COALITION SENATORS'
DISSENTING REPORT

1.1        Coalition Senators are disappointed that this Private Senators Bill did not have a full and detailed inquiry and note that there was not even a hearing into this Bill.

1.2        Coalition Senators welcome the broad community consensus for this Bill including from one of Australia’s most prominent union bosses Mr Paul Howes of the Australian Workers Union:

UNION leader Paul Howes has backed the Coalition's plan to toughen penalties for union bosses who misuse members' funds, declaring he has no issue with moves to impose similar punishments to those faced by company directors.

...

“I actually believe there is a higher responsibility for us as guardians of workers' money to protect that money and to act diligently and honestly,” Mr Howes told the ABC.

“The reality is I do not have any issue with increasing the level of requirements and penalties on trade unions for breaching basic ethics like misappropriation of funds.[1]

1.3        However, Coalition Senators are not surprised that many submitters to the inquiry did not emphatically support the proposed Bill given many submitters are themselves, or represent, registered organisations.

1.4        This Bill is not designed to benefit registered organisations but to act in the national interest and in the interests of individual members of registered organisations.

1.5        From the outset, Coalition Senators reject assertions, including from Workplace Relations Minister Bill Shorten, that:

It is not good enough that the only things they’ve announced in workplace relations is union baiting and union bigotry. It is not enough for them to smear everyone in the union movement with the actions of a few and say, therefore, all unions are the same.[2]

1.6        Coalition Senators firmly believe that unions and employer organisations have an important role in the community. Unions were established to service the needs of their membership in the full range of industrial matters. This role has now expanded to a provision of a range of other services.

1.7        The behaviour exposed in Fair Work Australia’s Report of the Delegate to the General Manager of Fair Work Australia in relation to the Investigation into the National Office of the Health Services Union under section 331 of the Fair Work (Registered Organisations) Act 2009 and ongoing media reports relating to the misuse of union members’ money is of great concern to Coalition Senators.

1.8        While Coalition Senators recognise that this behaviour is not the norm and by and large officers of registered organisations are hardworking and diligent in their duties, these scandals have exposed loopholes and a culture that has been allowed to develop due to inadequate oversight and penalties.

1.9        Coalition Senators also recognise that the Australian Council of Trade Unions commissioned a report to be conducted by former Federal Court judge Rod Madgwick.

1.10      The report is understood to recommend a code of conduct and an ombudsman to investigate complaints.

1.11      Coalition Senators congratulate Mr Paul Howes who, according to reports, told the Australian Workers’ Union Annual Conference last month:

...that unions should be held to a higher account than the corporate sector and there should be "zero tolerance" for corruption.

His union, among others, has already moved to publish officials' pay rates in its annual report and introduce financial management training.[3]

1.12      It is regrettable that these reforms were only initiated in response to overwhelming public reaction.

1.13      Coalition Senators also welcome the statement by ACTU secretary Dave Oliver that there was no place in the union movement for the 'gross misuse of members’ money'.[4] Coalition Senators are in strong agreement and welcome the self-initiated reforms of the ACTU. This Bill would support the ACTU’s reforms by ensuring that there are strong penalties in place for any officer of a registered organisation who breaks the law and betrays their high office.

1.14      Coalition Senators note that officers of Registered Organisations need only be concerned with this Bill if they have been engaged in conduct that would be in breach of the law.

Registered Organisations and Corporations

1.15      The Committee’s Report notes an observation from the Australian Council of Trade Unions that there is ‘no parallel between the nature of the power exercised by corporations and the power exercised by unions’.[5]

1.16      Coalition Senators agree that trade unions, and indeed registered organisations, are different to corporations. Indeed, it was a Coalition Government who created a separate act to govern registered organisations and this Bill makes amendments to the Fair Work (Registered Organisations) Act 2009 and does not seek to bring registered organisations under the Corporations Act 2001.

1.17      That said, Coalition Senators do believe that – in relation to the discharge of duties – that the same responsibilities should apply to a union boss as to a company boss. At present this is not the case, for example:

Mr Smith is the CEO of The Book Corporation and is found to have misused $50,000 of shareholders' money in contravention of his duties to the Corporation and its membership in an intentionally dishonest manner under the Corporations Act 2001. Under section 184 of the Corporations Act 2001, Mr Smith could be subject to a maximum fine of 2,000 penalty units and five years’ imprisonment as well as further civil and criminal offences i.e. fraud.

1.18      However:

If Mr Smith is the Secretary of the Bookkeepers Union and is found to have misused $50,000 of union members’ money in contravention of his duties to that union and its membership in an intentionally dishonest manner under the Fair Work (Registered Organisations) Act 2009, Mr Smith would not be liable for any criminal penalty but may be liable for further civil and criminal offences i.e. fraud.

1.19      Coalition Senators believe that the duties and penalties with regard to the proposed new section 288A, as taken from section 184 of the Corporations Act 2001, will act as a deterrent for officers of registered organisations.

1.20      The provisions of this Bill do not seek to impose additional regulation or red tape on registered organisations but do make it clear that if officers of registered organisations do the wrong thing, there will be very severe penalties, something that appears to be supported in the ACTU’s submission:

...we recognise that the conduct that would amount to breaches of the proposed duties are sufficiently serious to attract criminal sanctions...[6]

1.21      Coalition Senators also note that a number of provisions from the Corporations Act in a similar vein (ss.180-183) already appear in the Fair Work (Registered Organisations) Act 2009 (ss.285-287). This is demonstrated at Attachment 1.

1.22      Coalition Senators also note the Institute of Public Affairs submission to the Committee’s inquiry into the Fair Work (Registered Organisations) Amendment Bill 2009:

Unions are large financial entities. For example, the 2010 financial report of the Victorian Branch of the CFMEU Construction and General Division reported net assets of $42 million. In 2011 the ANF Victorian Branch held $22 million in net assets. The NSW division of United Voice reported $25 million in net assets in 2011. If these unions were classed as proprietary companies they would be considered large corporations.[7]

1.23      Coalition Senators conclude that it is in the national interest and in the interests of members of registered organisations to ensure that there is an equivalent high standard set as between directors of corporations and officers of registered organisations in this regard.

Recent changes to the Act

1.24      Coalition Senators note the sentiment expressed by the Government that penalties were recently ‘tripled’, however a basic look at these penalties shows that they are still totally inadequate.

1.25      The maximum penalty, for example, for a union boss who misuses millions of dollars members' funds at present is just $10,200. Coalition Senators contend that this is not a sufficient deterrent value to stop breaches of the Act that have come to light in recent time.

1.26      While some submitters have contended that enhanced penalties may act as a disincentive to people who may wish to voluntarily participate in registered organisations, Coalition Senators believe the most important consideration is enhanced transparency and peace of mind for members of registered organisations, therefore Coalition Senators support increased penalties in line with this Bill.

Lodging of Reports

1.27      The IPA submission noted that in the most recent annual report of Fair Work Australia some 37 per cent of reports that are required to be filed with the Commission are not filed within the target timeline.

1.28      Coalition Senators also note a comprehensive response to Question on Notice 2543 asked by Senator Abetz which details widespread non-compliance with the required timelines which is at Attachment 2.

1.29      Given the lax attitudes towards lodging these reports on time, Coalition Senators believe it is appropriate to add a new section which will allow for further action to be taken should a reporting unit fail to lodge the required reports on time or if those reports are lacking.

1.30      Coalition Senators commend the Fair Work Commission for taking the initiative to employ a forensic accountant to ensure that reports are thoroughly examined and to commit additional resources to its regulatory function in relation to registered organisations. While this is just one step in the right direction, the Commission is to be commended on taking these positive steps in the absence of additional legislation.

1.31      It has been a welcome step to see allegations of impropriety investigated by the Commission in a more speedy manner. Coalition Senators note that, according to the Commission’s website, there are four inquiries and five investigations as follows:

Current inquiries

• Tasmanian Branch of United Voice (formerly known as the Liquor, Hospitality and Miscellaneous Union)-commenced 23 July 2012
• Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia-commenced 4 September 2012
• National Office of the Australian Salaried Medical Officers Federation –commenced 28 January 2013
• Electrical, Energy and Services Division NSW Branch of the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia – commenced 11 February 2013.

Current investigations

• Australian Childcare Centres Association – commenced 23 November 2012
• Musicians' Union of Australia (separate investigations concerning each of the Federal Office, the Sydney Branch, the Melbourne Branch and the Hobart Branch) – commenced 23 November 2012
• Australian Salaried Medical Officers Federation, Queensland Branch – commenced 23 November 2012
• CPSU, the Community and Public Sector Union, SPSF Group, Queensland Branch – became an investigation 7 December 2012 (after commencing as an inquiry on 21 September 2012)
• Australian Nursing Federation, Western Australian Branch – commenced 3 January 2013.

1.32      While it is regrettable that any registered organisation should need investigation, it is comforting that there is a more robust examination of matters that are reported both to the Commission and in the media.

Court Orders

1.33      Coalition Senators have noted with great concern a disregard by some registered organisations for orders issued by courts of law. A recent example is the order for an injunction against the Construction Forestry Mining and Energy Union (CFMEU) which the Chief Justice of the Supreme Court of Victoria, Hon. Marilyn Warren AC issued on 22 August 2012, an order which was ignored by the CFMEU and its officials.

1.34      The CFMEU, in particular, has a history of illegal conduct over many years culminating in fines and penalties of more than $3 million since 2005 for breaches of the Building and Construction Industry Improvement Act 2005.

1.35      Indeed, the Federal Court observed in one case in June of 2011 that the national governing councils of the CFMEU:

...are either unable or unwilling to curb the unlawful activities of the [Victorian] branch.[8] 

1.36      Coalition Senators are deeply troubled by the comments of the Maritime Workers Union WA Branch Secretary Chris Cain who according to a Maritime Union of Australia press release:

...speaking in his usual straightforward and strong militant views, told the delegates: "Laws need to be broken, you're going to get locked up. Because if you want equality in this country, you need to take action," said Cain.[9]

1.37      On the same day that Workplace Relations Minister Bill Shorten, addressing the Maritime Workers Union said:

There's no other place I'd rather be today anywhere in Australia, and I mean this with all my heart, than here with you.

This is a pretty impressive conference because you get a sense there's something happening here.

You get the sense that you're a union who is determined to be true to its members and determined to stand up for its members it is very, very palpable.

I wish we could bottle a bit of the spirit here and spread it on perhaps some of the members in the Labor caucus because nothing is gone until it's over.[10]

1.38      Coalition Senators firmly believe in the rule of law and that the laws of States, Territories and the Commonwealth must be obeyed. Compliance with court orders is fundamental to sustain a respected and effective legal system.

1.39      The Institute of Public Affairs submission expresses a concern about recent activities:

26. A most detrimental feature of the Australian workplace relations system is the propensity of some union officials to act as if they are above the law. The defiance of court orders regrettably has occurred too often. This is compounded when many of the orders are made against industrial conduct that is itself unlawful.

27. Defiance of the rule of law in this way cannot be tolerated. Organisations that enjoy many statutory protections and privileges should face severe penalties when they choose to ignore the law by defying orders of the courts.

28. Those who observe workplace relations have noticed a gap in the attitude to legal rights and obligations by a number of practitioners. The registered organisations’ rights to the protections of the law are strongly defended. A commitment to respecting unfavourable court orders is less evident.[11]

1.40      Coalition Senators are disappointed that such a provision is required in a Bill but confronted with the activities of some officers of registered organisations in recent times, it is a sad reality that this provision is needed.

1.41      This provision, which will make it a specific offence of an officer or an employee of an organisation or a branch to breach a court order, in addition to other powers of a court to deal with such breaches, is welcome and supported.

Conclusion

1.42      Coalition Senators welcome this Bill as an important step forward to protect members of registered organisations and the rule of law, but in doing so recognise the overwhelming need for further reform in this area and endorse the Coalition’s Better Plan for Accountability and Transparency of Registered Organisations.

Recommendation: That the Senate pass the Bill

 

Senator Chris Back Deputy Chair

Senator Bridget McKenzie

Attachment 1 (PDF 207KB)

Attachment 2 (PDF 1715KB)

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