Bills Digest no. 61, 2017–18
PDF version [682KB]
Jaan Murphy
Law and Bills Digest Section
2 January 2018
Contents
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Senate Education and Employment
Legislation Committee
Senate Standing Committee for the
Scrutiny of Bills
Broad delegation of administrative
powers
Procedural fairness
Exclusion of merits review
Policy position of non-government
parties/independents
Opposition
Australian Greens
Other non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions: financial
management obligations
Reportable loans, grants and
donations – current provisions
Proposed definition of reportable
loans, grants and donations
Proposed reporting obligations in
relation to reportable loans, grants and donations
Details to be reported
Other obligations
Penalties
Privacy protection measures
Commencement of new obligations in
relation to reportable loans, grants and donations
Records of use of credit cards
Definition of a credit card
Obligations related to credit cards
held by a reporting unit
Obligation related to other credit
cards not held by a reporting unit
Penalties
Policies in relation to financial
management and accountability
Compliance with policies and duties
of officers
Model policies in relation to
financial management and accountability
Commencement of obligations regarding
financial management and accountability policies
Key issues and provisions: regulation
of worker entitlement funds
RCTUGC findings in relation to worker
entitlement funds
RCTUGC conclusions about the effect
of the current regulatory regime
What did the RCTUGC recommend?
Overview of the regulatory model
adopted by the Bill
Commencement dates relating to worker
entitlement funds
Key definitions
Worker entitlement
Worker entitlement fund
Single employer funds
Operator of a worker entitlement fund
Registration of worker entitlement
funds effectively mandatory
Criminal offence for
operating an unregistered fund
Civil penalty for
contributions to unregistered WEFs
Registration process
Consideration of applications
Appeal rights in relation to
registration decisions
When does registration takes effect?
Overview of conditions of
registration
One operator
Operator is a constitutional
corporation and not an organisation
Compliance with conditions
Equal treatment of members
Limits of classes of members
Constitutional requirements
Officers and staff of the operator
must be of good fame and character
Two types of independent directors
Fund to be managed at arm’s length
|
Arrangements to ensure contributions
and income retains their character
Compliance with worker entitlement
fund rules
Provision of annual audited reports
Informing the Commission about
certain changes
Provision of information to the
Commission, contributors and members
Disclosure of certain information and
documents
Training requirements
Authorised uses of contributions
Authorised uses of income
Restrictions on distributions of
income or capital
Human rights criticism of the
registration requirements for worker entitlement funds
Other provisions related to
authorised uses of contributions and income
Worker entitlement fund rules
What can be prescribed by the WEF
Rules?
Types of funds regulated
Constitutional requirements
Capital adequacy and liquidity
requirements
Governance
Specific impact on annual and audit reports
Limits on the rule-making power of
the Minister
Consequences of non-compliance with
conditions other than de-registration
Civil penalties
Table 1: proposed civil penalties for
non-compliance with registration conditions
Infringement notice regime
De-registration of worker entitlement
funds
Show cause notice
Mandatory de-registration following
the issue of a show-cause notice
Discretionary de-registration
following the issue of a show-cause notice
Natural justice requirements
Deregistration on other grounds
Post-deregistration obligations
Reinstatement of registration
Appeal rights in relation to
deregistration decisions
Information gathering and sharing
powers
Information sharing powers
Publishing of annual reports of WEFs
Transitional rules for WEFs
Key issues and provisions:
prohibition on terms requiring payment to WEFs
Modern awards and payments to WEFs
Enterprise agreements, employment
contracts and payments to WEFs
Application of
prohibitions of certain terms
Human rights
concerns
Key issues and provisions:
prohibition of election payments
Human rights concerns
Key issues and provisions: coerced
payments to employee benefit funds
Human rights concerns
Key issues and provisions:
disclosable arrangements
Proposal differs from the
recommendation of the RCTUGC
Who is covered by the disclosable
arrangements regime?
What is a disclosable arrangement?
Disclosable arrangements rules
Limits on the rule-making power of
the Minister
What must be disclosed?
Consideration for services provided
by officers of organisations
Consideration for services provided
by officers of employers
Criticisms of deeming consideration
provided to officers to be a financial benefit
Who must disclosure be made to?
How must the disclosure be made?
When must the disclosure be made?
Other obligations
Penalties for non-disclosure and
other matters
Table 2: proposed civil penalties
for non-compliance with disclosure and related obligations
Alternative disclosure methods
Publication by the Commissioner of
disclosure documents
Application of amendments
Other provisions
Concluding comments
Date introduced: 19 October 2017
House: House of Representatives
Portfolio: Employment
Commencement: Various commencement dates as set out in clause 2 of the Bill and referred to in the body of this Bills Digest.
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.
When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at January 2018.
Purpose of
the Bill
The purpose of the Fair Work Laws Amendment (Proper Use of
Worker Benefits) Bill 2017 (the Bill) is to amend the Fair Work
(Registered Organisations) Act 2009 (the FWRO Act), the Fair Work Act 2009
(the FW Act) and other legislation to:
- impose
new governance and transparency requirements on registered organisations by
requiring registered organisations to:
- keep
credit card records and to report certain loans, grants and donations
- adopt,
and periodically review, financial management policies that are binding on all
officers and employees of the organisation
- disclose
the financial benefits obtained by them and persons linked to them in
connection with:
- employee
insurance products
- employee
welfare fund arrangements and
- training
fund arrangements.
- impose
new governance and transparency requirements on entities related to registered
organisations such as worker entitlement funds and other similar funds
- create
a registration process for worker entitlement funds and apply governance,
financial reporting and financial disclosure requirements to them
- prohibit
terms of a modern award or an enterprise agreement requiring or permitting
contributions for the benefit of an employee to be made to any fund other than a
superannuation fund, a registered worker entitlement fund or a registered
charity
- require
any term of a modern award or enterprise agreement that names a worker
entitlement fund or insurance product to allow an employee to choose another
fund or insurance product
- prohibit
any term of a modern award, enterprise agreement or contract of employment
permitting or requiring employee contributions to an election fund for an
industrial association and
- prohibit
any action with the intent to coerce an employer to pay amounts to a particular
worker entitlement fund, superannuation fund, training fund, welfare fund or
employee insurance scheme.
Structure
of the Bill
This Bill is divided into five Schedules:
- Schedule
1 contains amendments to the FWRO Act relating to financial management
and accountability of registered organisations.
- Schedule
2 deals with the regulation of worker entitlement funds.
- Schedule
3 deals with election payments.
- Schedule
4 deals with coerced payments to employee benefit funds.
- Schedule
5 deals with disclosable arrangements, such as employee insurance schemes.
Background
Organisations registered under the FWRO Act have
certain rights under the FW Act and other legislation, including in
relation to bargaining for enterprise agreements. Registered organisations that
represent the interests of employees include trade unions and professional
associations, whilst registered organisations that represent the interests of employers
or an industry are referred to as employer organisations.
Registered organisations (organisations) occupy a unique
position within Australia's workplace relations system. Whilst they represent
the interests of their members, organisations also seek to advance their own
interests.
For example, organisations may set up (usually via a
‘joint venture’ with other industry parties, such as employers) various forms
of worker entitlement funds (WEFs). These are then used to fund various
employee entitlements such as redundancy pay (thus representing the interests
of their members).[1]
Generally—as with other managed investment funds—income that is identified as
excess to the forecast requirements of the WEF may be distributed to the
parties who set up the WEF from time to time (thus representing the interests
of the organisation itself).
The Royal Commission into Trade Union Governance and
Corruption (RCTUGC) examined the operation of worker entitlement funds and
related entities.
The Bill responds to the recommendations made by the RCTUGC
in relation to the regulation and oversight of WEFs and related issues such as
disclosure of certain benefits arising from specified arrangements between
registered organisations and employers and the types of terms that can be
included in modern awards, enterprise agreements and employment contracts in
relation to WEFs.
The Bill also introduces governance, record keeping and
transparency requirements on organisations.
Committee
consideration
Senate
Education and Employment Legislation Committee
The Bill has been referred to the Senate
Education and Employment Legislation Committee for inquiry and report by
10 November 2017. Details of the inquiry are on the inquiry
homepage.[2]
The majority of the Committee recommended that the Bill be
passed subject to one recommendation.[3]
Labor and the Greens both issued dissenting reports,
recommending that the Senate reject the Bill.[4]
Amongst other things, Labor considers:
[...] the provisions of the Bill that prevent worker
entitlement funds from being able to distribute excess capital and/or income to
the Sponsors is punitive and political rather than fair and logical and that a
large part of the intent of the legislation is premised not for good governance
nor to protect members’ benefits but to stop funds flowing to our Sponsors’.[5]
The Greens described the Bill as ‘yet another example of the
government’s determination to erode workers’ rights and undermine unions in an
effort to reduce the effectiveness of their collective power’.[6]
Both Labor and the Greens were concerned with the perceived
lack of consultation on the Bill.[7]
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills (the
Committee), after considering the Minister’s responses to its initial scrutiny
concerns,[8]
remained concerned with a number of elements of the Bill.[9]
Broad
delegation of administrative powers
In relation to the infringement notice regime contained in
proposed section 329MB, the Committee considered that it would be
appropriate to amend the Bill to confine persons authorised to issue
infringement notices to officers with specified attributes, qualifications or
qualities.[10]
Procedural
fairness
Proposed Subdivision B of Division 5 of proposed Part
3C provides a deregistration process for non-compliant registered WEFs. Proposed
section 329MK states that this Subdivision is taken to be an exhaustive
statement of the requirements of the natural justice hearing rule in relation
to the Commissioner's decision to deregister a registered WEF.
The Committee noted the Minister's advice that proposed
sections 329MG and 329MK are not intended to exclude the natural
justice hearing rule, but stated:
... the Minister's response does not address why proposed
section 329MK, which provides that the Subdivision is taken to be an exhaustive
statement of the requirements of the natural justice hearing rule, is necessary
and appropriate. The committee reiterates that the natural justice hearing rule
enables the courts to consider whether a hearing provided prior to an adverse
decision is fair in the circumstances of the case, including in the statutory
context of the power being exercised.[11]
The Committee further noted that the effect of proposed
section 329MK would be that the only applicable procedural fairness
requirements are those set out in the Subdivision, and therefore concluded that
in ‘the absence of a satisfactory response as to why it is necessary and
appropriate to provide that proposed Subdivision B provides an exhaustive
statement of the natural justice hearing rule’ the Committee reiterated its
scrutiny concerns and ‘leaves to the Senate as a whole the appropriateness of
excluding aspects of the natural justice hearing rule in relation to the
deregistration process’.[12]
Exclusion
of merits review
Proposed section 329MA provides the Commissioner
with the power to direct the operator of a registered WEF to take, or stop
taking, one or more actions. Proposed section 329NI lists a number of
decisions made by the Commissioner that are reviewable by the Administrative
Appeals Tribunal (AAT). Proposed section 328MA is not listed in proposed
section 329NI. This means that decisions are not subject to any form of
merits review.
The Committee noted the Minister's advice that:
- decisions
taken under proposed section 329MA are directed towards ensuring
compliance with the conditions for registration of a WEF and ‘are thus properly
characterised as law enforcement in nature’ and
- non-compliance
with a direction given under proposed section 329MA is subject to a
civil liability action and judicial review of the Commissioner's direction
under proposed section 329MA is available.
The Committee concluded that as it was not clear that
determinations made under proposed section 329MA are of a law
enforcement nature, ‘it remains unclear why it would be inappropriate to allow
merits review of the Commissioner's decision’.[13]
Policy
position of non-government parties/independents
Opposition
As noted above, the Australian Labor Party opposes the Bill.[14]
Shadow Minister for Employment and Workplace Relations, Brendan O’Connor
stated:
We are concerned about the construction of
this Bill... There are too many questions yet to be answered, as I said from the
outset, about the details of the Bill for Labor to give it support, even
qualified support.[15]
Australian Greens
The Greens oppose the Bill. In the second reading debate in
the House of Representatives, Adam Bandt stated that the short time given for consideration
of the Bill:
... suggests that the government's purpose is not at all to
improve governance in the sector. Yet again this is purely an ideological stick
to beat up people with. That's all it is... So, pardon me if we don't take you on
trust, government, and if we don't accept that this is all just about tidying
up some loose ends.[16]
Other
non-government parties/independents
At the time of writing the position of other non-government
parties/independents was not clear.
Position of
major interest groups
Almost all trade unions and operators of funds that are
likely to be captured by the reforms proposed in Schedule 2 oppose the Bill.[17]
Objections to specific aspects of the Bill are noted below in the Key Issues
and provisions sections of this digest.
Employer and industry associations are generally
supportive of the Bill.[18]
However the Master Plumbers' and Mechanical Services Association of Australia,
which represents plumbing contractors throughout Australia (some of which are
employers) opposed the Bill.[19]
Financial
implications
The Explanatory
Memorandum states that ‘the Bill will have a minor financial impact’ on the
Commonwealth.[20]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[21]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights (PJCHR)
raised a number of concerns with the Bill and has sought advice from the
Minister on a number of issues.[22]
Whilst the relevant issues are explored in detail below
under the Key Issues and Provisions parts of this digest, in brief the
PJCHR had concerns regarding:
- the
compatibility of the proposed prohibition on any term of a modern award or an
enterprise agreement requiring or permitting contributions for the
benefit of an employee to be made to any fund other than a superannuation fund,
a registered WEF or a registered charity with the rights to freedom of
association and just and favourable conditions at work[23]
- whether
the requirement that WEFs be registered and meet certain conditions relating to
financial management, board composition, disclosure and how money is spent is
compatible with the rights to freedom of association and just and favourable
conditions at work (which includes the right of workers to autonomy of union
processes, organising their administration and activities and formulating their
own programs without interference)[24]
- the
compatibility of the proposed prohibition on any term of a modern award,
enterprise agreement or contract of employment from requiring or permitting
employee contributions to an election fund with the right to just and
favourable conditions at work (which includes the right to collectively
bargain)[25]
and
- the
compatibility of the proposed prohibition on any person organising, taking or
threatening to take any action (other than protected industrial action) with
the intent to coerce a person to pay amounts to a particular WEF,
superannuation fund, training fund, welfare fund or employee insurance scheme
with the rights:
- to
strike (which is an aspect of the right to freedom of association and the right
to form and join trade unions) and
- to
freedom of assembly and expression.[26]
At the time of writing, the Minister’s response to these
concerns had been received, but was not publically available.[27]
Key issues
and provisions: financial management obligations
Schedule 1 of the Bill seeks to introduce a number of
new financial management obligations into the FWRO Act, to reflect
issues identified by the RCTUGC and its associated recommendations (9, 10, 17
and 39).[28]
Schedule 1 will commence on the earlier of a day to be fixed by proclamation, or
six months after Royal Assent.[29]
Reportable
loans, grants and donations – current provisions
Currently section 237 of the FWRO Act requires
organisations to provide the Commissioner of the Registered Organisations
Commission (ROC) with statements about loans, grants and donations over $1,000
made by the organisation, including details about the amount
involved, the purpose of the loan, grant or donation and the name and address
of the person to whom the loan, grant or donation was provided.
A failure to lodge such statements with the ROC or making
false and misleading statements about such loans, grants and donations attract
civil penalties of up to 100 penalty units.[30]
The statements lodged with the ROC must be available for inspection by members
of the organisation during office hours.[31]
Proposed
definition of reportable loans, grants and donations
Proposed subsections 237(1A) and (1B), at item
5 of Schedule 1 to the Bill, define reportable loans, grants and
donations as:
- a
loan, grant or donation exceeding $1,000
- a
loan, grant or donation of $1,000 or less made by the
organisation to a person during the financial year, if the total value
of loans, grants and donations made by the organisation to the person during the
financial year exceeds $1,000 and
- a
loan, grant or donation of $1,000 or less made to the
organisation by a person during the financial year, if the total value
of loans, grants and donations made to the organisation by the person during
the financial year exceeds $1,000.
Proposed reporting
obligations in relation to reportable loans, grants and donations
Proposed subsection 237(1) provides that organisations
will have to lodge with the Commissioner of the ROC (the Commissioner) annual statements
that include the details of each reportable loan, grant or donation. That is,
loans, grants and donations:
- over
$1,000 made by, or to, an organisation during a financial year
and
- under
$1,000 made by or to the organisation if the total
of those loans, grants and donations being provided to, or received from, an
individual would together exceed $1,000 within a financial year.
In contrast to the present situation, under the Bill details
of relevant loans, grants and donations made to the organisation (and
not just those made by it) must be provided to the Commissioner on
an annual basis.
Details to
be reported
The relevant details that must be reported to the Commissioner
are:
- the
name and address of the person to whom a reportable loan was made, and the
arrangements for repayment of the loan[32]
- the
name and address of the person who made a reportable loan to the organisation,
and the arrangements for repayment of the loan[33]
- the
name and address of the person to whom a reportable grant or donation was made[34]
and
- the
name and address of the person who made a reportable grant or donation to the
organisation.[35]
However, in relation to reportable loans, grants and
donations made to persons by the organisation, the name and address do not need
to be reported if the loan, grant or donation was made to ‘relieve a member of
the organisation, or a dependant of such a member, from severe financial
hardship’.[36]
Other
obligations
Section 293J of the FWRO Act requires organisations to
prepare officer and related party disclosure statements (ORPDS). An ORPDS must
contain details regarding the top five most highly remunerated officers and
payments made to related parties and declared persons or bodies. Further, section
252 of the FWRO Act requires organisations and branches of organisations
to keep proper financial records, and also details the purposes for which
financial records must be kept.
Proposed paragraph 252(1)(d), at item 12 of
Schedule 1, imposes a specific obligation on reporting units to keep financial
records in a manner that will enable an ORPDS to be prepared in accordance with
section 293J of the FWRO Act for the organisation to which the reporting
unit relates or, if the reporting unit is made up of one or more branches, each
such branch. (‘Reporting unit’ is defined at section 242 of the FWRO Act.
If an organisation is not divided into branches, the ‘reporting unit’ is the
whole of the organisation. If an organisation is divided into branches, each branch
will be a ‘reporting unit’ unless alternative arrangements are authorised by
the FWC.)
Penalties
Currently subsection 252(5) of the FWRO Act requires
organisations to keep the financial records required under subsection 252(1) for
at least seven years after the completion of the relevant transactions. The
amendment to proposed subsection 252(5), at item 13 of Schedule
1, provides that a civil penalty of up to 100 penalty units will apply for
failures to comply with the requirement to retain records.
Privacy
protection measures
The Bill contains a number of measures designed to protect
the privacy of individuals captured by the disclosure and reporting obligations
pertaining to reportable loans, donations and grants. As noted above the
address of an individual or entity does not need to be reported if the
reportable loan, grant or donation was made to ‘relieve a member of the
organisation, or a dependant of such a member, from severe financial hardship’.[37]
Further, proposed subsection 237(4A), at item 6
of Schedule 1, provides that the Commissioner must omit from the reportable
loan, grant and donation statements any residential addresses and also
has the discretion to omit any other personal information to ‘protect the
privacy of such information during an inspection’ of the statements by members
of the organisation.[38]
Commencement
of new obligations in relation to reportable loans, grants and donations
Item 17 of Schedule 1 provides that the new
obligations in relation to reportable loans, grants and donations will apply in
relation to financial years commencing on or after the day item 17 commences.
Records of
use of credit cards
Proposed section 252A of the FWRO Act, at item
14 of Schedule 1, provides that statements or records relating to certain
credit card expenditure must be retained by reporting units. The misuse of
credits cards was an issue of major concern to the RCTUGC, and is reflected in its
recommendation 10. The Government argues that by:
Requiring that reporting units retain records relating to
credit card expenditure will ensure that relevant records are available if ever
they should be needed for the purpose of an investigation.[39]
Definition
of a credit card
Proposed subsection 252A(7) defines credit card in an
operationally flexible manner as including items known as credit or charge
cards and similar items. It is similar to the definition used in other
legislation.[40]
Obligations
related to credit cards held by a reporting unit
Where a reporting unit is the holder of a credit card
account, proposed subsection 252A(2) provides that it must keep credit
card statements or copies of those statements provided by the issuer of a
credit card.
Obligation
related to other credit cards not held by a reporting unit
Where the reporting unit does not hold the account for a
credit card, proposed subsection 252A(3) provides that the reporting
unit must keep records of a particular use of that credit card in accordance with
proposed subsection 252A (4). The subsection will apply if:
- the
organisation to which the reporting unit relates or a branch that is, or is
part of, the reporting unit, is obliged to make a payment to the credit card
account in relation to that use and
- the
user of the credit card was an officer of the organisation to which the
reporting unit relates, or an officer of a branch that is or is part of the
reporting unit and
- the
use of the credit card was on behalf of, or purportedly on behalf of, the
reporting unit in the course, or purported course of, performing the officer’s
duties in relation to the reporting unit.
The obligation to keep records of credit card use in the
circumstances covered above applies whether or not the credit card is held by
an officer of the organisation to which the reporting unit relates or a branch
that is (or is part of) the reporting unit. It also applies whether or not the
credit card is also used in ways other than those covered by proposed
subsection 252A(3).[41]
However, the obligation does not require the reporting unit to keep records of
a particular use of a credit card where that use is not covered by proposed
subsection 252A(3).[42]
Proposed subsection 252A(4) provides that a record
of a particular use of a credit card must include the information on the credit
card statement about the use. However, a reporting unit is not prevented from
redacting information from that statement that is not relevant to the reportable
transaction.[43]
The reference to a reporting unit being ‘obliged to make a
payment to the credit card amount’ includes circumstances where the reporting
unit either has to pay the credit card account itself, or is obliged to
reimburse:
- the
holder of the credit card account or
- another
person who pays, or is obliged to pay, an amount to the credit card account.[44]
Penalties
The effect of items 11 and 12 of Schedule 1 is
that failure to keep the specified credit card records will attract a civil penalty
of up to 100 penalty units.[45]
Policies in
relation to financial management and accountability
Currently paragraph 141(1)(ca) of the FWRO Act provides
that organisations must have rules that require the organisation and its
branches to ‘develop and implement’ policies relating to the expenditure of the
organisation or branch. Whilst developing and implementing such policies would
appear to encompass their application to all officers and employees, the
amendments proposed by the Government are more directive and detailed. As a
result they are likely to operate to remove any uncertainty about their
application to all officers and employees of the organisation or branch.
Item 2 of Schedule 1 repeals paragraph 141(1)(ca) of
the FWRO Act. In its place, item 16 inserts proposed Division
5 of Part 2A of Chapter 9 of the FWRO Act which deals with policies
in relation to financial management and accountability. Proposed subsection
293N(1) provides that an organisation and any branch of it must, at all times,
have written policies:
- are
approved by the committee of management of the organisation or branch and
- are
binding on all officers and employees of the organisation or branch.
Further, at a minimum there must be policies that are ‘not
inconsistent with’ the FWRO Act[46]
dealing with the following matters in relation to the organisation or branch:
- financial
decision-making
- receipts
- levels
of authorisation of expenditure
- credit
cards
- procurement
- hospitality
and gifts
- the
establishment, operation and governance of related parties
- any
other matters prescribed by the regulations.[47]
The above policies must be reviewed at least once during
the four years after their initial approval, and subsequently at least once every
four years after the completion of the last review.[48]
They must also be provided to the Commissioner no later than 28 days after the
policy is first approved by the committee of management of the organisation or
branch, a review of the policy is completed or a material change is made to the
policy.[49]
A failure to comply with the above requirements attracts a civil penalty of up
to 100 penalty units.[50]
Copies of the policy must also be made available to
members of the organisation or branch via its website, or given to members.[51]
Compliance
with policies and duties of officers
Proposed section 293P of the FWRO Act, at item
16 of Schedule 1, provides that when determining whether an officer or
employee of an organisation or branch has breached various financial management
duties set out in Division 2 of Part 2 of Chapter 9 of the FWRO Act, which
sets out general duties in relation to the financial management of
organisations, regard may be had to whether the officer or employee complied
with the mandatory and binding policies discussed above.
Model
policies in relation to financial management and accountability
Currently section 142A of the FWRO Act enables the
Minister to make model rules about the expenditure of organisations or
branches. Item 3 of Schedule 1 will repeal section 142A. In its place, proposed
section 293R provides that the Commissioner (rather than the Minister) may
publish model policies in relation to the matters discussed above, which
organisations or branches can adopt in whole or part and with or without
modification.
Commencement
of obligations regarding financial management and accountability policies
Item 18 of Schedule 1 has the effect of ensuring
that organisations and branches will have six months from the date upon which item
18 commences to develop financial management and accountability policies that
comply with the new obligations discussed above. However, as paragraph
141(1)(ca) of the FWRO Act continues to have effect during that period,
organisations and branches will still be required to ‘develop and implement’
policies relating to the expenditure of the organisation or branch, as
discussed above.
Key issues
and provisions: regulation of worker entitlement funds
Schedule 2 deals with regulation of worker entitlement funds
(WEFs). Broadly speaking a WEF can be defined as a fund established for the
purpose of funding employee entitlements such as redundancy pay, sick leave and
other similar entitlements.[52]
According to the RCTUGC the typical features of a WEF are:
- they
are established as ‘joint ventures’ between industry parties (that is a union(s),
employer(s) or employer organisation(s), although some do not involve employer
organisations)
- operated
by a trustee company, the directors of whom are associated with the industry
parties
- pursuant
to enterprise agreements negotiated with a particular union, employers make
regular payments on behalf of workers into a particular WEF
- the
WEF will commonly provide a financial benefit to the industry parties
- under
the rules of the WEF, employees will be entitled to receive certain benefits
(for example, sick leave or redundancy pay) including in some circumstances,
retirement benefits, age-related benefits and death benefits, provided certain
conditions are satisfied and
- the
rules of the WEF will be set out in a trust deed entered into between the
corporate trustee and the industry parties, but the ‘trust deed can be, and
often is, amended from time to time’.[53]
RCTUGC
findings in relation to worker entitlement funds
The RCTUGC examined the current regulation of WEFs under the
Corporations Act
2001, the Fringe
Benefits Tax Assessment Act 1986 (FBTA Act) and in particular
the impact of ASIC Class
Order [CO 02/314] (the Class Order), which has been repealed and
effectively replaced by the ASIC Corporations
(Employee redundancy funds relief) Instrument 2015/1150 (the Relief
Instrument). The Australian Securities and Investments Commission (ASIC) noted
that the relief provided by the Relief Instrument was the same as that provided
by the Class Order.[54]
However, ASIC also noted that as part of its consultation process the following
issues were raised:
- whether
employee redundancy funds would actually meet the definition of a 'managed
investment scheme' in the Corporations Act and
- if
they did, whether they should be subject to the managed investment and
associated provisions in the Corporations Act and
- a
12-month extension to the relief was inadequate and that the relief should be
extended for a longer period.[55]
ASIC decided to extend the interim relief for employee
redundancy funds by 24 months to sunset on 1 October 2018 in
consideration of the submissions received, and announced that:
ASIC intends to conduct a full policy review and to conduct
further consultation before the relief provided under the new instrument
sunsets or expires.[56]
Whilst beyond the scope of this digest to explore, the RCTUGC
noted that the effect of the Class Order (now replaced by the Relief
Instrument) was to exempt WEFs from a range of governance, reporting and
oversight requirements that would otherwise be imposed on WEFs as, in the view
of the RCTUGC, they are captured by the definition of a managed investment
scheme contained in the Corporations Act.[57]
RCTUGC
conclusions about the effect of the current regulatory regime
The RCTUGC concluded that a ‘startling consequence’ of the
operation of Class Order (and therefore the Relief Instrument) is that WEFs
‘are not subject to any mandatory disclosure requirements’.[58]
The RCTUGC also noted that as a result of the operation of the Class Order (and
therefore the Relief Instrument):
- there
is no statutory requirement on WEFs to provide annual reports or accounts to
persons with an interest in the fund
- there
is no requirement that the entities operating WEFs treat different types of
members (for example, union or non-union workers) who hold interests of the
same class equally and those who hold interests of different classes ‘fairly’
and
- WEFs
‘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’.[59]
The RCTUGC also noted:
- on
a ‘proper construction’ of the FBTA Act, WEFs 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, but in practice
many WEFs ‘avoid this limitation in practice’ by ‘treating the income generated
in a prior financial year as capital, and they then distribute the capital to
industry parties’
- the
absence of any requirement for one or more independent directors on the board
of directors of companies operating WEFs ‘can lead to significant deadlocks
where, as is commonly the case, unions and employer organisations have equal
representation’
- although
the FBTA Act ‘has the effect of imposing some minimum governance
requirements’ on WEFs those requirements ‘are by no means comprehensive’ and do
not include a requirement that directors and managers involved in the WEF ‘be
of good fame and character’ or deal with the forfeiture of workers’ interests
and
- it
is ‘not usual to impose indirect regulation on an entity’ through taxation
legislation such as the FBTA Act.[60]
The RCTUGC noted that there were three possible reform
options that could deal with the above issues:
(1) revocation or amendment
of the Class Order (replaced by the Relief Instrument)
(2) amendment of the relevant
conditions in the FBTA Act and
(3) introducing
specific legislation subjecting WEFs to governance, supervision and reporting requirements
‘overseen by an appropriate regulator’.[61]
What did
the RCTUGC recommend?
The RCTUGC, whilst arguing that the retention of the Class
Order after its sunset date ‘was inappropriate’ nonetheless considered that:
... 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.[62]
Ultimately, the RCTUGC concluded that the FBTA Act
required amendment and the preferable course of action was to ‘introduce
specific legislative provisions governing worker entitlement funds, either in
the Corporations Act 2001 (Cth) or in a standalone Act’.[63]
It therefore recommended:
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.
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.[64]
In this regard, the regime proposed by the Bill differs
somewhat from the recommendations of the RCTUGC as noted below where
appropriate.
Overview of
the regulatory model adopted by the Bill
In summary the Bill proposes:
- the
ROC, rather than ASIC, is the primary regulator of WEFs
- registration
of WEFs will effectively be mandatory and will be contingent on certain
on-going conditions being complied with
- WEFs
be subject to stringent rules regarding the allowable uses of member’s
contributions and capital of the fund and
- the
Minister is granted substantial powers that can determine a range of matters
impacting on the internal governance of operators of WEFs.
Commencement
dates relating to worker entitlement funds
Parts 1 to 3 of Schedule 2 (the substantive amendments
creating the proposed regime and its transitional rules) will commence on the
earlier of a day to be fixed by proclamation, or six months after Royal Assent.[65]
Part 4 of Schedule 2 (which deals with pre-commencement applications by funds
for registration as a WEF) commences the day after the Act receives the Royal
Assent.[66]
The commencement of Part 5 of Schedule 2 is linked to the commencement of the Fair
Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017,
which is currently before the Senate.[67]
Key
definitions
Worker
entitlement
Proposed section 329HB of the FWRO Act, at item
13 of Schedule 2 to the Bill, defines a ‘worker entitlement’
as any payment:
- in
respect of or in lieu of leave (however described)
- that
is an employment termination payment or any other payment in relation to
termination of employment or
- payable
by an employer to an employee under a fair work instrument or contract of
employment.
Worker
entitlement fund
A ‘worker entitlement fund’ is defined expansively in proposed
section 329HC as funds whose purposes are or include paying worker
entitlements (discussed above) to fund members. Fund members are defined in
proposed subsection 329HC(2) as workers:
- in
respect of whom contributions are made or
- in
respect of whom transfers from other funds of amounts that relate to worker
entitlements are made.
A WEF is also defined as including funds whose purposes
include paying worker entitlements to the dependants (in the event of the
worker’s death) or legal representatives of fund members.[68]
The Explanatory Memorandum notes ‘the question of a fund’s purpose is a
question of fact to be determined in light of evidence such as the fund’s
constituting documents’.[69]
Proposed paragraph 329HC(1)(b) enables the worker entitlement
fund rules (WEF Rules) to prescribe additional funds for the purpose of this
definition. The Government argues allowing the WEF Rules (which are legislative
instruments and hence subject to the usual Parliamentary scrutiny and
disallowance processes) to prescribe types of funds not covered by the proposed
definition as WEFs:
... is necessary as the Royal Commission did not deal
comprehensively with all types of funds. It is important and appropriate to
provide scope to add to the definition as the need arises to address any gaps
or attempts to circumvent the intent of the registration provisions.[70]
However, proposed subsection 329HC(3) provides that
certain types of funds such as superannuation funds and registered charities
are excluded from the definition of a WEF. In addition, proposed subsection
329HC(4) excludes single-employer funds from the definition of a WEF
unless an election for the fund under proposed section 329HD is in
effect (discussed below).
The effect of the definition of a WEF is that any fund
(other than those of a type specifically excluded) that provides any or all of
the range of benefits identified by the RCTUGC as usually being provided by
such funds will be captured by the definition.
Single employer
funds
As noted above, single-employer funds are excluded from the
definition of a WEF. Proposed section 329HD defines ‘single-employer
fund’ as a fund:
- that
has purposes that include paying worker entitlements to fund members or their
death benefits dependants or legal personal representatives
- that
is controlled by a single employer (this includes trusts where the employer is
or appoints the trustee) and
- to
which all contributions are made in respect of employees of the employer.
Despite being excluded from the definition of a WEF, proposed
subsection 329HD(3) allows the operator of a single-employer fund to elect
for the fund to be a WEF.
Operator of
a worker entitlement fund
Proposed subsection 329HE(1) defines the ‘operator’
of a WEF that is a trust to be the trustee, or each trustee, of the fund. The
note to the proposed subsection states that it a condition for registration of
a WEF that the fund has no more than one operator.[71]
A person who merely:
- acts as an agent or employee of another person or
- takes
steps in accordance with a constitution that comply with the conditions
regarding winding up a WEF or remedying a defect that led to the WEF being
deregistered.[72]
Registration
of worker entitlement funds effectively mandatory
Proposed section 329JA provides that it is an offence
to operate an unregistered WEF. Proposed section 329JB provides that a civil penalty of up to 100 penalty units applies where
a person contributes to an unregistered WEF.[73]
As result of these two provisions and the expansive definition of a
‘worker entitlement fund’ and related definitions, registration of WEFs is
effectively mandatory. This point is expressly made in the Bill’s Human Rights
Compatibility statement, where it was noted that the Bill:
... will require the registration of
worker entitlement funds to address the lack of prudential regulation of worker
entitlement funds.[74]
(emphasis added).
Criminal offence for operating an unregistered fund
Proposed section 329JA provides the
penalty for operating an unregistered fund is 200 penalty units or imprisonment
for five years or both.[75]
This is identical to the penalty imposed by the Corporations Act for
operating an unregistered managed investment scheme.[76] The elements of the
offence are:
- the person is an operator of a fund
- the fund is a WEF
- the fund is not registered and either:
- the purposes of the fund are or include the payment, by or on behalf
of one or more federal system employers,[77]
of worker entitlements to or in relation to one or more federal system
employees or
- the person is a constitutional corporation.
Civil penalty for contributions to unregistered WEFs
Proposed section 329JB provides that a civil penalty of up to 100 penalty units applies where
a person contributes to an unregistered WEF.[78]
The Government notes that the penalty ‘is intended to ensure that only
registered worker entitlement funds operate’.[79]
As the penalty applies to ‘a person’ this
means that not only will employees potentially be liable for making
contributions to unregistered WEFs, but that employers will also be liable in
certain circumstances. The Government argues this:
... will also serve the legitimate policy
purpose of ensuring that employers and other fund contributors take sufficient
care to ensure that they are making payments only to registered worker
entitlement funds.[80]
Proposed section 329JB will not apply to contributions made to single-employer funds unless
they are registered as a WEF, as the definition of a WEF excludes single-employer
funds that are not registered.
Registration
process
Proposed section 329KA deals with application
requirements for the registration of a WEF. Applications for registration to
the Commissioner:
- must
be in writing and in the form specified by the Commissioner, and accompanied by
any information or documents required by the Commissioner[81]
- may
result in the Commissioner, by written notice, requesting further information
or inviting the applicant to make written submission in relation to the
application by a specified deadline[82]
and
- must
be decided no later than 40 days after the application is made, or after the
deadline specified in a written notice requesting further information or
submissions from the applicant.[83]
As soon as practicable after the application is made,
certain details about the application (such as the name of the fund and its
operator) must be published on the Commission’s website.[84]
Proposed subsection 329KA(6) then provides that once an application is
determined, the details of the application are to be removed from the website
(this is because details of the fund must be included on the register maintained
under proposed section 329KD).
Consideration
of applications
Proposed section 329KB provides that the Commissioner
must grant an application if satisfied that the fund is, or will be on registration,
a WEF and the initial conditions for registration applicable to the fund will
be satisfied (both in relation to the fund and its operator).[85]
The conditions for registration are discussed below.
However if the Commissioner is not required to approve the
application, proposed section 329KC provides that the application must
be refused.
Once granted, the Commissioner must notify the applicant and
enter the name of the fund on the register established by proposed section
329KD. Likewise if the application is refused, the Commissioner must notify
the applicant within 14 days of the refusal and set out, in writing, the
reasons for refusal.[86]
Appeal
rights in relation to registration decisions
Proposed section 329NI provides that appeals
against a decision to refuse to register a WEF can be made to the
Administrative Appeals Tribunal (AAT).
When does
registration takes effect?
Proposed section 329KE provides that a WEF is
registered once the Commissioner approves an application and the WEF is not
deregistered.
Overview of
conditions of registration
Proposed section 329LA sets out the initial and
ongoing conditions for registration of a WEF. Only certain conditions are
applicable to single-employer funds. The conditions are set out in the table
to proposed section 329LA.
One
operator
Condition one provides that a WEF can only have one operator—this
is both an initial and ongoing condition, and is applicable to single-employer
funds.[87]
The Government notes that this condition is based on the requirement in section
601FA of the Corporations Act, which provides that a managed investment
scheme can only have one operator.[88]
Operator is
a constitutional corporation and not an organisation
Condition two provides that the operator of a WEF must be a
constitutional corporation and not a registered organisation—this is both an
initial and ongoing condition.[89]
Whilst the Government notes that the Superannuation Industry (Supervision)
Act 1993 imposes a similar requirement in relation to superannuation funds,[90]
this condition was criticised by some stakeholders. For example the ACTU
argued:
A worker entitlement fund will now only be allowed to be
operated by a constitutional corporation, and will not be allowed to be
operated by a registered organisation. There was no recommendation to
this effect made by the Royal Commission. It is clearly inconsistent with
Australia’s international obligations, given the consequences of operating an
unregistered fund.[91]
This condition does not apply to single-employer funds.
Compliance
with conditions
Condition three provides that the Commissioner must be satisfied
that the operator, and other persons likely to be involved in the operation of
the WEF, will conduct its affairs in a way that meets the ongoing conditions
imposed by proposed section 329LA.[92]
The Government notes ‘this condition will allow the
Commissioner to refuse an application for registration on the basis of past
conduct and to prevent phoenix arrangements’.[93]
Equal
treatment of members
Condition four provides that the WEF must treat members equally
and, if there are different classes of members, the WEF must treat members of a
class equally with other members of that class. Further, different classes
of members must be treated without discrimination on the basis of membership of
an organisation (for example on the basis of union membership). This is an
ongoing condition and is applicable to single-employer funds.[94]
Whilst the Government argues that this ‘requirement adapts
the requirement in section 601FC(1)(d) of the Corporations Act in
relation to equal treatment’[95]
this is disputed by a number of stakeholders. For example the ACTU argued that
the provisions in the Corporations Act actually:
... require managed investment funds to “treat the members who hold
interests of the same class equally and members who hold interests of different
classes fairly”[96]
(emphasis added)
Other stakeholders criticised other aspects of this
condition. For example, Protect Services Ltd (an operator of funds that would
be eligible for registration as WEFs) noted that whilst this condition aims to
‘ensure that entitlements and services provided to union members are also
provided to non-union members’:
... the drafting of the condition is open to a far broader
interpretation which will have consequences beyond what is intended. For
instance, the condition does not take into consideration the fact there may be
legitimate reasons for different classes of members (i.e., different divisions)
having different rules or access to benefits because the divisions cater for
different demographics or industries. In Protect’s case, we currently have
members in the Electrical division, Metals/Manufacturing division and Maritime
division. The drafted condition may prevent an operator from offering
training and welfare services tailored to the needs of those divisions. It
may also be open to interpretation as to whether an operator may provide a
service, such as training, to Metal workers but not provide similar training to
Electrical workers. We submit that the clause be amended to remove any
ambiguity and to allow, in effect, the tailoring of different services (albeit
irrespective of union membership, which is the intention). Superannuation
law contains similar requirements but refers to members of different classes
being treated ‘fairly’, which is a more appropriate test. There are also
exemptions in superannuation law that allow a trustee to offer different
benefits to different classes of members in certain circumstances (i.e., where
an employer has arranged particular insurances for their employees), but these
exceptions in superannuation law only came about after trustees and employers
pointed out that the initial drafting of the relevant legislation was too
restrictive.[97]
(emphasis added).
Limits of
classes of members
If the WEF has different classes of members, condition five
provides that these must not be differentiated by reference to membership of a
registered organisation. This is an on-going condition that also applies to
single-employer funds.[98]
The Government notes this is based on a recommendation of
the RCTUGC.[99]
This provision was criticised by some stakeholders as being unnecessary and
ideologically based. For example, the ACTU argued that this condition:
... is based on the Royal Commission report and the ideological
objection taken therein to funds applying their surplus income to entities that
benefit union members (no ideological objection is apparently taken to commercial
providers of managed investment schemes applying their management or
performance fees to any particular purpose). A member’s interest in a fund
is in the form of funded employment entitlements and insurance benefits. There
is no discrimination between members of the fund in terms of the nature or
accessibility of their interest in the fund. The “discrimination” seized upon
by the Royal Commission only arises after the extent of fund member interests
in the fund has been fully accounted for and a surplus exists. That surplus
(income) is directed as deemed appropriate. The situation is comparable to
the Commonwealth Bank, a provider of managed investments, making a 1.1 million
donation in 2009 to the Victorian Bushfire relief appeal. Some of that may have
benefited persons who were interest holders in its various managed schemes—much
of it would not have—but the nature and extent of the interest holders’
interests in those schemes was unaltered by this expenditure, nor did they
suffer any discrimination.[100]
The ACTU also argued that ‘there is nothing at all
untoward’ about a WEF (after the interests of members are accounted for) applying
its own profits or surplus ‘to purposes that it sees fit’ as is the case with
companies and other managed investment schemes. [101]
Constitutional
requirements
Condition six provides that a WEF must have a written
constitution that complies with the requirements set out in proposed
subsection 329LB(1) and the WEF Rules issued by the Minister.[102]
This condition is both an initial and ongoing condition for registration, and
also applies to single-employer funds.[103]
Proposed subsection 329LB(1) provides that a constitution of a WEF must:
- require
that the operator be a constitutional corporation and must not be an
organisation
- specify
that no more than five per cent of the assets of the WEF may be invested in an
entity controlled by a contributor to the WEF or an associate of a contributor
- specify
that the assets of the WEF are not to be used in relation to financial
assistance to a contributor, member or associate of a contributor or member of
the WEF
- require
that contributions to the WEF may only be used for purposes authorised by proposed
section 329LC (discussed under the heading ‘Authorised uses of
contributions’ below)
- require
that income of the fund may only be used for purposes authorised by proposed
section 329LD (discussed under the heading ‘Authorised uses of income’
below)
- not
allow contributions or income of the fund to be used to make a payment to an
employee relating to periods of industrial action (for example, strike pay)
- provide
that unclaimed or forfeited money, or money that is treated as such under the
constitution, must not be paid to an industrial association or related party of
an industrial association[104]
- require
that a separate account be kept for each fund member in a way that enables the
member’s entitlements to be calculated.
Whilst the Government argues that the above requirement
are modelled on the requirements that currently apply to ‘approved worker
entitlement funds’ in subsection 58PB(4) of the FTBA Act, some
stakeholders have criticised the requirements.[105]
For example the ACTU argued that condition six would:
- impose
on WEFs more restrictions on the distributions of their surplus income when
compared to managed investment funds and under the current regime and
- impose
a requirement to comply with the WEF Rules issued by the Minister at any time,
which may result in operators being required to ‘give information to
contributors, at any time’ and therefore ‘this power could be used excessively
and oppressively, with no explicit or implicit limit expressed in the Bill on
its exercise’.[106]
The ACTU also argued that the prohibition on unions
operating WEFs is a clear contravention of Article 3 of ILO Convention 87
and the principle of freedom of association and ‘did not form part of the Royal
Commission’s recommendations’.[107]
Protect Services Ltd also criticised condition six on the basis that as it
allows the Minister to ‘impose any requirements into a Fund’s constitution’ the
use of this power ‘may put the trustee in a position where they are
contravening their fiduciary duties’.[108]
Condition seven—an on-going condition—provides that the
WEF must be administered in accordance with its constitution, which includes
the above requirements. This condition also applies to single-employer funds.[109]
Officers
and staff of the operator must be of good fame and character
Condition eight provides that the Commissioner must have no
reason to believe that:
- an
officer of the operator of the WEF or
- a
staff member of the operator who performs duties in relation to the WEF
are not of good fame or character.[110]
This condition is initial and ongoing, and is linked to proposed
section 329LE which provides that when considering whether there is reason
to believe that a person is not of good fame or character, the Commissioner
must have regard to the following:
- any
conviction of the person, within the period of 10 years ending immediately
before the consideration time, for an offence that involves dishonesty and is
punishable by imprisonment for at least three months
- whether
the person has at any time been:
- because
of a conviction, ineligible to be a candidate for an election, or elected or
appointed, to an office in an organisation or
- otherwise
disqualified under the FWRO Act from holding office in an organisation
and
- any
other matters the Commissioner considers relevant.
This condition has been criticised by some stakeholders. For
example, the ACTU argues:
Whilst this test in terms is adapted from the test that
applies for the granting or banning of Australia Financial Services Licenses
(which commercial providers of managed investment schemes are required to
hold), in that setting the test does not apply to all staff of the operator of
the scheme who perform duties in relation to it. Rather, in the commercial
sector, the only persons who are required to meet this test are those who are
the officers of the operator or who are persons who participate in making in
decisions affecting the business or who have the capacity to significantly
affect its financial standing and persons who have the defacto capacity to
control the directors. Under the Bill, all staff members who perform any duties
“in relation to the fund” are covered by this requirement. The test appears to
be designed to ensure that persons disqualified from or deemed ineligible for
office in [a] Registered Organisation (for example, because they are found to
have breached civil penalty provisions that contravene Australia’s requirements
under international law) are unable to find employment in such funds.[111]
Protect Services Ltd also criticised this condition,
arguing that one element of the condition is that a person must not, at any
time, have been ineligible to be a candidate for an election to hold office in
an organisation. However, any such person ‘would be eligible to remain an
employee of an organisation although not permitted to be elected to an office’.[112]
Protect Services Ltd therefore argued that as currently drafted the condition:
... presents an anomaly which allows a person to be employed by
an organisation but not employed by a worker entitlement fund.[113]
Protect Services Ltd recommended that the condition be
amended to ensure that it only applies to directors and officers by omitting
condition 8(b) ‘otherwise more onerous conditions are placed on fund operators
than are placed on unions in terms of who may be employed’.[114]
Two types
of independent directors
Conditions nine and ten provide that a WEF must have:
- condition
nine: at least one voting director who is independent of, and has no
material relationship with, the operator of the fund other than in the role as
director[115]
and
- condition
ten: at least one voting director who is independent of, and has no
material relationship, with any of the following:
- any
contributor to the fund or associates of contributors to the fund
- any
organisation that has a member, or associate of a member, who is a fund
contributor or
- any
organisation that has a member, or associate of a member, who is a fund member
- any
associate of the operator of the fund.[116]
These conditions are both initial and ongoing. The
Government notes that the first requirement noted above (condition nine) ‘is
intended to prevent deadlocks on the board of a fund operator’.[117]
These requirements have been criticised by a number of
stakeholders. For example, the ACTU notes that as a result of these two
conditions and proposed paragraph 329LD(2)(e) the independent directors ‘must
vote in favour of’ and will have a veto right over ‘payments to a training or
welfare service provider’.[118]
Further the ACTU argued that:
... all corporations have options available to relieve
deadlocks and the issue of potential conflict of interest cannot be said to be
material in light of the proposed prohibition on unions deriving income from
the fund and the extensive disclosure provisions contained in the Bill.[119]
Protect Services Ltd also expressed concern about how the
above two conditions are drafted, noting that ‘it is not clear from the
language in the Bill whether the same independent director’ can satisfy both conditions.[120]
That is, whether a single independent director can fulfil both roles or whether
the Bill requires that a different person fills each of the two types of
independent director roles specified in conditions nine and ten.
Fund to be
managed at arm’s length
Condition 11 provides that a WEF and its investments must be
managed at arm’s length from:
- the
contributors to the fund and their associates and
- the
fund members.[121]
This is both an initial and on-going condition. The
Government notes that it is modelled on paragraph 58PB(4)(a) of the FBTA Act
(which the Bill will repeal).[122]
The drafting of condition 11 has been criticised by some stakeholders. For
example, Protect Services Ltd noted that as currently drafted the condition
‘presents some ambiguity’ resulting in significant practical issues.[123]
As noted by the RCTUGC, WEFs are frequently established as ‘joint ventures’
between industry parties and are operated by a trustee company, the directors
of whom are associated with the industry parties (and may be appointed by
them).[124]
Protect Services Ltd noted that this means that because
directors of a WEF are drawn from industry parties ‘to represent worker and
employer interests respectively’ this means that:
- directors
nominated by an employer or employer association may be an owner or executive
in a business that is a contributor to the fund
- directors
nominated by a union ‘may have commenced their careers as a worker and will likely
be a fund member’.[125]
As such, as drafted, condition 11 would prevent such
persons from being directors of the operator of a WEF. Therefore Protect
Services Ltd recommended that it instead should be ‘sufficient to rely on
directors’ obligations under the Corporations Act to avoid conflicts of
interest’.[126]
Further, it was also noted that paragraph 58PB(4)(a) of the FBTA Act—which
the Government says condition 11 is modelled on—only refers to ‘“contributors
to the fund”, not fund members’.[127]
Arrangements
to ensure contributions and income retains their character
Condition 12—which is an ongoing condition—provides that
there must be arrangements in place to ensure that the provisions requiring
that contributions and income retain their character are given effect.[128]
The Government notes that this ‘is to prevent the operator converting
contributions into capital’.[129]
This condition is linked to proposed subsections 329LC(2)
and 329LD(3), which provide that:
- an
amount that is paid into a fund as a contribution continues at all later times,
while held by the fund, to have the character of a contribution and
- an
amount that is earned, derived or received as income by a fund while the fund
is registered continues at all later times, while held by the fund, to have the
character of income.
Compliance
with worker entitlement fund rules
Condition 13—an ongoing condition—provides that the WEF must
comply with requirements in relation to capital adequacy, governance and
liquidity that are prescribed by the WEF Rules.[130]
This condition has been criticised by a number of
stakeholders. Protect Services Ltd noted:
... condition 13, requires that funds comply with prescribed
worker entitlement fund rules in relation to “capital adequacy, governance and
liquidity”. Under s329NJ, the Minister is provided broad and extensive power to
prescribe such Rules. We strongly believe that such fundamental parameters
should be clearly set out in the relevant legislation, rather than being
prescribed by the Minister. We also urge that such rules become available as
soon as possible in order for the Board to consider any investment portfolio
implications.[131]
Protect Services further argued that as the WEF Rules can
deal with a broad ‘range of areas which each have the potential to materially
impact operations’ (such as capital adequacy, governance and liquidity) and
that ‘there are no parameters to regulate the timeframes’ in which any changes
to the WEF Rules made by the Minister come into effect, there would be on-going
‘uncertainty as to operation of Registered Worker Entitlement Funds’.[132]
The ACTU also criticised the requirement to comply with WEF
Rules on the basis that this ‘power could be used excessively and oppressively,
with no explicit or implicit limit expressed in the Bill on its exercise’.[133]
Provision
of annual audited reports
Condition 14—an ongoing condition—provides that an operator
must give the Commissioner audited annual reports for a fund in accordance with
proposed section 329LF.[134]
The audited annual reports must be prepared for the financial year in
accordance with any applicable Australian Accounting Standards and be provided
to the Commissioner within three months after the end of the financial year.[135]
The annual report must also include:
- a
statement of the profit or loss of the fund, net of tax and net of benefits
paid to fund members, for the financial year
- a
statement of the financial position of the fund as at the end of the financial
year, including all assets and liabilities (including liabilities for accrued
benefits)
- a
statement of the benefits, including the type of benefits, paid for the
financial year to fund members
- details
of certain payments in relation to insurance cover related to payments of
worker entitlements (including details of any commissions or benefits received
or obtained by the operator of the fund or a related party of the operator in
relation to the insurance cover for the financial year)
- a
statement of any management or administration fees paid for the financial year
and the recipients
- the
number and total value of any benefits forfeited during the financial year
- certain
training or welfare payments
- any
other matters prescribed by the WEF Rules and
- the
auditor’s report.[136]
The annual report must be audited by a registered auditor
or a registered company auditor and the auditor’s report of the audit must be
attached to (and form part of) the annual report. The audit itself, along with
the audit report, must comply with any applicable Australian Auditing Standards.[137]
The auditor’s report must also set out:
- whether
the annual report complies with the requirements discussed above
- whether
the auditor was given all information, explanation and assistance necessary for
the conduct of the audit (and if not, the reasons why)
- whether
the auditor is of the opinion that the operator has kept financial records
sufficient to enable an annual report for the fund to be prepared and audited
in accordance with the requirements in proposed Part 3C of the FWRO
Act (and if not, the reasons why) and
- any
other matters prescribed by the WEF Rules.[138]
The ACTU, after noting that companies that currently
operate WEFs may be required to lodge such reports with ASIC, if their size
and/or ASIC requires them to do so, criticised the above requirements on the
basis that:
The main purpose of this regulation appears to be to expose
funds to a civil penalty of over $100,000 if they do not provide the same
document to two different regulators on the same date. The existing enforcement
mechanism for failing to comply with existing regular financial reporting
requirements to ASIC is an offence of strict liability, so it is unclear why
additional regulation in this area is necessary.[139]
Likewise, Protect Services Ltd also criticised allowing
the Minister to specify matters that must be included in the annual report and
auditor’s report:
There are no restrictions on the period of notice to obtain
the information and report on it. The condition is far-reaching and has the
potential for matters to be included in annual reports of funds, such as terms
of contracts, directors’ and officers’ details, which are not imposed on other
corporations. Additional reporting and/or auditing requirements, of an as-yet
unknown extent, have potential to add significant cost. These catch-all
provisions provide a serious degree of uncertainty in operating a business when
key operating parameters are at the whim of a Minister – conditions that are
not imposed on other corporations.[140]
Informing
the Commission about certain changes
Condition 15—an ongoing condition—provides that the operator
of a WEF must notify the Commissioner in writing of any changes of details
included in the register of WEFs.[141]
This includes the name of the WEF, the name of its operator and other details
the Commissioner considers appropriate.[142]
Provision
of information to the Commission, contributors and members
Condition 16—an ongoing condition—provides that the operator
of a WEF must give to the contributors of the WEF the information prescribed by
the Minister in the WEF Rules at that time, or at the intervals required
by the Rules.[143]
This condition has attracted some criticism. For example, Protect Services Ltd argued:
... condition 16... Allows the Minister to require that
contributors are provided with “information” prescribed by the worker
entitlement fund rules and at the time and intervals prescribed by the rules. This
has far-reaching consequences for the operations of a business. Funds
operate with sophisticated and custom-built information technology systems.
Changes to information and reporting must be taken with due care, with
consideration given to proper amendments to software. Such changes may require
many months of work (and cost) to modify systems in response to a Minister’s
imposition. While we do not object to providing contributors with information,
more certainty needs to be provided to operators to ensure reasonable
timeframes to comply, as well as appropriate contemporary methods of low-cost
electronic communication such as email or text message. Funds also enter into a
broad range of confidential commercial arrangements and handle sensitive
business and financial information as many other corporate entities do. The
broad scope of the Minister’s powers makes it unclear whether Registered Worker
Entitlement Funds could continue to enter into such arrangements.[144]
(emphasis added).
The ACTU also argued that the power of the Minister (via
the WEF Rules) to require ‘on an ad-hoc basis’ operators to give information to
contributors, at any time ‘could be used excessively and oppressively, with no
explicit or implicit limit expressed in the Bill on its exercise’.[145]
Condition 17—an ongoing condition—effectively requires the
operator to provide workers with an annual statement.[146]
Protect Services Ltd criticised this requirement arguing:
... we regard the concept of annual statements as outdated,
when information is available to members “24/7” through online access as well
as a Smartphone App. While we respect the fact that not all members have such
access it is important that communications with members are cost effective and
efficient.[147]
However, Protect Services Ltd noted with approval that the
Explanatory
Memorandum provides that the requirement that an operator ‘gives’ a certain
thing (in this case, the annual statements) ‘may be met by emailing the
relevant person, including emailing a link to the prescribed information’.[148]
Condition 18—an ongoing condition—provides that the
operator must give the Commissioner, contributors and fund members information
about any change to the constitution of the WEF and any change to the operation
of the WEF affecting payments to members as soon as practicable.[149]
Disclosure
of certain information and documents
Condition 19—an ongoing condition— provides that an operator
of a WEF must give a person certain information either before they become a
member of the WEF, or as soon as practicable after they become a member. The
information that must be provided in a statement includes:
- the
amount of any fees and administrative expenses charged by the operator in
relation to the fund and
- information
about the eligibility of fund members to makes claims for payment from the WEF and
how to make such a claim.[150]
Condition 20—an ongoing condition—provides that an
operator of a WEF must:
- on
request, give a copy of the constitution of the fund to any contributor to the
fund
- give
a copy of the constitution of the WEF to each person who may become a
fund member and
- ensure
that each member has a copy of the constitution or has access to it on the WEF’s
website.[151]
The ACTU criticised conditions 19 and 20 on the basis that
a requirement to ‘give’ the above information ‘is clearly different in law to a
requirement to take reasonable steps to provide, or to ensure that the thing is
available’ and therefore:
... in industries where workers are highly mobile, it is
inevitable that the requirement to “give” could not be satisfied in all
circumstances. It is a highly oppressive requirement that results in civil
penalties and possible deregistration.[152]
Protect Services Ltd also criticised condition 20 on the
basis of its practicality. Protect Services Ltd noted that subcondition 20(b), which
requires a copy of the constitution to be provided to each person who ‘the
operator knows may become a fund member’, causes two issues:
- it
requires that the operator establishes a knowledge of who may become a
member and
- operators
‘can only establish who may become a member if an employer chooses to
disclose their list of employees and their contact details to [the operator]
prior to becoming a contributor’.[153]
Protect Services Ltd noted that in relation to the second
point above ‘this is impractical and unlikely to occur or may impose an
obligation on us to obtain details for people [who] are not yet party to an
industrial agreement to become a member’ and therefore recommended that either
subcondition 20(b) be removed from the Bill or the word ‘or’ be substituted for
the word ‘and’ at the end of subcondition 20(b), which would allow
‘notification to be provided or for the information to be available on a
website’.[154]
Condition 21—an ongoing condition—provides that if the
income of the WEF is used to make certain training or welfare payments, the
operator of the fund must notify each member of the fund as soon as is
practicable after the payment is approved. Such a notification must include who
the payment will be made to and what training and welfare services will be
provided. Alternatively, the operator of the WEF can ensure that each member
has access to this information on the WEF’s website.[155]
Training requirements
Condition 22—an ongoing condition—provides that an
operator of a WEF must comply with training requirements set out in proposed
section 329LG.[156]
Those requirements are that the officers and staff members of an operator the
WEF whose duties include those related to the financial management of the WEF
have:
- within
six months of assuming duties that relate to the financial management of a fund
- undertaken
training that covers those duties and is approved by the Commissioner.[157]
The Commissioner may approve training provided by an
organisation, peak council or other body or person that the Commissioner is
satisfied has the appropriate skills and expertise to provide the training.[158]
Proposed subsection 329LG(5) provides that an operator or other entity may
apply to the Commissioner on behalf of an officer or staff member for an
exemption from the training requirements. The Commissioner has the discretion
to grant such exemptions subject to any conditions if satisfied that the person
has ‘a proper understanding’ of their duties ‘relating to the financial
management’ of the WEF because of their:
- experience
as a company director or as an officer of a registered organisation or
- other
professional qualifications and experience.[159]
Authorised
uses of contributions
Proposed section 329LC effectively limits the
purposes for which a constitution complying with condition six of registration
(and therefore proposed section 329LB) can allow contributions to a WEF to
be used. The Government notes that these authorised uses are adapted from the
requirements in paragraph 58PB(4)(c) of the FBTA Act.[160]
The authorised uses of contributions are:
- to
pay a kind of worker entitlement to WEF members for whom contributions have
been made for that kind of entitlement (payments may also be made to death
benefits dependants or legal personal representatives of those WEF members)
- to
make investments to generate income from the assets of the WEF
- to
reimburse contributors to the fund who have paid entitlements directly to WEF
members in circumstances where the contributor was under an obligation or
permitted to pay those entitlements
- to
return contributions to contributors to the WEF
- to
pay, at market value, for certain types of insurance cover
- to
transfer contributions to another WEF
- to
pay the reasonable administrative expenses of the WEF including administrative
costs to the trustee and board fees to directors of the operator
- to
pay amounts to an external administrator of a contributor in certain circumstances
- to
pay interest on or repay money lent to the WEF.[161]
Authorised
uses of income
Proposed section 329LD effectively limits the
purposes for which a constitution complying with condition six of registration
(and therefore proposed section 329LB) can allow income of a WEF to be
used. The authorised uses of the income of a WEF are:
- the
purposes covered in proposed section 329LC in relation to authorised
uses of contributions (discussed above)
- payments
other than worker entitlements to fund members, their death benefits dependants
or legal personal representatives
- payments
to a contributor to the fund whose contributions are in respect of employees or
former employees of the contributor and
- payments
for certain training and welfare purposes.[162]
Income of a WEF may only be used to make payments for
training and welfare purposes when they satisfy the criteria in proposed subsection
329LD(2):
- the
payment is made for the sole purpose of providing training or welfare services
to either or both of:
- participants
or former participants in any industry in which fund members participate and
- the
spouses or dependents of such participants or former participants and
- if
the training or welfare services are not provided by the operator of the WEF:
- the
services must be provided at market value and on commercial terms and
- negotiated
at arm’s length from any director with a material personal interest in the
provider of the services and
- the
services are provided in such a way that does not discriminate ‘unfairly’
between fund members and
- before
payment is made, the payment is approved by the voting directors of the
operator including by:
- at
least one voting director who is independent as per condition nine and
- a
voting director who is independent per condition ten.[163]
Restrictions
on distributions of income or capital
A number of stakeholders were critical of the restrictions
on the types of distributions of income or capital that the Bill proposes to
impose on WEFs. For example, Protect Services Ltd argued:
Section 329LD does not allow for a distribution of income
nor prior years income under s329LD(3) to sponsors of the fund.
Distributions of income are permitted to fund members (workers) under
s329LD(1)(b) and to contributors (employers) under s329LD(1)(c). This change in
the framework for distribution of income may have the effect of both workers
and employers claiming an entitlement to the income of investment of capital.
If the fund operators (which are generally trustees of trusts) were required to
take into consideration a claim of these beneficiaries on the income of the
fund when setting the fund’s investment strategy, this could have the
unintended consequence of shifting the core purpose of Registered Worker
Entitlement Funds away from capital preservation in order to generate income to
meet beneficiary expectations... it is important to note that trustees of
retail superannuation funds can distribute income to their sponsors instead of
returning that excess money to fund members and likewise companies can
distribute excess to their shareholders via dividends. We submit that the
only reason that such distributions are being prevented in the case of our fund
is because some of those sponsors are unions.[164]
(emphasis added)
The ACTU made a similar point, arguing that if passed in its
current form, WEFs would become ‘the only managed investment schemes in
Australia’ that would be:
- prohibited
from distributing any income that they generate to their operator or sponsor and
- restricted
in how their operator may dispose of income earned from operating the fund.[165]
Human
rights criticism of the registration requirements for worker entitlement funds
The PJCHR expressed concern about the proposed WEF
registration regime discussed above. The PJCHR noted that under condition two
in proposed section 329LA a WEF will only be able to be operated by a
corporation and cannot be operated by a registered organisation (that is, a
trade union or employer organisation). In addition, it noted that under proposed
sections 329JA to 329JB it will be an offence to operate an unregistered
WEF and a civil penalty provision for employers to contribute to such a fund.[166]
The PJCHR noted that the interpretation of the right to
freedom of association and the right to just and favourable conditions of work
is informed by the ILO treaties, and that ILO Convention 87 specifically
protects the right of workers to autonomy of union processes, organising their
administration and activities and formulating their own programs without
interference. The PJCHR stated that:
Providing that registered organisations cannot administer
'worker entitlement funds' and limiting the purposes for which such money may
be used would appear to engage and limit these rights. However, the statement
of compatibility does not acknowledge this limitation so does not provide an
assessment of whether the limitation is permissible as a matter of international
human rights law.[167]
As such the PJCHR concluded that there are ‘questions as
to whether the measure is compatible with the right to freedom of association
and the right to just and favourable conditions at work’ and sought further
information from the Minister regarding:
- whether
the measure is aimed at pursuing a legitimate objective for the purposes of
international human rights law
- how
the measure is effective to achieve (that is, rationally connected to) its
stated objective and
- whether
the limitation is a reasonable and proportionate measure to achieve the stated
objective (including whether the measure is the least rights restrictive way of
achieving its stated objective).[168]
The Minister’s response to the PJCHR was not publically
available at the time of writing.[169]
Other provisions
related to authorised uses of contributions and income
Under the new annual reporting requirements WEFs must report
on training and welfare payments. Specifically they will be required to include
in the annual report details of who the payments are made to, the service being
provided (or the purpose of the payment) and the amount spent.[170]
WEFs must also report on payments made in relation to certain types of
insurance that can be made from member contributions.[171]
In addition, under condition 21 WEFs must notify each
member, as soon as is practicable after the payment is approved, about training
and welfare service related payments. That notification must detail who the payment
was made to and what training or welfare services will be provided.
Alternatively, the operator of the WEF can ensure that each member has access
to such information on the website of the fund.
The penalty for non-compliance with conditions six and seven
(and hence proposed sections 329LC and 329LD) is 100 penalty
units and/or deregistration.[172]
The Commissioner may also issue a direction to a fund to comply with an ongoing
condition.[173]
Failure to comply with such a direction attracts a maximum penalty of 60
penalty units.[174]
Finally, the Commissioner may also seek an injunction from
the Federal Court under existing section 308 of the FWRO Act in relation
to a breach of a civil penalty provision.
Worker
entitlement fund rules
Proposed section 329NJ provides that the Minister
may, by legislative instrument, make WEF Rules that prescribe matters:
- required
or permitted to be prescribed by the WEF Rules or
- necessary
or convenient to be prescribed for carrying out or giving effect to the
amendments to the FWRO Act contained in proposed Part 3C.
As the breadth of the WEF Rules and their interaction with
the reforms proposed by the Bill has attracted substantial criticism from
stakeholders, it is examined below in detail. However, it should be noted that
the WEF Rules are legislative instruments and therefore subject to
Parliamentary scrutiny and disallowance.[175]
What can be
prescribed by the WEF Rules?
Apart from the broad drafting contained in proposed
subsection 329NJ(1), a range of other provisions allow the WEF Rules to
deal with a wide array of different matters. Some of these are discussed below.
Types of
funds regulated
The WEF Rules can be used to prescribe that certain types of
funds are worker entitlement funds, and therefore must be registered (as
operating an unregistered WEF is an offence).[176]
This was criticised by some stakeholders on the basis that it allows the
Minister ‘to increase the scope of coverage of the legislation’ and therefore
this introduces ‘a source of significant business risk’ rooted in increased
uncertainty.[177]
The ACTU also argued:
The Minister is, on the face of it, empowered to prescribe
funds in this way even if they do not provide a benefit to the members that
would meet the definition of worker entitlements. The most troubling aspect of
this executive power, aside from the lack of certainty, is that union operated
funds that comply with the law may be prescribed, with the result that the Union
instantly will be liable for a criminal offence under proposed section 329JA of
the [FW]RO Act. It is to be noted that the scope created in these provisions
also extends significantly on the scope which formed the context of the
discussion in the Royal Commission’s final report.[178]
Constitutional
requirements
The WEF Rules can be used to impose requirements in relation
to the constitution of a WEF.[179]
As such, the WEF Rules can be used to regulate a broad array of matters related
to membership, elections, numbers and types of directors, voting requirements
and so forth.[180]
United Voice argued:
The extent of regulation and interference in internal
affairs, down to the level of requiring a union to submit its internal policies
to the regulator, is unparalleled. It certainly is not a feature of corporate
regulation, despite persistent misconduct, which harms workers, consumers and
the economy, and includes wage theft, fraud, insider trading and money
laundering.[181]
A number of other stakeholders expressed similar concerns
about the ability of the WEF Rules to regulate the contents of the
constitutions of WEFs, arguing it was an inappropriate degree of interference and
regulation.[182]
Capital
adequacy and liquidity requirements
The WEF Rules can be used to prescribe both capital adequacy
and liquidity requirements that WEFs must comply with.[183]
Some stakeholders expressed concerns about this power,
noting that both capital adequacy and liquidity are not defined, nor is there
any indication regarding minimum or maximum timeframes in which WEFs would be
‘required to achieve this position’.[184]
Protect Services Ltd argued:
We strongly believe that such fundamental parameters should
be clearly set out in the relevant legislation, rather than being prescribed by
the Minister. We also urge that such rules become available as soon as possible
in order for the Board to consider any investment portfolio implications.[185]
Governance
The WEF Rules can be used to prescribe ‘governance’
requirements that WEFs must comply with.[186]
Some stakeholders expressed concern about this power. For example, Protect
Services Ltd argued that as ‘governance’ requirements are not defined in the
Bill it would ‘in effect allow the Minister to provide broad conditions so long
as there is a tenuous link to “governance”’ and thus expose WEFs to operational
uncertainty and risk.[187]
Specific
impact on annual and audit reports
Proposed paragraph 329LF(3)(h) requires WEFs to include
in their annual report ‘any other matters’ prescribed by the WEF Rules.
Likewise proposed paragraph 329LF(5)(d) requires auditor’s to include in
their audit report ‘any other matters’ prescribed by the WEF Rules.
Further, in relation to the contents of the auditor’s
report, proposed subsections 329NJ(2) and (3) effectively allow
the WEF Rules to specify how WEFs are to be audited, including by applying,
adopting or incorporating (with or without modification) relevant accounting or
auditing and assurance standards in force at a particular time. Protect Services
Ltd criticised the above requirements:
S329LF(3)(h) and s329LF(5)(d)– allow the Minister to specify
any ‘other matter’ to be included in an Annual Report and Auditor’s report.
There are no restrictions on the period of notice to obtain the information and
report on it. The condition is far-reaching and has the potential for matters
to be included in annual reports of funds, such as terms of contracts,
directors’ and officers’ details, which are not imposed on other corporations.
Additional reporting and/or auditing requirements, of an as-yet unknown extent,
have potential to add significant cost.
These catch-all provisions provide a serious degree of
uncertainty in operating a business when key operating parameters are at the
whim of a Minister – conditions that are not imposed on other corporations.[188]
The ACTU was also critical of this aspect of the potential
application of the WEF Rules arguing:
The worker entitlement rules will enable the minister to
directly... impose requirements on the content of the annual reports and audit
reports of the funds. This rule-making power can be used to introduce change
just for the sake of it, to constantly keep these funds on the hop, tying them
up in red tape.[189]
Limits on
the rule-making power of the Minister
Whilst the breadth of the matters allowed to be dealt with
by the WEF Rules is substantial, there are limits on the rule-making power of
the Minister. First, proposed subsection 329NJ(4) provides that the WEF
Rules cannot:
- create
an offence or civil penalty
- provide
powers of arrest, detention, entry, search or seizure
- impose
a tax
- set
an amount to be appropriated from the Consolidated Revenue Fund or
- directly
amend the text of the FWRO Act.
Second, proposed subsection 329NJ(5) provides that where
the WEF Rules are inconsistent with the regulations made under the FWRO Act,
the Rules have no effect to the extent of any such inconsistency, but are taken
to be consistent to the extent they are capable of operating concurrently with
the regulations.
Consequences
of non-compliance with conditions other than de-registration
Broadly speaking, the Bill proposes a range of consequences
for operators who fail to comply with the conditions for registration. These
are:
- infringement
notices
- civil
penalties and
- de-registration.
Whilst the Bill also creates a criminal offence in
relation to operating an unregistered WEF (discussed above) the civil
enforcement regime is focused on non-compliance with conditions of registration
as a WEF by operators, along with de-registration in certain cases (discussed
below separately).
Civil
penalties
The Bill creates a range of civil penalties for failing to
comply with conditions of registration. Single-employer funds are subject to a
smaller range of penalties. As noted above, single employer funds that elect to
be registered (and hence regulated) are subject to fewer conditions than WEFs that
manage contributions from multiple employers. The Department of Employment
notes that:
... lighter-touch regulation for single-employer funds is
appropriate. These funds are set up to protect the entitlements only for an
employer’s own employees, while other multi-employer funds hold millions of
dollars’ worth of entitlements and accept contributions from thousands of
employers for thousands of workers. Overregulation of single-employer funds may
deter employers from establishing these funds entirely which might make
workers’ entitlements more vulnerable to non-payment, particularly in the case
of a business winding up.[190]
This ‘light touch’ regulation is reflected in the fact
that many of the civil penalties for breaching conditions of registration do
not apply to single-employer funds. The table below provides an outline of the
main civil penalty provisions in relation to breaching conditions of
registration and their application.
Table 1: proposed civil penalties for non-compliance with registration conditions
| Condition(s) |
Provision |
Penalty |
Notes |
| Four (equal and non-discriminatory treatment) |
Proposed section 329MC |
100 penalty units |
Does not apply to single-employer funds. |
| Five (classes of membership) |
Proposed section 329MD |
100 penalty units |
Does not apply to single-employer funds. |
| Six and parts of Seven (constitutional aspects) |
Proposed section 329ME |
100 penalty units |
Does not apply to single-employer funds. |
| Conditions 14 to 21 |
Proposed section 329MF |
100 penalty units |
Does not apply to single-employer funds. |
Source: Fair Work Laws Amendment (Proper Use of Worker
Benefits) Bill 2017.
In addition to the above penalties, proposed section
329MA enables the Commissioner to give an operator of a registered WEF fund
that is not a single-employer fund a written notice directing the operator to
take, or stop taking, one or more actions specified in the notice, provided
that the Commissioner is satisfied that giving the notice is in the best
interests of the fund’s contributors or members.
Such a notice given by the Commissioner is for the purposes
of ensuring that:
- an
ongoing condition in relation to a RWE fund is being complied with or
- a
report, notice, information or a statement given in accordance with conditions
14 to 19 is not false or misleading in a material particular.
A failure to comply with a direction is a civil liability
contravention with a maximum penalty of 60 penalty units.[191]
The Government notes that such directions and associated civil penalties will
operate ‘as an alternative to deregistration’.[192]
Infringement
notice regime
Proposed section 329MB provides that each of the civil
penalty provisions in proposed sections 329ME (constitution) and 329MF
(giving information) that apply to operators of registered WEFs that are not
single-employer funds are subject to the infringement notice framework
established under Part 5 of the Regulatory Powers
(Standard Provisions) Act 2014.[193]
An infringement notice is:
... a notice of a pecuniary penalty imposed on a person by
statute setting out particulars of an alleged contravention of a law ...
Infringement notices are administrative methods for dealing with certain
breaches of the law and are typically used for low-level offences and where a
high volume of uncontested contraventions is likely.[194]
In effect proposed section 329MB will allow a small
group of persons with particular expertise in the regulation of registered
organisations and their associated entities to be authorised as infringement
officers by the Commissioner. In turn this will allow them to exercise the
powers and functions in relation to infringement notices (such as issuing
infringement notices) as part of the overall enforcement regime created by the
Bill.[195]
De-registration
of worker entitlement funds
Proposed section 329MG sets out the process for
deregistration of a WEF for non-compliance with an ongoing condition of
registration. Importantly, within this process there are certain circumstances
in which the Commissioner has no discretion and deregistration is mandated.
Show cause
notice
The first step in the deregistration process is the Commissioner
giving a WEF operator a show-cause notice. However, before issuing a show-cause
notice the Commissioner must consider:
- the
seriousness of the non-compliance
- any
previous non-compliance with ongoing conditions in relation to the WEF
- whether
deregistration would be in the best interests of the fund members
- whether
action other than deregistration (such as the imposition of civil penalties)
would be more appropriate in the circumstances and
- any
other matters.[196]
If the Commissioner determines it is appropriate to issue a
show cause notice, the notice must:
- set
out the grounds for the proposed deregistration
- include
the proposed date of effect (which must be at least 56 days after the day the
notice was given) and
- invite
submissions on the proposed deregistration within a specified time-frame (at
least 28 days after the notice was given).[197]
The notice must also be published on the Commission’s
website.[198]
Mandatory
de-registration following the issue of a show-cause notice
If a show-cause notice related to non-compliance with
conditions one or two[199]
then, after considering any submissions of the operator, if the Commissioner
continues to be satisfied that the condition has not or is not being complied
with the Commissioner must, by written notice, deregister the WEF.[200]
The deregistration takes effect from the day of the proposed deregistration
provided in the written notice. Once deregistered, the Commissioner must remove
the details of the WEF from the register as soon as practicable.[201]
If the Commissioner determines not to deregister the WEF,
the Commissioner must within 14 days of making that decision notify the
operator of the decision and the reasons for the decision and publish a copy of
the notice on the Commission’s website.[202]
Discretionary
de-registration following the issue of a show-cause notice
If a show-cause notice related to non-compliance with on-going
conditions other than conditions one and two then, after considering any
submissions of the operator, if the Commissioner continues to be satisfied that
the condition has not or is not being complied with the Commissioner may,
by written notice, deregister the WEF.[203]
The deregistration takes effect from the day of the
proposed deregistration provided in the written notice. Once deregistered, the
Commissioner must remove the details of the WEF from the register as soon as
practicable.[204]
If the Commissioner determines not to deregister the WEF,
the Commissioner must within 14 days of making that decision notify the
operator of the decision and the reasons for the decision and publish a copy of
the notice on the Commission’s website.[205]
Natural
justice requirements
Proposed section 329MK provides that the show-cause
process exhaustively deals with the natural justice (procedural fairness)
requirements in relation to the deregistration process. As noted earlier in
this digest, the Senate Standing Committee for the Scrutiny of Bills raised
some concerns about this provision.
Deregistration
on other grounds
A WEF maybe also be deregistered on request by the operator,
or when a WEF has been fully wound up or otherwise ceases to exist.[206]
In addition, where the operator of a single-employer fund that elected to
register as a WEF revokes that election, the WEF is also deregistered.[207]
Post-deregistration
obligations
Proposed section 329NC provides that a former
operator of a deregistered WEF must, no more than 90 days after deregistration takes
effect provide:
- a
final annual report
- final
information for contributors and
- final
information for fund members.
Each requirement is a civil penalty provision with a maximum
penalty of 100 penalty units. The requirements do not apply if the registration
of the fund is reinstated before the end of the 90-day period following the
deregistration day and do not apply to single-employer funds.
Reinstatement
of registration
Other than through the appeals process (discussed below) proposed
section 329ND allows the Commissioner to re-register a WEF if satisfied:
- it
should not have been deregistered or
- that
the conditions that led to deregistration are now being complied with.
The Commissioner must include the details of the reinstated
worker entitlement fund on the register of funds as soon as practicable.
Appeal
rights in relation to deregistration decisions
Proposed section 329NI provides that appeals
against a decision to deregister a WEF can be made to the AAT.
Information
gathering and sharing powers
Proposed section 329NF provides information
gathering powers to the Commissioner. In summary, if the Commissioner believes
on reasonable grounds that a person has information or a document:
- relevant
to determining whether an ongoing condition applicable to a registered WEF has
been or is being complied with or
- whether proposed section 329NC (in relation to final reports after deregistration)
has been complied with
the Commissioner may require, by issuing a written notice,
a person to give the Commissioner specified information or documents or a
specified kind of information or documents.[208]
The written notice must specify a time, at least 14 days after the notice was
given, for compliance with the requirement to provide information or documents
to the Commissioner.[209]
A civil penalty of 30 penalty units applies if a person
who is given a notice does not comply with it, except where the person has a
reasonable excuse, including that to answer a question or produce a document
may tend to incriminate the person or expose the person to a penalty.[210]
As such, the proposed information gathering powers do not abrogate the
privilege against self-incrimination, nor do they abrogate the right to legal
professional privilege.[211]
Information
sharing powers
Currently paragraph 329G(2)(b) of the FWRO Act
allows the Commissioner to disclose information if they reasonably believe that
its disclosure is likely to assist in the administration or enforcement of a
law of the Commonwealth, a state or territory. In spite of the existence of this
broad power, proposed section 329NH requires the Commissioner to provide
to the Commissioner of Taxation:
- a
copy of constitutions of registered WEFs and funds for which an application for
registration has been made and
- information
about changes to the constitutions of registered WEFs.
Publishing
of annual reports of WEFs
Proposed section 329NG provides that the Commissioner
must publish the annual reports of registered WEFs on its website.
Transitional
rules for WEFs
The Bill contains detailed transitional rules regarding
WEFs. These are described on pages 35 to 39 of the Explanatory Memorandum.
Key issues
and provisions: prohibition on terms requiring payment to WEFs
Modern
awards and payments to WEFs
The RCTUGC recommended that the FW Act be amended to:
.... 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.[212]
The amendments proposed by the Bill differ substantially
from this recommendation. For example, proposed section 151A of the FW
Act, at item 3 of Schedule 2 to the Bill, prohibits any term of a
modern award requiring or permitting contributions to be made to a WEF unless
it is registered and each employee can choose the registered WEF to which the
payments are to be made.
Whilst the RCTUGC made no recommendations in relation to
imposing such a prohibition in relation to modern awards the Government argues:
These restrictions on the content of a modern award or
enterprise agreement engage with the right to negotiate terms and conditions of
employment voluntarily. The legitimate objectives of this amendment are to
address the potential for misappropriation of funds and avoid conflicts of
interest and possible coercion. The Royal Commission recommended that where a
fund controls workers’ entitlements it should be subject to appropriate
regulation.
The amendments address the problems identified by the Royal
Commission in a reasonable, necessary and proportionate manner. The amendments
do not prohibit contributions to worker entitlement funds. Rather, they require
such contributions to be made to registered worker entitlement funds that are
subject to basic governance and disclosure requirements designed to address
potential conflicts of interest, breaches of fiduciary duty and the potential
for coercion. Furthermore, the amendments will provide employees with a
guarantee that any contributions they voluntarily make to a worker entitlement
fund is [sic] subject to appropriate scrutiny.[213]
This restriction has been criticised by some stakeholders.
For example, it is argued that introducing the ability for employees to choose
a fund for contributions and insurance payments to be made into on their behalf
‘would be onerous and add extra responsibility on the employer, not the Fund,
to source more than one fund’ and, because of the small number of funds
operating in some states, would ‘increase the administration and general cost
of the employer doing business’.[214]
Further it is also argued that comparisons with choice of
superannuation funds rules are inappropriate for a range of reasons including
that ‘Registered Worker Entitlement Funds are not investment vehicles and are
not intended to generate investment income for members, but to preserve their
entitlement to capital’.[215]
The ACTU argued that prohibiting employment instruments
such as modern awards from mandating contributions to certain WEFs is a ‘clear
contravention of Article 4 of ILO Convention 98 and the principle of
voluntary agreement making’.[216]
Enterprise
agreements, employment contracts and payments to WEFs
The Bill would amend the FW Act to prohibit any
term of an enterprise agreement (proposed paragraphs 194(i)‑(k),at
item 4 of Schedule 2) or an employment contract (proposed section 333B,
at item 8 of Schedule 2) from requiring or permitting contributions to
be made to any fund that provides training or welfare payments other than a:
- superannuation
fund
- registered
WEF
- registered
charity or
- deductible
gift recipient.
The prohibition on such terms in enterprise agreements is
broadly consistent with the recommendation of the RCTUGC. Likewise, whilst the
RCTUGC did not recommend such prohibitions apply to employment contracts, given
that they usually—in conjunction with a modern award or enterprise agreement—form
the basis or totality of the employment arrangement, the inclusion of such a
prohibition in terms of employment contracts is arguably consistent with the
underlying purpose of the RCTUGC’s recommendation. That said, the inclusion of
deductible gift recipients in the type of funds that payments can be made to
under the terms of an enterprise agreement or employment contract goes further
than what was recommended by the RCTUGC, but in doing so adds a degree of
flexibility beyond what was recommended.
Currently subsection 186(4) of the FW
Act provides that before approving an enterprise agreement, the FWC must be
satisfied that an agreement does not include any unlawful terms (defined in
section 194). As the amendments expand the list of unlawful terms as noted
above, the amendments would prevent an enterprise agreement containing these
terms from being approved by the FWC, and therefore being legally enforceable. The
extension of this prohibition to terms in employment contracts will prevent
them from being used to circumvent the prohibition against their inclusion in
enterprise agreements and modern awards.
Application of prohibitions of certain terms
Item 25 of
Schedule 2 of the Bill inserts proposed Part 7 into Schedule 1 to the FW
Act. Proposed clause 32 of Schedule 1 to the FW Act provides
that the prohibitions on terms of modern awards, enterprise agreements and
employment contracts in Part 1 of Schedule 2 to the Bill will apply only to
modern awards made or varied after commencement and to enterprise agreements
and employment contracts that are made after the commencement of the amendments,
but do not apply in relation to a transitioning approved fund or transitioning
non-approved fund, as defined by proposed clause 31 of Schedule 1 to the FW Act. The
Explanatory Memorandum notes ‘this means a transitioning approved fund or a
transitioning non-approved fund can be named in a modern award or enterprise
agreement’.[217]
Human rights concerns
The PJCHR raised concerns about the compatibility
of the proposed prohibition on any term of a modern award or an enterprise
agreement requiring or permitting contributions for the benefit of an
employee to be made to any fund other than a superannuation fund, a registered WEF
or a registered charity with the right to freedom of association and the right to
just and favourable conditions at work (which includes the right to
collectively bargain without unreasonable and disproportionate interference
from the state).[218]
The PJCHR noted that the above rights are informed by ILO treaties, and hence:
The principle of 'autonomy of bargaining' in
the negotiation of collective agreements is an 'essential element' of Article 4
of ILO Convention No. 98 which envisages that parties will be free to reach
their own settlement of a collective agreement without interference.[219]
The PJCHR stated that prohibiting the
inclusion of particular terms in an enterprise agreement interferes with the
outcomes of the bargaining process and therefore ‘engages and limits the right
to just and favourable
conditions of work and the right to collectively bargain as an aspect of the
right to freedom of association’.[220]
The PJCHR noted that the prohibition may be permissible, provided certain
criteria are satisfied:
- the measure must address a legitimate objective
- it must be rationally connected to that objective and
- be a proportionate way to achieve that objective.[221]
The PJCHR noted:
... the statement of compatibility provides
limited information as to whether the limitation is proportionate. In order to
be a proportionate limitation on human rights a measure must be the least
rights restrictive way of achieving its stated objective.[222]
The PJCHR therefore concluded that the
measure engages and limits the right to freedom of association, the right to
collectively bargain, and the right to just and favourable conditions of work and raised questions as to its compatibility with
those rights. The PJCHR sought from the Minister advice regarding:
- whether the limitation is a reasonable and proportionate measure to
achieve that objective (including findings by relevant international supervisory
mechanisms about whether the limitation is permissible) and
- whether consultation has occurred with the relevant workers' and employers'
organisations in relation to
the measure.[223]
The Minister’s response to the PJCHR was not publically
available at the time of writing.[224]
Key issues
and provisions: prohibition of election payments
Schedule 3 deals with election payments in relation to
industrial associations. It will commence immediately after Parts 1 to 3 of
Schedule 2 commence.[225]
The RCTUGC recommended that the FW Act 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.[226]
The amendments in Schedule 3 of the Bill give effect to and
are consistent with this recommendation. Item 1 will amend section 12 of
the FW Act to insert a definition of ‘regulated
election purpose’. A ‘regulated election purpose’ is defined as a payment:
.... made for a purpose that includes the
purpose of funding, supporting or promoting the election of a candidate or
group of candidates for an election or elections to an office in an industrial
association (including the election of a person or group of persons in a future
election or elections).[227]
Item 2 amends section 194 of the FW Act to
include in the definition of an ‘unlawful term’ of an enterprise agreement a
term that requires or permits a payment to be made for a regulated election
purpose. The effect of this is to prevent the FWC from approving
agreements with such terms, and prevent those agreements from being legally
enforceable. Proposed section 333C, at item 5 of Schedule
3, imposes the same prohibition on the inclusion of such a term in employment
contracts.
None of the amendments in Schedule 3 appear to deal with
the inclusion of such terms in modern awards.
Human
rights concerns
The PJCHR raised concerns about the compatibility of the
proposed prohibition of any term of a modern award, enterprise agreement or
contract of employment permitting or requiring employee contributions to an
election fund with the right to just and favourable conditions of work and the
right to collectively bargain as an aspect of the right to freedom of
association, as it represents an interference with the outcomes of collective
bargaining processes.[228]
The PJCHR noted that as the Explanatory Memorandum ‘only
asserts that the measure 'is reasonable, necessary and proportionate’ and
‘provides no reasoning or evidence’ as to whether the proposed prohibition ‘is
rationally connected (that is, effective to achieve) and proportionate to the
stated objectives’.[229]
The PJCHR stated that this ‘raises questions as to whether the measure is
compatible with the right to freedom of association and the right to just and
favourable conditions at work’[230]
and sought from the Minister advice regarding:
- whether
there is reasoning or evidence that establishes that the stated objective
addresses a pressing or substantial concern or whether the proposed changes are
otherwise aimed at achieving a legitimate objective
- how
the measure is effective to achieve (that is, rationally connected to) its
stated objective and
- whether
the limitation is a reasonable and proportionate measure to achieve the stated
objective (including whether the measure is the least rights restrictive way of
achieving its stated objective).[231]
The Minister’s response to the PJCHR was not publically
available at the time of writing.[232]
Key issues
and provisions: coerced payments to employee benefit funds
Schedule 4 deals with coerced payments to employee benefit
funds. Items 1 and 3 will commence on the earlier of a day to be
fixed by proclamation or six months after Royal Assent.[233]
Item 2 will commence at the later of immediately after item 1
commences and the time Parts 1 to 3 of Schedule 2 commence.[234]
Arguably existing section 343 of the FW Act already
prohibits the coercion of payments to employee benefit funds (that is, funds
that would be considered WEFs under the regulatory framework proposed by the
Bill) where such coercion is in relation to a proposed enterprise agreement.
However the RCTUGC recommended that:
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.[235]
(emphasis added)
The amendments in Schedule 4 purport to give effect to
this recommendation.[236]
Proposed section 355A prohibits a person from organising or taking, or
threatening to organise or take, any action (other than protected industrial
action) against another person with intent to coerce that other person
(or a third person) to make payments to certain employee benefit funds
including:
- superannuation
funds
- training
funds
- welfare
funds
- life
or disability insurance cover funds
- WEFs
and
- certain
types pf managed investment schemes that are promoted by an organisation or
related party.[237]
In this regard, as the prohibition is expressed as
applying to any coercion against another person, rather than an employer, and
also applies to types of funds arguably not captured by the RCTUGC’s
recommendation, the proposed amendment would have a broader application than
recommended by the RCTUGC.
Proposed subsection 355A(2) provides that the
prohibition does not apply to protected industrial action. The penalty for such
coercion is a civil penalty of up to 60 penalty units.[238]
Human
rights concerns
The PJCHR noted that the right to strike is protected as
an aspect of both the right to freedom of association and the right to form and
join trade unions under Article 22 of the International Covenant on Civil and
Political Rights (ICCPR) and Article 8 of the International Covenant on
Economic, Social and Cultural Rights (ICESCR).[239]
However the right to strike is not absolute and may be limited in certain
circumstances.[240]
The PJCHR also noted that the right to freedom of assembly and the right to
freedom of expression are protected by Articles 19 and 21 of the ICCPR, but
those rights may be limited for certain prescribed purposes (for example, where
it is necessary to respect the rights of others, to protect national security,
public safety, public order, public health or morals) provided those
limitations are prescribed by law, reasonable, necessary and proportionate to
achieving the prescribed purpose.[241]
The PJCHR noted that the prohibition proposed by Schedule
4 of the Bill and proposed section 355A in particular engages and limits
the right to strike because:
By prohibiting action (other than protected industrial
action) intended to coerce a person to pay amounts into a particular fund, the
measure further engages and limits the right to strike. This is because it may
impose an additional penalty or disincentive to taking unprotected industrial
action with the intent of influencing the conduct of an employer. The existing
restrictions on taking industrial action under Australian domestic law have
been consistently criticised by international supervisory mechanisms as going
beyond what is permissible.[242]
The PJCHR noted that whilst the Explanatory Memorandum
‘acknowledges that the measure engages work-related rights’ it did not
‘expressly acknowledge that the right to strike as an aspect of the right to
freedom of association’.[243]
The PJCHR further noted that the prohibition ‘on forms of protest action
appears to be potentially quite broad’ and therefore ‘may extend to prohibiting
forms of expression or assembly’ and therefore ‘it may engage and limit the
right to freedom of expression and assembly’.[244]
The PJCHR further noted:
- beyond
providing a description of the measure, the Explanatory Memorandum does not
clearly identify the legitimate objective of the measure
- the
Explanatory Memorandum appears to argue that the measure in fact supports
freedom of association and human rights, but provides no explanation of the
reasoning for this view and
therefore the statement of compatibility contained in the
Explanatory Memorandum:
does not meet the standards outlined in the committee's
Guidance Note 1, which require that where a limitation on a right is proposed
the statement of compatibility provide a reasoned and evidence-based assessment
of how the measure pursues a legitimate objective, is rationally connected to
that objective, and is proportionate.[245]
The PJCHR concluded that there were ‘questions as to
whether the measure is compatible with the right to strike as an aspect of the
right to freedom of association’[246]
and therefore sought from the Minister further advice regarding:
- whether
the measure is aimed at achieving a legitimate objective for the purposes of
international human rights law
- how
the measure is effective to achieve (that is, rationally connected to) that
objective
- the
scope of any restriction on the right to freedom of expression and assembly and
- whether
the limitation is a reasonable and proportionate measure to achieve the stated
objective (including any relevant safeguards and whether the measure is the
least rights restrictive way of achieving its stated objective).[247]
The Minister’s response to the PJCHR was not publically
available at the time of writing.[248]
Key issues
and provisions: disclosable arrangements
Schedule 5 inserts a new Part 3D into Chapter 11 of the FWRO
Act dealing with ‘disclosable arrangements’. Items 1 to 3 and
item 5 of the Schedule will commence on the later of a day to be
fixed by proclamation or six months after Royal Assent.[249]
Item 4 will commence at the later of the time Parts 1 to 3 of Schedule 2
commence and immediately after the commencement of items 1 to 3.[250]
The RCTUGC examined the types of arrangements that will be
captured by the amendments in Schedule 5 of the Bill. In framing its
recommendation, the RCTUGC argued that:
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.[251]
(emphasis added)
The above gives context to the RCTUGC’s recommendation 47
that amendments be made to the Corporations Act requiring disclosure of
‘the direct and indirect pecuniary benefits obtained by them in connection with
employee insurance products’ and that the provisions should require:
- a
branch of a registered organisation, and an officer of a branch of a registered
organisation
- 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)
- 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.[252]
Importantly however the RCTUGC noted that it ‘is important
to emphasise that the disclosure envisaged by Recommendation 47 is separate
from any disclosure that occurs as part of enterprise bargaining’.[253]
Proposal
differs from the recommendation of the RCTUGC
The disclosable arrangement regime proposed by Schedule 5 of
the Bill differs from the broad model proposed by the RCTUGC in a number of
substantive ways.
First, the regime will be housed in the FWRO Act
rather than the Corporations Act as recommended. Second the regime will
apply not only to pecuniary benefits derived from employee insurance schemes
but also certain managed investment schemes, training funds, welfare funds and
any other types of arrangements prescribed by the ‘disposable arrangements
rules’ (DARs). This means the regime proposed by the Bill has substantially
broader application than that envisaged and recommended by the RCTUGC. Third,
the regime proposed by the RCTUGC envisaged disclosure by registered
organisations to employers. In contrast, the Bill proposes to mandate
disclosure by employers to employees as well.
Who is
covered by the disclosable arrangements regime?
The disclosable arrangements regime will apply to both registered
organisations (and their branches) and federal system employers, as well as
persons linked to them.[254]
What is a
disclosable arrangement?
Proposed section 329PE of the FWRO Act, at item
3 of Schedule 5, defines a disclosable arrangement as including any
arrangement (whether or not in writing and whether formal or informal):
- between
an organisation, or a person linked to an organisation, and a federal system
employer for:
- insurance
promoted or arranged by the organisation or a person linked to the organisation
to be offered or provided to the employer’s employees or
- the
organisation or person linked to the organisation to refer the employer to an
insurer or insurance intermediary for the purposes of employees of the employer
being offered or provided insurance[255]
- for
a federal system employer to become a member of, or make payments in relation
to, a managed investment scheme (within the meaning of the Corporations Act):
- that
is promoted or arranged by an organisation or a person linked to an
organisation and
- that
is for the purposes of (or for purposes that include) managing financial risk
and
- from
which employees of the employer benefit or may benefit if specified events
occur in relation to the employees[256]
- between
an organisation, or a person linked to an organisation, and a federal system
employer for the employer to:
- become
a member of or make payments to a training fund, welfare fund or WEF that is
for the benefit of the employer’s employees, if
- the
fund is arranged or promoted by the organisation or a person linked to the
organisation[257]
or
- between
an organisation, or a person linked to an organisation, and a federal system
employer if the arrangement is prescribed by the DARs.[258]
Proposed section 329PC provides that the DARs may
prescribe that certain financial benefits are not disclosable arrangements for
the purposes of proposed Part 3D of Chapter 11 of the FWRO Act.
Disclosable
arrangements rules
Proposed section 329PF provides that the Minister
may, by legislative instrument, make disclosable arrangements rules (DARs) that
prescribe matters:
- required
or permitted to be prescribed by the DARs or
- necessary
or convenient to be prescribed for carrying out or giving effect to the
amendments to the FWRO Act contained in proposed Part 3D of
Chapter 11.
Noting that the DARs are legislative instruments and
therefore are subject to Parliamentary scrutiny and disallowance,[259]
nonetheless the breadth of the DARs and their interaction with the reforms
proposed by the Bill attracted criticism from some stakeholders. For example, the
ACTU argued that:
...the arrangements that must be disclosed are too broad. They
are not limited to arrangements that are contractual in nature or legally
binding. Further, the Minister may, at any time, unilaterally prescribe what
constitutes a disclosable arrangement. Beyond the Minister’s power to
prescribe, the arrangements that are covered are arrangements for the provision
of or referral for insurance, arrangements for certain management investment
schemes, training funds and welfare funds. It is to be noted that Royal
Commission limited its recommendation to pecuniary benefits associated with
employee insurance products.[260]
Limits on the
rule-making power of the Minister
Whilst the breadth of the matters allowed to be dealt with
by the DARs is substantial, there are limits on the rule-making power of the
Minister. First, proposed subsection 329PF(2) provides that the DARs
cannot:
- create
an offence or civil penalty
- provide
powers of arrest, detention, entry, search or seizure
- impose
a tax
- set
an amount to be appropriated from the Consolidated Revenue Fund or
- directly
amend the text of the FWRO Act.
Second, proposed subsection 329PF(3) provides that
where the DARs are inconsistent with regulations made under the FWRO Act,
the DARs have no effect to the extent of any such inconsistency, but are taken
to be consistent to the extent they are capable of operating concurrently with
the regulations.
What must
be disclosed?
Organisations and employers must disclose a financial
benefit it, or persons linked to it:
- can
reasonably be expected to receive or obtain (directly or indirectly)
- in
connection with a disclosable arrangement it proposes to enter into or with an
existing disclosable arrangement it proposes to change.[261]
Consideration
for services provided by officers of organisations
In relation to organisations, where an organisation or an
officer of an organisation:
- will,
or can reasonably be expected to receive consideration
- from
a managed investment scheme or type of fund to which proposed subsections
329PE(3) or (4) relates
- for
services provided by an officer of the organisation
then the consideration must be disclosed as proposed
subsection 329QA(4) effectively deems such payments or consideration to be a
financial benefit that the organisation will, or can reasonably be expected to,
receive in connection with the arrangement for the purposes of the proposed
disclosable arrangements regime.
Consideration
for services provided by officers of employers
In relation to employers, where an employer or an officer
of an employer:
- will,
or can reasonably be expected to receive consideration
- from
a managed investment scheme or type of fund to which proposed subsections
329PE(3) or (4) relates
- for
services provided by an officer of the employer
then the consideration must be disclosed as proposed
subsection 329RB(5) effectively deems such payments or consideration to be a
financial benefit that the employer will, or can reasonably be expected to,
receive in connection with the arrangement for the purposes of the proposed
disclosable arrangements regime.[262]
Criticisms
of deeming consideration provided to officers to be a financial benefit
The ACTU criticised the effect of proposed subsection
329QA(4) which is mirrored in relation to officers of employers by proposed
subsection 329RB(5)) on the basis that its effect is:
... where union officials are already paid for their time in
managing established training and welfare funds, that payment is deemed to be
“a financial benefit that the organisation will, or can be reasonably be
expected to, receive in connection with” the arrangement, and therefore be
disclosable. This will create the impression that the union, or one if its
officials, is receiving a kickback as a result of “doing a deal” with the
employer, whereas the reality is that the income flow is entirely independent
of any arrangement ultimately entered into with the employer in question.[263]
Who must
disclosure be made to?
Organisations must disclose to employers any financial
benefits it or persons linked to it might receive or obtain in connection with
a disclosable arrangement it proposes to enter into, or an existing disclosable
arrangement it proposes to change, with an employer.[264]
In turn, the employer must notify its employees of the organisation’s
disclosure.[265]
An employer must disclose to its employees any financial
benefits it or persons linked to it might receive or obtain in connection with
a disclosable arrangement it proposes to enter into, or an existing disclosable
arrangement it proposes to change, with an organisation or person linked to the
organisation.[266]
A number of stakeholders criticised the proposed disclosure
obligations for employers, arguing that employers are not obliged to disclose
to registered organisations or their employees if they propose to enter into an
arrangement with a registered organisation whereby they may derive some benefit
from a party other than the registered organisation.[267]
How must
the disclosure be made?
Disclosures made by organisations and employers must be
made by a disclosure document that is provided to the employer or
employee respectively.[268]
The disclosure document must describe the connection
between the arrangement and the financial benefits that will or can reasonably
be expected to be received or obtained in connection with it by the
organisation, employer or persons linked to the organisation or employer (the expected
recipients) and:
- describe
the nature and (as far as reasonably practicable) amount of those financial
benefits in relation to each expected recipient
- name
each expected recipient
- be
in accordance with any other requirements prescribed by the DARs and
- be
given in a manner (if any) prescribed by the DARs.[269]
When must
the disclosure be made?
In relation to proposed disclosable arrangements,
organisations and employers must disclose the arrangement before the
arrangement is entered into.[270]
In relation to disclosable arrangements in force prior to the commencement of
the proposed amendments, the organisation and employers must disclose relevant
changes to the arrangement before the proposed change takes effect.[271]
The ACTU was critical of the timing requirements related to
disclosure, arguing:
.... the requirement to disclose is pre-emptive, ongoing and
enforceable by way of civil penalty. In addition, disclosures are required to
be provided to the ROC, which in turn must publish the disclosures on its
website... The oppressiveness of these provisions becomes obvious once it is
understood that the obligation to disclose something and consequentially have
it published on the ROC website arises at the point when the arrangement is proposed
and before it is entered into. This means compulsory disclosures to
the employer, its employees and the world at large of arrangements that may
never be entered into simply because the employer rejects them... The net effect
is therefore to create red-tape disincentives to employers negotiating with
unions that have established offerings outside their union to benefit their
members.[272]
Other
obligations
In addition to the disclosure obligations, organisations
and employers must:
- keep
their disclosures up to date[273]
- correct
any inaccuracies or misleading material included in the disclosure document as
soon as practicable after becoming aware of the inaccuracy or misleading
material[274]
- notify
the Commissioner about disclosable arrangements by providing the Commissioner
with copies of the disclosure documents no later than 28 days after the later
of:
- the
day the arrangement to which the document relates is entered into and
- the
day the document is given to the employer or employees.[275]
- notify
the Commissioner about any previously notified arrangements coming to an end.[276]
Penalties
for non-disclosure and other matters
The table below sets out the penalties for non-disclosure
and other related matters.
Table 2: proposed
civil penalties for non-compliance with disclosure and related obligations
| Obligation |
Provision(s) |
Penalty |
| Failure to provide a disclosure document by the required
time |
Proposed subsections 329QA(1), (2) and 329RB(1),
(2) |
60 penalty units |
| Employer failing to notify employees of organisation’s
disclosure |
Proposed section 329RA |
60 penalty units |
| Knowingly or recklessly making false or misleading
statements in a disclosure document |
Proposed sections 329QC and 329RD |
60 penalty units |
| Failing to keep disclosures up to date |
Proposed subsections 329QB(1) and 329RC(1) |
60 penalty units |
| Failing to correct any inaccuracies or misleading material
included in the disclosure document as soon as practicable |
Proposed paragraphs 329QB(1)(b)(ii), (2)(b) and
329RC(1)(b)(ii), (2)(b) |
60 penalty units |
| Failing to notify Commissioner about disclosable
arrangements by providing the Commissioner with copies of the disclosure
documents by the required time |
Proposed subsection 329SA(2) |
60 penalty units |
| Failing to notify the Commissioner about a notified
arrangement coming to an end |
Proposed subsection 329SA(3) |
60 penalty units |
Source: Fair Work Laws Amendment (Proper Use of Worker
Benefits) Bill 2017.
Alternative
disclosure methods
Publication
by the Commissioner of disclosure documents
Proposed subsection 329SC(1) requires the
Commissioner to publish on the Commission’s website copies of disclosure documents
provided under the new regime, as soon as practicable. Proposed subsection
329SC(2) provides that the Commissioner must omit any residential
addresses and has the discretion to omit other personal information (such as
names).
The Explanatory Memorandum states that ‘it is expected that
only information that is required to provide the necessary level of
transparency of disclosable arrangements will be published’.[277]
Application
of amendments
Item 5 deals with the application of the amendments
in Schedule 5. Proposed subitem 5(1) provides that the regime created by
proposed Part 3D of Chapter 11 will apply in relation to disclosable
arrangements entered into on or after the commencement of proposed Part 3D.
Subitem 5(2) provides that the disclosure obligations
in proposed Part 3D also apply to arrangements entered into before
the commencement of proposed Part 3D as if:
- the
arrangement had been entered into on the day item 5 commences
- the
references in proposed sections 329QA and 329RB to a ‘financial
benefit that will or can reasonably be expected to be received or obtained in
connection with the arrangement’ were references to financial benefits that
‘will or can reasonably be expected to be received or obtained on or after that
day’ and
- the
time by which a document must be given under proposed sections 329QA or 329RB
in relation to the arrangement was six months after the commencement of Item
5.
This means that in effect, the amendments will apply
retrospectively to arrangements entered into before the application of proposed
Part 3D, provided the financial benefits arising from the arrangement ‘will
or can reasonably be expected to be received or obtained’ on or after the
commencement of proposed Part 3D.
Subitem 5(3) provides that for arrangements captured
by the retrospective operation of the amendments provided in subitem 5(2),
a discloser (an organisation or employer) is taken to comply with its
obligation to provide copies of the disclosure documents to the Commissioner[278]
if they do so no later than 28 days after giving the document to:
- the
employer under proposed section 329QA or
- the
employees under proposed section 329RB.
Other provisions
Items 17 to 24 of Part 1 of Schedule 2 make amendments to
taxation legislation reflecting the intention to shift regulation of WEFs from
the FBTA Act to the FWRO Act.
Concluding comments
The Bill contains a number of measures which are highly
contentious and/or go beyond, or at least substantially build up, the
recommendations of the RCTUGC.
The prohibition on distributing income to the sponsors of
WEFs after the forecast claims on the fund by employees have been accounted for,
is particularly controversial and would set WEFs apart from other collective
investment or insurance funds.
In addition, the discretion granted to the Minister by the WEF
Rules and DARs is substantial and may allow a degree of intervention into the
management of WEFs that is highly granular when compared to other comparable
collective investment vehicles.
More broadly, other measures such as the disclosable
arrangements regime, apart from being contentious, may impose a heavy
regulatory burden on registered organisations that other entities do not have
to comply with.
[1]. The
Royal Commission into Trade Union Governance and Corruption (RCTUGC), Final
report, vol. 5, ch. 5, Part E – Worker Entitlement Funds, RCTUGC,
Canberra, 28 December 2015, p. 3456. [Note, in the hard copy of Volume 5 of the
RCTUGC’s Final report, this information is at page 295].
[2]. Senate
Education and Employment Legislation Committee, Inquiry into the Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, The Senate,
Canberra, 2017.
[3]. Senate
Education and Employment Legislation Committee, Inquiry into the Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017 [provisions],
The Senate, Canberra, November 2017, p. 14. Recommendation 1 being that: ‘[...]
the government review the wording of proposed section 329LD in light of
the concerns raised that it would not allow for a gift or donation to be made
to charities operating in this sector’. Proposed section 329LD is discussed
under the heading ‘Authorised uses of income’ below.
[4]. Ibid.,
p. xx
[5]. Ibid.
[6]. Ibid.,
p. 19.
[7]. Ibid.,
pp. 17, 19.
[8]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 13, 2017, The Senate, 15 November 2017, pp. 22–7.
[9]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, The Senate, 6 December 2017, pp. 37–50.
[10]. Ibid.,
p. 43.
[11]. Ibid.,
p. 45.
[12]. Ibid.
[13]. Ibid.,
p. 47.
[14]. B
O’Connor, ‘Second
reading speech: Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017’, House of Representatives, Debates, 24 October 2017, p. 11717.
[15]. Ibid.
[16]. A
Bandt, ‘Second
reading speech: Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017’, House of Representatives, Debates, 24 October 2017, p. 11848.
[17]. See
the submissions
from: Protect Services Ltd (Protect), pp. 1–2, 13; Australian Plumbing and Fire
Protection Industries, p. 1; United Voice (UV), pp. 1–2; Queensland Council of
Unions, p. 1; Electrical Trades Union Of Australia (ETU), p. 3; Incolink, p. 6;
MATES in Construction, pp. 4–7; Construction Forestry Mining & Energy
Union (CFMEU), p. 2; Australian Council of Trade Unions (ACTU), p. 3; BERT
Fund, p. 4; and Australian Workers Union (AWU), p. 4. The Contracting Industry
Redundancy Trust (CIRT) whilst not indicating support or opposition for the
Bill, recommended a number of changes to various provisions.
[18]. See
the submissions
from: Housing Industry Association (HIA), p. 3; Australian Industry Group
(AiG), p. 3; Master Builders Australia (MBA), p. 2.
[19]. Master
Plumbers' and Mechanical Services Association of Australia, Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017
[provisions], 25 October 2017, p. 1.
[20]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. iii.
[21]. The
Statement of Compatibility with Human Rights can be found at page v of the
Explanatory Memorandum to the Bill.
[22]. Parliamentary
Joint Committee on Human Rights (PJCHR), Twelfth
report of the 45th Parliament, 28 November 2017, The Senate, Canberra,
p. 16.
[23]. Ibid.,
pp. 16–17.
[24]. Ibid.,
p. 20.
[25]. Ibid.,
pp. 16–17.
[26]. Ibid.,
pp. 22–3.
[27]. PJCHR,
‘Correspondence
register, Table 2: recent correspondence received’, The Senate, Canberra
(as at 20 December 2017).
[28]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 3.
[29]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 2.
[30]. Fair Work
(Registered Organisations) Act 2009, subsections 237(1) and (3).
[31]. Ibid.,
subsection 237(4).
[32]. FWRO
Act, proposed paragraph 237(5)(d), at item 8 of Schedule 1.
[33]. FWRO
Act, proposed paragraph 237(5)(e), at item 8 of Schedule 1.
[34]. FWRO
Act, proposed paragraph 237(6)(c), at item 10 of Schedule
1.
[35]. FWRO
Act, proposed paragraph 237(6)(d), at item 10 of Schedule
1.
[36]. FWRO
Act, proposed paragraphs 237(5)(d) and 237(6)(c).
[37]. Ibid.
[38]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 5.
[39]. Ibid.,
p. 6.
[40]. See
for example subsection 39(5) of Schedule 2 of the Competition and
Consumer Act 2010.
[41]. FWRO
Act, proposed subsection 252A(6).
[42]. Ibid.
[43]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 7.
[44]. FWRO
Act, proposed subsection 252A(5).
[45]. As
a penalty unit is currently equal to $210 (section 4AA of the Crimes Act 1914)
the maximum civil penalty under this provision is $21,000.
[46]. FWRO
Act, proposed subsection 293N(2).
[47]. FWRO
Act, proposed subsection 293N(1).
[48]. FWRO
Act, proposed subsection 293N(3).
[49]. FWRO
Act, proposed subsection 293Q(1).
[50]. FWRO
Act, proposed subsections 293N(1), (2) and (3) and 293Q(1).
[51]. FWRO
Act, proposed subsection 293Q(2).
[52]. RCTUGC,
Final
report, vol. 5, ch. 5, op. cit., p. 3456. [Note, in the hard copy of
Volume 5 of the RCTUGC’s Final report, this information is at page 295].
[53]. RCTUGC,
Final
report, vol. 5, ch. 5, op. cit., pp. 3456–8, 3466. [Note, in the hard
copy of Volume 5 of the RCTUGC’s Final report, this information is at pages
295–7 and 305].
[54]. Australian
Securities and Investment Commission (ASIC), ‘ASIC
remakes “sunsetting” employee redundancy funds class order’,
17 December 2015.
[55]. Ibid.
[56]. Ibid.
[57]. RCTUGC,
Final
report, vol. 5, ch. 5, op. cit., p. 3461. [Note, in the hard copy of
Volume 5 of the RCTUGC’s Final report, this information is at page 300].
[58]. Ibid.,
p. 3463. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report, this
information is at page 302].
[59]. Ibid.,
pp. 3463–5. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report,
this information is at pages 302–4].
[60]. Ibid.,
pp. 3467–8. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report,
this information is at pages 306–7].
[61]. Ibid.,
p. 3469. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report, this
information is at page 308].
[62]. Ibid.,
p. 3476. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report, this
information is at page 315].
[63]. Ibid.,
pp. 3476–7. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report,
this information is at pages 315–16].
[64]. Ibid.,
p. 3481. [Note, in the hard copy of Volume 5 of the RCTUGC’s Final report, this
information is at page 320].
[65]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 3.
[66]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 4.
[67]. Parliament
of Australia, ‘Fair
Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017
homepage’, Australian Parliament website.
[68]. Proposed
paragraphs 329HC(1)(a)(ii) and (iii) of the FWRO Act.
[69]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 15.
[70]. Ibid.
[71]. See
also proposed section 329LA of the FWRO Act.
[72]. Proposed
subsection 329HE(2) of the FWRO Act.
[73]. However,
where a body corporate is convicted of an offence, subsection 4B(3) of the
Crimes Act 1914
allows a court to impose a fine of up to five times the penalty stated.
[74]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. xi.
[75]. However,
where a body corporate is convicted of an offence, subsection 4B(3) of the
Crimes Act 1914
allows a court to impose a fine of up to five times the penalty stated.
[76]. See
Corporations Act
2001, subsection 601ED(5) and Schedule 3, item 163.
[77]. Section
6 of the FWRO Act defines federal system employer as a national system
employer within the meaning of the FW Act. A national system employer is
an employer that is covered by the FW Act. For more information see
Workplace info, ‘National
system employer’, Workplace information website.
[78]. However,
where a body corporate is convicted of an offence, subsection 4B(3) of the
Crimes Act 1914
allows a court to impose a fine of up to five times the penalty stated.
[79]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 16.
[80]. Ibid.
[81]. Proposed
subsection 328KA(2)
[82]. Proposed
subsection 328KA(4)
[83]. Proposed
subsection 328KA(5)
[84]. Proposed
subsection 328KA(3)
[85]. Proposed
subsection 329KB(1).
[86]. Proposed
subsection 329KC(2).
[87]. Proposed
section 329LA, table item 1.
[88]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 18.
[89]. Proposed
section 329LA, table item 2.
[90]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 18.
[91]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, n.d.,
p. 9.
[92]. Proposed
section 329LA, table item 3.
[93]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 18.
[94]. Proposed
section 329LA, table item 4.
[95]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 18.
[96]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, n.d.,
pp. 11–12.
[97]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, 25
October 2017, p. 12.
[98]. Proposed
section 329LA, table item 5.
[99]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 18; RCTUGC, Final
report, vol. 5, ch. 5, op. cit., p. 3480 [Note, in the hard copy of
Volume 5 of the RCTUGC’s Final report, this information is at page 319].
[100]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 12.
[101]. Ibid.
[102]. Proposed
section 329LA, table item 6.
[103]. Ibid.
[104]. Proposed
subsection 329LB(3) applies the definition of ‘related party’ in section 9B
of the Fair Work (Registered Organisations) Act 2009 to industrial
associations and their officers for the purposes of proposed paragraph
329LB(1)(g).
[105]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 21.
[106]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., pp.
10–1, 13.
[107]. Ibid.,
p. 6. See ILO
Convention (No. 87) concerning Freedom of Association and Protection of the
Right to Organise, done in San Francisco on 9 July 1948, [1974]
ATS 3 (entered into force for Australia 28 February 1974).
[108]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, 25
October 2017, p. 4.
[109]. Proposed
section 329LA, table item 7.
[110]. Proposed
section 329LA, table item 8.
[111]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 11.
[112]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit.,
p. 10.
[113]. Ibid.
[114]. Ibid.
[115]. Proposed
section 329LA, table item 9.
[116]. Proposed
section 329LA, table item 10.
[117]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 19.
[118]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 11.
[119]. Ibid.
[120]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 10.
[121]. Proposed
section 329LA, table item 11.
[122]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 19.
[123]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 6.
[124]. RCTUGC,
Final
report, vol. 5, ch. 5, op. cit., p. 3456–8, 3466. [Note, in the hard
copy of Volume 5 of the RCTUGC’s Final report, this information is at pages 295–7
and 305].
[125]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 6.
[126]. Ibid.
[127]. Ibid.
[128]. Proposed
section 329LA, table item 12.
[129]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 19.
[130]. Proposed
section 329LA, table item 13.
[131]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 6.
[132]. Ibid.,
p. 1.
[133]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 13.
[134]. Proposed
section 329LA, table item 14.
[135]. Proposed
subsection 329LF(2).
[136]. Proposed
subsections 329LF(3) and (4).
[137]. Proposed
subsection 329LF(4) and (6).
[138]. Proposed
subsection 329LF(5).
[139]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 12.
[140]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 5.
[141]. Proposed
section 329LA, table item 15.
[142]. Proposed
subsection 329KD(2).
[143]. Proposed
section 329LA, table item 16.
[144]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 5.
[145]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 13.
[146]. Proposed
section 329LA, table item 17.
[147]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 11.
[148]. Ibid;
Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 20.
[149]. Proposed
section 329LA, table item 18.
[150]. Proposed
section 329LA, table item 19.
[151]. Proposed
section 329LA, table item 20.
[152]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 13.
[153]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 11.
[154]. Ibid.
[155]. Proposed
section 329LA, table item 21.
[156]. Proposed
section 329LA, table item 22.
[157]. Proposed
subsections 329LG(1) and (2).
[158]. Proposed
subsection 329LG(3).
[159]. Proposed
subsection 329LG(6).
[160]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 22.
[161]. Proposed
subsection 329LC(1).
[162]. Proposed
subsection 329LD(1).
[163]. Proposed
subsection 329LD(2).
[164]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., pp. 5–6,
8.
[165]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 7.
[166]. PJCHR,
Twelfth
report of the 45th Parliament, op. cit., p. 20.
[167]. Ibid.
[168]. Ibid.
[169]. PJCHR,
‘Correspondence
register, Table 2: recent correspondence received’, op. cit.
[170]. Proposed
paragraph 329LF(3)(g).
[171]. Proposed
paragraph 328LF(3)(d).
[172]. See
proposed sections 329ME, 329MG.
[173]. Proposed
section 329MA.
[174]. Ibid.
[175]. Proposed
subsection 329NJ(1); Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, pp. 31–2.
[176]. Proposed
paragraph 329HC(1)(b).
[177]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 4.
[178]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 8.
[179]. Proposed
subsection 329LA(1), table item 6(b).
[180]. T
Clarke (Leader, Industrial Directorate, Australian Council of Trade Unions), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, 30
October 2017: ‘The worker entitlement rules will enable the Minister to
directly determine which funds are regulated under the Bill, what the
constitutions must say in order to become or remain registered, and what
internal governance procedures they adopt’ and M Connolly (Chief Executive
Officer, Protect Severance Scheme No. 2 and Protect Services Pty Ltd), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, 30
October 2017, p. 24: ‘Condition 6 of 329LA, allows for any requirements to be
imposed on a fund’s constitution. Again, this is another very broad requirement
that could be imposed on our industry that does not apply elsewhere.’
[181]. UV,
Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017
[provisions], n.d., p. 2.
[182]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 4;
ACTU, Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 8;
CFMEU, Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, 25
October 2017, p. 7; Clarke (Leader, Industrial Directorate, Australian Council
of Trade Unions), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, op.
cit., p. 1.
[183]. Proposed
subsection 329LA, table item 13.
[184]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op cit., p. 6; Connolly
(Chief Executive Officer, Protect Severance Scheme No. 2 and Protect Services
Pty Ltd), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, op.
cit., p. 24: ‘The other thing, in terms of uncertainty and what it means for
the operation, is that changing the investment portfolio in order to meet the
capital adequacy requirements, if we need to liquidate assets or change our
portfolio structure, are very complex matters that need to be done in the
appropriate time frame’.
[185]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 6.
[186]. Proposed
subsection 329LA, table item 13.
[187]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 4; Connolly
(Chief Executive Officer, Protect Severance Scheme No. 2 and Protect Services
Pty Ltd), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, op.
cit., p. 24: ‘Firstly, we'd like to know what we have to do... There are
particular terms in there like the 'capital adequacy requirements'... If we are
managing a great deal of money on behalf of others then we need to know what
they are. Similarly, the ability for the minister to impose the broad term,
'governance requirements'. I think that is as broad a word as we could possibly
find in order to impose conditions on an organisation.’ (emphasis added).,
[188]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 5.
[189]. Clarke
(Leader, Industrial Directorate, Australian Council of Trade Unions), Evidence
to Senate Education and Employment Legislation Committee, Inquiry into the
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, op.
cit., p. 1.
[190]. Department
of Employment, Submission
to the Senate Education and Employment Legislation Committee, Inquiry into
the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, October
2017, p. 6.
[191]. Proposed
subsection 328MA(3).
[192]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 26.
[193]. For
further information about the Regulatory Powers
(Standard Provisions) Act 2014 see: J Murphy, Regulatory
Powers (Standard Provisions) Bill 2014, Bills digest, 73, 2013–14,
Parliamentary Library, Canberra, 2014, p. 17 and C Raymond, Regulatory
Powers (Standardisation Reform) Bill 2016, Bills digest, 42, 2016–17,
Parliamentary Library, Canberra, 2016.
[194]. Explanatory
Memorandum, Regulatory Powers (Standard Provisions) Bill 2014, p. 33.
[195]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, pp. 26–7.
[196]. Proposed
subsections 329MG(3) and (4).
[197]. Proposed
subsections 329MG(1) and (2).
[198]. Proposed
paragraph 328MG(1)(b).
[199]. Conditions
one and two require a fund to have one operator that is a constitutional
corporation and not an organisation.
[200]. Proposed
subsection 329MH(1).
[201]. Proposed
subsections 329MH(2) and (3).
[202]. Proposed
section 329MJ.
[203]. Proposed
subsection 329MI(1).
[204]. Proposed
subsections 329MI(2) and (3).
[205]. Proposed
section 329MJ.
[206]. Proposed
sections 329NA and 329NB.
[207]. Proposed
section 329NE.
[208]. Proposed
subsections 329NF(1) and (2).
[209]. Proposed
subsection 329NF(3)
[210]. Proposed
subsections 329NF(4) to (6).
[211]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 30.
[212]. RCTUGC,
Final
report, vol. 5, ch. 6, Part B – Enterprise Agreements, RCTUGC,
Canberra, 28 December 2015, p. 3500. [Note, in the hard copy of Volume 5 of the
RCTUGC’s Final report, this information is at page 339].
[213]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017,
p. xi.
[214]. Protect,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 7.
[215]. Ibid.,
p. 8.
[216]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 7. ILO
Convention (No. 98) concerning the Application of the Principles of the Right
to Organise and to Bargain Collectively, done in Geneva on 1 July 1949,
[1974] ATS 5 (entered into force for Australia 28 February 1974).
[217]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, pp. 34-35.
[218]. PJCHR,
Twelfth
report of the 45th Parliament, op. cit., pp. 16–20.
[219]. Ibid.,
p. 17.
[220]. Ibid.
[221]. Ibid.,
p. 18.
[222]. Ibid.,
p. 19.
[223]. Ibid.,
p. 20.
[224]. PJCHR,
Correspondence
register, Table 2: recent correspondence received, op. cit.
[225]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 8.
[226]. RCTUGC,
Final
report, vol. 5, ch. 5, Part D – Election funds, RCTUGC, Canberra, 28
December 2015, p. 3447. [Note, in the hard copy of Volume 5 of the RCTUGC’s
Final report, this information is at page 286].
[227]. Item
1, Schedule 3.
[228]. PJCHR,
Twelfth
report of the 45th Parliament, op. cit., pp. 21–3.
[229]. Ibid.,
p. 21.
[230]. Ibid.,
p. 22.
[231]. Ibid.,
p. 22.
[232]. PJCHR,
Correspondence
register, Table 2: recent correspondence received, op. cit.
[233]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table items 9 and 11.
[234]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 10.
[235]. RCTUGC,
Final
report, vol. 5, ch. 6, Part B – Term Requiring Contributions to
Employee Benefit Funds or Employee Insurance Schemes, RCTUGC, Canberra, 28
December 2015, p. 3501. [Note, in the hard copy of Volume 5 of the RCTUGC’s
Final report, this information is at page 340].
[236]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 41.
[237]. Proposed
subsection 355A(3) and item 2 of Schedule 4.
[238]. Item
3, Schedule 4.
[239]. International
Covenant on Civil and Political Rights, done in New York on 16 December
1966, [1980] ATS 23 (entered into force for Australia (except Art. 41) on 13
November 1980; Art. 41 came into force for Australia on 28 January 1994); International
Covenant on Economic, Social and Cultural Rights, done in New York on
16 December 1966, [1976] ATS 5 (entered into force for Australia on
10 March 1976).
[240]. PJCHR,
Twelfth
report of the 45th Parliament, op. cit., p. 22.
[241]. Ibid.,
p. 24.
[242]. Ibid.,
p. 23.
[243]. Ibid.,
p. 23.
[244]. Ibid.,
p. 24.
[245]. Ibid.,
p. 23.
[246]. Ibid.,
p. 23.
[247]. Ibid.,
pp. 23–4.
[248]. PJCHR,
Correspondence
register, Table 2: recent correspondence received, op. cit.
[249]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table items 12 and 14.
[250]. Fair
Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017, proposed
section 2, table item 13.
[251]. RCTUGC,
Final
report, vol. 5, ch. 5, Part F – Employee Insurance Schemes, RCTUGC,
Canberra, 28 December 2015, p. 3486. [Note, in the hard copy of Volume 5 of the
RCTUGC’s Final report, this information is at page 325].
[252]. Ibid.,
recommendation 47, p. 3487. [Note, in the hard copy of Volume 5 of the RCTUGC’s
Final report, this information is at page 326].
[253]. Ibid.
[254]. Proposed
sections 329PB and 329PD.
[255]. Proposed
subsection 329PE(2).
[256]. Proposed
subsection 329PE(3).
[257]. Proposed
subsection 329PE(4) and item 4 (proposed subparagraph
329PE(4)(a)(iii)).
[258]. Proposed
subsection 329PE(5).
[259]. Proposed
subsection 329PF(1).
[260]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 17.
[261]. Proposed
sections 329QA and 329RB.
[262]. It
should be noted that proposed subsection 329RB(4) excludes benefits
received or obtained in the ordinary course of the expected recipient’s
business and financial benefits provided directly to the employer’s employees.
[263]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 17.
[264]. Proposed
subsections 329QA(1) and (2).
[265]. Proposed
section 329RA.
[266]. Proposed
subsection 329RB(1) and (2).
[267]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 18;
CFMEU, Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 9;
Protect, Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 8.
[268]. Proposed
subsections 329QA(3) and 329RB(3).
[269]. Ibid.
[270]. Proposed
subsection 329QA(1) and 329RB(1).
[271]. Proposed
subsections 329QA(2) and 329RB(2).
[272]. ACTU,
Submission
to the Senate Education and Employment Legislation Committee, op. cit., p. 18.
[273]. Proposed
sections 329QB and 329RC.
[274]. Proposed
paragraphs 329QB(1)(b)(ii) and (2)(b) and 329RC(1)(b)(ii) and
(2)(b).
[275]. Proposed
subsections 329SA(1) and (2).
[276]. Proposed
subsection 329SA(3).
[277]. Explanatory
Memorandum, Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill
2017, p. 48.
[278]. See
proposed subsection 329SA(2).
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