3.1
This chapter outlines the key issues raised by submitters and witnesses in relation to the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 (the bill) including:
disqualification of individuals from holding office in a registered organisation;
cancellation of the registration of registered organisations;
placing registered organisations into administration;
introduction of a public interest test for the amalgamation of registered organisations;
consultation in relation to the bill; and
compliance with Australia's international obligations in relation to the right to freedom of association.
3.2
The chapter additionally outlines the committee's views and recommendations in relation to these matters.
3.3
The committee heard considerable evidence that there are serious insufficiencies with the operation of the current law and the governance of registered organisations. Many of these insufficiencies in the governance framework for registered organisations were canvassed in detail in the final Report of the Royal Commission into Trade Union Governance and Corruption (Heydon Royal Commission).
3.4
The Heydon Royal Commission made damning findings about the cultures of lawlessness that have developed in some registered organisations. Specifically, as explained in the explanatory memorandum to the bill, the Heydon Royal Commission 'uncovered numerous examples of registered organisations and officials repeatedly flouting the law, misappropriating union funds, putting their own interests before members and generally failing to meet the basic standards of accountability and governance that members and the community more broadly, should be able to expect from registered organisations'.
3.5
There has also been very considerable evidence from recent court findings that a culture of non-compliance with the law by some registered organisations is persisting in a very damaging way. Noting this context, the existence of gaps in the current legal framework need to be taken very seriously.
Schedule 1—Disqualification of individuals from holding office
3.6
The committee heard evidence from a range of submitters about the impact of the prosed amendments to expand the grounds for disqualifying individuals from holding office in a registered organisation.
Standard of regulation
3.7
A number of trade unions raised concerns about these proposed amendments and argued that the amendments provide for a greater level of regulation of officers of registered organisations than those imposed on company directors under the Corporations Act 2001 (Corporations Act).
3.8
For example Ms Elyane Palmer, an Industrial Officer at the Australian Council of Trade Unions (ACTU) outlined what she saw as key differences between the standard of regulation to be imposed on officers of registered organisations through the bill and standards imposed under the Corporations Act:
…the new offence of continuing to hold office or, essentially, hold a shadow office after disqualification is double the penalty for the equivalent offence in the Corporations Act. There's no equivalent to the serious offence of automatic ground for disqualification for company directors. There's no equivalent to the general fit-and-proper person test for company directors. And the formulation in the new section 222(2), that the court 'does not consider that it would be unjust to disqualify the person', is the reverse of the equivalent in the Corporations Act regime, which effectively puts the onus back on the defendant.
3.9
In relation to the applicable burden of proof, Ms Volzke, Acting Senior Executive Lawyer from the Department of Employment explained that the proposed disqualification provisions were not intended to reverse the burden of proof and that the legal burden of proof would remain with the applicant.
3.10
More generally, in relation to whether the amendments imposed a higher standard on officers of registered organisations, the committee heard evidence that the proposed obligations were not unusual and are broadly consistent with obligations imposed on company directors. For example, Ms Matheson, Australian Chamber of Commerce and Industry stated that:
[P]art 2D.6 of the Corporations Act provides for the directors' disqualification for breaches of the law, including indictable offences, dishonesty offences and offences under the Corporations Act punishable by at least 12 months imprisonment. Part 2D.1 also provides for grounds of disqualification for breaches of officers' duties. Court order disqualification can also occur where a civil penalty provision has been contravened or if, within seven years, the person has been an officer of two or more corporations that have failed.
There was a broad congruence between the proposed obligations for union officials and those running corporations. It is not accurate to claim unions are being held to radically different expectations from those applicable to corporations and directors. Furthermore, it is not unusual to regulate who can provide certain services or hold certain occupations.
3.11
The committee also heard evidence that the amendments were designed to make obligations as between company directors and officers of registered organisations more consistent. For example, Mr Humphrey of Housing Industry Association stated that, in their view, the proposed amendments provide an equivalent provision to that contained in the Corporations Act in respect of persons who continue to act in an influential capacity following disqualification:
…the gap that we see is the absence of the equivalent of what would be in the Corporations Act around shadow directors, or people continuing to act in an influential capacity within the registered organisation when they have been disqualified. We see that the bill addresses that by providing some fairly significant sanctions for individuals who continue to, essentially, subvert the intention of the disqualification in the first place.
3.12
This reflected a more general concern, expressed by some submitters, that without these amendments, it is anomalous that there are currently no penalties for a person who is disqualified from holding office to continue to act as an officer whilst they are disqualified.
3.13
Some trade unions expressed concerns that the measures would have the effect of disqualifying individuals from holding an office where they had been democratically elected. For example, Ms Myers of United Voice argued that in the context of an elected organisation any matters of misconduct should generally be self-regulated and left to the union membership to resolve:
Being a democratic, member-led organisation, we elect our officers from the members. What this disqualification regime allows is for the minister, the commissioner or a person with sufficient interest…to raise a claim that somebody should be disqualified and removed. We say that that should properly be a matter, other than in very limited circumstances, for the membership and, under our rules, we have the capacity to remove people for misconduct.
3.14
However, the committee heard evidence that the current degree of regulation and internal union self-regulation of registered organisations may be insufficient to address misconduct in a range of circumstances. In this respect, as set out in Chapter 2, officers of registered organisations are already subject to potential disqualification from holding office in relation to a range of conduct. Ms Volzke of the Department of Employment explained that the proposed amendments 'builds on and broadens the disqualification regime'. She further stated that, where a court is satisfied that a particular officer has engaged in conduct that would justify them being disqualified, such amendments 'enhances the democratic functioning of organisations.'
Scope and appropriateness of grounds for disqualification
3.15
There were a number of unions that argued that the proposed disqualification provisions amount to overregulation, were overly broad and were inappropriate given the particular manner in which unions operate. In this respect, some unions argued that there were circumstances where non-compliance with industrial relations laws may be warranted including representing the interests of members, or in order to prevent the exploitation of workers in particular industries. For example, Ms O'Neil, the National Secretary of the Textile Clothing and Footwear Union of Australia, stated that compliance with current right of entry notification laws in the context of the garment industry in Australia, was not always possible:
If I were walking down a street or driving down a road and happened to see a roller door open and I could see that inside that roller door was a group of workers sitting at sewing machines, what I would do is stop and walk inside. If I had taken the time to fill out what might be the correct paperwork that's required for me to walk inside that workplace, then—I know this of our industry—it would be likely not to be there by the time I turned back up. What happens in the clothing industry is that small sweatshops—these are workplaces you go into when the roller door is open because when it's closed it's locked.
3.16
Ms O'Neil explained her concern that, in theory, under the proposed legislation, she could face disqualification for not complying with right of entry notice laws in these circumstances:
Technically, if I go into that place where people are underpaid, exploited, working in dangerous conditions, and if I do that twice, under this legislation I could be no longer entitled to be elected to lead this union. I'd be breaching the provisions of the act and therefore, under this legislation, I could be disqualified from office...
3.17
Mr Gilbert, the Assistant Secretary of the Victorian Branch of the Australian Nursing and Midwifery Federation (ANMF), explained that there have been occasions where the union had risked conduct that could have been found not to comply with the Fair Work Act 2007 (Fair Work Act) or, in other words, to amount to unprotected industrial action:
…we have a role to play, and our role to play is to represent our members. We make every human effort to apply the laws as they currently stand. Some of them, either intentionally or inadvertently, have arisen to put us in a situation where we could not possibly succeed if we followed that course. In relation to the nurse-patient ratio dispute, in 2000, 2001, 2004, 2007, 2011 and 2012, on each of those occasions we've been forced into a situation where, if we followed strictly the law, we could not have kept nurse-patient ratios. The employers—in this case, the state governments of the day—knew that was the case and tried to force us down that path in order for us to lose our nurse‑patient ratios. So, yes, we put ourselves at risk, but I think I'd be voted out if I didn't do it.
3.18
In relation to such examples, Mr Blake, National Industrial Officer, ANMF, expressed concerns that an officer of a union could face disqualification under the proposed amendments, if they are found to have breached a provision of the Fair Work Act.
3.19
However, the committee also heard compelling evidence that the proposed disqualification scheme would only allow for disqualification where there had been a breach of the law or relevant finding of a regulator empowered to make decisions about, for example, the granting or revocation of right of entry permits, and would as, under the existing regime, remain in the discretion of the Federal Court.
3.20
The committee also heard compelling evidence that the proposed changes in the bill are appropriate given the significant rights and privileges conferred on officers of registered organisations and the findings of the final report of the Royal Commission into Trade Union Governance and Corruption (Heydon Royal Commission). For example, Ms Matheson of the Australian Chamber of Commerce and Industry (ACCI) stated that there was a strong basis for the range of disqualification requirements:
It's also important that these rights be revocable when conduct fall short of what members in the broader community have a right to expect. Serious criminal offences, punishable by five or more years, as grounds for automatic disqualification is appropriate in this regard. The ability to apply for disqualification from office in a registered organisation for multiple findings of other breaches of the law also responds to the royal commission's recommendations regarding officers of organisations who repeatedly contravene the law. While disqualification grounds will be broadened in this way, these applications will be considered by the Federal Court, which would be required to be satisfied that disqualification would not be unjust.
3.21
Similarly, Mr Smith of the Australian Industry Group (Ai Group) referred to the duties and responsibilities of officers of registered organisations as a basis for Ai Group's support of the amendments to the disqualification regime:
Registered organisation officers have very important duties to the members of the organisation. A registered organisation exists to represent the collective interests of its members, who, of course, have paid membership subscriptions to the organisation for the representation of their interests. These days, many registered organisations have large financial and other resources, and it's essential that the officers are fit and proper persons to hold office. We believe that persons who are convicted of serious criminal offences are not fit and proper persons to be officers of registered organisations and should be automatically disqualified. Registered organisation officers who repeatedly contravene industrial and/or other relevant laws are also not fit and proper persons to remain officers of registered organisations, and the Federal Court should have the power to disqualify them from holding office after hearing the circumstances.
3.22
The Australian Mines and Metals Association (AMMA) submitted that the proposed disqualification scheme was appropriately tailored and was supportive of it as a mechanism to oblige compliance with the law:
…the introduction of a series of definitions within the legislation, including "designated findings", "designated laws" and "wider criminal findings", are appropriately tailored to issues of criminality, or civil penalty or remedy provisions commonly found in Australia’s workplace relations framework and associated legislation. Given that officials are empowered to a large degree by legislation such as the Fair Work Act 2009 (FW Act), it is only appropriate that they be obliged to comply with other elements of it.
3.23
A number of submitters argued that the independent role of the Federal Court in making the ultimate determination as to whether a person should be disqualified operated as an appropriate safeguard in relation to the regime.
3.24
There were some concerns raised by a number of submitters that there may be retrospective aspects of the proposed disqualification scheme. In particular, the concern was that conduct which occurred before the amendments enter into force may be the subject of disqualification proceedings or a basis for disqualification.
3.25
The Department, however, indicated that, in its view, the amendments to discretionary disqualification were not retrospective. The Department also provided evidence that any disqualification is not permanent but is set at five years for automatic disqualification and is at the discretion of the court in respect of other grounds for disqualification.
3.26
The committee also received substantial evidence that the current laws are insufficient to address non-compliance with the Fair Work Act or other laws. For example, the Master Builders Association (MBA) pointed to the findings and recommendations of the Heydon Royal Commission as providing a strong evidentiary basis for the amendments to the disqualification regime. It noted in its submission that the Heydon Royal Commission found in relation to the Construction, Forestry, Mining and Energy Union (CFMEU) that:
…inquiries have revealed a worrying and recurring phenomenon, particularly within the CFMEU, of union officials deliberately disobeying court orders or causing the union to disobey court orders. Officials who deliberately flout the law should not be in charge of registered organisations.
3.27
As further evidence that the proposed amendments to the disqualification regime are required, the MBA highlighted the large number of matters before the courts in relation to the CFMEU and stated that '[s]ince the ABCC [Australian Building and Construction Industry] laws originally commenced, courts have handed down over $13.5 million in penalties against building unions.' The MBA further argued that the amendments to the disqualification provisions are likely to improve compliance with the law and 'boost the standard of overall industrial conduct'.
Breadth of standing
3.28
A number of trade unions raised concerns about the scope of proposed standing provisions which would allow the Fair Work Commissioner, the Minister or person with sufficient interest to apply to the Federal Court for an order disqualifying a person from holding office in a registered organisation. For instance, United Voice submitted that the broadened standing provisions:
…would allow an employer or employer organisation, among conceivably many others with no legitimate role in the running of unions, to bring disqualification applications against workers’ representatives.
3.29
However, other submitters considered that the proposed standing provisions were appropriate where a person has a sufficient interest. For example, the AMMA, pointing to broader issues of justice and fairness, argued that there is:
…ample case law considering not only interpreting a party who may have a sufficient interest, but also the rationale why it is appropriate, in the interests of justice and fairness, that such persons be provided an opportunity to be heard where their interests may be effected. This applies irrespective of whether that person is a party to proceedings. This is an existing element of the [Fair Work] Act which has been subject of significant FWC consideration. There are many examples where non‑parties have sought and been granted standing. It is an anomaly that the equivalent ability to be heard does not exist in the Fair Work (Registered Organisations) Act 2009…which the…Bill rectifies.
3.30
Similarly, representatives from ACCI also considered the proposed standing arrangements to be appropriate:
We need to be aware that there is already widespread and frequently accepted standing in relation to very analogous matters: demarcation, rules changes and the whole species of present capacities for registered organisations to change their coverage and operation. Employers are already heard; those affected are already heard and other registered organisations are already heard. So I think the point we want to make is, firstly, it's not a remarkable change to give someone standing, given the organisations that regularly gain standing in comparable matters. Secondly, we think these are essential voices in the proceedings where they want to exercise their voice. But, thirdly, it's up to the court what to make of the intervention that's gained. I struggle to see the wrong in hearing from employers or other unions that may be affected by a proposition at hand, whether it's a cancellation, an amalgamation et cetera; you're heard and an independent judicial authority gives your submissions the weight they merit, or otherwise.
3.31
In relation to standing, as noted in the overview of this Report, a number of the standing provisions in the Bill are similar in scope to existing standing provisions under the Registered Organisations Act.
Vexatious claims
3.32
On a related topic, several unions argued that the proposed amendments would lead to potentially vexatious claims. For example, Ms McManus, Secretary of the ACTU argued the broader standing provisions may allow for vexatious claims to be brought and take up the time of trade unions:
What we are extremely concerned about is that there's no protection from vexatious claims, from politically motivated claims or from an employer who might think, 'Wouldn't it be great if that union was distracted onto running that rather than this enterprise agreement'—all of those particular areas.
3.33
There was a suggestion from Mr Barklamb, ACCI's Director of Workplace Relations, in evidence to the committee, that concerns about lack of specific safeguards in relation to frivolous and vexatious claims might be addressed through an amendment to the bill.
3.34
However the committee was further advised by Ms Volzke of the Department of Employment that there are general provisions under the Federal Court rules for dealing with frivolous or vexatious claims and which would allow such matters to be dismissed. Specifically, the Federal Court is empowered to summarily dismiss an application or make an order for summary judgement including on the basis that: the applicant has no reasonable prospect of successfully prosecuting the proceeding; the proceeding is frivolous or vexatious; or the proceeding is an abuse of process.
Committee view
3.35
Today the Australian community is clearly faced with union officials who consider that there are circumstances that justify breaking the law. However, in the committee's view there is no justification for unions choosing to break the law or for what may be termed the defective culture of lawlessness that has developed within some registered organisations and industries. The current penalties for breaking the law are clearly insufficient to deter non-compliance as demonstrated by the findings of the Heydon Royal Commission and by numerous court cases. The committee notes that expanded grounds for disqualification were recommended by the Heydon Royal Commission to address such issues.
3.36
These expanded grounds for disqualification, for the most part, do not create new obligations but ensure that those who engage in unlawful conduct can be rooted out from leadership positions within registered organisations. The proposed amendments are not novel but draw upon established regimes including those that currently exist under the Corporations Act.
3.37
The committee rejects the idea that it is sufficient for registered organisations to self‑regulate and considers that it is appropriate to place limits on eligibility for office. Being an officer of a registered organisation entails significant rights and should also come with corresponding duties as articulated in the amendments. Ultimately, officers of registered organisations are in a position of trust and responsibility in relation to their members.
3.38
The amendments will allow matters of disqualification to be determined in an independent and impartial fashion by the Federal Court which provides an appropriate check and balance on the proposed disqualification regime. In relation to the potential for vexatious claims, the committee considers that the current powers of the Federal Court to deal with matters that are frivolous or vexatious are sufficient to address these concerns.
3.39
Finally, it is noted that officers of registered organisations who comply with the law should have nothing to fear from these disqualification provisions.
Schedule 2—Cancellation of registration of registered organisations
3.40
The committee received evidence from a range of submitters about the proposed changes to when the registration of registered organisations may be cancelled. As noted in Chapter 2, the registration of a trade union or an employer organisation under the Registered Organisations Act grants the organisation a range of rights and responsibilities including representing the interests of their members.
3.41
The committee heard compelling evidence from a number of submitters that there were a range of circumstances where cancellation or the loss the rights and responsibilities of a registered organisation were warranted. Mr Schmitke, the Deputy Chief Executive Officer of Master Builders Australia gave evidence that the rights afforded to registered organisations should be put in jeopardy if there is a failure by a registered organisation to comply with their responsibilities including compliance with the law:
…these rights would be better considered as privileges, and in return for those privileges comes responsibility and reciprocal obligations to the underpinning framework, members of an organisation and the community more broadly.
One of those obligations is to comply with the law, and it's our view that there is nothing in this bill that should be of concern to those organisations that represent members who comply with the law and do that representation in a manner consistent with the law. We believe that that's the case for the overwhelming majority of registered organisations, but those who do break the law should have their privileges jeopardised. This is an appropriate and additional consequence to ensure that organisations do the right thing, and it fixes what we would see as a deficiency within the current regime.
3.42
Mr Smith of Ai Group explained the role of cancellation and suspension processes in preventing non-compliance with various laws:
The main mechanism for removing rights and privileges of a registered organisation under industrial laws, either for a period of time or permanently, is the suspension or cancellation of registration under the registered organisations act. Giving the Federal Court the powers in schedule 2 would give those unions that are currently regularly breaking the law a strong incentive to stop that law-breaking behaviour. That's obviously in the community's interests.
3.43
Ms Matheson of the ACCI argued that, although cancellation should not be treated lightly and be subject to court oversight, there was a strong need for such a mechanism to prevent unlawful behaviour:
Cancellation of registration is a matter that should not be approached lightly and will never be approached lightly. However, the culture of industrial lawlessness that has been reported in multiple royal commissions, and that is enduring in the building and construction industry in particular, suggests that existing deterrents to wrongdoing have not proven effective. Where a union operates a business model in which it pays fines but continues to knowingly and deliberately breach the law, the threat of cancellation becomes the only effective mechanism of disruption. Again, we urge the Senate to consider the checks and balances in the proposal, particularly the role of the court. Applications for cancellation will be determined by the Federal Court, from which appeals are available. This avoids the risk of excessive or arbitrary interference in the free functioning of organisations.
3.44
The committee also received numerous examples of instances of non-compliance and disregard for industrial relations law by particular registered organisations. The MBA pointed to specific examples from court cases and judicial commentary which indicated that the CFMEU had shown a very significant history of non-compliance with, and disregard for, the law. The MBA submission notes that the Heydon Royal Commission did not recommend that the CFMEU be deregistered. However, it argues that this bill, in fact, addresses a number of factors that appear to weigh against a recommendation that the CFMEU be deregistered including the flexibility of the proposed regime.
3.45
During the committee's public hearing there was some discussion of the legislation passed in 1986 by the then Hawke Labor government which allowed for the deregistration of the Builders' Labourer Federation (BLF). Some submitters noted that there has not been a deregistration of a registered organisation other than for technical reasons since the BLF in 1986. While some submitters indicated that this meant that the current provisions were untested and no changes were needed, other submitters indicated that the difficulty in cancelling registration was of significant concern.
3.46
The question of whether particular registered organisations were engaged in conduct that was similar to that which led to the BLF being deregistered was explored in evidence. While Sally McManus, secretary of the ACTU, stated that she was not aware of the circumstances that led to the deregistration of the BLF, former Labor Prime Minister Bob Hawke has recently argued that there are parallels between the conduct of the BLF and particular registered organisations. In relation to the CFMEU, he indicated that he would be in favour of deregistration:
The unions need to clean up their act and get their house in order… It is just appalling. I mean, I wouldn’t tolerate it. You know what I did with the Builders’ Labourers Federation—I would throw them out.
3.47
The committee's attention was also drawn to the comments made by former Prime Minister Hawke, when introducing legislation that would ultimately lead to the deregistration of the BLF, that there was a need for 'civilised behaviour' in the industrial relations system:
In short, what is important to understand is that in the longer term, the interest of employers, and the interest of the community, depend upon having a rational system of industrial relations within which there is, as there appropriately should be within a democracy, the opportunity for legitimate trade unions to put points of view, and for there to be rational interchanges between employers and organised workers.
This relationship obviously hinges on the parties to the relationship being able to rely on there being civilized behaviour within the industrial environment.
3.48
However, a number of trade unions raised concerns that the proposed grounds for cancellation of registration were overly broad given the serious consequences that flow from cancellation including in relation to the representation of members. For example, the Community and Public Sector Union State Public Services Federation Group (CPSU SPSF) raised concerns that the conduct of a few officers or relatively minor breaches of industrial relations laws could be grounds for cancellation:
The grounds that could found a deregistration order are too broad and could mean an accumulation of relatively insignificant breaches of the Fair Work Act (for example) could found an order.
3.49
The National Tertiary Education Union (NTEU) raised similar concerns that the 'improper behaviour' of some members or officers could lead to cancellation:
…it would appear the Bill could facilitate deregistration of a registered organisation in circumstances where a handful of members or officers engaged in improper behaviour. This is a heavy-handed and inappropriate response to trade union corruption; it is a response that unfairly punishes the members who benefit on a day-to-day basis from the bargaining, dispute handling and other industrial work performed by the many other union officials they pay dues to support.
3.50
Some submitters also raised specific concerns that the expansion of the grounds for cancellation went beyond the recommendations of the Heydon Royal Commission particularly noting the potential impact on members. However, other submitters indicated that, while not recommended by the Heydon Royal Commission, the proposed amendments appropriately addressed issues raised by the Heydon Royal Commission.
3.51
The committee also heard persuasive evidence that, by providing the Federal Court with the capacity to make alternative orders, in appropriate circumstances, the bill struck the right balance. This included the Federal Court having the ability to take into account the interests of members and the seriousness of any contraventions. For example, the AMMA, in its submission stated that:
The capacity of the Federal Court to make alternative orders where it considers the cancellation of registration would be unjust, strikes this balance. It ensures appropriate remedial action in relation to conduct which would be grounds for cancellation of registration can be taken, while not disproportionately affecting members, officials or parts of registered organisations not involved in the relevant activity.
3.52
Some submitters raised concerns that once a ground for cancellation was established, the court is required to cancel registration (unless it would be unjust to do so). Ms Palmer of the ACTU argued this means that it is not left to the court's discretion as to whether to cancel registration:
…once a ground for cancellation of registration is made out the court has no discretion. It must exercise that power unless it would be unjust not to, and the onus is on the defendant to convince the court that it would be unjust not to.
3.53
However, Ms Volzke of the Department of Employment provided evidence to the committee that she could 'absolutely confirm' that in relation to the cancelation provisions 'the legal burden of proof rests with the applicant' which is consistent with the current law. As noted above, there would also be the capacity for the Federal Court to make alternative orders where it considers the cancellation of registration would be unjust.
3.54
A number of submitters raised concerns about the breadth of standing provisions. However, as set out in the overview of this report, the provisions are no more broad than the existing standing provisions under the Registered Organisations Act.
Committee view
3.55
The committee considers that there is a strong basis for expanding the grounds for the cancellation of registered organisations. There may be particular rights that come with being a registered organisation but as a consequence there are also particular responsibilities. It is right that a failure to comply with these responsibilities including breaking particular laws should have appropriate consequences. While the cancellation of registration is a serious consequence, the committee has heard evidence that the availability of this consequence is likely to assist to restore the correct balance to the industrial relations system. Indeed the committee has heard detailed evidence that some registered organisations have a protracted record of non-compliance with the law and, in fact, often operate with a blatant disregard for it. In such circumstances, currently, it is too difficult for the registration of a registered organisation to be cancelled. This is demonstrated by the fact that there has not been a single use of the existing deregistration provisions for over 30 years. These amendments will address this issue and help address the deplorable behaviour that is rampant in some industries.
3.56
The committee considers that the independent role given to the Federal Court in ordering cancellation will ensure that the consequence of deregistration is applied appropriately including with due consideration to the interests of members. The committee notes, in this respect, that the court will be empowered to make orders as an alternative to cancellation where appropriate. Ultimately, these amendments will restore balance to the industrial relations system and will strengthen compliance with the law.
Schedule 3—Placing registered organisations into administration
3.57
The committee received a range of evidence about the amendments to the regime for placing registered organisations into administration.
3.58
Some submitters expressed concern that these amendments were not based on specific recommendations of the Heydon Royal Commission and that the amendments change the nature and scope of when a registered organisation may be placed into administration. For example, the ACTU submission argued that:
The existing provisions provide for a remedial scheme to be imposed by the Court for the benefit of members in very limited circumstances, where there are no effective means under the organisation's own rules to address the circumstance. Schedule 3 fundamentally changes the nature of the provisions to essentially provide for punitive measures to address alleged wrongdoings by an organisation or its officers or members.
3.59
However, other submitters were supportive of these amendments including on the basis that they would clarify the law and pointed to the role of the Federal Court in ordering a remedial scheme as an appropriate check and balance.
3.60
Further, the Department of Employment submission explained there are a number of limitations with the current framework for placing a registered organisation into administration. It explained specifically how the bill addresses such limitations:
Firstly, the Bill makes clear that the circumstances in which an organisation can be placed into administration include where officers have repeatedly broken the law, breached their duties or misappropriated funds.
Secondly, the Federal Court’s power to approve a scheme consequent to the making of a declaration will be amended to expressly permit the appointment of an administrator, and the functions of an administrator will be clearly set out.
Finally, standing to apply for a declaration that an organisation has ceased to function effectively will also be extended to the Registered Organisations Commissioner and the Minister.
3.61
Ms Volzke of the Department of Employment explained further that there were questions about the operation and scope of current administration provisions following the case of Brown v Health Services Union [2012] FCA 644 (involving the Health Services Union (HSU) being placed into administration). In this case there was a specific question about whether an administrator could be appointed.
Committee view
3.62
The committee is of the view that amendments are required to the current regime for placing registered organisations into administration. The need for reform is well documented by the difficulties identified in the case of the HSU being placed into administration. Importantly, the bill puts beyond doubt that the Federal Court can appoint an administrator and can do so where officials of registered organisations have misappropriated member funds, repeatedly breached their duties or repeatedly broken the law. The committee considers that the expanded grounds for placing registered organisations into administration are appropriately balanced.
Schedule 4—Introduction of a public interest test for the amalgamation of registered organisations
3.63
The committee received significant evidence in relation to the proposed amendment to introduce a 'public interest test' for the amalgamation of registered organisations. As set out in Chapter 2, the amendments would require the FWC to decide an amalgamation is in the public interest before setting an amalgamation date.
3.64
A number of trade unions considered that the current amalgamation provisions were effective and opposed these amendments. For example, Ms McManus of the ACTU argued are that the current amalgamation provisions are working well and that no changes are required:
The current way that it operates and has operated for quite a long time now has overseen a process of amalgamations for the last 20 years. It is something that has been in the interests of the economy and in the interests of those members, and it has happened smoothly and fairly.
3.65
Ms Palmer of the ACTU further explained that the current matters which the FWC is to have regard to are appropriate:
What the commission currently has to have regard to is ensuring that the amalgamation has been properly approved in accordance with organisations' own rules and the wishes of the organisations' members.
3.66
Some trade unions claimed that the motivation behind the introduction of a public interest test was aimed at preventing the proposed amalgamation of particular trade unions (namely, the CFMEU, the Maritime Union of Australia (MUA) and the Textile Clothing and Footwear Union of Australia (TCFUA)). The CFMEU raised a particular concern that the public interest test would be applied retrospectively in relation to amalgamations that are currently being pursued:
There is an unfair element of retrospectivity to the ‘public interest’ test. Item 13(3) of the Bill provides that ‘compliance record events’ include events that occurred before the commencement of the Bill. This means that any of the full range of specified contraventions that occurred at any time before the public interest test even came into existence will be taken into account. Of course neither a union nor its officers or members had any way of knowing at the time of the occurrence that these types of events would count against a possible amalgamation at some future time.
3.67
Concerns were also raised that the introduction of the public interest test could override the wishes of union members to join together with another union.
3.68
Ms O'Neil, National Secretary of the TCFUA explained that the union was considering amalgamating with the CFMEU and the MUA on the basis of improving their capacity to campaign for better pay and conditions in the industry:
We are proud of the things we have achieved for workers in the industry. But one of the things we also realise in representing workers in a low-paid industry where there is often exploitation and very difficult working circumstances is the shrinking size of the union…
So it was a fairly logical step for our members to say: 'We want to increase our collective bargaining power. We want to improve our capacity to win. We want to increase our ability to have industrial and political influence.'… So the decision to support the amalgamation was about saying, 'We want to be part of a union which will join with us in fighting for workers' jobs as well as improving their pay and conditions.'
3.69
However, industry representatives raised significant concerns about the proposed amalgamation of the CFMEU, the MUA and the TCFUA given the breadth of an amalgamated union's potential power. For example, Ms Mansini, the Director of Workplace Relations at AMMA outlined the following industry concerns with the proposed amalgamation:
…there is concern of industrial chaos that would be created by a monopoly of the supply chain, literally from pit to port. That would give the 'mega-union', as it describes itself, the capacity to organise coordinated action right across the supply chain that services most of our projects in Australia… there are concerns within our membership that this merger, in the CFMEU and the MUA's own words, would facilitate their proud and notorious lawlessness through giving them greater power.
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Mr Schmitke of MBA expressed similar concerns about the proposed amalgamation of the CFMEU, the MUA and the TCFUA:
Much could be said about this move, but I would simply note that the prospect of what some have described as a 'superunion' is of very significant concern to our members. We think there could be consequences in terms of influence and conduct of an organisation of that size, with ramifications for the economy, investment and the community more broadly.
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In this context, and in view of such concerns, a number of submitters argued that it was proper that matters of public interest be taken into account by the FWC in deciding whether to approve an amalgamation. For example, Mr Smith of Ai Group provided evidence that, as contemplated by the bill, it was appropriate that in considering matters of public interest that the FWC must have regard to an organisation's record of compliance with the law. In this respect, he argued that in the absence of this test there were potential harms that may flow from amalgamation:
...if you have two registered organisations that have an approach of non‑compliance with the law it would be logical for the commission to decide that it would not be in the public interest for those organisations to amalgamate as it would be highly likely that the combined organisation would adopt the same approach but with more resources and more ability to inflict harm and damage upon businesses, the community and the economy.
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The Department of Employment also made a similar point about the potential consequences resulting from mergers of unions with different cultures of non‑compliance with the law:
Currently there is no capacity for the Fair Work Commission to consider the impact of the amalgamation of organisations where one may have a history of non-compliance with the law. For example, when an organisation with a poor compliance record amalgamates with another organisation, it expands the potential to influence behaviour in the other organisation. The current framework does not ensure the approval process considers all those affected by the outcome of a potential amalgamation. There is also very limited scope for any person with a sufficient interest to raise concerns about a proposed amalgamation.
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Further, some submitters argued that the inclusion of a public interest test was not an unusual or unorthodox approach. For example, Ms Mansini of AMMA explained AMMA's view of the public interest test:
We say this is an orthodox and fairly unremarkable approach that's consistent with industrial history and practice but also practices under current workplace laws. For example, in an enterprise agreement approval process where a union seeks to intervene and oppose the enterprise agreement being approved and where it has no members and was not a bargaining representative, the public interest is considered at that stage. In other proceedings such as enterprise agreement variations and protected industrial action, the public interest test comes up at each of those junctures.
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Mr Smith of Ai Group similarly explained that there were numerous provisions already within the Fair Work Act which required the FWC to apply a public interest test:
For over 100 years, the commission and its predecessors have been applying a public interest test when exercising many of its powers. These days of course the Fair Work Act has a more limited role for the commission. But, as we have identified in our submission, we readily found 15 separate sections of the Fair Work Act where the commission is required to apply a public interest test—something it has been applying for 100 years. It seems to be an obvious deficiency in the scheme that the public interest is not able to be taken into account when applications are made to amalgamate registered organisations.
Committee view
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The committee supports the introduction of a public interest test prior to the amalgamation of registered organisations. Public interest tests have a long-standing precedent in current industrial relations law. The FWC is practised in applying these tests. It is also a concept that is applied to corporate mergers, where a merger that would substantially lessen competition can only be approved by the Australian Competition Tribunal if it would be in the public interest.
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The amalgamation of registered organisations may have far reaching effects and the committee considers that it is appropriate that the views of all those effected are able to be taken into account. It is also relevant that when registered organisations seek to amalgamate that consideration must be given to whether there is a history of non‑compliance with the law by the organisation. Importantly, this consideration will assist to prevent the spread of non-compliance and its potential impacts on union members, employers, industry and the Australian economy.
Consultation in relation to the bill
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Some submitters to the inquiry raised concerns that there had been insufficient consultation in relation to a number of provisions in the bill. However, the committee heard evidence that there had been consultation with employers groups and trade unions in relation to the bill through the mechanism of National Workplace Relations Consultative Council. Mr Barklamb of ACCI explained the relevant process:
The National Workplace Relations Consultative Council is a creature of statute of the parliament. It formally gives effect to Australia's obligations under an ILO convention to talk to unions and employers when you pass industrial legislation. One of its subcommittees means that our organisation, along with Amanda's organisation [AMMA] and along with the ACTU and a number of its affiliates, are sat around a table confidentially with a draft of the legislation and we're given an opportunity to provide immediate comments, not necessarily on policy but on mechanics and practicality, omissions and the like. That is the main point at which we see legislation, through a formal, closed-door process under statute.
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Departmental officials detailed the many organisations that had been formally consulted through this process:
The employer associations invited to attend were the Housing Industry Association, the Australian Chamber of Commerce and Industry, the Australian Industry Group, the Australian Mines and Metals Association, the Master Builders association, the Australian Council of Trade Unions [and] a number of affiliated unions, including the Australian Workers' Union, the Australian Services Union, the SDA and the Australian Nursing & Midwifery Foundation.
Compliance with Australia's obligations in relation to the right to freedom of association
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Australia has voluntarily accepted obligations under a number of International Labour Organization (ILO) treaties as well as the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR). Amongst other things, these treaties provide protection for the right to freedom of association.
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A number of submitters raised concerns that the measures in this bill do not comply with the right to freedom of association and Australia's obligations under these treaties.
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During its public hearing the committee heard evidence from Mr Barklamb of ACCI who explained he is one of 14 members of the Governing Body of the ILO and has previously worked for the International Organisation of Employers Secretariat. He stated that there had not been any finding yet about this particular bill by the ILO's Committee on Freedom of Association (which is a supervisory mechanism that examines complaints about violations of the right to freedom of association and the right to collectively bargain). Mr Barklamb provided the following view:
[W]hat we've got at the moment are predictions of what the Committee on Freedom of Association might decide in relation to a complaint that's not been made… We say that there's nothing the parliament can make of this—of the threat of a complaint and a tacit suggestion...
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Additionally, the committee was told in evidence from the Department of Employment that they considered that the bill complied with international law. Departmental officials also explained that they consulted with the Office of International Law at the Attorney-General's Department regarding the bill's compatibility with Australia's obligations under international law.
Concluding committee view
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Based on the evidence received during this inquiry, the committee is convinced that the measures in this bill are a necessary and balanced response to ensure the integrity of registered organisations and their officials, for the benefit of members. The committee agrees with the sentiment expressed in the explanatory memorandum that these 'amendments will combat the culture of lawlessness identified by the [Heydon] Royal Commission and improve the governance of registered organisations.'
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The committee recommends that the Senate pass the bill.
Senator Linda Reynolds CSC
Chair