman.

the large qu

n the followi

uched upon.

ue is the nam

current situ

referred to

confusing, an

monwealth (20

als’ where th

duct of a rel

industry is n

ces industry

supervision

e, subject to

work is und

e public inter

d constructio

ready been a

it is recomm

ic regulator f

advanced a

nd not simpl

uestion about

ing section,

me of the reg

uation wher

as Fair Wo

nd wrongly

003) 215 CLR

he different

levant distin

not a novel co

y, for exam

of a speciali

specialised

dertaken. It

rest in that st

on industry,

advanced.

mended that th

for the build

also support

ly as part of

t the regulat

there are tw

ulator. This

re the FWB

ork Building

suggests to

185 at [118].

treatment or

nction.127 Sp

oncept: differ

mple, are su

ised regulato

laws that go

t is not nec

tate of affair

the justifica

here continu

ding and con

t its retentio

the Office o

tor’s powers

wo issues tha

is largely a

BII is comm

g & Constr

o the public

r unequal

pecialised

rent areas

ubject to

or. Many

overn the

cessary to

rs. In the

ations for

ue to be a

nstruction

on as an

of the Fair

which is

at should

symbolic

monly but

ruction is

and the

435

112.

Recomm

There sh

separate

investigat

industrial

128 See Fai

industry tha

Commission

be referred to

The second

largely on t

Currently, th

otherwise co

including th

Building and

(Cth) propos

supplying of

circumstance

would ensur

supply of m

of disrupting

that ‘buildin

materials, oth

mendation 61

hould continu

from the O

ting and enf

l laws in conn

ir Work (Buildi

at the regu

n. For the pu

o as the ‘buil

issue is the

the definition

hat definitio

overs the w

he constructi

d Constructio

sed to expand

f goods dire

es that affect

re that the re

materials to a

g work on th

ng work’ doe

her than on-s

1

ue to be a b

Office of the

forcing the F

nection with

ing Industry) A

ulator is co

rposes of thi

lding and con

e regulator’s

n of ‘buildin

on excludes

whole of civ

ion of infra

on Industr y (I

d that definit

ectly to build

ted Boral, th

egulator can

building pro

he site. The

es not includ

site.

building and

e Fair Work

Fair Work A

building ind

Act 2012 (Cth),

onnected w

s Report, the

nstruction ind

jurisdictiona

ng work’ in

domestic or

vil and comm

structure. A

(Improvin g P

tion to includ

ding sites. H

his seems a s

deal with at

oject which w

legislation s

de the manu

d constructio

k Ombudsma

Act 2009 (Cth

dustry particip

, s 5.

with the Fa

e regulator w

dustry regula

al scope. T

the FW (B

r home buil

mmercial con

As noted ab

Productivity)

de the transp

Having rega

sensible exte

ttempts to di

would have t

should explic

ufacturing of

on industry r

an, with the

h) and other

pants.

air Work

will simply

ator’.

That turns

I) Act.128

ding, but

nstruction,

bove, the

Bill 2013

porting or

ard to the

ension. It

isrupt the

the effect

citly state

f building

regulator,

e role of

r relevant

436

E - COM

GATHER

Introduc

113.

114.

115.

116.

MPULSORY

RING POW

ction

The second

gathering po

and construc

The powers

Construction

amounted to

to require a

between the

powers prop

(Improvin g P

56 above.

The questio

necessary, w

safeguards a

Concerns ex

incrimination

under the Ad

the decision

coercive po

contraventio

Y INVES

WERS

of the key

owers should

ction industry

s proposed

n Industry

o an entitlem

a person to

e existing po

posed unde

Productivity)

ons that ari

whether they

against misus

pressed inclu

n in respect o

dministrative

n to issue an

owers in re

ns.

STIGATORY

issues is wh

be capable o

y regulator.

for the A

(Improving

ent to requir

answer ques

owers of the

r the Build

) Bill 2013 a

ise are whe

are excessiv

e.

ude the abrog

of examinatio

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n examinatio

espect of w

Y AND

hat investiga

of being exer

ABCC under

Productivity

re the produc

stions on oa

e Director of

ding and C

are summaris

ether the p

ve, and wheth

gation of the

ons, the abse

Judicial Revi

on notice, an

what are a

INFORM

atory and inf

rcised by the

r the Build

ty) Bill 20

ction of docu

ath. The di

f the FWBII

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sed in paragr

proposed pow

her there are

privilege aga

ence of judici

iew) Act 1977

nd the appli

almost entir

MATION

formation

e building

ding and

13 (Cth)

uments or

ifferences

I and the

Industry

raphs 55-

wers are

adequate

ainst self-ial review

7 (Cth) of

ication of

rely civil

437

Compuls

117.

Australia

118.

sory examin

In order to

context, it

empowering

gathering po

an Securities

Sections 19

2001 (Cth) p

19

(1)

(2)

30

(1)

ation power

place the va

is convenie

g other regu

owers.

and Investme

and 30 of t

provide as fol

Notice requ

This section suspects or b a matter th Division 1.

ASIC may, person, requ

(a) to g

wit

(b) to a

exa

Notice to p registered s

ASIC may g

(a) a b

or

(b) an e

rs of other re

arious subm

ent to set

ulators to ex

ents Commis

the Australia

llows:

uiring appeara

n applies wh believes that a hat it is inves

by written not uire the person:

give to ASIC th the investiga

appear before a amination on o

roduce books cheme

give to:

ody corporate

eligible person

egulators

issions ident

out some a

xercise com

ssion

an Securities

ance for exami

here ASIC, o person can giv stigating, or i

tice in the pres

all reasonable ation; and

a specified mem oath and to answ

s about affair

that is not an

n in relation to

tified below

analogous p

mpulsory info

and Investm

ination

on reasonable ve information is to investig

scribed form g

assistance in

mber or staff m wer questions.

rs of body cor

exempt public

such a body co

w in some

provisions

ormation-

ments Act

e grounds, relevant to gate, under

given to the

connection

member for

rporate or

c authority;

orporate;

438

119.

120.

I

129 Australi 130 Australi 131

Australi 132 Austra Securities a 133

Australi

Failure to co

offence car

imprisonmen

The power to

Investments

documents, m

Investments

have been a

information

contraventio

examination

representativ

privilege ag

requirement

may before

with the con

against the

penalty, othe

record.133

ian Securities a

ian Securities a

ian Securities a

lian Securities and Investmen

ian Securities a

a written noti staff member relating to aff

omply with r

rrying pena

nt for two ye

o issue a not

Act 2001 (

may only be

Commission

a contraventio

relevant

n.130 There

,131 but an A

ves from the

ainst self-inc

to produce a

giving an an

nsequence th

person in

er than a proc

and Investmen

and Investmen

and Investmen

s and Investm ts Commission

and Investmen

ice requiring th r, at a specifie ffairs of the bod

requirements

lties of 10

ars, or both.1

ice under s 1

(Cth), which

exercised w

ns (ASIC) ha

on, and that

to the inv

is an entitlem

ASIC examin

examination

crimination i

a record or g

nswer or sign

hat the answ

criminal pro

ceeding in re

ts Act 2001 (C

ts Act 2001 (C

ts Act 2001 (C

ments Act 200 n (No 3) (2008)

ts Act 2001 (C

he production ed place and t dy.

under the a

00 penalty

129

19 of the Aus

h may requir

where the Aus

as reason to s

the target o

vestigation

ment to lega

ner is empow

n in some ci

is abrogated

give evidence

ning a record

wer is not ad

oceedings, o

espect of falsi

th), s 63.

th), s 13.

th), s 23.

01 (Cth), s 22 ) 252 ALR 353

th), s 68.

to a specified time, of speci

above provisi

units ($18

stralian Secu

re the produ

stralian Secu

suspect that t

of the notice

of that s

al representat

wered to excl

ircumstances

d to the exte

e, save that th

d claim the p

dmissible in

or proceedin

ity of the sta

2; Collard v 3 at [39].

member or ified books

ions is an

8,000) or

rities and

uction of

urities and

there may

can give

suspected

tion at an

lude legal

s.132 The

ent of the

he person

privilege,

evidence

ngs for a

atement or

Australian

439

121.

Australia

122.

134 Australi 135 AWB Lt

There is no e

to refuse to

privilege, bu

been held th

legal profess

the recipient

an Competitio

Section 155

relevantly pr

Power

(1)

ian Securities a

td v Australian

express prov

o answer qu

ut consistentl

at a person m

sional privile

t of a notice t

on and Consu

5 of the C

rovides:

to obtain info

Subject to s or a Deputy capable of giving evide constitute, a Commission require that p

(a) to f

per com and info

(b) to p

in t not

(c) to a

spe ora

and Investmen

n Securities and

ision entitlin

uestions on

ly with well-may refuse to

ege.135 There

to have it set

umer Commi

Competition a

ormation, docu

subsection (2A y Chairperson furnishing in ence relating

a contraventio n may, by not person:

furnish to the C rson or, in th

mpetent officer d in the mann formation;

produce to the the notice actin tice, any such d

appear before t ecified in the n ally or in writin

ts Act 2001 (C

d Investments C

ng a person, o

the basis o

-established l

o answer a qu

e is no expre

aside.

ission

and Consum

uments and ev

A), if the Comm has reason to nformation, pr to a matter t on of this Ac

tice in writing

Commission, b he case of a

r of the body c ner specified

e Commission, ng on its behal documents; or

the Commissio notice to give a ng, and produce

th), s 69.

Commission (2

other than a l

of legal pro

legal princip

uestion on th

ess provision

mer Act 20

vidence

mission, the C believe that a roducing docu that constitute ct … a memb g served on th

by writing sign a body corpor corporate, with in the notice,

, or to a person lf, in accordanc

on, … at a time any such evide e any such doc

2008) 216 FCR

lawyer,134

ofessional

ples it has

he basis of

n entitling

010 (Cth)

Chairperson a person is uments or es, or may

ber of the

hat person,

ned by that rate, by a

hin the time , any such

n specified ce with the

e and place ence, either cuments.

R 577.

440

123.

124.

Commiss

125.

136 Compet 137 Compet 138

Compet 139 Compet 140

Taxatio 141 Taxatio

The evidenc

comply with

units or 2 ye

incrimination

record or gi

answer or si

that the ans

criminal pro

proceeding i

It is an excu

professional

provision all

as a matter

Australian C

ioner of Taxa

The Commis

information,

in the pers

administratio

with the re

tition and Cons

tition and Cons

tition and Cons

tition and Cons

on Administrati

on Administrati

ce may be r

h a notice is

ears imprison

n is abrogate

ive evidence

igning a reco

wer is not a

oceedings, o

n respect of f

use to refuse

privilege o

lowing legal

of practice r

Competition a

ation

ssioner of Ta

to attend an

son’s custod

on or operat

quirement is

sumer Act 2010

sumer Act 2010

sumer Act 2010

sumer Act 2010

ion Act 1953 (C

ion Act 1953 (C

required to b

an offence p

nment, or bo

ed to the exte

, save that t

ord claim the

admissible in

or proceedin

falsity of the

compliance w

or Cabinet s

representativ

representatio

and Consume

axation has p

nd give evide

dy and con

tion of a tax

s a crimina

0 (Cth), ss 155

0 (Cth), s 155(

0 (Cth), s 155(

0 (Cth), ss 155

Cth), Schedule

Cth), ss 8C, 8D

be given on

punishable by

oth.137 The p

ent of the requ

the person m

e privilege, w

n evidence a

ngs for a p

statement or

with a notice

secrecy.139

ves to appear

on is permitt

er Commissio

power to req

ence or to pr

ntrol for th

xation law.14

l offence.141

5(3), (3A).

(5), (6A).

(7).

5(7A), (7B).

1, Division 35

D.

oath.136 F

y a fine of 2

privilege aga

quirement to p

may before g

with the con

against the p

enalty, othe

r record.138

e on the basi

There is no

r at examina

ted by office

on (ACCC).

quire a perso

roduce any d

he purposes 40 Failure to 1

Penalties

53-10.

Failure to

20 penalty

ainst self-produce a

giving an

nsequence

person in

er than a

is of legal

o express

ations, but

ers of the

on to give

documents

s of the

o comply

increase

441

Australia

126.

Superann

127.

General M

128.

142 Taxatio 143 See Insu 144

Superan

depending o

penalty units

imprisonmen

an Prudential

The Australi

powers unde

Failure to c

maximum

imprisonmen

nuation

Similarly, a

powers und

(Supervision)

with a maxim

Manager o f t

Finally, as a

Manager has

of the FW(R

requirement

on Administrati

urance Act 197

nnuation Indus

on the numbe

s for a first o

nt, where mo

l Regulation A

ian Prudenti

er ss 55, 62C

comply with

penalties r

nt.143

range of re

der ss 269

n) Act 1993 (

mum penalty

the Fair Wor

already note

s compulsory

RO) Act. It

under s 335

ion Act 1953 (C

73 (Cth), ss 56

stry (Supervisio

er of previou

offence and 5

ore than 2 off

Authority

al Regulatio

C, 81 and 115

these provi

ranging fro

egulators ha

and 270 o

(Cth). Failur

y of 30 penalt

rk Commissio

d in Chapte

y information

is a criminal

5(2), with a

Cth), s 8E.

, 62D, 82 and

on) Act 1993 (C

us offences a

50 penalty un

fences have b

on Authority

5 of the Insur

isions is a c

om 3 mon

ave similar i

of the Supe

re to comply

ty units.144

on

er 2 of this V

n gathering p

l offence to

maximum p

115.

Cth), s 285.

and range be

nits and/or 12

been committ

(APRA) ha

rance Act 19

criminal offe

nths to 6

information

erannuation

y is a crimina

Volume, the

powers under

fail to comp

penalty of 30

etween 20

2 months’

ted.142

as similar

973 (Cth).

ence with

months

gathering

Industry

al offence

e General

r s 335(2)

ply with a

0 penalty

442

129.

Submissi

Submissio

130.

I

145 Althou example C 146

Austral p 36.

units in resp

body corpora

Some of the

regulator in

Most are ex

legislation th

than the car

Part IV of th

civil consequ

ions

ons in suppor

The Austra

examination

of those ex

Improvemen

powers to is

noting comp

agencies, su

ugh many con Corporations Ac

lian Chamber o

pect of an ind

ate.

e powers ide

the ordinar

xercisable in

hat attract on

rtel provision

he Competit

uences.

rt of compuls

alian Chamb

powers bein

xercised und

t Act 2005 (

ssue notices

pulsory pow

ch as the AC

ntraventions of ct 2001 (Cth),

of Commerce a

dividual, and

entified abov

ry administra

n relation to

nly civil con

ns, all of the

tion and Con

sory investiga

ber of Com

ng vested in t

der the Buil

(Cth).146 It s

and enforce

wers are wid

CCC, APRA

f the corporat ss 184, 1308-1

and Industry L

d 150 penalty

ve are exerci

ation of the

suspected c

sequences.145

e anti-compe

nsumer Act 2

ation powers

mmerce and

the ABCC th

lding and C

supported th

e failures to

dely used by

A, ASIC and

ions legislatio 1311, 1021A-P

Law Reform Su

y units in res

isable by the

e relevant le

contravention 5 For examp

etitive prohib

2010 (Cth) h

s

Industry s

hat reflect the

Construction

he use of exa

comply with

y many Go

the Commis

on are offence P.

ubmissions, Au

spect of a

e relevant

egislation.

ns of the

ple, other

bitions in

have only

supported

e strength

Industry

amination

h notices,

overnment

ssioner of

es: see for

ugust 2015,

443

131.

147 Austral p 38. 148

Housin para 5.20. 149

Master Legislation Productivi 150

Austral p 39. 151

Austra Complianc 2005 to 30 152

Uphold 25/3/2004,

Taxation.147

Builders Aus

The Australi

‘continuation

than was th

Report’.150

Commission

of the Interim

to the effect

The (a)

unw

ope

blac

the

lian Chamber o

ng Industry A

r Builders Au n Committee ty) Bill 2013 (C

lian Chamber o

alian Building ce Powers by t 0 September 20

ding the law - , p 13.

The HIA

stralia.149

ian Chamber

n of informa

he case at t

It referred

n Report on th

m Building I

that:

ere is a n

willingness o

erate with the

ck banning o

ABCC).

of Commerce a

Association Pt

ustralia, Subm into the B

Cth), 22/11/13

of Commerce a

g and Constr the Australian 008), p 6.

One Year On:

made a sim

of Commerc

ation gatherin

the time of

to the Austr

he Exercise o

Industry Tas

need for co

of many indu

e regulator fo

of contractors

and Industry L

ty Ltd Law R

mission to th Building and , p 30, paras 18

and Industry L

ruction Comm Building and

Findings of th

ilar submiss

ce and Indus

ng powers is

f the finalis

ralian Buildi

of Complianc

kforce,152 an

ompulsory p

ustry particip

or fear of retr

s that were kn

Law Reform Su

Reform Subm

e Senate Edu Construction 8.2-18.3.

Law Reform Su

mission, ‘Repo Construction C

he Interim Buil

sion,148 as di

try contende

even more i

ation of the

ing and Con

ce Powers,15

nd the Wilco

powers due

pants to be se

ribution (for

known to hav

ubmissions, Au

missions, 21/8/

ucation and E n Industry (

ubmissions, Au

ort on the E

Commission’

lding Industry

id Master

ed that the

important

e Wilcox

nstruction 1 findings

x Report,

e to the

een to co-example,

ve assisted

ugust 2015,

/15, p 10,

Economics (Improving

ugust 2015,

Exercise of (1 October

Taskforce,

444

132.

153 Royal C Vol 2, ch 8 154

Austral (received 2 155

Austral (received 2

The (b)

AB

Rec (c)

tow

CFM

inv

The ACCC

regulator, cit

in respect of

of a numbe

information

the Competit

It also refer

compliance

conceal evid

much highe

establish. Th

The dif fines, p may ha anti-com [sic] tha will out

Commission in 8.9.

lian Competiti 20/8/15), p 5.

lian Competiti 20/8/15), pp 6-

e exercise o

BCC led to a n

cent instance

wards Fair W

MEU demo

vestigative po

provided su

ting substant

f secondary b

r of witness

to the ACCC

tion and Con

rred to the

with the no

dence sought

er penalties

he submissio

fficultly [sic] i particularly for ave significant mpetitive cond

at may be done tweigh the low

nto Trade Union

on & Consum

on & Consum 7.

of compulso

number of su

es of threate

Work Buildin

onstrates the

owers.153

ubmissions in

tial barriers

boycott condu

ses to secon

C, even in re

nsumer Act 2

fact that the

tice creates

under s 155

for the con

on noted:155

n establishing r a corporation t incentives to duct. In some

e to a business w fines that mig

n Governance

mer Commissio

mer Commissio

ory examina

uccessful pen

ening and in

ng Inspector

e need for

n relation to

to assemblin

uct.154 It refe

ndary boycot

esponse to a

2010 (Cth), d

e low level

an incentive

5 rather than

ntraventions

a contraventio n, creates a sit o impede an in e situations, th

that complies ght be imposed

and Corruption

on Law Reform

on Law Reform

ation powers

nalty proceed

ntimidatory b

rs by officia

strong co

o its experien

ng probative

erred to the r

tt activity to

notice under

due to fear of

of penalty

e for some b

expose them

that eviden

on, coupled wi tuation where nvestigation in he commercia

with a section d for non-comp

n, Interim Rep

rm Submission

rm Submission

s by the

dings.

behaviour

als of the

ompulsory

nces as a

evidence

reluctance

o provide

r s 155 of

f reprisal.

for non-bodies to

mselves to

nce might

ith the low a business nto alleged al damages

155 notice pliance.

port (2014),

ns, undated

ns, undated

445

133.

134.

135.

156 Austral (received 2 157

Boral L 158 Citing t - Findings Australia, the Buildin pp 30-31, p

The ACCC a

to secondary

compliance

sanctions for

Boral submit

existing law

misuse of u

secondary b

evidence and

the ACCC.

the conseque

to be coope

customers ul

ACCC and

submitted t

compulsory

Master Buil

place there

withdrawn d

complaint w

powers inten

lian Competiti 20/8/15), p 5.

Law Reform Su

the Commonw s of the Build Submission to ng and Constru

para 18.3.

advocated gr

y boycott co

with informa

r non-compli

tted that its e

and enforce

union power.

oycott was t

d supporting

Boral indica

ences for the

erating volun

ltimately did

this Comm

that the sp

powers.

lders Austral

were a num

due to fear

was pursued.

nded to be

on & Consum

ubmissions, 20

wealth of Austra ding Industry T o the Senate Ed uction Industry

reater protect

onduct and

ation gatheri

iance.156

experience w

ment proced

. A key is

the willingne

g documents

ated that its

ir businesses

ntarily in B

d give eviden

mission.157 B

pecialist reg

lia submitted

mber of insta

of the ramif 158 Master

conferred o

mer Commissio

015, p 51.

alia Building I Taskforce’, Se ducation and E y (Improving P

tion for whis

the improve

ing powers,

with the CFM

dures are inad

sue it faced

ess of Boral

in relation to

customers v

s if they were

Boral’s proce

nce under co

Based on th

gulator shou

d that befor

ances in wh

fications tha

Builders Au

n the restor

on Law Reform

Industry Taskfo eptember 2005 Economics Leg Productivity) B

stleblowers in

ed ability to

including ap

MEU illustrate

dequate to co

d during the

witnesses to

o the ban to

voiced conce

e seen by the

eedings, but

ompulsion to

his experienc

uld have e

re the ABCC

hich complai

at might occ

ustralia supp

red ABCC u

rm Submission

force ‘Upholdin 5, p 11, Maste gislation Comm Bill 2013 (Cth)

n relation

o compel

ppropriate

es that the

ombat the

CFMEU

o provide

o Boral or

rns about

e CFMEU

t that the

o both the

ce, Boral

equivalent

C was in

ints were

cur if the

ported the

under the

ns, undated

ng the Law er Builders mittee into ), 22/11/13,

446

A

Submissio

136.

159 Austral Australia, the Buildin p 31, para 160

Master Legislation Productivi 161

Australi Legislation Productivi 162

Australi Legislation Productivi 163

Australi Legislation Productivi

Building and

(Cth), obser

compliance

Australian S

and that the

powers to

safeguard.160

ons against c

The ACTU

enhanced co

to the Sena

Employment

enforcement

property; an

protection of

ian Securities Submission to ng and Constru 18.6.

r Builders Au n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

d Constructio

rving in par

are less tha

Securities an

e procedure

the Commo 0

compulsory in

put forward

ompulsory in

ate Standing

t.161 It cont

t of industria

nd the right

f personal inf

and Investmen o the Senate Ed uction Industry

ustralia, Subm into the B

Cth), 22/11/13

f Trade Unions into the B

Cth), 22/11/13

f Trade Unions into the B

Cth), 22/11/13

f Trade Unions into the B

Cth), 22/11/13

on Industr y (I

rticular that

an those for

nd Investmen

for referral

onwealth O

nvestigation p

d strong opp

nformation ga

g Legislation

ended that s

l laws; that t

t to silence,

formation.162

nts Commission ducation and E y (Improving P

mission to th Building and , p 31, para 18

s, Submission t Building and , p 23, para 76

s, Submission t Building and , p 23, para 77

s, Submission t Building and , p 24, para 78

(Improvin g P

the penaltie

equivalent

nts Commissi

of the exe

Ombudsman

powers

position to t

athering pow

n Committee

such powers

they infringe

, as well a

2 The ACTU

n Act 2001 (Ct Economics Leg Productivity) B

e Senate Edu Construction .8.

to the Senate E Construction .

to the Senate E Construction .

to the Senate E Construction .

Productivity)

es proposed

provisions u

ion Act 2001

ercise of exa

was an ap

the reintrodu

wers in its su

e on Educa

have no pla

e rights of pri

as statutory

U asserts that:

th), s 63; Maste gislation Comm Bill 2013 (Cth)

ucation and E n Industry (

Education and E n Industry (

Education and E n Industry (

Education and E n Industry (

Bill 2013

for non-under the

1 (Cth)159

amination

ppropriate

uction of

ubmission

ation and

ace in the

ivacy and

rights to

:163

er Builders mittee into ), 22/11/13,

Economics (Improving

Economics (Improving

Economics (Improving

Economics (Improving

447

137.

138.

139.

164 Australi Legislation Productivi 165

Australi Legislation Productivi

The pu industri worker imping organis

The ACTU c

connection w

will be exam

Finally, the A

exercise of t

requirement

Tribunal for

‘switching o

The CFMEU

the introduct

the law, in th

the public re

Rather, the C

the powers

prejudice to

ian Council of n Committee ty) Bill 2013 (C

ian Council of n Committee ty) Bill 2013 (C

ublic interest ial arena to en s (as they hav e upon the exe se and take coll

contended th

with investig

mined further

ACTU objec

the powers c

to make an

r issue of a

ff’ the exami

U contends th

tion of coerc

hat they do n

evenue, serio

CFMEU con

out of the

the exercise

f Trade Unions into the B

Cth), 22/11/13

f Trade Unions into the B

Cth), 22/11/13

favours keepin nsure that, inso ve been overw ercise of indus

lective action.

hat the power

gation of terr

below.

cted to the re

currently rep

n application

an examinati

ination powe

hat the indus

cive powers i

not raise mat

ous corruptio

ntends that th

industrial a

of industrial

s, Submission t Building and , p 23, para 77

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interest, with

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ication.172

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no prospect f

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rights of the

nd Securities, ‘U ties Commissi vestigation of Law Reform

ealth Laws (AL

stigative Powe

r terms were

ned as a resu

Balanced ag

munity, the re

ether the ex

an attendant

crimination

hich the buil

ropriate that t

nt of the no

en under com

d to documen

d or created

n. Extendin

urtail the inv

regulator in

individual co

Use Immunity ion Law’ (199 f Corporate wr Commission T

LRC Interim R

ers) Act 2004 (

e found to

ult of the

gainst that

egulator is

xercise of

t risk that

will be

lding and

there be a

otice, and

mpulsion.

nts in the

when the

g the use

estigative

a manner

oncerned.

Provisions 91) [3.1.5]; rongdoing’ Traditional Report 127,

(2009) 198

458

Recommendation 62

Legislation be enacted conferring the building and construction industry

regulator with compulsory investigatory and information gathering powers

equivalent to those possessed by other civil regulators. The powers set out in

the Building and Construction Industry (Improving Productivity) Bill 2013 (Cth)

appear appropriate in this regard.

Recommendation 63

There should be oversight by the Commonwealth Ombudsman of the powers

exercised by the building and construction regulator in the manner provided for

in the Building and Construction Industry (Improving Productivity) Bill 2013

(Cth).

Recommendation 64

Consideration be given to redrafting the use/derivative use immunity provisions

in clauses 102 and 104 of the Building and Construction Industry (Improving

Productivity) Bill 2013 (Cth) to provide protections equivalent to those available

in relation to the powers exercised by the Australian Securities and Investments

Commission.

459

F - IND

Issues

156.

157.

USTRY SPE

Determining

regulator lea

enforce. It

lawlessness

introduction

occurs on

industrial ac

unlawful ind

applicable un

The argumen

building and

them is that

construction

employment

treatment, e

action or hav

be an action

prevalent in

be argued th

Building and

(Cth) endeav

differences b

ECIFIC IND

g that there s

aves for con

has been su

in the bu

of specific p

building sit

ction) and g

dustrial activ

nder the FW

nt against th

d constructio

the culture

industry

t areas. The

either by int

ving higher p

nable nuisan

the construc

at to prohibit

d Constructio

voured to do

between the b

DUSTRIAL

hould be a b

nsideration w

uggested that

uilding and

provisions d

es (such as

greater pena

vities (such

Act.

hese measure

on industry

of lawlessne

differentiate

existence o

troducing sp

penalties. Fo

nce at comm

ction industry

t certain pick

on Industr y (I

o, simply re

building and

LAWS

building and

what laws t

t a further o

d constructio

directed at co

s picketing

alties for co

as coercion

s is that they

participants.

ess that exist

es that in

f that culture

pecific laws

or example, p

mon law - i

y than in oth

kets in the bu

(Improvin g P

flects the fa

construction

construction

that regulato

option for co

on industry

onduct that f

and other

ontravention

n) than are

y discriminat

. The argu

ts in the buil

ndustry from

e justifies di

concerning

picketing - w

is considerab

her industries

uilding indust

Productivity)

act that there

n industry and

n industry

or should

ombatting

y is the

frequently

unlawful

of other

presently

te against

ument for

lding and

m other

ifferential

building

which may

bly more

s. It may

try, as the

Bill 2013

e are real

d others.

460

158.

Current p

159.

160.

161.

193 Fair Wo 194 Fair Wo 195

Fair Wo

It is conveni

provisions u

industrial ac

Building and

(Cth).

position

Under the FW

commencing

safety net c

participants.

the Independ

The Directo

commenced

commencing

proceedings

have settled

The FW Act

coercion. M

threaten to ta

the other per

ork (Building I

ork (Building I

ork (Building I

ient, for the p

under the F

ction, as wel

d Constructio

W(BI) Act, t

g proceeding

contractual e 193 The desi

dent Contrac

or is also em

by others.19

g or continu

(ordinarily,

their claims

t contains a n

More specific

ake, any actio

rson, or a thir

Industry) Act 2

Industry) Act 2

Industry) Act 2

purposes of d

FW Act pro

l as the prov

on Industr y (I

the Director

gs to enforc

entitlements’

ignated build

tors Act 2006

mpowered to 94 However

uing procee

employees

in the procee

number of ci

cally, a pers

on against an

rd person:

012 (Cth), s 10

012 (Cth), ss 7

012 (Cth), ss 7

discussion, to

ohibiting co

visions that w

(Improvin g P

of the FWB

e ‘designate

in relation

ding laws inc

6 (Cth).

o intervene

r, the Direct

dings where

and employ

edings.195

ivil remedy p

on must not

nother person

0(d).

71-72.

73-73A.

o refer to the

ercion and

were propos

Productivity)

BII has the fu

ed building

to building

clude the FW

in such pro

tor is preclu

e the partie

yers or organ

provisions pr

t organise or

n with intent

e existing

unlawful

sed in the

Bill 2013

unction of

laws and

g industry

W Act and

oceedings

ded from

es to the

nisations)

rohibiting

r take, or

to coerce

461

162.

163.

164.

196 Fair W This prohib 197

Fair Wo 198 Fair Wo 199

Fair W industrial a 200 Fair Wo

to (a)

exe

exe

to ‘ (b)

to e (c)

not

In addition,

basis of cove

The maximu

penalty units

and 300 pen

body corpora

The FW Act

the FW Act

industrial ac

complied w

employees o

claims in re

Work Act 2009 ( bition does not

ork Act 2009 (C

ork Act 2009 (C

Work Act 2009 action: s 354(2

ork Act 2009 (C

exercise or

ercise, a ‘wo

ercise a ‘work

engage in in

employ or no

t engage a pa

a person mu

erage of emp

um penalty f

s (currently $

nalty units (c

ate.200

t also deals w

(ss 408-416A

ction to be p

with. In pa

organised or

elation to a

(Cth), s 343(1) t apply to ‘prot

Cth), s 348. En

Cth), s 355.

9 (Cth), s 354 ).

Cth), ss 539, 54

not exercise

orkplace righ

kplace right’

dustrial activ

ot employ a

rticular indep

st not discrim

ployees by pa

for contrave

$10,800) for

currently $54

with industria

A) deals with

protected, a

articular, in

r engaged in

proposed en

). Workplace tected industria

ngage in indus

4(1). This pro

46(2).

e, or propos

ht’ or to ex

in a particul

vity’;197 or

particular pe

pendent cont

minate again

articular indu

ention of the

r a contraven

4,0000) for

al action. Div

h ‘protected i

number of f

relation to

n for the pu

nterprise agre

right is define al action’: s 34

trial activity is

ohibition does

se to exercis

xercise or pr

lar way;196

erson, or to e

tractor.198

st an employ

ustrial instrum

ese prohibitio

ntion by an i

a contravent

vision 2 of P

industrial act

formal steps

industrial a

urpose of su

eement, ther

ed very broadly 3(2).

s defined in s 3

s not apply to

se or not

ropose to

engage or

yer on the

ments.199

ons is 60

individual

tion by a

Part 3-3 of

tion’. For

s must be

action by

upporting

re must a

y in s 341.

347.

o protected

462

165.

201 Fair Wo 202 Fair Wo 203

Fair Wo 204 Fair Wo

ballot of em

under any la

action unles

injury, wilfu

property.202

Industrial ac

The (a)

or e

or

pen

con

(cu

cor

Cou

con

or a

Wh (b)

acti

stop

ind

plac

ork Act 2009 (C

ork Act 2009 (C

ork Act 2009 (C

ork Act 2009 (C

mployees appr

aw in relation

s the action

ful or dange

tion that is n

e effect of s 4

engaged in d

workplace

nalty is 60

ntravention

urrently $54

rporate.203 In

urt is empow

nduct on the

a person affe

here industria

ion, the Fair

p orders in r

dustrial action

ce on the app

Cth), s 409(2).

Cth), s 415.

Cth), ss 539, 54

Cth), ss 417(3)

roving the in

n to industria

has involved

erous destru

ot protected

417(1) is that

during the pen

determinatio

penalty un

by an indi

4,000) for

n addition, th

wered to gr

application

cted by the in

al action is o

r Work Com

respect of th

n or industri

plication of a

46(2).

), s 539, item 1

ndustrial acti

l action that

d or is likely

uction of pr

is dealt with

t industrial ac

ndency of an

on is unlawf

nits (curren

ividual and

a contrave

he Federal Co

rant an injun

of persons in

ndustrial acti

otherwise no

mmission is

hreatened, im

al action wh

a person affe

4, column 2.

ion.201 No a

is protected

y to involve

roperty or t

as follows:

ction that is o

n enterprise a

ful. The m

ntly $10,800

300 pena

ention by

ourt or Feder

nction to res

ncluding an

ion.204

ot protected

empowered

mpending or

hich is actual

ected by the

action lies

industrial

e personal

taking of

organised

agreement

maximum

0) for a

alty units

a body

ral Circuit

strain the

employer

industrial

to make

probable

lly taking

industrial

463

Proposed

166.

205 Fair Wo 206 Fair Wo 207

Fair Wo 208 Fair Wo

acti

pra

day

so,

Con (c)

unl

(cu

300

a bo

If t (d)

the

gra

the

com

for

d industry-spe

In summary

the Building

2013 (Cth) a

ork Act 2009 (C

ork Act 2009 (C

ork Act 2009 (C

ork Act 2009 (C

ion.205 Th e

acticable, dete

ys after the a

must make a

ntravention

awful. Th

urrently $10,8

0 penalty uni

ody corporat

the persons s

stop order, t

ant an injunct

contraven

mpensation o

a contravent

ecific provisi

, the industr

g and Constr

are as follows

Cth) ss 418-41

Cth), ss 539, 54

Cth), s 421(1).

Cth), s 421(4).

e Fair Work

ermine an ap

application is

an interim sto

of a stop or

he maximum

800) for a co

its (currently

te.206

subject to the

the Federal C

tion on the a

ntion.207

order may be

tion of a stop

ions

ry-specific pr

ruction Indus

s.

9.

46(2).

k Commissio

pplication for

s made, and

op order.

rder or an i

m penalty i

ontravention

y $54,0000) f

e stop orders

Court or Fede

application of

However,

made under

p order.208

rohibitions th

str y ( Improv

on must, as

r a stop order

if it is not a

interim stop

is 60 pena

by an indiv

for a contrav

s do not com

eral Circuit C

f a person af

exceptiona

r s 545 of the

hat were pro

ving Producti

soon as

r with two

able to do

p order is

alty units

vidual and

vention by

mply with

Court may

ffected by

ally, no

e FW Act

oposed in

ivity) Bill

464

167.

168.

169.

209 Building 210 Defined 211

One dif employee f 212 Building 213

Building

First, a civi

engaging un

action that i

defined in a

of the FW A

way as in th

enterprise ag

engaged in c

not ‘protecte

including a

with an inter

The propose

1,000 penalt

and 200 pen

court would

by the contra

Secondly, t

Productivity)

unlawful pic

this provisio

g and Construc

d in cll 7 and 8

fference was th for safety reaso

g and Construc

g and Construc

il penalty pr

nlawful indu

s not protect

similar way,

Act.211 Prote

he FW Act,

greement is n

concert with,

ed persons’.

union that is

rest in the par

ed maximum

ty units ($18

nalty units ($3

also be able

avention.212

the Building

) Bill 2013 (C

cketing.213 T

n as in relatio

ction Industry

respectively.

hat under the B ons was on the

ction Industry

ction Industry

rovision was

ustrial action

ted industria

and with sim

cted industri

except that

not protected

, or if the org

In substanc

s a bargainin

rticular enter

m penalty fo

0,000) for co

36,000) for c

e to award c

g and Co

Cth) propose

The same rem

on to unlawf

(Improving Pr

Bill the onus o e employee.

(Improving Pr

(Improving Pr

s proposed a

n,209 defined

al action.210

milar exclusio

ial action wa

action in re

d industrial a

ganisers incl

ce, protected

ng representa

rprise agreem

or unlawful

ontravention

contravention

compensation

nstruction I

ed a civil pen

medies were p

ful industrial

roductivity) Bil

of proving that

roductivity) Bil

roductivity) Bil

against orga

d to mean

Industrial ac

ons, as in ss

as defined in

elation to a

action if the

lude, persons

d persons are

ative and its

ment.

industrial ac

by a body c

n by an indiv

n to a person

Industr y (Im

nalty provisio

proposed in r

action.

ll 2013 (Cth), c

at action was ta

ll 2013 (Cth), c

ll 2013 (Cth), c

anising or

industrial

ction was

19(1), (2)

the same

proposed

action is

s who are

e persons,

s officers,

ction was

corporate,

vidual. A

n affected

Improving

on against

respect of

cl 46.

aken by an

cl 81.

cl 47.

465

170.

171.

172.

214 Building 215 Defined Territory b 216

Building

The Building

2013 (Cth)

injunction

picketing.214

The principa

restrictions

fourfold. Fi

a ‘stop orde

industrial ac

restrain unla

‘stop order’.

much higher

prohibition a

Thirdly, th

Productivity)

provisions

provisions e

covered enti

intent to affe

constitutiona

or inciting, o

g and Construc

d in clause 5 t body, or an org

g and Construc

g and Constr

also conta

restraining

al practical d

on unlawfu

irst, the ‘two

er’ is replac

ction. Secon

awful indust

. Thirdly, th

r than those u

against unlaw

he Building

) Bill 2013

against coe

each cover

ity215 that aff

fect the activ

ally covered

or action take

ction Industry

to mean a corp anisation for th

ction Industry

ruction Indus

ained provis

unlawful i

differences b

ul industrial

step’ proces

ed with an

ndly, in all c

trial action c

he penalties

under the FW

wful picketing

g and Con

(Cth) prop

ercion and

conduct un

ffects, is capa

ities, functio

entity, that

en with intent

(Improving Pr

poration, the C he purposes of

(Improving Pr

str y ( Improv

ions enablin

ndustrial ac

between thes

action und

ss in the FW

outright pro

ases an inju

conduct with

for unlawful

W Act. Fourt

g.

nstruction I

posed a ser

discriminati

ndertaken by

able of affec

ons, relations

consists of a

t to coerce:21

roductivity) Bil

Commonwealth f the FW(RO) A

roductivity) Bil

ving Product

ng the gran

ction and

se provisions

der the FW

Act of first

ohibition on

unction is ava

hout first ob

l industrial a

thly, there is

Industr y (Im

ries of civil

ion. The

y a constitu

cting or is ta

ships or busi

advising, enc 16

ll 2013 (Cth), c

h or a Commo Act.

ll 2013 (Cth), c

tivity) Bill

nt of an

unlawful

s and the

Act are

obtaining

unlawful

ailable to

btaining a

action are

a specific

Improving

l penalty

coercion

utionally-aken with

iness of a

couraging

cl 48.

onwealth or

cl 51.

466

173.

174.

175.

217 Building 218 Building 219

Building 220 Building

A p (a)

per

dut

A b (b)

par

A p (c)

bui

Clause 55

Productivity)

against a bu

proposed to b

Each of the

pecuniary pe

and 200 pena

Fourthly, t

Productivity)

cl 34(1) as a

be complied

work in a Te

respect of bu

g and Construc

g and Construc

g and Construc

g and Construc

person to em

rsons as buil

ties and respo

building emp

rticular super

person to ag

lding enterpr

of the Build

) Bill 2013 (

uilding empl

be covered b

above provis

enalties of up

alties units fo

the Building

) Bill 2013 (

a code of prac

d with by per

erritory or Co

uilding work

ction Industry

ction Industry

ction Industry

ction Industry

mploy or en

lding employ

onsibilities to

ployee or em

rannuation fu

gree or refu

rise agreemen

ding and C

(Cth) propos

loyer becaus

by a particula

sions were su

p to 1,000 p

or an individu

g and Con

Cth) provide

ctice, issued

rsons (being

ommonwealt

. The intenti

(Improving Pr

(Improving Pr

(Improving Pr

(Improving Pr

ngage or no

yees or cont

o those perso

mployer to n

und;218

se to make,

nt.219

Construction

ed to preven

se building e

ar industrial in

ubject to com

penalty units

ual.220

nstruction I

ed for a Build

by the releva

corporations

h place, or th

ion of the pr

roductivity) Bil

roductivity) Bil

roductivity) Bil

roductivity) Bil

ot employ o

tractors or to

ns;217

nominate or

vary or ter

Industr y (Im

nt the taking

employees a

nstrument.

mpensation o

for a body

Industr y (Im

ding Code, d

ant Minister,

s, persons un

he Commonw

rovision is to

ll 2013 (Cth), c

ll 2013 (Cth), c

ll 2013 (Cth), c

ll 2013 (Cth), c

or engage

o allocate

pay to a

rminate a

Improving

of action

are or are

orders and

corporate

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defined in

, that is to

ndertaking

wealth) in

o continue

cl 52.

cl 53.

cl 54.

cl 81.

467

Submissi

Submissio

176.

177.

221 Explana Bill 2013 Industry) A history of t Territories Constructio 222

Australi 223 Boral L 224

Master 225 Austral p 40.

the present r

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ng introducti

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n the Cole R inal Report (20

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ubmissions, Au

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fective in

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ugust 2015,

468

178.

179.

226 Austral p 41-42. 227

Housin 5.22. 228

Housin 5.23-5.25. 229 Master Legislation Productivi

must be set

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cost’.226

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laws.227 It

Commission

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g industry-sp

submitted to

yment that i

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ively regulat

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strain industr

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in the buildin

abolished.236

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Metals Associ n and Employ oductivity) Bill o averted to i

eport, 27/5/14,

f Trade Unions into the B

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f Trade Unions into the B

Cth), 22/11/13

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n to the Senate nto the Building 3, p 13.

ecific laws

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s, Submission t Building and , p 20.

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Education and E n Industry (

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FW Act

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471

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238 Australi Legislation Productivi 239

CFMEU Employme Bill 2013 ( 240

Australi Legislation Productivi

The ACTU2

justification

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permitting te

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disproportion

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removal of

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proceedings

parties to th

desirable.

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ian Council of n Committee ty) Bill 2013 (C

238 and the

for imposing

in which th

mportance tha

industry,

ermination o

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ximum penalt

mprovin g P

nate to the

tion.240

(supported

f laws prev

that have b

at there is n

or in permi

he conduct do

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f Trade Unions into the B

Cth), 22/11/13

n to the Senate nto the Building 3, p 14.

f Trade Unions into the B

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CFMEU239

g higher pen

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both conten

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such treatmen

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d in the Build

Bill 2013

arm occasio

MEU in this

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nded that the

orkers by ref

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ons in the

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oned by un

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arties. It

multiple

where the

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to pursue

Economics (Improving

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472

184.

Conclusi

185.

241 Australi Legislation Productivi 242

CFMEU Employme Bill 2013 Committee Industry (I 243

CFMEU Employme Bill 2013 (

proceedings

of disputes o

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on unlawful

taken in rela

is contrary to

submitted th

catch condu

motivated by

of assembly

ions

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against unla

openly ackno

union object

laws govern

ian Council of n Committee ty) Bill 2013 (C

U, Submission ent’s inquiry in (Cth), 22/11/1 e on Education Improving Prod

U, Submission ent’s inquiry in (Cth), 22/11/13

independent

or fostering in

U and AMWU

industrial ac

ation to legiti

o the policy

hat the prohib

ct that is no

y a lawful pu

and of speec

obvious nee

awful conduc

owledge that

tives without

ning protected

f Trade Unions into the B

Cth), 22/11/13

n to the Senate nto the Building 3, p 11; AMW n and Employ

ductivity) Bill 2

n to the Senate nto the Building 3, p 17.

tly of settlem

ndustry relati

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ction has the

imate occupa

of ensuring

bition of unl

ot unlawful a

urpose, thus i

ch.243

ed for laws t

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t regard to w

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s, Submission t Building and , p 25.

e Standing Leg g and Construc WU, Submissi yment’s inquir

2013, Novemb

e Standing Leg g and Construc

ment as cont

ionships.241

mitted that the

e potential to

ational health

safe workpla

lawful picket

at common l

imposing on

that ensure a

nvironment w

ake industrial

hether that a

tected indust

to the Senate E Construction

gislation Comm ction Industry on to the Sen ry into the Bu ber 2013, p 6, p

gislation Comm ction Industry

trary to the r

e proposed pr

catch condu

h and safety r

aces.242 The

ts has the po

aw and actio

the rights of

an effective

where union

l action to ac

action might

trial action, t

Education and E n Industry (

mittee on Edu (Improving Pr nate Standing L uilding and Co

paras 20-21.

mittee on Edu (Improving Pr

resolution

rohibition

uct that is

risks, and

e CFMEU

otential to

on that is

f freedom

deterrent

n officials

chieve the

break the

there is a

Economics (Improving

ucation and roductivity) Legislation onstruction

ucation and roductivity)

473

186.

187.

188.

need for law

provide stron

There is, ho

even where t

Subject to

proposed in

Productivity)

the FW Act.

governing bu

should apply

the FW Act a

and construc

relation to c

entitlement f

One matter

from the ma

penalties are

the construc

CFMEU app

like any othe

be consider

industrial ac

particular pe

discretion.

coercion an

increased. I

ws that expre

ng penalties f

wever, merit

there is a nee

certain mat

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) Bill 2013 (

This sugge

uilding indus

y to building

are necessary

ction industr

oercion to co

funds are dea

is the subst

atters canvass

e an ineffectiv

ction unions

pear to regard

er. That sugg

red dispropo

ction and c

enalties from

Rather, it su

d breaches

It is recomm

essly address

for contraven

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ed for specifi

tters, the b

ding and Co

(Cth) are ver

ests that rathe

stry participa

industry par

y to deter unl

ry. General

ontribute to

alt with in Ch

tantial differe

sed in sectio

ve deterrent t

s, and judici

d financial p

gests that hig

ortionate to

oercion, par

m case to cas

uggests that

of ss 417 a

mended that th

s what is pr

ntion of them

ity of substa

c regulatory

building spec

onstruction

ry similar to

er than havin

ants, the prov

rticipants, bu

lawful condu

l amendment

superannuati

hapter 6 of th

ence in pena

on B and D a

to unlawful c

ial officers

penalties as s

gher maximu

the harm

rticularly wh

e are subject

the penaltie

and 421 sho

hey be incre

rohibited con

m.

antive indust

enforcement

cific industr

Industr y (Im

o those estab

ng separate le

visions of the

ut that amend

uct within the

ts to the FW

ion funds an

his Volume.

alties. It is

above that th

conduct on th

have noted

simply a busi

um penalties

caused by

hen the sele

t to the usua

es in the FW

ould be sub

ased to 1,00

nduct and

trial laws,

t.

rial laws

Improving

blished by

egislation

e FW Act

dments to

e building

W Act in

nd worker

apparent

he present

he part of

that the

iness cost

could not

unlawful

ection of

al judicial

W Act for

bstantially

00 penalty

474

189.

D

244 (1999) 9 245 Transfi Pty Ltd v N Energy Un Industry In 170 at [57 Postal, Plu

units for bod

strong argum

increase sho

effect the rec

them.

A second m

definition of

is arguably

worksite inc

or restriction

acceptance o

authorities o

Court in Da

held that pic

was directed

picket. The

picketing co

industrial ac

community

than one o

different for

the provisio

Davids Distr

91 FCR 463 at

eld Constructi NUW (2006) 1 nion (No 2) (20 nspectorate v C 7]-[59]. See a

umbing and All

dies corporat

ments that ev

ould be much

commended p

matter is whet

f ‘industrial a

sufficient to

luding by m

n on the per

of or offerin

on this point

avids Distribu

keting by a u

d by and to

reasoning s

ould be ‘indu

ction’ which

at large. Th

ccasion (per

rms that pick

n under con

ribution Pty

t [52].

ion Pty Ltd v A 58 IR 80 at [1 008) 170 FCR Construction, F also Communic

lied Services U

te and 200 p

ven these pe

h greater. P

penalties hav

ther picketin

action’ in s 1

o include, in

means of a pic

rformance of

ng for work

are uncertai

ution Pty Ltd

union did not

the work o

eemed to be

ustrial action

h would ha

hat decision

rhaps unsur

keting may ta

nsideration in

Ltd v Natio

AMWU [2002] 0]-[13]; Cahil 357 at [51]-[5 Forestry, Min cations, Electr Union of Austra

enalty units

enalties are t

Perhaps it is

ve, assuming

ng is caught b

19(1) of the F

n s 19(1)(b)

cket: it invol

f work by an

by an emplo

n. The Full

d v National

t fall within t

of the emplo

focused on

n’, it could

ave a preju

has been d

rprisingly, w

ake are cons

n some auth

onal Union o

FCA 171; Sa ll v Constructio 52]; Director of ing and Energ

rical, Electron alia v Laing (19

for others. T

too low, and

best to obse

g the legislatu

by the FW A

FW Act is b

), action to

lves ‘a ban, l

n employee

oyee.’ How

l Court of th

l Union o f W

the provision

oyees engage

the possibili

in turn be ‘

udicial effect

distinguished

when the nu

sidered).245 H

horities distin

of Workers c

aint-Gobain Wa on, Forestry, M f the Fair Wor gy Union [201 nic, Energy, In

998) 89 FCR 1

There are

d that the

erve what

ure adopts

Act. The

broad, and

disrupt a

limitation

or on the

wever, the

he Federal

Workers244

n unless it

ed in the

ity that if

‘protected

t on the

on more

umber of

However,

nguishing

concerned

Warehousing Mining and rk Building 5] FCAFC nformation, 17 at 32.

475

190.

191.

I

192.

246 Building 247 See Da [68]-[72].

contraventio

and Constr

contained an

action under

Picketing in

law.247 It is

that kind of

under s 418

than having

deal specific

The third ma

Improvemen

need first to

matter of c

industrial ac

more effect

significant e

cases where

time to prev

and submiss

reached abou

One final m

building and

g and Construc

avids Distribut

ns of the pro

ruction Indu

n express pro

rtaken by an o

nvolving obst

s highly anom

tortious indu

in relation to

special buil

cally with ind

atter is that u

t Act 2005 (C

obtain a stop

ommon sen

ction in the b

t. Short w

conomic effe

employers a

vent damagin

ions before t

ut that matter

matter that d

d constructio

ction Industry

tion Pty Ltd v

ohibition on u

ustry Improv

ovision defin

organisation.

truction and

malous if Fa

ustrial condu

o other types

ding industr

dustrially mot

under the Bu

Cth) industri

p order from

se, it is lik

building and

work stoppag

ect on constr

are unable to

ng industrial

the Commiss

r.

deserves con

on industry r

Improvement A

National Uni

unlawful acti

vement Act

ning unlawfu

.246

besetting is

air Work Com

uct when it c

of industrial

ry legislation

tivated picke

uilding and C

ial action is p

the Fair Wor

kely that a d

construction

ges and blo

ruction proje

o obtain a st

l action. Ho

sion do not e

nsideration i

egulator to m

Act 2005 (Cth)

ion of Workers

ion under the

2005 (Cth

ul industrial

s tortious at

mmission ca

can make sto

l action. Aga

n, the FW A

eting.

Construction

prohibited wi

rk Commissi

direct prohib

n industry wo

ockades can

ects, and ther

top order in

owever, the

enable any v

is the power

maintain enf

), ss 36-37.

s (1999) 91 F

e Building

h), which

action as

common

annot stop

op orders

ain, rather

Act should

n Industry

ithout the

ion. As a

bition on

ould have

n have a

re may be

sufficient

materials

view to be

rs of the

forcement

FCR 463 at

476

248 Under s 249 Under s 250

Under Act 2001 (C 251 Under s

proceedings.

whether sepa

raises two is

second is th

conduct. In

able indepen

unlawful con

affected by

including Fa

Work Comm

seek pecunia

compensatio

regulators ar

penalties fol

persons.

s 539 of the FW

s 310 of the FW

ss 12GBC and Cth), ss 1315,

ss 77 and 82 of

. Whether th

arate proceed

ssues. The f

e need for an

the present

ndently to ma

nduct withou

the conduct

air Work Ins

mission,249 A

ary penalties

on in respect

re prevented

llowing settle

W Act.

W(RO) Act.

d 12 GF of the 1317J of the C

f the Competiti

hat power sh

dings concern

first is the ne

n appropriate

context, it is

aintain enfor

ut being subje

t. It can be

spectors,248 t

ASIC,250 and

s while affec

t of the sam

d from maint

ement of pro

e Australian S Corporations A

on and Consum

hould be con

ning private i

eed for final

e regulatory

s important f

rcement proc

ect to the priv

e observed t

the General

the ACCC2

cted persons

e contravent

taining proce

oceedings co

Securities and I ct 2001 (Cth),

mer Act 2010 (

nstrained acc

individuals a

lity in litigat

response to

for the regula

ceedings in r

vate concern

that other re

Manager of 251 are empo

s are entitled

tions. None

eedings for p

oncerning the

Investments C

(Cth).

cording to

are settled

tion. The

unlawful

ator to be

relation to

s of those

egulators,

f the Fair

owered to

d to seek

e of those

pecuniary

e affected

Commission

477

Recomm

The build

enforce t

laws. T

commenc

according

been settl

Act 2012

Recomm

The Fair

(a) to

an

ac

an

(b) to

‘i

in

G - RIC

193.

mendation 65

ding and co

the Fair Wor

The power o

ce and main

g to whether

led. Accordi

(Cth) should

mendation 66

Work Act 20

o increase the

nd 355 (coe

ction) to 1,0

nd 200 penal

o provide th

industrial act

ndustrially m

O

Submissions

various med

unlawful a

consideration

5

nstruction in

rk Act 2009

of the build

ntain enforce

any other pr

ingly, ss 73 a

d be repealed

6

009 (Cth) be

e maximum

ercion) and

00 penalty u

lty units othe

hat picketing

tion’, and to

motivated pick

s to the Com

dia commen

activity in

n ought to b

ndustry regu

(Cth) and o

ding and co

ement procee

roceedings in

and 73A of t

d.

amended:

penalties for

ss 417(1) a

units for a co

erwise; and

g by employ

o deal specif

kets.

mmission by

ntators sugg

the buildin

be given to th

ulator continu

other existing

onstruction i

edings shoul

n respect of th

the Fair Wor

r contraventi

and 421(1)

ontravention

yees or emp

fically with

Boral in 20

ested that,

ng and co

he introducti

ue to investi

g designated

industry reg

ld not be co

he same cond

rk (Building

ions of ss 34

(prohibited

n by a body

ployee associ

the consequ

14 and state

in order to

onstruction

ion of laws s

igate and

d building

gulator to

onstrained

duct have

Industry)

43(1), 348

industrial

corporate

iations is

uences of

ements by

o combat

industry,

similar to

478

A

What is R

194.

195.

196.

252 Rackete 253 Rackete

the United

Act,252 comm

further subm

RICO?

Enacted by C

Organized C

crime by pr

lawful enterp

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wh (a)

rack

deb

ope

affe

thro (b)

coll

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acti

eer Influenced

eer Influenced

States Racke

monly know

missions on th

Congress in

Crime Contr

reventing the

prises.

d terms, the s

ul for any per

o has rece

keteering act

bt to use or

erate any ‘en

ect, interstate

ough ‘a pa

lection of an

erest or con

ivities of whi

and Corrupt O

and Corrupt O

eteer Influen

wn as RICO

he topic.

1970, RICO

rol Act of 19

e investment

scheme of RI

rson:253

eived any

tivity’ or thro

r invest that

terprise’ eng

e or foreign c

attern of ra

n unlawful

ntrol in any

ich affect, int

Organizations A

Organizations A

nced and Co

O. The Disc

was introdu

970 to seek

of unlawful

ICO is as fol

income thro

ough the coll

t money to

gaged in, or t

commerce;

acketeering

debt to acqu

y enterprise

terstate or fo

Act, 18 USC §§

Act, 18 USC §

Corrupt Orga

cussion Pape

uced as Title

to combat o

lly derived m

llows.

ough a ‘pa

lection of an

acquire, est

the activities

activity’ or

uire or main

engaged in

oreign comme

§ 1961-1968.

1962.

anizations

er sought

IX of the

organised

money in

attern of

unlawful

tablish or

of which

through

ntain any

n, or the

erce;

479

197.

198.

254 Rackete 255 Rackete 256

Rackete 257 Rackete

emp (c)

the

to c

affa

coll

to c (d)

(a)-

A ‘pattern o

activity’ the

definition o

numerous of

bribery, exto

An ‘enterpri

or ‘group o

entity’.256

A person wh

civil penalti

maximum pe

also have br

ordering div

eer Influenced

eer Influenced

eer Influenced

eer Influenced

ployed by or

activities of

conduct or p

airs through

lection of an

conspire to d

-(c).

of racketeerin

last of which

of ‘racketee

ffences includ

ortion, fraud,

ise’ includes

of individua

ho violates th

ies. Crimin

enalty of 20

road power t

vestment of a

and Corrupt O

and Corrupt O

and Corrupt O

and Corrupt O

r associated w

f which affec

participate in

h a ‘pattern

unlawful deb

do any of th

ng’ requires

h is within te

ering activit

ding, among

illegal gamb

a partnershi

als associate

he RICO pro

nal convictio

years’ impri

to restrain fu

assets, prohib

Organizations A

Organizations A

Organizations A

Organizations A

with any ente

ct, interstate

n the conduc

n of racke

bt; or

e things men

at least two

en years of a

ty’ is expa

other things

bling and ob

ip, corporatio

d in fact a

ohibitions is

on under RI

isonment.257

urther RICO

bition of enga

Act, 18 USC §

Act, 18 USC §

Act, 18 USC §

Act, 18 USC §

erprise engag

or foreign c

ct of that en

eteering act

ntioned in pa

acts of ‘rac

a previous ac

ansive and

s, murder, kid

struction of j

on, associatio

although not

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ICO gives r

United Stat

violations,

aging in the

1961(5).

1961(1).

1961(4).

1963(a).

ged in, or

commerce

nterprise’s

tivity’ or

aragraphs

cketeering

ct.254 The

includes

dnapping,

justice.255

on, union

t a legal

minal and

rise to a

tes courts

including

activities

480

199.

j

200.

Adoption

201.

258 18 USC preventing influencing union mem 259

Rackete 260 Sedima the effect caused by racketeerin the racket Organisatio 261

Rackete 262 Boral L

of an enterpr

making due p

In addition,

RICO violat

jurisdiction t

on an anteri

plaintiff mu

contrary to

business or p

In addition,

one of ‘gen

expedited.261

n in Australi

Boral subm

Australia.262

C § 1964(a). Fo g defendant uni g union affairs mbers: United S

eer Influenced

SPRL v Imrex that recovery the establishm ng activity, rec

teering activi ons’ (2015) 52

eer Influenced

Law Reform Su

rise and the d

provision for

the legislati

tion to sue to

to hear a civ

ior convictio

st show that

RICO and

property.260

the Attorney

neral public 1

ia?

mitted that

The reasoni

or example, civ ion officials fro s and prohibit States v Local 5

and Corrupt O

x Co Inc 473 U on the basis o ment, operation covery on the b

ity: see E T

2 Am Crim L Re

and Corrupt O

ubmissions, 20

dissolution an

r the rights o

ion permits

o recover treb

vil RICO clai

on for violat

t there was

that the act

y-General ma

c importance

like legisla

ing put forw

vil preventativ om holding uni ting association 560 (IBT) 974

Organizations A

US 479 at 488-of § 1962(a) or n or investmen basis of § 196 T Phillips et

ev 1507 at 155

Organizations A

15, p 70.

nd reorganisa

f innocent pe

a person inj

ble the dama

im is broad,

ion of the c

a pattern of

tivity injured

ay designate

e’ following

ation should

ard was that

ve orders have b ion office, part n between cor F 2d 315 at 34

Act, 18 USC §

-95, 479 (1985 r (b) requires nt in the enter 62(c) requires p

al, ‘Rackete 3-1554.

Act, 18 USC §

ation of an e

ersons.258

jured by rea

ages sustained

and is not d

criminal statu

f racketeering

d the plaint

a civil RICO

g which the

d be introd

legislation li

been made in R ticipating in un rrupt union of 42, 344 (3d Cir

1964(c).

5). The author proof that the rprise as oppo proof of harm eer Influence

1966.

enterprise,

ason of a

d.259 The

dependant

ute. The

g activity

tiff in its

O case as

e case is

duced in

ike RICO

RICO suits nion rallies, fficials and r 1992).

rities are to e harm was osed to the caused by

d Corrupt

481

202.

203.

204.

205.

263 Master 264 Pub L N (3rd Cir 20 265

Though Finance Tr [29] and St

would provid

engage in ra

severe penal

Further, the

legislation s

maximum pe

In contrast, M

that such le

undertaken o

The RICO l

perceived in

organised cr

numerous a

umbrella.264

and lawlessn

various piec

Crime Comm

task of comb

The genesis

number of

Builders Austr

No 91-452, 84 003); Atlas Pile

h the differenc Trust Co Ltd v N tate of South A

de a substant

cketeering ac

ties and expe

e submission

such as prev

enalty of 20 y

Master Build

gislation be

on the broade

legislation w

adequacy in

rime. In part

cts of crimi

Australia’s

ness has pr

es of Comm

mission (AC

batting seriou

of the ACC

Royal Com

ralia Law Refo

4 Stat 922 (197 e Driving Co v

ces are primar New South Wa Australia v Tota

tial deterrent

ctivity by, am

edited hearin

n outlined

ventative ord

years’ impris

ders Australi

implemente

er effect it wo

was introduce

their crimina

ticular, the l

inal organisa

journey to a

roceeded dow

monwealth an

CC) is a natio

us and organi

lies in the in

mmissions, in

orm Submission

70); United Sta v Dicon Fin Co

rily of degree ales Crime Com ani (2010) 242

t to participan

mong other th

ng dates.

the procedu

ders, divestit

sonment.

a urged caut

ed without p

ould have on

ed in the Un

al and civil la

egislation w

ations under

address system

wn a differe

nd State legis

onal statutor

ised crime.

nquiries and r

n particular

ns, 21/8/15, pp

ates v Irizarry 886 F 2d 986

e: see the disc mmission (200 CLR 1 at [37]

nts in enterpr

hings, provid

ural benefits

ture of asse

tion in recom

proper resear

n the country.

nited States

aws to addres

was intended

r a single l

mic crime, c

ent path.265

slation, the A

ry authority

recommenda

the Costiga

p 48-49, para 8

341 F 3d 273 at 990 (8th Cir

cussions in Int 09) 240 CLR 3 ].

rises who

ding more

s of the

ets and a

mmending

rch being

.263

due to a

ss serious

to collect

egislative

corruption

Among

Australian

given the

ations of a

an Royal

4.

at 292 n 7 r 1989).

ternational 19 at [25]-

482

206.

207.

266 Royal C Final Repo 267

See Na Crime Auth 268

Explana Those pow Divisions 1 269

Austral the membe the Chief E Security un each State

Commission

final report

appropriately

The consequ

establishmen

The Nationa

established o

functions of

investigatory

intelligence

functions of

Criminal Inte

The ACC o

between the

crime.269 O

evidence co

Commission on ort (1984), Vol

ational Crime hority Bill 198

atory Memoran wers are conta 1A and 2.

ian Crime and ers of the ACC Executive Offi nder the Austra

and Territory P

n into the Fed

of the Cost

y adapted, th

uence was n

nt of the Nati

al Crime Auth

on 1 January

f the two bod

y powers in

and its inve

f the Nationa

elligence and

operates to

e relevant G

Once an in

ollated is the

n the Activitie l 3, pp 166, 174

Authority Ac 3 (Cth).

ndum, Australi ained in Austr

d Commission A C Board include icer of Custom alian Security I

Police Force an

derated Ship

tigan Royal

he RICO Ac

ot the introd

ional Crime A

hority was su

2003. One o

dies was tha

order for i

estigatory ro

al Crime Au

d the Office o

provide a

Government

nvestigation

en provided

s of the Feder 4, 229.

ct 1984 (Cth);

ian Crime Com ralian Crime

Act 2002 (Cth) es the Commis ms, the Chairpe Intelligence Or

nd the Commis

Painters and

Commission

ct be implem

duction of th

Authority.267

uperseded by

of the key di

at the ACC w

it to carry o

oles.268 The

uthority, the

of Strategic C

channel of

agencies t

is undertak

to the app

ated Ship Pain

Explanatory

mmission Estab Commission A

, ss 7-7C. Sec ssioner of the A erson of ASIC, rganisation Ac

ssioner for Tax

d Dockers Un

n recommen

mented in Au

he RICO Act

y the ACC w

ifferences bet

would have

out both its

e ACC comb

Australian B

Crime Assess

information

to combat o

ken, the mat

propriate Go

nters and Dock

Memorandum

blishment Bill 2 Act 2002 (Cth

ction 7B(2) stip Australian Fede , the Director-ct 1979 (Cth), t

xation.

nion. The

nded that,

ustralia.266

t, but the

which was

tween the

access to

criminal

bined the

Bureau of

sments.

n sharing

organised

atters and

overnment

kers Union,

m, National

2002 (Cth). h), Part 2,

pulates that eral Police, -General of the head of

483

208.

209.

270 Australi 271 The po offences fr contravent various oth years’ imp persons or (Cth), ss 15 272

See Cri Criminal P (SA); Ser (Confiscati Confiscatio 273

Boral L

agency.270 T

particular leg

In addition, t

made for the

proceeds of

orders in re

offence.271

Territories.27

Having rega

recommende

already exist

intelligence

existing crim

officials and

parts of this

damages un

private parti

ian Crime and

ower to make s rom which a b ions of the ca her specified prisonment inv

a loss to the C 5B, 17-19, 47-iminal Assets R Proceeds Conf rious and Org

ion of Profits) on Act 2000 (W

Law Reform Su

The offences

gislation und

the Proceeds

e freezing an

criminal con

espect of be

Cognate le 72

ard to the e

ed that RICO

ts to seek to

gathering a

minal laws an

d employers d

Volume. Bo

nder the RIC

ies to bring

d Commission A

such orders is benefit is deriv artel provisions offences, and volving unlawf

Commonwealth 49.

Recovery Act 1 fiscation Act 2 rganised Crim Act 1993 (Ta WA).

ubmission 2015

and the resul

der which the

s of Crime A

nd forfeiture

nduct, and for

enefits deriv

egislation is

existing fram

O-style laws b

o combat seri

and investiga

nd penalties t

dealing with

oral submitte

CO legislatio

actions aga

Act 2002 (Cth),

engaged, in t ved, or serious s of the Comp indictable off ful conduct cau

h of at least $1

1990 (NSW); C 2002 (Qld); C me (Unexplain ax); Confiscati

5, p 70.

lting penaltie

offence aris

ct 2002 (Cth

of property

r the making

ved from th

s in place i

mework of

be adopted in

ious and org

ation. Furth

to deter crimi

them has bee

ed that the ab

on was a po

ainst unions.

, s 12(1).

the main, by c s offences, def etition and Co fences punisha

using or intend 0,000: see Pro

Criminal Prope Criminal Assets ned Wealth) A ion Act 1997 (

es are govern

es.

h) enables ord

that forms p

g of pecuniar

e commissio

in many St

legislation,

n Australia. T

ganised crime

her, the ade

minal conduct

en considered

bility to sue

owerful ince

.273 Howev

commission of fined in s 338 onsumer Act 2 able by more

ded to cause a oceeds of Crim

erty Forfeiture s Confiscation Act 2009 (SA (Vic); Crimina

ned by the

ders to be

part of the

ry penalty

on of an

tates and

it is not

The ACC

e through

equacy of

by union

d in other

for treble

entive for

ver, treble

f indictable to include 2010 (Cth), than three

a benefit to me Act 2002

e Act (NT); n Act 2005 A); Crime al Property

484

274 Objects tobacco ma Influenced

damages stat

least since th

scope of app

would have e

s of civil RICO anufacturers, h d Corrupt Organ

tutes have no

he early days

plication of a

effects well b

O applications h health funds, an nisations’ (201

ot found favo

after Federa

RICO-type

beyond the b

have included e nd police serv 15) 52 Am Crim

our with Aus

ation. Finally

statute274 me

uilding and c

environmental ices: see E T P m L Rev 1507 a

stralian legisl

y, the extrem

eans that its e

construction

and other prot Phillips, et al, at 1559-1566.

latures, at

mely broad

enactment

industry.

test groups, ‘Racketeer

485

486

APPENDIX A

BUILDING & CONSTRUCTION INDUSTRY LITIGATION 2000-2015

1

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

1.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1173 (penalty)

Mitcham train station, VIC

Union (CFMEU)

Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability uncontested.

Pecuniary penalties amounting to $55,125: x

$22,500 and $26,250 against the CFMEU (for 2 contraventions of s 348 FW Act);

x

$3,000 and $3,375 against Myles (for 2 contraventions of s 348 FW Act).

************************************************************ 1 Legislation Key: x

BCII Act -

Building and Construction In

dustry Improvement Act

2005 (Cth) (replaced by

Fair Work (Building Industry) Act

2012 (Cth))

x FW Act -

Fair Work Act

2009 (Cth)

x TPA -

Trade Practices Act

1974 (Cth) (repealed and replaced by the

Competition and Consumer Act

2010 (Cth))

x WR Act -

Workplace Relations Act

1996 (Cth) (repealed and replaced by

Fair Work Act

2009 (Cth))

*

487

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

2.

Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 1125 (liability)

La Scala, North Melbourne, VIC Yarra Street, North Melbourne, VIC

Union (CFMEU)

Adverse action (freedom of association) Coercion to employ or engage a particular person or independent contractor, or to allocate/designate particular duties or responsibilities.

Liability uncontested.

CFMEU and Edwards found to have contravened ss 346 and 355 of the FW Act - penalties to be determined. Respondents also to pay compensation to the employer in the amount of $18,084.

3.

Director, Fair Work Building Industry Inspectorate v Bragdon (No 2) [2015] FCA 668; 147 ALD 373 (liability) [2015] FCA 998 (penalty)

Seventh Street, Mascot, NSW

Union (CFMEU)

Contravention of right of entry provisions: Failure to produce entry permit for inspection when requested. Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.

Liability contested.

Declarations and pecuniary penalties amounting to $272,500: x

$20,000 against Bragdon (for 1 contravention of s 497 FW Act, 2 contraventions of s 500 FW Act, and 2 contraventions of s 503(1) FW Act);

x

$27,500 against Kong (for 1 contravention of s 497 FW Act, 3 contraventions of s 500 FW Act, and 2 contraventions of s 503(1) FW Act);

x

$225,000 against the

488

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

Misrepresentation(s) concerning rights of entry.

CFMEU (for contravention of ss 497, 500 and 503 FW Act by reason of s 793 FW Act).

4.

Director, Fair Work Building Industry Inspectorate v Upton [2015] FCA 672 (penalty)

Wheatstone Liquefied Natural Gas, Onslow, WA

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.

Liability uncontested.

Pecuniary penalties amounting to $24,000: x

$4,000 against Upton (for contraventions of s 500 of the FW Act on 2 occasions);

x

$20,000 against the CFMEU (for contraventions of s 500 of the FW Act on two occasions).

5.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry Mining and Energy Union (No 2) [2015] FCA 199 (liability) (No 3) [2015]

Central Apartments, Darwin, Northern Territory

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability contested.

Pecuniary penalties amounting to $45,600: x

$6,000 against Pearson (for contravening s 500 FW Act);

x

$4,600 against Olsen (for contravening s 500 FW Act);

x

$35,000 against CFMEU (for contravening s 348 FW Act).

489

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

FCA 845 (penalty)

6.

Director, Fair Work Building Industry Inspectorate v Cradden [2015] FCA 614 (penalty)

Common Ground Project Site, QLD

Union (CFMEU)

Coercion in relation to enterprise agreements.

Liability partially contested.

Declarations and pecuniary penalties amounting to $555,000: x

$30,000 against Cradden (for 6 contraventions of s 44 BCII Act);

x

$40,000 against Myles (for 4 contraventions of s 44 BCII Act);

x

$30,000 against O’Brien (for 6 contraventions of s 44 BCII Act);

x

$20,000 against Davis (for 4 contraventions of s 44 BCII Act);

x

$25,000 against Cummins (for 5 contraventions of s 44 BCII Act);

x

$400,000 against the CFMEU (for contraventions of s 44 BCII Act).

490

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

7.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 407 (penalty)

Bald Hills Wind Farm Project, VIC $400 million

Union (CFMEU)

Adverse action (workplace right). Coercion to employ or engage a particular person or independent contractor, or to allocate/designate particular duties or responsibilities. Attempting to exercise OHS law right of entry without a permit.

Liability uncontested as per earlier determination in related case ( Director, Fair Work Building Industry Inspectorate v CFMEU [2015] FCA 226)

Pecuniary penalties amounting to $109,500: x

$102,500 against the CFMEU (for 3 contraventions of s 340(1)(a) FW Act and 4 contraventions of s 355(a) FW Act);

x

$7,000 against Stephenson (for 1 contravention of s 494 FW Act and 1 contravention of s 355(a) Act).

8.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 353

Work site in Hawthorn, VIC

Union (CFMEU)

Coercion (freedom of association). Adverse action (workplace right). Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability contested for second respondent.

Pecuniary penalties amounting to $43,000: x

$28,500 against the CFMEU (for contraventions of s 343 FW Act);

x

$8,250 against Berardi (for contraventions of ss 340, 343 and 348 FW Act);

x

$6,000 against Reardon (for 1 contravention of s 343 FW Act).

491

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

9.

Director, Fair Work Building Industry Inspectorate v Merkx[2015] FCA 316

Royal Adelaide Hospital, SA

Employees Industrial action prior

to nominal expiry date of enterprise agreement.

Liability uncontested.

Pecuniary penalties amounting to $22,000 (22 employee respondents ordered to pay $1,000 each for contravening s 417 of the FW Act)

10.

Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 225 (liability) [2015] FCA 1213 (penalty)

Myer Emporium Site, Lonsdale Street, VIC McNab Site, McNab Avenue, Footscray, VIC

Union (CFMEU)

Coercion to employ or engage a particular person or independent contractor, or to allocate/designate particular duties or responsibilities. Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability contested.

Pecuniary penalties amounting to $147,500: x

$95,000 against CFMEU (for multiple contraventions of ss 348 and 355 of the FW Act on);

x

$19,750 against Setka (for multiple contraventions of ss 348 and 355 of the FW Act and 1 contravention of s 346);

x

$14,500 against Reardon (for multiple contraventions of ss 348 and 355 of the FW Act);

x

$3,000 against Christopher (for multiple contraventions of ss 348 and 355 of the FW Act);

x

$7,000 against Spernovasilis

492

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

(for multiple contraventions of ss 348 and 355);

x

$3,500 against Oliver (for multiple contraventions of ss 348 and 355 of the FW Act);

x

$5,250 against Edwards (for multiple contraventions of ss 348 and 355 of the FW Act);

x

$1,000 against Stephenson (for multiple contraventions of ss 348 and 355 of the FW Act);

x

$2,000 against Johnson (for multiple contraventions of ss 348 and 355 of the FW Act).

11.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 226 (contempt) (penalty)

Bald Hills Wind Farm Project, VIC $400 million

Union (CFMEU)

Contempt of court: Breach of court order Breach of undertaking.

Liability uncontested.

Pecuniary penalties amounting to $125,000: x

$100,000 against the CFMEU (for two charges of contempt for not complying with an undertaking);

x

$25,000 against the CFMEU (for not complying with court order to file affidavit material).

x

493

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

12.

Director, Fair Work Building Industry Inspectorate v Stephenson (2014) 146 ALD 75; [2014] FCA 1432 (penalty)

Construction projects in Adelaide, SA

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.

Liability uncontested.

Pecuniary penalties amounting to $205,100: x

$4,000 against Stephenson (for 2 contraventions of s 500 FW Act);

x

$1,000 against Smart (for 1 contravention of s 500 FW Act);

x

$3,800 against Bolton (for 2 contraventions of s 500 FW Act);

x

$1,100 against Vitler (for 1 contravention of s 500 FW Act);

x

$800 against Huddy (for 1 contravention of s 500 FW Act);

x

$4,000 against McDermott (for 1 contravention of s 500 FW Act);

x

$800 against Jarrett (for 1 contravention of s 500 FW Act);

x

$1,100 against Sloan (for 1 contravention of s 500 FW Act);

x

$3,500 against Pitt (for 1

494

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

contravention of s 500 FW Act);

x

$5,000 against Perkovic (for 1 contravention of s 500 FW Act);

x

$180,000 against the CFMEU (for all the officials’ contraventions of s 500 FW Act).

13.

Director, Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd [2014] FCCA 2257 (liability) (No 2) [2015] FCCA 177 (penalty)

Employer Contravention of a

provision of the National Employment Standards. Employer dismissed (threatened to dismiss) an employee in order to engage the individual as an independent contractor.

Liability contested.

Pecuniary penalties amounting to $39,600: x

$33,000 against Robko Constructions Pty Ltd (for contraventions of ss 44 and 358 FW Act)

x

$6,600 against Robbins (for contraventions of ss 44 and 358 FW Act).

Robko Constructions Pty Ltd ordered to pay $1,164.14 to employee affected.

14.

Director, Fair Work Building Industry

Building construction site at

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another

Liability uncontested.

Pecuniary penalties amounting to $152,600:

495

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

Inspectorate v Cartledge [2014] FCA 311 (interim injunction) [2014] FCA 1047 (penalty) [2015] FCA 453 (contempt of court)(No 2) [2015] FCA 851 (penalty for contempt of court)

50 Flinders Street, Adelaide, SA

person, or otherwise acted in an improper manner, when exercising right of entry.Contempt of court.

x

$6,000 against O’Connor (for 2 contraventions of s 500 FW Act);

x

$9,000 against Pitt (for 2 contraventions of s 500 FW Act);

x

$3,000 against Cartledge (for 1 contravention of s 500 FW Act);

x

$4,000 against Bolton (for 1 contravention of s 500 FW Act);

x

$600 against Stephenson (for 1 contravention of s 500 FW Act);

x

$130,000 against the CFMEU (for officials’ contraventions of s 500 FW Act).

$12,000 against O’Conner for acting in contempt of a court order.

15.

Director of Fair Work Building Industry Inspectorate v Luka Tippers &

Essence Apartments, Park Street, Melbourne, VIC

Employer Contravention of a

term(s) of an enterprise agreement. Contravention of a

Liability uncontested.

Pecuniary penalties amounting to $10,000: x

$8,000 against Luka Tippers & Excavation Pty Ltd (for

496

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

Excavation Pty Ltd [2014] FCCA 1459 (penalty)

provision of the National Employment Standards. Adverse action (workplace right). Adverse action (freedom of association).

contraventions of ss 50, 44, 340(1)(a) and 346 FW Act);

x

$2,000 against Maric (for contraventions of ss 50, 44, 340(1)(a) and 346 FW Act).

16.

Director, Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd [2014] FCCA 1017 (liability) (No.2)

[2014]

FCCA 1328 (penalty)

Employer Contravention of term

of modern award. Failure to comply with compliance notice.

Liability contested.

Pecuniary penalties amounting to $21,420: x

$17,850 against Robko Construction Pty Ltd (for contravention of ss 45 and 716 of the FW Act);

x

$3,570 against Robbins (for contravention of ss 45 and 716 of the FW Act).

497

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

17.

Director, Fair Work Building Industry Inspectorate v Baulderstone Pty Ltd [2014] FCCA 721 (liability) (No 2) [2015] FCCA 2129 (penalty)

Edmund Barton Building Project, Canberra, ACT

Employer Adverse action

(freedom of association).

Liability contested.

Pecuniary penalties amounting to $32,000: x

$25,000 against Baulderstone Pty Ltd (for contravention of s 346 FW Act);

x

$3,500 against Razlog respondent (for contravention of s 346 FW Act);

x

$3,500 against Kidman respondent (for contravention of s 346 FW Act).

18.

Grocon Constructors (Victoria) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2)

(2014) 241

IR 288; [2014] VSC 134 (liability and penalty) Construction, Forestry, Mining and Energy Union

Emporium and McNab Construction sites, VIC

Union (CFMEU)

Criminal contempt of court

Liability contested.

$1.15 million against CFMEU for being in criminal

contempt

of a

court order.

498

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

v Grocon Constructors (Victoria) Pty Ltd; Construction, Forestry, Mining and Energy Union v Boral Resources (Vic) Pty Ltd [2014] VSCA 261 (appeal)

19.

Brookfield Multiplex Engineering and Infrastructure Pty Ltd v McDonald [2014] FCA 389 (penalty)

Mundaring Water Treatment Plant, WA

Union (CFMEU)

Adverse action (freedom of association). Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity. Industrial action prior to nominal expiry date of enterprise agreement.

Liability uncontested.

Pecuniary penalties amounting to $123,000: x

$21,000 against McDonald (for contraventions of s 346 FW Act, s 348 FW Act and contraventions of s 417 FW Act);

x

$7,000 against Molina (for contraventions of s 346 FW Act, s 348 FW Act and s 417 FW Act);

x

$95,000 against the CFMEU (for contraventions of s 346 FW Act, s 348 FW Act and s 417 FW Act).

499

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

20.

Brookfield Multiplex FSH Contractor Pty Ltd v McDonald [2014] FCA 359 (penalty)

Fiona Stanley Hospital Project, WA

Union (CFMEU)

Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity. Industrial action prior to nominal expiry date of enterprise agreement.

Liability uncontested.

Pecuniary penalties amounting to $61,000: x

$9,500 against McDonald (for 1 contravention of s 348 FW Act and 1 contravention of s 417 FW Act);

x

$3,500 against Pallott (for 1 contravention of s 348 FW Act and 1 contravention of s 417 FW Act);

x

$48,000 against the CFMEU (for a contravention of s 348 FW Act and 1 contravention of s 417 FW Act).

CFMEU agreed to pay $250,000 in compensation for losses arising from statutory breaches.

21.

Director, Fair Work Building Industry Inspectorate v McDermott (2014) 140 ALD 337; [2014] FCA 160

Harris Scarfe construction project, SA

Union (CFMEU)

Coercion to employ or engage a particular person or independent contractor, or to allocate/designate particular duties or responsibilities.

Liability uncontested.

Pecuniary penalties amounting to $17,820: x

$1,320 against McDermott (for 1 contravention of s 355 FW Act);

x

$16,500 against the CFMEU (for 1 contravention of s 355 FW Act).

500

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

(penalty)

22.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2014] FCA 126

Construction site at 901 William Street, Northbridge, WA

Union (CFMEU)

Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability uncontested.

Pecuniary penalties amounting to $35,640: x

$5,940 against McDonald (for 3 contraventions of s 348 FW Act);

x

$29,700 against the CFMEU (for 3 contraventions of s 348 FW Act).

23.

Director, Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No 7) [2013] FCCA 1097 (liability) (No 8) [2014] FCCA 225 (appeal) (No 9) [2014] FCCA 1124 (penalty)

384-386 Flinders Lane, Melbourne, VIC

Employer Misrepresented

employment as an independent contracting arrangement (a contract for services).

Liability contested.

Pecuniary penalties amounting to $313,500: x

18 contraventions of s 900 of the WR Act;

x

77 contraventions of s 357 of the FW Act;

x

Contravening an enterprise agreement.

501

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

[2015] FCAFC 99 (penalty appeal)

24.

Director, Fair Work Building Industry Inspectorate v Myles [2013] FCCA 2229 (liability) [2014] FCCA 1429 (penalty)

Work site at 123 Albert Street, Brisbane, QLD

Union (CFMEU and BLF)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.

Liability contested.

Pecuniary penalties amounting to $38,500: x

$4,950 and declaration against Myles (for 1 contravention of s 500 FW Act);

x

$4,950 and declaration against Pearson (for 1 contravention of s 500 FW Act);

x

$2,200 and declaration against Treadaway (for 1 contravention of s 500 FW Act);

x

$26,400 against the CFMEU (for 1 contravention of s 500 FW Act).

25.

Director, Fair Work Building Industry Inspectorate v McDonald

Citic Pacific Sino Iron Ore Mine, Karratha, WA

Union (CFMEU and CFMEUW)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $193,600: x

$17,600 against McDonald (for 2 contraventions of s 38 BCII Act);

502

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

[2013] FCA 1431 (penalty)

x

$88,000 against the CFMEU (for 2 contraventions of s 38 BCII Act);

x

$88,000 against the CFMEUW (for 2 contraventions of s 38 BCII Act).

26.

Brookfield Multiplex FSH Contractor Pty Ltd v McDonald [2013] FCA 1380 ( contempt

)

(penalty)

Fiona Stanley Hospital Project, WA

Union (CFMEU)

Contempt of court order.

Liability uncontested.

$40,000 against McDonald for contempt of a court order.

27.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCCA 2130 (penalty)

Brisbane Convention and Exhibition Centre, QLD Construction site at 123 Albert Street, Brisbane, QLD Multi-level car park at

Union (CFMEU and BLF)

Unlawful industrial action.

Liability uncontested.

$55,500 pecuniary penalty against the CFMEU and BLF (jointly and severally) (for 1 contravention of s38 BCII Act).

503

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

Brisbane Airport, QLD $140 million

28.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 1014 (penalty)

Peninsula Link Project, VIC Southern Link Upgrade, VIC Alliance Project, VIC $759 million

Union (CFMEU)

Unlawful industrial action. Coercion in relation to engagement of building employees and building contractors.

Liability uncontested.

Pecuniary penalties amounting to $230,000: x

$155,000 against the CFMEU (for 3 contraventions of s 43 BCII Act);

x

$11,000 on Doyle (for 1 contravention of s 43 and 1 contravention of s 38 BCII Act);

x

$29,000 on Stephenson (for 3 contraventions of s 43);

x

$24,500 on Powell (for 2 contraventions of s 43);

x

$5,000 on MacDonald (for 1 contravention of s 43 and 1 contravention of s 38);

x

$3,000 on Benstead (for 1 contravention of s 38);

x

$2,500 on John Parker (for 1 contravention of s 38).

504

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

29.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 981 (penalty)

Florey Neuroscience Institute at the Austin Hospital, Heidelberg, VIC $119 million

Union (CFMEU)

Industrial action prior to nominal expiry date of enterprise agreement.

Liability uncontested.

Pecuniary penalties amounting to $15,000: x

$12,500 against the CFMEU (for 1 contravention of s 417 FW Act);

x

$2,500 against Beattie (for 1 contravention of s 417 FW Act).

30.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 846 (penalty)

Translation Research Institute Project, QLD Queensland Institute of Medical Research Centre Project, QLD Carrara Stadium Project, QLD $150 million

Union (CFMEU and CEPU)

Coercion in relation to enterprise agreements. Coercion in relation to engagement of building employees and building contractors.

Liability uncontested.

Pecuniary penalties amounting to $119,000: x

$99,000 against the CFMEU (for contravening ss 43(1)(b) and 44 BCII Act);

x

$20,000 against the CEPU (for 1 contraventions of s 43(1)(b) BCII Act).

505

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

31.

Director, Fair Work Building Industry Inspectorate v Buildpower Pty Ltd [2013] FCCA 1037 (liability) (No 2) [2013] FCCA 2236 (penalty)

Building sites in VIC

Employer Contravention of the

Australian Fair Pay and Conditions Standard.

Liability contested.

Pecuniary penalties amounting to $39,660: x

Buildpower Pty Ltd ordered to pay $33,000 in compensation to Mr Alcantara (for contraventions of ss 182 and 226 WR Act, and s 546 FW Act);

x

$6,600 against Slabbert (for contraventions of ss 182 and 226 WR Act, and s 546 FW Act).

32.

Director, Fair Work Building Industry Inspectorate v Zion Tiling Pty Ltd [2013] FCCA 769 (liability) [2013] FCCA 1288 (penalty)

WA Employer Contravention of a

provision of the National Employment Standards. Contravention of term of modern award. Breach of obligation to maintain employee records. Failure to comply with compliance notice.

Liability contested.

Pecuniary penalties amounting to $23,740: x

$19,800 against Zion Tiling Pty Ltd (for 1 contraventions of ss 44, 45, 535 and 716 FW Act)

x

$3,960 against Tae Young Yoon (for contraventions of ss 44, 45, 535 and 716 FW Act).

x

Zion and Yoon ordered to pay $6,000 compensation to Mr Choi

506

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

33.

Director of Fair Work Building Industry Inspectorate v Giovanni Italiano [2013] FCCA 530 (penalty)

VIC Employer Contravention of a

provision of the National Employment Standards.

Liability uncontested.

Pecuniary penalties amounting to $9,300: x

$1,800 against Italiano (for contravention of s 44 FW Act)

x

Italiano ordered to pay Mr Gerges $7,500 in compensation fo

r losses

34.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCA 515 (penalty)

Ashwood Chadstone Gateway Project, VIC Other St Hilliers construction sites in VIC: Ararat prison; Watsonia Military Camp; Carlton apartment and social housing project; Canterbury housing

Union (CFMEU)

Coercion in relation to engagement of building employees and building contractors.

Liability uncontested.

Pecuniary penalties amounting to $115,000: x

$84,000 against the CFMEU(for 8 contraventions of s 43 BCII Act);

x

$10,500 against Beattie (for 2 contraventions of s 43 BCII Act);

x

$9,500 against Berardi (for 2 contraventions of s 43 BCII Act);

x

$4500 against Theodorou (for 1 contravention of s 43 BCII Act);

x

$3500 against Bell (for 1 contravention of s 43 BCII Act);

x

$3000 against Pitt (for 1

507

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

complex $365.8 million

contravention of s 43 BCII Act).

35.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FMCA 160 (penalty)

Royal Melbourne Institute of Technology site, VIC $25 million

Union (CFMEU)

Action taken or threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability uncontested.

CFMEU ordered to pay a pecuniary penalty of $10,000 for contravening s 348 of the FW Act.

36.

Director, Fair Work Building Industry Inspectorate Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2013] FCA 82

West Werribee Dual Water Supply Project, VIC $40 million

Union (AMWU)

Coercion to employ or engage a particular person or independent contractor, or to allocate/designate particular duties or responsibilities.

Liability contested.

Concerns that s 355 had been breached resulted in an injunction against AMWU from: x

Preventing or hindering access to and egress from the site;

x

Counselling, procuring, encouraging or persuading any person not to enter the site;

x

Counselling, procuring, encouraging or persuading any person not to work at the

508

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

site.

37.

Director of Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2012) 271 FLR 7; [2012] FMCA 946 (first instance) [2013] FCAFC 53 (appeal) (No 2)

[2013]

FCCA 1255 (penalty)

Peninsula Project, Burswood, WA $700 million

Union (CFMEU and CFMEUW)

Industrial action prior to nominal expiry date of collective agreement/ workplace determination.

Liability contested.

Pecuniary penalties amounting to $7,260: x

$3,300 against the CFMEU (for 1 contravention of s 494(1) WR Act);

x

$3,300 against the CFMEUW (for 1 contravention of s 494(1) WR Act);

x

$660 against McDonald (for 1 contravention of s 494(1) WR Act).

38.

Director, Fair Work Building Industry Inspectorate v Sutherland (Unreported, FCCA,

Gold Coast Hilton Hotel, QLD Wintergarden shopping precinct, Brisbane,

Union (CFMEU and CEPU)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $65,000: x

$50,000 against the CFMEU (for 2 contraventions of s 38 BCII Act);

x

$15,000 against the CEPU (for 1 contravention of s 38

509

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

BRG1008/2011, Burnett J, 19 July 2013)(penalty)

QLD $700 million

BCII Act).

39.

Lend Lease Project Management Construction (Australia) Pty Ltd v Construction, Forestry, Mining and Energy Union (No 5)

[2012]

FCA 1144 (injunction application) (No 6 )

[2012]

FCA 1273

Gold Coast University Hospital, QLD $1.76 billion Supreme and District Courts, Brisbane, QLD $570 million

Union (CFMEU and CEPU)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $590,000: x

$550,000 against the CFMEU and CEPU (jointly and severally liable) payable to Lend Lease (for 1 CEPU contravention of s 38 BCII Act and 12 CFMEU contraventions of s 38 BCII Act);

x

$6,450 against Pearson (for 4 contraventions of s 38 BCII Act);

x

$6,450 against Vink (for 2 contraventions of s 38 BCII Act);

x

$4,300 against O’Doherty (for 2 contraventions of s 38 BCII Act);

x

$7,750 against Hanna (for 6 contraventions of s 38 BCII Act);

510

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY x

$6,450 against Jarvis (for 4 contraventions of s 38 BCII Act);

x

$6,450 against Olsen (for 2 contraventions of s 38 BCII Act);

x

$2,150 against Malone (for 1 contravention of s 38 BCII Act).

40.

Director of Fair Work Building Industry Inspectorate v Supernova Contractors Pty Ltd [2012] FMCA 935 (penalty)

QLD Employer Misrepresented

employment as an independent contracting arrangement (a contract for services).

Liability uncontested.

Pecuniary penalties amounting to $11,880: x

Supernova Contractors Pty Ltd ordered to pay $9,900 for contravening s 357 FW Act;

x

Long ordered to pay $1,980 for contravening s 357 of FW Act.

511

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

41.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2012] FMCA 916 (penalty)

Rosso Apartments, Carlton, VIC

Union (CFMEU)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $25,000: x

$7,500 against Hudson (for one contravention of s 38 BCII Act);

x

$17,500 against the CFMEU (for one contravention of s 38 BCII Act by reason of vicarious liability for the conduct of Hudson).

42.

Radisich v McDonald [2012] FMCA 919 (penalty)

Herdsman Business Park Project, WA

Union (CFMEU)

Unlawful industrial action. False or misleading statement about the obligation/need to be (or not to be) a member of an industrial association or about the requirement to disclose membership status.

Liability uncontested.

Pecuniary penalties amounting to $34,980: x

$6,380 against McDonald (for 1 contravention of s 790(1) WR Act and 1 contravention of s 38 BCII Act);

x

$28,600 against the CFMEU (for 1 contravention of s 790(1) WR Act and 1 contravention of s 38 BCII Act).

512

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

43.

Helal v Brookfield Multiplex Ltd [2012] FCA 653 (penalty)

Southbank One project, VIC $100 million

Union (CFMEU)

Coercion in relation to engagement of building employees and building contractors.

Liability uncontested.

CFMEU ordered to pay a pecuniary penalty of $30,000 for contravening s 43(1) BCII Act.

44.

Director, Fair Work Building Industry Inspectorate v Mates[2012] FMCA 475 (penalty)

81 Lorimer Street, Docklands, VIC $5 million

Union (CFMEU)

Adverse action (freedom of association).

Liability uncontested.

$3,500 pecuniary penalty against Mates (for 2 contraventions of s 346 FW Act).

45.

Australian Building and Construction Commissioner v Christopher [2012] FMCA 589 (penalty)

RMIT Building Re- development, 379-405 Russell Street, Melbourne, VIC $25 million

Union (CFMEU)

Unlawful industrial action.

Liability uncontested.

$20,000 pecuniary penalty against the CFMEU (for 1 contravention of s 38 of BCII Act.

513

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

46.

Australian Building and Construction Commissioner v Bollas [2012] FCA 484

Penders Grove Primary School, VIC

Union (CFMEU)

Misrepresentation about another person’s obligation to engage in industrial activity.

Liability uncontested.

$2,000 pecuniary penalty against Bollas (for 1 contravention of s 349(1)(a) FW Act).

47.

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2012] FCA 189 (penalty)

Caroline Springs Square Shopping Complex, VIC $30 million

Union (CFMEU)

Unlawful industrial action.

Liability uncontested.

$50,000 pecuniary penalty against the CFMEU (for contravening s 38 of the BCII Act).

48.

Hogan v Jarvis [2012] FMCA 189 (penalty)

Gold Coast University Project, QLD $1.76 billion

Union (CFMEU)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $46,860: x

$36,300 and declarations against the CFMEU (for 1 contravention of s 38 BCII Act);

x

$7,260 and declarations against Jarvis (for 1 contravention of s 38 BCII Act);

514

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY x

$3,300 and declarations against Temoho (for 1 contravention of s 38 BCII Act).

49.

Cozadinos v Construction, Forestry, Mining and Energy Union [2012] FCA 46 (liability) (2013) 231 IR 278; [2013] FCAFC 8 (appeal) [2013] FCA 1243 (penalty)

Epsom Shopping Centre, Bendigo, VIC $10 million

Union (CFMEU)

Coercion in relation to enterprise agreements.

Liability contested.

$20,000 pecuniary penalty against the CFMEU (for contravening s 44 of the BCII Act).

50.

Australian Building & Construction Commissioner v Doyle(Unreported, FMCA, Turner FM,

Safeway Beaconsfield, VIC $7 million

Union (CFMEU)

Failure to comply with right of entry provisions: Failure to produce entry permit for inspection when requested.

Liability uncontested.

Pecuniary penalties amounting to $26,000: x

$6,500 against the CFMEU (referable to 1 contravention of s 497 FW Act);

x

$6,500 against the CFMEU (referable to 1 contravention

515

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

MLG859/2010, 5 October 2011) Lukies v Doyle (Unreported, FMCA, Burchardt FM, MLG1502/2010, 14 December 2011)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner. Attempting to exercise OHS law right of entry without a permit. Misrepresentation(s) concerning right of entry.

of s 500 FW Act);

x

$13,000 against the CFMEU (referable to 1 contravention of each of ss 756 and 768 of the WR Act.

51.

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2011] FCA 1518 (penalty)

140 William Street, Perth, WA $40 million

Union (CFMEU)

Unlawful industrial action. Coercion in relation to enterprise agreements.

Liability partially contested.

Pecuniary penalties amounting to $231,000: x

$154,000 and declarations against the CFMEU (for 4 contraventions of s 38 BCII Act);

x

$38,500 and declarations against the CFMEU (for 1 contravention of s 44 BCII Act);

x

$30,800 and declarations

516

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

against McDonald (for 4 contraventions of s 38 BCII Act)

x

$7,700 and declarations against McDonald (for 1 contravention of s 44 BCII Act).

52.

United Group Resources Pty Ltd v Calabro (No 5)

(2011) 198

FCR 514; [2011] FCA 1408 (liability) (No 6)

[2012]

FCA 431 (application to amend orders) (No 7)

(2012) 203

FCR 247; [2012] FCA 432 (penalty)

Pluto LNG Project, WA $15 billion

Employees Unlawful industrial

action. Industrial action prior to nominal expiry date of enterprise agreement. Contravention of an order.

Liability contested.

Pecuniary penalties ordered against respondents: x

$1,300 (wholly suspended) for each day the respondents breached s 38 of BCII Act and ss 417 and 421 FW Act;

x

$1,200 (wholly suspended) for each day the respondents breached s 38 of BCII Act and s 421 of FW Act;

x

$1,100 (wholly suspended) for each day the respondents breached s 38 of BCII Act and s 417 of FW Act;

x

$1,000 (wholly suspended) for each day the respondents breached s 38 of BC II Act;

x

$300 for two respondents who breached s 417 and 421 FW Act (but not s 38 of the

517

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

BCII Act).

53.

Australian Building and Construction Commissioner v Gray [2011] FMCA 919 (penalty)

ANZ Docklands Project, VIC $600 million

Union (CEPU) Action taken or

threatened w

ith intent

to coerce another person to engage in industrial activity.

Liability uncontested.

$10,000 pecuniary penalty against the CEPU (for 1 contravention of s 348 of the FW Act).

54.

Director, Fair Work Building Industry Inspectorate v Abbott ( No 5)

(2011) 211

IR 267; [2011] FCA 950 (liability) (2012) 209 FCR 448; [2012] FCAFC 178 (successful appeal in relation to Upton and CFMEU)

North West Shelf LNG Plant, WA $27 billion

Employees Union (CFMEU) - successfully appealed

Unlawful industrial action. Industrial action prior to nominal expiry date of collective agreement/workplace determination. Failure to comply with an order of an Australian Industrial Relations Commissioner. Failure to comply with the terms of a Union Collective Agreement.

Liability contested by the majority of respondents

Pecuniary penalties ordered against 117 employee respondents for contravening s 38 BCII Act, s 496(1) WR Act and two union collective agreements (some respondents ½ suspended).

518

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

( No 6)

[2013]

FCA 942 (penalty)

55.

Woodside Burrup Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FCA 949 (penalty)

Pluto LNG Project, WA $15 billion

Union (CFMEU)

Unlawful industrial action.

Liability uncontested.

Pecuniary penalties amounting to $85,800: x

$71,500 against the CFMEU (for 2 contraventions of s 38 BCII Act);

x

$14,300 against McDonald (for 2 contraventions of s 38 BCII Act).

56.

White v Benstead [2011] FMCA 920 (penalty)

Preston Pump Station, VIC $17 million

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.Misrepresentation(s) concerning right of entry.

Liability uncontested.

Pecuniary penalties amounting to $13,000: x

$10,000 against the CFMEU (for 1 contravention of each of ss 500 and 503 FW Act);

x

$2,000 against Benstead (for 1 contravention of s 500 FW Act);

x

$1,000 against Beattie (for 1 contravention of s 503 FW Act).

57.

Australian Building and Construction

The Crescent Dee Why, NSW

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another

Liability uncontested.

Pecuniary penalties amounting to $12,500:

519

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

Commissioner v Mitchell [2011] FMCA 622 (penalty)

person, or otherwise acted in an improper manner, when exercising right of entry.

x

$2,500 against Mitchell (for 1 contravention of s 500 FW Act);

x

$5,000 against the CFMEU (for 1 contravention of s 500 FW Act);

x

$5,000 against the CFMEU (NSW) (for 1 contravention of s 500 FW Act).

58.

Gregor v Construction, Forestry, Mining and Energy Union [2011] FMCA 562 (penalty)

Tullamarine Construction Project, VIC $65 million

Union (CFMEU)

Permit holder(s) intentionally hindered or obstructed another person, or otherwise acted in an improper manner, when exercising right of entry.

Liability uncontested.

Pecuniary penalties amounting to $6,000: x

$5,000 against the CFMEU (for 1 contravention of s 767(1) WR Act);

x

$1,000 against Travers (for 1 contravention of s 767(1) WR Act).

520

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

59.

Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2011] FCA 810 (penalty) [2012] FCAFC 44 (appeal) [2012] FCA 966 ( contempt

)

Commercial Office Tower, 915 Hay Street, Perth, WA Queens Riverside Project, Perth, WA

Union (CFMEU)

Unlawful industrial action.

Liability contested.

Pecuniary penalties amounting to $150,000: x

$120,000 against the CFMEU (for 3 contraventions of s 38 BCII Act);

x

$17,000 against McDonald (for 2 contraventions of s 38 BCII Act);

x

$13,000 against Buchan (for 3 contraventions of s 38 BCII Act).

$150,000 against the CFMEU and McDonald for contempt: x

$100,000 against the CFMEU (for contempt of court on two occasions);

x

$50,000 against McDonald (for contempt of court on two occasions).

Pecuniary penalties amounting to $50,000: x

$40,000 against the CFMEU (for 2 contraventions

521

*

CASE NAME & CITATION

PROJECT & VALUE

UNION/ EMPLOYER

NATURE OF CONDUCT

LIABILITY

PENALTY

contravention of s 44 BCII Act);

x

$10,000 against McDonald (for 2 contraventions of s 44 BCII Act).

60.

Australian Building and Construction Commissioner v Graauwmans (Unreported, FMCA, Riley FM, MLG912/2011, 16 April 2012) (penalty)

Barwon Heads Bridge Project, VIC $23 million

Union (CFMEU)

Unlawful industrial action.

Li