Chapter 2 Overview of the bill

2.1

This chapter provides an overview of the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 (the bill) which proposes to make a number of amendments to the Fair Work (Registered Organisations) Act 2009 (the Registered Organisations Act).

2.2

The Registered Organisations Act sets out the framework for the regulation of registered organisations (namely, trade unions and employer associations) at the federal level. The final report of the Royal Commission into Trade Union Governance and Corruption (the Heydon Royal Commission) made a number of findings and recommendations in relation to the building and construction industry and the governance arrangements and regulation of registered organisations more generally.1 The explanatory memorandum to the bill states that the bill will amend the Registered Organisations Act to:

…respond to community concern and the recommendations of the Final Report of the Royal Commission into Trade Union Governance and Corruption (the Royal Commission) to ensure the integrity of registered organisations and their officials, for the benefit of members.2

2.3

The explanatory memorandum further states that the measures in the bill also implement an election commitment to 'effectively deal with registered organisations that are dysfunctional or not serving the interests of their members.'3

2.4

The amendments in the bill will apply to all registered organisations (both trade unions and employer associations).4

Schedule 1—Disqualification of individuals from holding office

2.5

Under the current provisions of the Registered Organisations 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;

offences involving intentional violence or intentional property damage; or

offences relating to the formation, registration or management of associations and elections.5

2.6

Alternatively, the Federal Court may make an order disqualifying a person who has contravened a civil penalty provision where the Court is satisfied that the disqualification is justified.6 In determining whether the disqualification is justified, the Court may have regard to the person's conduct in relation to the management, business and property of any organisation; and any other matter that the Court considers appropriate.7

2.7

Schedule 1 would expand the circumstances in which a person may be disqualified from holding office in a registered organisation.8

2.8

The explanatory memorandum explains that schedule 1 has the objective of 'ensuring the leadership of registered organisations acts lawfully'.9 It further states that schedule 1 responds to a number of the recommendations of the Heydon Royal Commission.10

2.9

The bill expands the definition of '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.11

2.10

Additionally, under the bill, the Fair Work Commissioner, the Minister or another person with sufficient interest may apply to the Federal Court for an order disqualifying a person from holding office in a union (a disqualification order).12 The Federal Court may make a disqualification order in respect of a person 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.13 The grounds for disqualification would include:

a 'designated finding' or contempt of court;

a 'wider criminal finding' or 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, a wider criminal 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 having regard to a range of factors.14

2.11

A 'designated finding' is defined to include a finding that a person has contravened a civil penalty provision of industrial laws or committed particular criminal offences.15

2.12

The term 'wider criminal finding' is defined to include that the person has committed an offence against any law of the Commonwealth or a State or Territory in the course of performing their duties.16

2.13

'Corporate impropriety' is defined as occurring if the person is found in civil or criminal proceedings to have contravened the general duties obligations of directors of corporations under Division 1, Part 2D of the Corporations Act 2001 or the person becomes disqualified from managing corporations.17

Criminal offences

2.14

The bill 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;18

continue to hold office in a registered organisation;19

exercise capacity to significantly affect the financial standing or other affairs of the registered organisation; or20

give directions to the committee of management of the organisation.21

Application of schedule 1—conduct engaged in prior to commencement and grounds for disqualification

2.15

The bill provides that in determining whether particular grounds for disqualification exist the court may have regard to, in the case of:

a 'designated finding' or a 'wider criminal finding', conduct engaged in after the commencement of the bill or in relation to an injunction or order after commencement;22

two or more failures to take reasonable steps to prevent particular conduct, a 'finding' after commencement that particular conduct was engaged in and a failure after commencement to take reasonable steps to prevent such conduct;

'corporate impropriety', a finding made in relation to conduct engaged in, or a disqualification in relation to conduct engaged in or an event occurring, after commencement;

a person is not a 'fit and proper' person, an event occurring after commencement or under proposed section 223(6)(d) or (e) (which relates to criminal and civil penalty proceedings for fraud, dishonesty or misrepresentation or criminal proceedings relating to intentional violence or intentional property damage)—a finding made in relation to conduct engaged in after commencement.23

Schedule 2—Cancellation of registration of registered organisations

2.16

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. Under current provisions of the Registered Organisations Act the Federal Court may make an order cancelling the registration of an organisation for certain kinds of misconduct or on technical grounds.24 An order may be made on application of the Minister, an organisation, or an interested person.25 The Court must cancel the registration if it considers that it would not be unjust to do so.26

2.17

Schedule 2 of the bill seeks to 'expand the grounds for, and streamline the regime in relation to' the cancellation of the registration of trade unions and employer organisations under the Registered Organisations Act.27 The explanatory memorandum states that the amendments in schedule 2 also respond to findings by the Heydon Royal Commission.28

2.18

Under the bill, the Fair Work Commissioner, the Minister or another person with sufficient interest can apply to the Federal Court for an order cancelling registration of an organisation.29 The new grounds for cancellation include:

a substantial number of officers or two or more senior officers have engaged in conduct abusing their position, perverted the course of justice, engaged in corruption, acted in their own interests rather than the interests of the members as a whole, conducted affairs of the organisation in a manner that is oppressive or prejudicial to a class of members or contrary to the interests of the members as a whole;30

multiple findings against the organisation—two or more 'designated findings' or 'wider criminal findings' have been made against the organisation;31

the organisation is found to have committed a serious criminal offence (defined as an offence punishable by at least 1,500 penalty units (currently equivalent to $315,000) for a body corporate);32

that there have been multiple 'designated findings' against a substantial number of members of the organisation, part of the organisation or a class of members of the organisation;33

that the organisation or a substantial number of members have failed to comply with an order or injunction;34 or

that the organisation or a substantial number of members have organised or engaged in 'obstructive industrial action'.35

2.19

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.36

2.20

Where an order cancelling registration has been made, the court may make additional orders regarding any future registration and any future application for registration.37

2.21

Consistently with the current Act, the Federal Court would also be empowered to make a range of alternative orders (other than cancellation of the registration of an organisation) where it would be just to do so.38 The bill will extend these orders to include the disqualification of certain officers and the exclusion of certain members or the suspension of the rights of the organisation.39

Schedule 3—Placing registered organisations into administration

2.22

The current provisions of the Registered Organisations Act allow an application to be made to the Federal Court for a remedial scheme to be approved in respect of a registered organisation that has "ceased to function effectively".40

2.23

Schedule 3 of the bill seeks to put beyond doubt that this phrase includes misconduct in which officers of the organisations have:

on multiple occasions, contravened designated laws;

misappropriated funds of the organisation or pert; or

otherwise repeatedly failed to fulfil their duties as officers of the organisation or part of the organisation.41

2.24

If a court makes a declaration under section 324 then it may order a scheme to resolve the circumstances of the declaration including providing for the appointment of an administrator; reports to be given to a court; when the scheme begins and ends and when elections, if any, are to be held.42

2.25

There are also a range of proposed provisions relating to the obligations of the administrator, officers, former officers and employees of the organisation.43

Schedule 4—Introduction of a public interest test for the amalgamation of registered organisations

2.26

The current provisions of the Registered Organisations Act provide for a procedure for the amalgamation of registered organisations. Once an application for amalgamation of registered organisations is lodged with the Fair Work Commission (FWC), it must set a hearing date in relation to the scheme of proposed amalgamation.44 Providing certain preconditions are satisfied, the FWC fixes an amalgamation day on which the new organisation will become the only registered organisation, and the amalgamated organisations will be de-registered.45

2.27

The Hon Christopher Pyne MP in his second reading speech for the bill explained that, unlike the current case in relation to the merger of particular companies, 'there are no general public interest considerations and there is very limited scope for affected parties to raise any concerns about a proposed merger of registered organisations'.46 Schedule 4 of the bill seeks to introduce a public interest test in respect of the procedure for the amalgamation of registered organisations under the Registered Organisations Act.47

2.28

Under the bill, before fixing a date for an amalgamation of registered organisations, the Fair Work Commission must decide that the amalgamation is in the 'public interest'.48 In determining whether an amalgamation is in the 'public interest' the Fair Work Commission must have regard to a range of factors including record of compliance with the law, the impact of the amalgamation on employees and employers in the industry and other matters it considers relevant. In relation to compliance with the law, the Fair Work Commission must decide that the amalgamation is not in the public interest if the organisation has a record of not complying with the law.49

1

Final report, Royal Commission into Trade Union Governance and Corruption, 28 December 2015.
2

Explanatory Memorandum (EM), p. i.
3

EM, p. ii.
4

See, EM, p. i.
5

Registered Organisations Act, section 215.
6

Registered Organisations Act, section 307A.
7

Registered Organisations Act, subsection 307A(2).
8

EM p. 2. Current disqualification requirements are contained in Chapter 7, Part 4 of the Registered Organisations Act.
9

EM, p. viii.
10

EM, p. viii. The EM explains that schedule 1 would implement recommendations 36–38 of the Heydon Royal Commission. These recommendations are reproduced in Appendix 3.
11

Proposed section 212(aa), schedule 1, item 6.
12

Proposed section 222, schedule 1, item 9.
13

Proposed section 222, schedule 1, item 9.
14

Proposed section 223, grounds for disqualification, item 9.
15

This includes contravening a civil penalty provision or committing a criminal offence under any of the following laws: Fair Work Act 2009 (Fair Work Act); Fair Work (Registered Organisations) Act 2009; Building and Construction Industry (Improving Productivity) Act 2016 (ABCC Act); Part IV of the Competition and Consumer Act 2010; Work Health and Safety Act 2011; each State or Territory OHS law; Part 7.8 of the Criminal Code (causing harm to, and impersonation and obstruction of, Commonwealth public officials). See definition of designated law in proposed subsection 9C(2), schedule 1, item 2.
16

Proposed subsection 9C(2), schedule 1, item 2.
17

Proposed subsection 223(4), schedule 1, item 9.
18

Proposed subsection 226(1), schedule 1, item 9.
19

Proposed subsection 226(2), schedule 1, item 9.
20

Proposed subsection 226(3), schedule 1, item 9.
21

Proposed subsection 226(3), schedule 1, item 9. See also EM, p. 2.
22

See Schedule 1, item 15(2). However, the bill provides that, for the purposes of determining whether a person engaged in a 'wider criminal finding' or a contempt of court in the course of performing functions in relation to any organisation, the court may have regard to matters occurring before or after commencement.
23

See Schedule 1, item 15(2).
24

See Chapter 2, Part 3, sections 28 and 29 of the Registered Organisations Act. Current circumstances for cancellation include where the conduct of the registered organisation or a substantial number of its members has prevented or hindered the intention or objects of the Fair Work Act or the Registered Organisations Act.
25

Registered Organisations Act, subsection 28(1).
26

Registered Organisations Act, subsection 28(3).
27

EM, p. 15. The current cancellation and alternative order regime is contained in Chapter 2, Part 3, sections 28 and 29 of the Registered Organisations Act.
28

EM, p. ix.
29

See proposed section 28, schedule 2, item 4.
30

See proposed subsection 28C(1), schedule 2, item 4.
31

See proposed section 28D, schedule 2, item 4. See also definition of 'designated law' in proposed subsection 9C(2), schedule 1, item 2 and 'Wider criminal finding' in proposed subsection 9C(3), schedule 1, item 2.
32

See proposed section 28E, schedule 2, item 4.
33

See proposed section 28F, schedule 2, item 4.
34

See proposed section 28G, schedule 2, item 4.
35

See proposed section 28H. The section covers industrial action other than protected industrial action that prevented, hindered or interfered with a federal system employer or the provision of any public service by the Commonwealth, state or territory or the authority of the Commonwealth or a state or territory or that had or is having a substantial adverse impact on the safety, health or welfare of the community or part of the community: proposed subsection 28H(2).
36

Proposed section 28K, schedule 2, item 4. Under proposed paragraph 28K(1)(b) in deciding whether the organisation has not satisfied the court it would be unjust to cancel an organisation's registration, the court is to have regard to: the nature of the matters constituting that ground; the action, if any, that has been taken by, or against, the organisation; the best interests of the members of the organisation as a whole and any other matters the court considers relevant.
37

Proposed section 28L, schedule 2, item 4.
38

Registered Organisations Act, subsection 28(4).
39

Proposed sections 28N–28Q, schedule 2, item 4.
40

See section 323 of the Registered Organisations Act.
41

Proposed subsection 323(4).
42

Proposed section 323A.
43

See, for example, proposed sections 323G, 323H.
44

Registered Organisations Act, section 73.
45

Registered Organisations Act, section 73. These include that the ballot has no irregularities; the FWC is satisfied that there are no relevant pending proceedings against the existing organisations; and the newly amalgamated organisation will be bound by the obligations of the existing organisations.
46

The Hon Christopher Pyne MP, House of Representatives, Hansard, 16 August 2017, p. 8607. Current provisions relating to the amalgamation of registered organisations are contained in Chapter 3 of the Registered Organisations Act.
47

EM, p. 32.
48

See proposed section 72A.
49

See proposed section 72D.

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Chapter 2

Overview of the bill