INDUSTRIAL RELATIONS by Peter WestmoreNews Weekly
Union royal commission recommends law changes
, June 6, 2015
The Royal Commission into Trade Union Governance and Corruption, established by the Federal Government in 2014 following widespread allegations of corruption in the building industry over many years, has released a discussion paper outlining options for legal reform to deal with criminal conduct unearthed by the commission.
From left: Attorney-General
George Brandis, Employment Minister
Eric Abetz and Prime Minister
The Commissioner, former High Court Justice Dyson Heydon QC, handed his interim report to the Governor-General last year. It was tabled in Federal Parliament last December.
In its latest discussion paper, the royal commission raised possible law reform proposals for debate.
At the outset, the Commissioner made clear that his concern was not the existence or function of trade unions, but rather the misconduct of some union officials.
He said: “The issues which the commission has considered to date do not arise from the conduct of union members. Nor do they arise from the existence of unions themselves, which play, and for a long time have played, a significant part in the industrial relations system, as the ensuing discussion in this paper explains.
“Rather, the issues with which this commission has been concerned to date arise from the conduct of certain union officials and leaders who disregard their legal obligations and duties. Many of the options considered in this discussion paper arise out of consideration of their conduct.”
The commission has considered the legal framework within which unions and employer organisations operate, and points out that there are different requirements under state and federal law in relation to what are known as “registered organisations” of employers or employees. This makes it difficult for organisations to conform to the legal requirements, and often difficult to enforce the law in relation to organisations.
It has asked the question whether there needs to be separate state and federal registration; whether there should be uniform state and federal laws regarding the registration, deregistration and regulation of organisations; whether the states should cede their powers to the Commonwealth; and more broadly, what can be done to provide greater uniformity in the law.
The commission also examined the Fair Work Commission (FWC), which has the role of setting minimum wages as well as regulating organisations.
Commissioner Heydon pointed out that the Abbott Government had put forward legislation providing for the functions of regulating organisations to be separated from the Fair Work Commission, but it had been defeated in the Senate last March.
He said: “There are a number of arguments which can be made in support of having an independent regulator of organisations registered under the RO (Registered Organisations) Act.
“One obvious point is that the current division of responsibility between the General Manager and the FWC adds complexity to the existing law and is apt to confuse the public about the functions of the FWC.
“In addition, the fact that the General Manager has a range of other tasks means that the regulation of organisations may be given a lower priority than other tasks.
“Another point is that appointments to the FWC regularly give rise to claims of bias by both sides of politics: appointments are regularly described as ‘union friendly’ or ‘employer friendly’.
“Irrespective of whether those claims have substance or not, a regulator which is publicly regarded as not being impartial risks losing legitimacy and public confidence.
“Arguably, therefore, the body regulating registered organisations should be free from any suggestion that it is biased and therefore structurally it should be financially independent from the FWC.”
The Commissioner also suggested that there was a case for enhanced record keeping by organisations, and greater disclosure of information, including payments made to third parties.
A contentious issue raised by the commission is whether the legal requirement that union funds should not be used in election-related expenditures should explicitly outlaw union funds being used in elections in other unions.
The commission also discussed the thorny old issue of political donations, pointing out that the law in the UK required political donations to be voluntary, and come from a different fund from the working funds of unions. The current law in Australia is quite different, and allows the officers of a union to determine whether to make political donations.
The commission seems inclined to support the continuation of existing law, accepting that as union officials are elected to run the union, they should be free in how they perform their duties.
It also asked whether all trade union elections should be conducted by the Australian Electoral Commission and, specifically, whether the existing exemption which permits some unions to conduct their own elections should remain in place.
The commission urged enhanced whistleblower protection for existing or former officials of organisations, to ensure that corrupt conduct was brought to light.
Commissioner Heydon also documented the abuse of right-of-entry permits, particularly in the building industry, where the Construction, Forestry, Mining and Energy Union (CFMEU), dominates.
The discussion paper said: “The commission’s inquiries thus far have revealed a number of potential problems with the existing regulation of right-of-entry permits.
“These include misuse of permits by union officials, false declarations being made to the FWC by applicants for permits, and the holding of permits by individuals with significant criminal convictions.”
It was alarming to find out that the Fair Work Commission and the Federal Court were apparently aware of these problems but have done nothing about them.
The discussion paper said that “the FWC has ruled that it is not required to take into account the poor record of certain unions’ compliance with the right-of-entry regime.
“In May 2014, the FWC rejected an argument that it was obliged to take into account the CFMEU’s poor record of compliance with the rules around right-of-entry permits.
“In addition, the Full Federal Court has held that the FWC may issue under section 515 ‘conditional’ permits to organisers who fail the fit and proper person test.”
It recommended that the law should be strengthened to prohibit such conduct.
In relation to union election campaigns, the commission suggested that union election campaign funds should be subject to high levels of accountability, and that mandatory contributions to union election campaigns should be banned.
The commission also examined employee benefit funds, associated with matters such as sickness benefits, insurance policies and redundancy payments. These are usually run by unions, but often have poor accounting and auditing requirements.
It said: “The commission’s inquiries to date ... suggest that the governance of employee benefits funds is often poor or non-existent and that in a number of cases funds are used for improper purposes.
“This is not a new phenomenon. The Gyles and Cole royal commissions identified a number of problems with trade-union associated redundancy funds and income protection schemes.”
The commission asked whether such funds should be regulated in a similar way to industry super funds, which are jointly established by employer organisations and unions and run by persons nominated by both parties.
In relation to superannuation funds, the commission asked whether the law should be changed to eliminate the default superannuation fund, particularly in enterprise agreements.
It said: “Employees in Australia are generally able to make a choice as to their superannuation fund. However, employees employed under a collective agreement, enterprise agreement, state award or state agreement are not always entitled to choose their superannuation fund. It remains lawful for such agreements and awards to mandate the fund to which employers must make contributions.”
Near the end of the discussion paper, a section discusses the endemic problem of blackmail, extortion and secret commissions that have bedevilled the building industry for many decades.
It said: “The existing laws governing what have been described as ‘corrupting benefits’ given to and taken by union officials are arguably unsatisfactory in a number of respects.
“In the first place the laws concerning secret commissions differ significantly between jurisdictions and are not well suited to application to the officers of the registered organisations.
“A second point is this. Notwithstanding the existing criminal laws, the commission’s inquiries indicate that such payments continue to be sought and made. This raises for consideration whether additional legal measures are needed to try to eliminate the giving and receiving of corrupting benefits.”
It suggested that the Commonwealth Crimes Act, including the provisions outlawing corrupt payments overseas, be applied to registered organisations and their officials in Australia.
In light of the long record of illegal conduct by union officials in the building industry, the commission asked whether the Australian Building and Construction Commission (ABCC), a body established by the Howard government but disbanded by Labor, should be re-established.
Evidence given at the commission by officials of the Master Builders Association and building supplier Boral shows that criminal behaviour against selected employers in this industry is ongoing and remains unpunished, and has worsened since 2012 when the ABCC was abolished.
A separate but related issue was whether the law relating to secondary boycotts should be strengthened.
While many of the issues the commission raises are serious public policy concerns, there remains the difficulty of getting legislation through the Senate.
Peter Westmore is national president of the National Civic Council.