This chapter provides an overview of the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2019 (the bill). The bill proposes amendments to the Fair Work (Registered Organisations) Act 2009 (the Act), which sets out the framework for the regulation of registered organisations (namely, trade unions and employer associations) at the federal level.
Purpose of the bill
In his second reading speech, the Minister for Industrial Relations, the Hon Christian Porter MP noted that:
This bill delivers on the government's commitment to ensure, and in some cases restore, integrity to registered organisations and their officers to make sure that they work in their members' best interests.
These views are reiterated in the bill's explanatory memorandum, which states that the measures in the bill implement a commitment to 'effectively deal with registered organisations that are dysfunctional or not serving the interests of their members'. The explanatory memorandum goes on to state that the bill also responds to the Final Report of the Royal Commission into Trade Union Governance and Corruption (the Royal Commission).
The amendments in the bill would apply to all registered organisations: both trade unions and employer associations.
The bill is made up of five schedules:
Schedule 1 deals with disqualifying people from holding office in a registered organisation;
Schedule 2 deals with the cancellation of registration of a registered organisations and related matters;
Schedule 3 deals with the administration of dysfunctional registered organisations;
Schedule 4 proposes a public interest test for amalgamations of registered organisations; and
Schedule 5 contains minor and technical amendments.
Schedules 1 to 4 will be discussed below.
The Royal Commission was established on 13 March 2014 to investigate the governance arrangements of separate entities established by employee associations and the adverse conduct of unions. On 28 December 2015, it provided its final report and made 79 recommendations.
Following the recommendations of the Royal Commission, the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017
(the 2017 bill), was introduced into the House of Representatives on 16 August 2017 and subsequently referred to the Senate Education and Employment Legislation Committee (the committee) for inquiry and report. On 12 October 2017, the committee reported on the 2017 bill and made one recommendation—that the Senate pass the 2017 bill.
The 2017 bill passed the House of Representatives on 16 October 2017 and lapsed at the prorogation of the 45th Parliament on 11 April 2019.
The 2017 bill is substantially similar to the current bill, but with some noticeable differences. Like the 2017 bill, this bill seeks to implement recommendations 36, 37 and 38 made by the Royal Commission. Minister Porter explained:
In re-introducing this bill, the government has listened to stakeholders to ensure that its provisions as closely as possible align with the standards for registered organisations and their officers with those that apply to companies and their directors.
The differences between the two bills will be outlined in this chapter.
Schedule 1—Disqualification of individuals from holding office
Schedule 1 would expand the circumstances in which a person may be disqualified from holding office in a registered organisation. The explanatory memorandum explains that schedule 1 responds to recommendations 36, 37 and 38 of the Royal Commission. Also, it has the objective of 'improving the governance of registered organisations and protecting the interests of members'.
Automatic disqualification—definition of 'prescribed offence' expanded
Under the current provisions of the Act, a person can be automatically disqualified from holding office in a registered organisation on the basis of having been convicted of a 'prescribed offence' which is defined to include:
offences involving fraud or dishonesty and punishable on conviction by imprisonment for a period of 3 months or more;
prescribed offences under the Act that relate to the interference of an organisation's election, criminal breaches of an official's duties, use of position and information, and criminal offences related to reprisals of whistleblowers;
offences relating to the formation, registration or management of associations and elections; or
offences involving intentional violence or intentional property damage.
The bill expands the definition of a 'prescribed offence' for the purposes of automatic disqualification to include 'an offence under a law of the Commonwealth, a State or Territory or another country, punishable on conviction by imprisonment for life or a period of five years or more'.
The explanatory memorandum states that the proposed amendment directly responds to recommendation 36 of the Royal Commission.
Court ordered disqualifications
The bill seeks to add two new divisions to Part 4 of Chapter 7 of the Act, which would have the effect of significantly revising the current discretionary disqualification regime.
New Division 3 seeks to introduce a comprehensive mechanism by which the Minister, a person with sufficient interest, or the regulator can apply to the Federal Court (the court) to have a person disqualified from holding office in an organisation (a disqualification order). The explanatory memorandum explains that the proposed amendment is in response to recommendation 38 of the Royal Commission. Recommendation 38 recommended that the Act be amended to provide 'the Federal Court jurisdiction, upon the application of the registered organisations regulator, to disqualify a person from holding any office in a registered organisation for a period of time the court considers appropriate'.
The bill would allow for the following people to apply to the court for a disqualification order: the Registered Organisation Commissioner (the ROC), the Minister or a 'person with sufficient interest'. The court may make a disqualification order in respect of a person, for a period the court considers appropriate, if satisfied that a ground for disqualification applies and it would not be unjust to disqualify the person having regard to the nature of the ground, the circumstances and any other matters the court considers relevant. The grounds for disqualification would include:
a 'designated finding' or contempt in relation to a designated finding;
a contempt of court where the person has engaged in this conduct in the course of functions in relation to any organisation;
two or more failures to take reasonable steps to prevent particular conduct (a designated finding or contempt of court in respect of injunctions or orders) by an organisation while the person was an officer of that organisation;
corporate impropriety; or
a person is not a 'fit and proper' person.
A 'designated finding' is defined to include a finding that a person has committed particular criminal offences against a designated law or has contravened a civil penalty provision of particular industrial laws. The relevant laws include the Act, the Fair Work Act 2009, the Building and Construction Industry (Improving Productivity) Act 2016, the Work Health and Safety Act 2011, or a provision of a State or Territory occupational health and safety law within the meaning of the Fair Work Act 2009.
'Corporate impropriety' is defined as occurring if the person is found in civil or criminal proceedings to have contravened the general duties of directors of corporations under Division 1, Part 2D of the Corporations Act 2001 or the person becomes disqualified from managing corporations.
'Not fit and proper', has been defined to include:
where a person is refused an entry permit or have had their entry permit revoked or suspended;
where a person is refused a work health and safety entry permit or have had this entry permit revoked or suspended;
where a person has been found to have engaged in conduct involving fraud, dishonesty, misrepresentation, concealment of material facts or a breach of duty, in any criminal or civil proceedings, or any action by an agency of the Commonwealth, State or Territory; or
in criminal proceedings where the person is found:
to have engaged in conduct involving the intentional use of violence, or causing of death or injury to a person, or the intentional damage or destruction of property; or
to have committed an offence against a law of the Commonwealth, State or Territory that is punishable by imprisonment for two or more years.
The 2017 bill similarly provided a ground for disqualification on the basis of a person being not fit and proper. However, the specific provision relating to committing an offence punishable by imprisonment for two years or more has been added since the 2017 bill. The 2017 bill also included ‘any other event the court considers relevant’ as a ground for disqualification as part of the fit and proper person test. This ground has been removed from the bill.
Additionally, the 2017 bill included 'wider criminal findings' as a ground for disqualification, which has been removed from this bill. A wider criminal finding was defined to include circumstances where the person committed an offence against any law of the Commonwealth, State or Territory.
The 2017 bill also included the following laws within the definition of a designated finding or designated laws:
the Fair Work (Building Industry) Act 2012;
Part IV of the Competition and Consumer Act 2010; and
the Competition Code of a State or Territory.
The effect of removing wider criminal findings, any other event that the court considers relevant, and particular laws as an explicit ground for disqualification would limit the types of offences and contraventions that are grounds for the disqualification of officials.
Offences for persons disqualified from holding office
New Division 4 would make it a criminal offence for a person who is disqualified from holding office in a registered organisation to:
stand as a candidate for elected office in a registered organisation;
continue to hold office in a registered organisation;
exercise capacity to significantly affect the financial standing or other affairs of the registered organisation; or
give directions to the committee of management of the organisation.
Proposed subsection 226(4) states that strict liability applies to the physical element of the above offences.
Each new offence may be subject to 100 penalty units (currently equivalent to $21 000) or imprisonment for two years, or both.
Schedule 1, item 17 of the bill outlines the application of the amendments. In particular, it specifies that, in relation to the automatic disqualification regime, it will only apply to convictions that relate to conduct engaged in after the commencement of the bill.
Similarly, in relation to applying the grounds for disqualification outlined in proposed section 223, the court may only have regard to conduct or events that occurred after the commencement of the bill.
Schedule 1, item 17(3), provides that the court may have regard to matters that occurred before the commencement of the amendments for the purposes of determining whether it would be unjust to disqualify the person.
Schedule 2—Cancellation of registration of organisations
Schedule 2 of the bill seeks to expand the grounds for the cancellation of registration of organisations under the Act. The explanatory memorandum states that the amendments in schedule 2 respond to evidence presented to the Royal Commission of a culture within some organisations of 'little or no regard for the law'.
The registration of a trade union or an employer organisation under the Act grants the organisation a range of rights and imposes responsibilities, including representing the interests of their members. Under current provisions of the Act the court may make an order cancelling the registration of an organisation for certain kinds of misconduct or on technical grounds. An order may be made on application of the Minister, an organisation, or an interested person. The court must cancel the registration if it finds that a ground for cancellation has been established and where it considers that it would not be unjust to do so.
The bill proposes to repeal sections 28 and 29 of the Act and provide for the following people to apply to the court for an order cancelling registration of an organisation:
a person with sufficient interest.
The new grounds for cancellation would include:
officers of the organisation or part of the organisation acting in affairs of the organisation that:
is in their own interests rather than the interest of its members;
conducted affairs of the organisation in a manner that is oppressive, unfairly prejudicial to, or discriminatory against, a member, a class of members, or the interests of the members as a whole; or
are being conducted in a manner where the organisation or its members have a record of not complying with designated laws;
the organisation is found to have committed a criminal offence against a law of the Commonwealth, State or Territory and the offence is punishable by a penalty for a body corporate of at least 1500 penalty units (currently equivalent to $315 000);
multiple designated findings have been made against a substantial number of the member, or a class of members, of the organisation or a part of the organisation;
the organisation, part of the organisation or its members fail to comply with an order or injunction made under a designated law; or
the organisation or a substantial number of members have organised or engaged in obstructive industrial action.
It is noted that the wording for the first ground for cancellation, has changed from the 2017 bill, which focused on the whether the conduct was engaged in by a 'substantial number of officers, or two or more senior officers, of an organisation'. The current wording states 'officers of the organisation'. Additionally, one of the ground's for cancellation contained in the 2017 bill relating to multiple findings against the organisation, has not been included in this bill.
If the court finds that a ground is established it must cancel the organisation's registration unless the organisation can satisfy the court that it would be unjust to do so.
Where an order cancelling registration has been made, the court may make additional orders regarding any future registration and any future application for registration.
In cases where the court determines that it would be unjust to cancel the registration of an organisation, the bill enables the court to make a range of alternative orders, where it would not be unjust to do so. These alternative orders could include the disqualification of certain officers, the exclusion of certain members, and the suspension of the rights and privileges of the organisation, including the later reconsideration of the cancellation or alternative orders.
While the Act provides that the Minister may delegate their powers, the bill makes clear that the Minister's functions or powers to apply for a disqualification order, cancellation of registration or alternative order, or a declaration that an organisation is dysfunctional, cannot be delegated.
Schedule 3—Administration of dysfunctional organisations
Schedule 3 of the bill would repeal section 323 of the Act and substitute a new part, Part 2A, to expand the grounds on which the court may order remedial action to deal with governance issues.
Section 323 of the Act allows an organisation, a member of an organisation, or any other person having sufficient interest, to apply to the court for a declaration that the organisation, or part of the organisation, has ceased to function effectively.
The bill would allow for the following people to apply to the court for a declaration: the ROC, the Minister, the organisation, a member of the organisation, or any other person having a sufficient interest in the organisation. The declarations may include:
that an organisation is dysfunctional;
that officers of an organisation have engaged in financial misconduct;
that a substantial number of officers have acted in their own interests;
that an organisation has acted in an oppressive, unfairly prejudicial, unfairly discriminatory manner, or contrary to the interest of the members; or
that there is a vacancy within the office with no effective means to fill the position.
Proposed subsection 323(4) puts beyond doubt that the phrase 'ceased to function effectively' includes misconduct in which an officer of an organisation has:
on multiple occasions, contravened designated laws;
misappropriated funds of the organisation or part; or
otherwise repeatedly failed to fulfil their duties as officers of the organisation or part of the organisation.
If a court makes a declaration under section 323 then it may order a scheme to resolve the circumstances of the declaration including providing for the appointment of an administrator; requiring reports to be given to a court; providing for when the scheme begins and ends; and providing for when elections are to be held. Proposed subsection 323A(3) specifies that the court must not make an order under this section unless it is satisfied that the order would not do substantial injustice to the organisation or any members of the organisation.
Two strict liability offences are introduced in proposed Schedule 3 of the bill. These offences relate to the following conduct:
not providing the administrator with information that is reasonably required by the administrator without reasonable excuse; and
not complying with a written notice from the administrator requiring the person to deliver to the administrator specified books within the person's possession.
Both offences are strict liability offences and may be subject to a penalty of 120 penalty units. The penalties for both offences have been amended since the 2017 bill, which proposed penalties of 50 penalty units, or 12 months imprisonment, or both. It is noted that removing the imprisonment sentence goes some way to addressing some of the concerns raised by the Scrutiny of Bills Committee. However, it fails to fully address the concerns as the offences have been increased to 120 penalty units, which is greater than the 60 penalty units that is recommended for strict liability offences under the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. The penalty unit amount for these offences is comparable with the equivalent offences under the Corporations Act 2001.
There are also a range of proposed provisions relating to the obligations and functions of the administrator, as well as providing administrators with protection from civil prosecutions where they have acted in good faith.
Schedule 4—Introduction of a public interest test for the amalgamation of registered organisations
Schedule 4 of the bill would introduce a public interest test prior to the amalgamation of registered organisations. The explanatory memorandum states that the bill does not intend to override the current amalgamation provisions, but to supplement them.
The current process for the amalgamation of organisations is outlined in chapter 3 of the Act. It sets out a three stage process involving:
the management committees of the organisations lodging an application to the Fair Work Commission (FWC);
a ballot of effected members conducted by the Australian Electoral Commission; and
an amalgamation date fixed by the FWC of when the amalgamated organisation will be de-registered and the new organisation will become the only registered organisation.
The bill would require the FWC to determine that the amalgamation is in the 'public interest' prior to fixing an amalgamation date. In determining whether an amalgamation is in the public interest, the FWC must fix an appropriate date and place to hear submissions about the organisations record of compliance with the law.
Where the FWC considers that an organisation has a record of not complying with the law, the FWC must determine the amalgamation to not be in the public interest and the amalgamation would not take effect.
Proposed section 72E of the bill defines a 'compliance record event' to mean:
a designated finding made against the organisation or an officer of an organisation;
a contempt finding in relation to an order or injunction made under a designated law;
the organisation or a substantial number of members of the organisation, or part of the organisation, organises or engages in unprotected industrial action covered by subsection 28G(2); or
an officer in an organisation becomes disqualified from holding office in the organisation.
If the FWC is not able to determine whether the amalgamation is in the public interest based on the compliance record of the organisations, the FWC must have regard to the impact the amalgamation is likely to have on employees and employers in the industries concerned.
The bill provides for a list of relevant persons who may make submissions about the public interest, including:
the existing organisations;
other organisations that represent the same industry, or industries concerned, or that may be affected by the amalgamation;
'a body other than an organisation that represents the interests of employers or employees in the industry or industries concerned';
a Minister of a referring State or Territory who has responsibility for workplace relations matters in the State or Territory; and
any other person with sufficient interest in the amalgamation.