PART 19: AREAS FOR REFORM
INTRODUCTION
CHAPTER 19.1
A
INTRODUCTION
1.
As noted above, the Commission’s date for delivery of a final report has recently
been extended. The report which is likely to be submitted to the Governor General
on or about 15 December 2014 is an interim report.
The Commission’s
investigations will continue next year.
2.
In these circumstances it is neither possible nor appropriate to make final
recommendations for reform. Further information may come to light during the
course of the Commission’s inquiries which will have a direct bearing on the
policy questions which will inform whatever final recommendations might be
made.
3.
The Commission received 24 submissions including from registered organisations;
the Australian Industry Group, Master Builders Australia and Slater and Gordon
on behalf of the Construction, Forestry, Mining and Energy Union.
Other
submissions came from the NSW Government, Seyfarth Shaw on behalf of the
State of Victoria and the Queensland Attorney-General and Minister for Justice.
B
PREVIOUS INQUIRIES
4.
There have been a number of inquiries into trade unions held in Australia in recent
decades that are of relevance to the current inquiry.
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5.
Australia’s workplace relations system has undergone significant legislative
change in the period from 1976 to the present.
Accordingly, some
recommendations from previous inquiries were specific to the legislative and
policy context that existed at that point in time which has since changed. Despite
this, previous inquiries’ recommendations and their implementation can provide
guidance on past challenges and opportunities for future policy development.
6.
The most relevant inquiries conducted since the 1970s are referred to below with
commentary on those aspects of most relevance to the current inquiry.
B1
Royal Commission into Alleged Payments to Maritime Unions – 1976
7.
The 1974-1976 Royal Commission into Alleged Payments to Maritime Unions,
led by J.B. Sweeney (the Sweeney Royal Commission) looked into allegations that
maritime unions were demanding indemnity payments from foreign shipowners
for protection from industrial disruption.
The recommendations resulted in
amendments expanding Part VIIAA of the Conciliation and Arbitration Act
dealing with financial matters.
8.
The Sweeney Royal Commission found that among financially compliant unions,
the keeping of financial records evidenced a lack of accounting skills and
knowledge.
This was particularly so as elected officials often came from
occupations that would ordinarily have little need for these skills. 1 The Royal
Commission found that:
It is essential in the interest of democratic control that the financial dealings of an
organisation are presented in sufficient detail to allow those members interested to
establish the state of the organisation’s finances, evaluate its financial administration
and satisfy themselves that the financial transactions are in accordance with the rules
and the decisions of the membership. 2
9.
To rectify this, it was recommended that compliance with the reporting principles
should be reported on by the organisation’s auditors. It was also recommended
that legislation be amended to prescribe statements in financial reports.
1
Commonwealth, Royal Commission into Alleged Payments to Maritime Unions, Final Report, (1976),
para 16.4.
2
Commonwealth, Royal Commission into Alleged Payments to Maritime Unions, Final Report, (1976),
para 16.7.1.
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10.
The Sweeney Royal Commission took into consideration that legislative changes
would apply to all federally registered organisations, which include employer
associations as well as trade unions. It acknowledged that the size, structure and
needs of the organisations varied widely and that as such, any change to
governance should not impact more on the smaller organisations and their
resources.
B2
Royal Commission into the Activities of the Australian Building Construction
Employees’ and Builders’ Labourers’ Federation – 1982
11.
The 1982 Report into the Activities of the Australian Building Construction
Employees’
and
Builders’
Labourers’
Federation
(the
Winneke
Royal
Commission) examined the potential for union officials to engage in bribery and
corruption. The Winneke Royal Commission recommended that donations to
political parties be authorised by a ballot of members.
Resulting legislative
amendments required that such donations be authorised by the committee of
management.
12.
The Winneke Royal Commission also recommended governance that would
prevent officials from gaining material interests or loans which would create a
conflict of interest with their duties as an official.
It recommended that an
appropriate sanction for bribery and corruption from union officers was
disqualification from office for five years.
It also recommended legislative
provisions requiring unions to disclose to their members details of any loans made
to its officials.
B3
Royal Commission on the Activities of the Federated Ship Painters and Dockers
Union – 1984
13.
One of the main outcomes of the 1984 Report of the Royal Commission on the
Activities of the Federated Ship Painters and Dockers Union (Costigan Royal
Commission) was the establishment of the National Crime Authority.
The
Costigan Royal Commission uncovered links between organised crime and the
Federated Ship Painters and Dockers Union.
One of the Commission’s
recommendations was that the Commonwealth and States enact laws similar in
nature and to the same effect as have been enacted in the United States in the
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Racketeer Influenced and Corrupt Organisations Act.3
This Act is further
discussed in Chapter 19.6 concerning building and construction.
B4
Report of the Duties and Fiduciary Obligations of Officials of Industrial Unions of
Employers and Employees – 1989
14.
The 1989 Report on the Duties and Fiduciary Obligations of Officials of Industrial
Unions of Employers and Employees by Mr Meagher QC, Mr Heydon and Mr
Reynolds (the 1989 Report) resulted from a NSW based inquiry held in 1988–89.
15.
The 1989 Report noted that as unions exist to protect the economic rights and
interests of members the integrity of their officers is of paramount concern.
Governance that would provide greater clarity, especially in relation to imposing
duties of honesty, reasonable care and diligence upon officers of trade unions was
recommended. There are current provisions in ss 285–287 of the Fair Work
(Registered Organisations) Act 2009 dealing with these matters.
16.
While improvements to governance have been implemented in recent years, the
continued allegations and findings of illegal conduct by some union officials
suggest these provisions do not, on their own, create an effective system of
transparency or deterrence. This is expanded upon in Chapter 19.7 Duties of
Union Officials.
17.
The 1989 Report recognised the variation in size and nature of registered
organisations and acknowledged that an appropriate system of governance should
be stringent enough to deter and sanction wrongdoers, but at the same time,
provide a fair system for smaller organisations.
18.
The inquiry found a need for legislation to regulate corruption and breach of
fiduciary duties by union officials. The recommendations were embodied into
suggested draft legislation for NSW, which was included in the 1989 Report. This
3
Commonwealth and Victoria, Royal Commission on the Activities of the Federated Ship Painters and
Dockers Union, Final Report (1984) Vol 1, p 268.
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provided that officials should be equated with company directors in terms of the
fiduciary duties that they owe to their union.4
19.
The legislative changes were not implemented at the time. However, some of the
recommendations are similar to provisions now included in the Fair Work
(Registered Organisations) Act 2009. For example, the Act requires all federally
registered organisations and their branches to implement rules including a mandate
for officers to declare material personal interests.
B5
Royal Commission into Productivity in the Building Industry in New South Wales –
1992
20.
The Report on the Royal Commission into Productivity in the Building Industry in
NSW (the Gyles Royal Commission) focused on issues within the construction
industry including corruption and bribery of union officers, and the use of
aggressive behaviour, threats and intimidation. These behaviours were considered
in the context of negotiations on building sites between employers and contractors.
21.
The Gyles Royal Commission found it difficult to identify the extent of bribery
and corruption as bribery would usually occur as a secretive cash-in-hand
transaction between two people.
Commissioner Gyles stated: ‘Corruption is
always covert. If violence and intimidation succeed, complaint will rarely be
made’.5
22.
A key outcome arising from the Gyles Royal Commission was the establishment
of the Building Industry Task Force to pursue criminal remedies where this would
serve the public interest, and to pursue some civil actions on behalf of small
businesses. The Gyles Royal Commission also recommended de-registration as a
remedy for militant, abusive behaviour of union officials in the construction
industry, who would not comply with the obligations of a registered organisation.
4
Roderick Meagher, John Dyson Heydon, G. O’L. Reynolds, Report of the Duties and Fiduciary
Obligations of Officials of Industrial Unions of Employers and Employees, (Department of Industrial
Relations and Employment, 1989), p 4.
5
New South Wales, Royal Commission into Productivity in the Building Industry in NSW, Final Report,
(1992)
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Relevant provisions now exist under section 28 of the Fair Work (Registered
Organisations) Act 2009.
B6
Royal Commission into the Building and Construction Industry – 2003
23.
The Howard Government established a Royal Commission led by the Hon
Terrence Cole AO RFD QC in 2001 to inquire into certain matters relating to the
building and construction industry. The final report was tabled in Parliament in
March 2003 and comprised 23 volumes (22 public volumes and 1 confidential
volume) with 212 recommendations (the Cole Royal Commission).
24.
The Cole Royal Commission found widespread disregard for the rule of law in the
building and construction sector. It also found that the freedom to choose to join
or not join a union is a fundamental right that was not always present in the
industry, and that the building industry was a ‘special case’ requiring specific
reforms to ensure the return of rule of law.6
25.
The 212 recommendations of the Cole Royal Commission proposed changes
largely to federal workplace relations legislation and practices governing the
building and construction industry.
It resulted in the establishment of the
Australian Building and Construction Commission to enforce the Building and
Construction Industry Improvement Act, the Workplace Relations Act 1996 and
other laws. The Australian Building and Construction Commission also monitored
unlawful industrial action by unions.
26.
Other recommendations included:
(a)
that an official of a registered organisation be a ‘fit and proper person’ to
hold such office in relation to the building and construction industry;
(b)
increasing restrictions on right of entry, including that no right of entry
permit be made unless a ‘fit and proper person’ assessment has been
made;
6
Commonwealth, Royal Commission into the Building and Construction Industry, Summary of Finding
and Recommendations (2003) vol 1, p 155.
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(c)
increasing penalties for unlawful industrial action;
(d)
that costs be awarded where unlawful industrial action has caused loss;
and
(e)
27.
prohibiting pattern bargaining in the industry.
The Cole Royal Commission dedicated volume 10 to the issue of improper
practices relating to union funds in the building and construction industry and
made a number of findings and recommendations. See Chapter 19.6 for further
information
about
implementation
of
the
Cole
Royal
Commission’s
recommendations.
C
REGISTERED ORGANISATIONS & LEGISLATIVE FRAMEWORK
28.
When considering what changes should be considered to regulatory frameworks as
a result of issues arising out of the Commission, it is important to recognise the
unique character of registered organisations and specifically of trade unions.
29.
Registered organisations are established to represent their members in the
industrial relations system with special rights under the Fair Work Act 2009.
These rights include collective bargaining and rights of entry. Being a registered
organisation can also bring benefits such as tax concessions and corporate status.
Registered organisations, and in particular trade unions, have significant
economic, legal and political influence throughout Australia.
30.
Trade unions are intended to be voluntary and democratic organisations and their
governance framework needs to take into account principles such as freedom of
association and freedom of political communication.
31.
Currently, around 40% of registered organisations are unions: As of 13 May 2014,
there were 111 registered organisations 45 of which were unions and the
remainder were employer associations.7 Unless there is a wholesale restructure to
7
Fair Work Commission, Find Registered Organisations, https://www.fwc.gov.au/registeredorganisations/find-registered-organisations accessed 25/10/14.
1257
the way the Act operates, the Act’s provisions and any amendments will continue
to impact on employer associations as well as unions.
32.
The Fair Work (Registered Organisations) Act 2009 provides the legislative
framework for registered organisations and is administered by the Fair Work
Commission. The Act was subject to significant amendments in 2012, which
sought to improve the Fair Work Commission’s investigative functions. These
amendments also aimed to strengthen the financial accountability requirements of
registered organisations and provide for the:
33.
(a)
disclosure of salaries of top officials;
(b)
financial interests of officials,
(c)
transactions with related parties;
(d)
strengthened penalties for breaches of the Act.
Officials of registered organisations are also now required to undertake training
about their governance and accounting obligations.
34.
A further Bill was introduced in 2013/14 to respond to issues related to the Health
Services Union (the HSU).
The Fair Work (Registered Organisations)
Amendment Bill 2014 primarily relates to governance of registered organisations
and indicates the Government’s preference to regulate unions along similar lines to
corporations. These issues are expanded upon in Chapter 19.7 on Duties of Union
Officials.
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