3.1
This chapter will outline the key issues raised by submitters and witnesses concerning the bill. These key issues include:
justification for the bill;
concerns relating to the contravention of specific international laws;
policy justification that registered organisations should be treated in a similar manner to corporations;
broadening of the standing provisions;
the scope of the terms 'designated finding' and 'designated law';
expansion of the automatic disqualification regime in schedule 1;
expansion of court ordered disqualification regime in schedule 1;
expansion of the cancellation regime in schedule 2;
expansion of the remedial scheme in schedule 3; and
introduction of a public interest test for the amalgamation of organisations in schedule 4.
3.2
This chapter will conclude by outlining the committee view.
Is there a need for the bill?
3.3
Inquiry participants provided mixed views in relation to whether it was necessary to implement amendments to the Fair Work (Registered Organisation) Amendment Act 2016 (the Act) to provide more expansive powers to effectively deal with the actions of registered organisations and their officials.
3.4
Supporters of the bill cited the findings of the Royal Commission into Trade Union Governance and Corruption (the Royal Commission) as well as the improper or illegal actions of particular unions as evidence that existing laws are not providing a sufficient deterrent. Mr Stephen Smith from the Australian Industry Group (Ai Group) explained:
Where a registered organisation, a branch or a division repeatedly breaches industrial laws, it is appropriate that the organisation, branch or division is exposed to the potential suspension or loss of the rights and privileges that it enjoys under industrial laws; otherwise, there's little incentive to comply with laws, particularly if the registered organisation has sufficient revenue to readily pay fines that are imposed by courts for unlawful conduct.
3.5
Master Builders Australia (MBA) referred to the Act's current deterrent provisions as 'manifestly deficient', and provided a detailed list of highly negative statements made by judges concerning the actions of the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) as evidence. Mr Paul Moss from the Chamber of Commerce and Industry of Western Australia (CCIWA) explained that monetary penalties are not a sufficient deterrent:
The benefit of this bill is that, clearly, monetary penalties aren't a sufficient deterrent for a number of unions in order to ensure that they comply with the legislation which was established by parliament. It's important to have a system in place which provides an appropriate method of addressing noncompliance, particularly where it is so systemic and particularly where there's a very clear view such as: 'It doesn't matter how much you fine me; I will continue to act in the way that I see fit.' This legislation, we think, effectively seeks to deal with that.
3.6
Mr Shaun Schmitke from MBA concluded that 'if passed, this bill will bring about significant and positive cultural change'.
3.7
While the Australian Resources & Energy Group, AMMA (AMMA) observed that ‘[t]he long history of unlawful behaviour of some unions such as the CFMMEU continues unabated to this day.’
3.8
Those that opposed the bill argued that the amendments represent an attack on unions. However, a number of submitters and witnesses observed that the bill applies equally to unions as it does to employee associations, as stated by Ms Tasmin Lawrence from the Australian Chamber of Commerce and Industry (ACCI):
Firstly, I would like to address a misconception—in fact, a fallacy—raised by some who have already come before this committee, namely that this bill is simply union bashing. Those who make such claims seem to have forgotten that the bill applies to all registered organisations equally, both unions and employer associations. In fact, the word 'union' does not appear anywhere in the bill.
3.9
However, Ms Renee Burns from the Australian Institute of Employment Rights (AIER) sought to explain why, in her organisation's view, the bill would have a greater effect on unions:
The problem with the idea that it applies equally, though, is that the nature of trade union work in representing the interests of their members, in negotiating agreements, in running industrial action, in bargaining and in protecting their members, essentially, by looking at safety breaches, means that they are more likely to run afoul of industrial rules. The system is set up that way. That is the result; it is going to have an unequal effect. The funding to bring applications is also more readily available for employers.
3.10
A number of inquiry participants argued that the bill was not necessary as the amendments regulating unions were only introduced in 2016 and therefore the effectiveness of the regulations have not been properly tested. Furthermore, the point was argued that adequate measures already existed under the Act. When questioned directly about the conduct of Mr John Setka as a union official, Ms Burns provided the following response:
I am of the opinion also that the provisions of the current legislation, the registered organisations act, provide a mechanism for deregistration of the union and for the potential disqualification of Mr Setka, should that be a means that needs to be pursued. I don't think any of those circumstances justify the extent to which a variety of parties with such a low threshold and broad range of industrial law grounds can bring actions against registered organisations.
…
I will repeat for the committee that the laws are in place to allow that to happen. …Those regulations had not even been tested before this legislation was brought forward.
3.11
In response to questions relating to the actions of the CFMMEU and Mr Setka, Ms Michele O'Neil, President of the Australian Council of Trade Union (ACTU), stated that they did not condone any criminal conduct, but argued that existing laws provide penalties to deal with matters of a criminal nature. Ms O'Neil also advised that the construction industry is subject to more stringent regulation and penalties than any other sector:
Firstly, as you know, we have a set of particular laws in this country that apply to the building and construction industry that set requirements in relation to those workers—members of the unions that operate in the construction and building industry—that are far greater than in any other workplace or any other sector of the Australian economy or labour market. So there are already provisions in terms of the [Australian Building and Construction Commission (ABCC)] and the acts that operate in relation to the ABCC that carve out workers in that sector as having fewer rights than workers in any other sector.
Secondly, you've got an issue where, with the reintroduction of the ABCC and increased penalties that were brought into effect in 2016, many of the comments that you refer to in relation to judges' findings in relation to the CFMEU were for action that had happened prior to the increased penalties and requirements of the [Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act)].
3.12
Mr Dave Noonan, National Secretary of the CFMMEU acknowledged that the CFMMEU currently have nine applications on foot involving alleged contraventions of the BCIIP Act but that no contraventions have been found since the introduction of the Act. Mr Noonan stated:
…since the passing of the Building and Construction Industry (Improving Productivity) Act, there are significantly increased penalties for breaches of that act. Since the passing of the act, no contraventions have been found against the union under that act—although there are proceedings in force.
3.13
Concerning the unlawful actions of some unions and their officials, Ms Monique Hurley from the Human Rights Law Centre (HRLC) observed that the misconduct of a small number of individuals has been used as justification for the bill, which will impact all unions:
When we look at this bill and consider the actions of individuals in the union movement, one of the important principles that we would apply is that the consequences of individual misconduct shouldn't be inflicted on the union movement as a whole. We've looked at this law very closely and we think that it uses the actions of a few bad apples as justification for some of the sweeping new powers in the bill. We don't think that the terms of the bill are drafted narrowly enough to address those bad apples.
3.14
As evidence that the provisions of the bill are not necessary to effectively deal with mismanagement, the Health Services Union (HSU) explained it was able to use existing provisions within the Act to disqualify corrupt officials and put in place a remedial scheme. This will be discussed in more detail later in this chapter.
3.15
However, in answers to questions taken on notice, the Attorney-General's Department (the department), provided the following information concerning the number of proceedings that were commenced after 2016:
Since the commencement of the Building and Construction Industry (Improving Productivity) Act 2016 (BCIIP Act) and the re-establishment of the Australian Building and Construction Commission (ABCC) on 2 December 2016, the ABCC has commenced 21 proceedings against the CFMMEU in relation to conduct that occurred after the Act’s commencement. … A further eight proceedings have been brought against other unions, employers or employees for conduct that occurred after 2 December 2016.
The number of cases brought by the ABCC since its re-establishment has been increasing each year, with four cases brought in 2017, nine in 2018 and 19 in 2019 (to date).
The alleged conduct identified in cases after the commencement of the BCIIP Act includes:
Unlawful industrial action and picketing, including to pressure contractors to sign up to enterprise agreements;
…
Verbally abusing workers and government officials;
…
Preventing non-union members from working at various projects.
3.16
In relation to proceedings commenced involving the CFMMEU during an equivalent time period prior to the commencement of the BCIIP Act in 2016, the department advised that 62 cases were commenced involving the CFMMEU.
3.17
Concerning litigation commenced by the Registered Organisation Commission (ROC), the department provided the following information:
Since the commencement of the Fair Work (Registered Organisations Act) 2016, which established the Registered Organisations Commission (ROC), the ROC has commenced litigation on one matter concerning conduct that occurred after the Act’s commencement. …
The ROC has commenced an additional three litigations since its establishment on 1 May 2017 which concern contraventions that are alleged to have occurred prior to the Act’s commencement. The ROC has continued three other matters following their transfer from the Fair Work Commission.
Prior to the ROC’s establishment the Fair Work Commission concluded five litigations regarding breaches of the Fair Work (Registered Organisations) Act 2009.
International conventions
3.18
Some submitters raised concern that the bill would create unreasonable and disproportionate laws, which would limit freedom of association, a right protected at international law. Furthermore, it was argued that the bill would be incompatible with 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).
3.19
The International Centre for Trade Union Rights (ICTUR) argued that the bill:
…creates a number of sweeping powers for interference in trade union organisations, which are not only in violation of the principles of freedom of association, but are also highly likely to produce arbitrary and disproportionately punitive outcomes damaging to Australia's industrial relations system.
3.20
The importance of freedom of association for unions was explained by Ms Hurley:
Freedom of association is particularly important for trade unions because of the important role they play in regulating the power imbalance between workers and employers. It is the bedrock of the protection of workers' rights. The system of collective bargaining which ensures that Australian workers are employed subject to fair conditions and pay relies on the freedom of trade unions to form, meet and support their members without the threat of interference by the government or others.
3.21
The ICTUR analysed the first four schedules of the bill and provided a detailed comparison of the provisions with the laws governing trade unions in other countries. It concluded that the bill was contrary to the principles under the two ILO conventions. In particular, the ICTUR noted its three main concerns with the bill and determined that the rationale for the provisions was unjustified and anti-democratic:
The legislation's principle failures are its conflation of serious crimes and minor legal infractions, a blurring of joint and individual liabilities, and the establishment of punitive sanctions that are both disproportionate and arbitrarily directed. While a differentiated approach to these issues would improve the proposals, the justification for a special regime targeting the internal functioning of workers' organisations is unconvincing. Rather these measures entail a significant, unjustified and antidemocratic attack on trade union members' rights to collectively determine the establishment and functioning of their own organisations. These proposals will ultimately exacerbate rather than ameliorate any concern about democratic deficiency in particular trade union organisations.
3.22
In contrast the ACCI, who are recognised by the ILO as the employer social partner for Australia and whose Director is one of only 14 titular members of the ILO’s governing body, provided a detailed analysis of the provisions of the bill against the ILO conventions and concluded that it 'knows of no impediment in Australia's ILO treaty obligations to the passage of the [bill].' Similarly, the statement of compatibility with human rights, contained within the explanatory memorandum, concluded that:
Registered organisations verses corporations
3.23
Some submitters argued that as corporations and registered organisations are profoundly different, the corporate model should not be automatically applied to registered corporations.
3.24
Professor Anthony Forsyth acknowledged that unions and corporations share a number of similarities, but commented that the differences 'far outweigh the similarities'. In relation to the similarities, Professor Forsyth noted that some corporations and unions can be 'large enterprises with significant financial assets and the ability to wield economic and political power'. Additionally, unions have a form of corporate personality, similar to companies.
3.25
Professor Forsyth explained that the differences included:
the different purposes which companies and unions are formed, the former to carry out commercial activities to generate revenue and profit, the later to represent their members and improve their members working conditions; and
shareholders and union members have different interests, where shareholders are concerned with seeing a high return on their investment, while union members are concerned with improving the conditions of their members through industrial representation, collective bargaining, and the provision of services.
3.26
In addition to outlining the differences as stated by Professor Forsyth, Maurice Blackburn Lawyers also contrasted the number of registered companies (over 2.7 million), with the number of federally-registered organisations (106). They stated that the bill 'neglects the purpose of corporate regulation which is to manage commercially driven entitles on a scale that is unparalleled with those of registered organisations'.
3.27
Professor Forsyth concluded that:
…the significant differences between the two types of organisations mean that there is no basis for the automatic application of the corporate model of regulation to unions. Many of the provisions of the Bill therefore proceed from a flawed assumption.
Standing provisions
3.28
As outlined in chapter 2, the bill would allow the ROC, the Minister and a person with sufficient interest with standing to apply to the Federal Court (the court) under schedules 1 to 3, and to the Fair Work Commission (FWC) under schedule 4. In addition, schedule 3 would provide standing to the organisation and its members, while schedule 4 would also give the following groups standing under this schedule:
the existing organisation;
other organisations within the industry or organisations that may be affected by the amalgamation;
other bodies within the industry or industries concerned; and
a Minister within the referring State or Territory.
3.29
Many submitters raised concerns relating to the standing rules proposed by the bill. Dr Jim Stanford from the Centre for Future Work explained, what he considers to be, the effect of broadening the standing provisions:
Together these measures would provide more opportunities for government and employers to interfere with union leadership, organisation, decision-making and activity, up to and including taking over or banning unions entirely. These measures would open new possibilities for outside interests, including employers, to interfere with the operation and activity of unions, including by launching frivolous action intended solely to harass and distract unions from their core missions.
The Minister
3.30
Submitters expressed concern that providing the Minister with standing, would allow a greater degree of political interference with the operations of unions. The Community and Public Sector Union (PSU Group) (CPSU (PSU Group)) stated:
This Bill gives the Minister expanded and intrusive powers to intervene in the internal affairs of unions. This is concerning for all unions and their members, but it is particularly concerning for the CPSU because in the main industry in which we operate, the Government is both the employer and the regulator.
3.31
Furthermore, the CPSU (PSU Group) argued that the bill 'does not contain safeguards to ensure that these powers are not abused or used for political or other ideological motivations'. Ms Nadine Flood from the CPSU (PSU Group) elaborated that:
…it is entirely possible that Commonwealth ministers would launch repeated tactical litigation to tie up CPSU resources as we seek to fight privatisation, protect services, protect jobs and protect wages and rights. That aspect of ensuring integrity does not rely on CPSU officials or our union doing the wrong thing, given the bar in this legislation is set so incredibly low and the government has so many more resources than a small not-for-profit organisation such as ours.
3.32
The ACTU also noted that no equivalent provision exists for corporations and that the Minister does not have standing to apply for a court order disqualifying a company director, seeking the winding up of a company, or the liquidation of a company.
3.33
In relation to schedule 1, the ACTU commented that the standing provision is broader than the Royal Commission's recommendation that the regulator be given standing to bring an application for a disqualification order.
3.34
In contrast, the ACCI argued that empowering the Minister's role to intervene in such matters was appropriate:
…the Minister has a role in protecting the public interest and in ensuring that the regulatory system achieves its statutory objectives, including enhancing relations within workplaces, the reduction of the adverse effects of industrial disputation and ensuring the standards set out in the Registered Organisations Act are being met.
There is an additional protection in place in respect of the Minister and the Registered Organisations Commissioner, who are obliged under the Legal Services Directions 2017 issued under the Judiciary Act 1903 to act as a model litigant. As a model litigant any matter which proceeds to litigation must be in the public interest to commence the proceedings and have reasonable prospects of success.
Lastly, there is the additional check and balance that only the Federal Court, an independent arbiter, has power to make decisions in relation to these provisions.
3.35
The Business Council of Australia (BCA) also expressed support for the expansion of the standing provisions noting that the court's determination of matters would provide an adequate safeguard:
Finally, and most importantly, the Bill does not hand power to any business or Minister to interfere in registered organisations. Only the Court has the power to impose the various remedies, and only when very clear criteria have been met.
3.36
The department noted that the Act currently provides standing to the Minister to apply to the court to disqualify a person for holding office in a registered organisation, as well as under the existing cancellation regime. In relation to schedule 3, the department explained that currently, the Minister would be able to bring a case under the existing provisions by showing they are a person with a 'sufficient interest'. This was reiterated at the hearing by Ms Rachel Volzke from the department:
The standing provisions in the bill are based on provisions that already exist in the Fair Work (Registered Organisations) Act. For example, the current cancellation provisions already provide standing for the minister and a person interested to apply for cancellation of an organisation's registration.
Person of sufficient interest
3.37
The explanatory memorandum clarifies the term sufficient interest:
‘Sufficient interest’ has been judicially interpreted to mean an interest beyond that of an ordinary person and includes those whose rights, interests or legitimate expectations would be affected by the decision.
3.38
However, the CPSU (SPSF Group) argued the term was not clear and would significantly expand the class of persons who could bring action against registered organisations:
The word “sufficient” is opaque and has no clear meaning. It would require an interest that is more than an “emotional concern” and amounting to a “advantage or disadvantage beyond the ordinary citizen”. Any employer in an industry in which a union operates could have a “sufficient interest” even though they may not have been directly affected by the conduct of an organisation. Also, customers of enterprises effected by actions of a union could have a “sufficient interest.”
The great expansion in the class of persons who can bring proceedings under the Bill reinforce an argument that it breaches our international obligations relating to free association.
3.39
Conversely, the ACCI argued that persons with sufficient interest should be given standing to apply to the court and that courts applied a high bar when determining 'sufficient interest':
Giving standing to such persons provides the courts with the discretion to determine whether, in the context and circumstances of a particular application, a person has sufficient legitimate interest to warrant allowing that person to make an application.
…
The case law in this area demonstrates the high bar and type of substantial interest that the court will consider to meet the test of ‘sufficient interest’, and the importance of providing explicit standing to appropriate parties.
3.40
Inquiry participants noted that similar standing provisions did not apply in the Corporations Act 2001 (Corporations Act). Maurice Blackburn Lawyers commented that if similar provisions applied to corporations, unions would also have standing to bring action against a corporation:
If these notions were matched in the Corporations Act, they could potentially allow a union, or a union official, as a ‘person with sufficient interest’, to apply for the disqualification of company directors or the winding up of companies due to serious and systemic industrial wrongdoings such as breaches of workplace health and safety laws, liability in relation to workplace injuries and deaths, and wage theft. No such provision currently applies to company directors, unlike registered organisation office holders.
3.41
Inquiry participants also raised concerns that the standing provisions may allow external parties to use litigation as a tool against unions. For example, the Australian Services Union (ASU) stated that ‘there is a risk that this standing could potentially be used by employers tactically during disputes and bargaining.’ While the Uniting Church in Australia, Synod of Victoria and Tasmania noted:
While it is appropriate for laws to require unions to act ethically and with integrity, the broad standing provisions combined with the breadth of grounds in this Bill appears to create provisions where anti-union employers will be able to seek to harass unions with applications for disqualification and deregistration. Such tools will also be available to less ethical members of the union movement to harass their political or industrial opponents in the union movement.
3.42
Similarly, Queensland Council of Unions (QCU) made the following observation:
The potential for litigation arising out of opening up of applicants is recipe for greater legal costs and clogging of precious court time and resources. It would be indeed surprising if politically and industrially motivated individuals and organisations did not misuse these provisions as part of a strategy.
3.43
The department explained that current provisions under the Act relating to the cancellation of registration and alternative orders already provides person's with a 'sufficient interest' standing. Furthermore, Ms Volzke confirmed that it was the intention of the bill to have uniform standing rules:
…part of the objective of the bill was to try to standardise the standing rules across all the schedules of the bill. In relation to cancellation, for example, it is already the case that somebody who has, I think, a person interested is the formulation of the test, which is, in our view, the exact same threshold will suffice interest; it's not intended to affect a material change.
Designated findings and designated laws
3.44
The bill expands the grounds on which an official may be disqualified (schedule 1), an organisation deregistered (schedule 2), an organisation placed under a remedial scheme (schedule 3) and an amalgamation of organisations opposed (schedule 4). The grounds unique to individual schedules will be discussed in more detail under separate headings.
3.45
The bill introduces the terms ‘designated finding’ and ‘designated law’, which are referred to in all four schedules. As outlined in chapter two a designated finding includes a finding that a person has committed a criminal offence against a designated law or has contravened a civil penalty provision of particular industrial laws. The following laws are designated law—the Act, the Fair Work Act 2009, the Building and Construction Industry (Improving Productivity) Act 2016, the Work Health and Safety Act 2011, and each State and Territory’s occupational health and safety laws.
Distinguishing between serious criminal offences and minor infractions
3.46
Submitters raised concern that the bill does not distinguish between serious criminal offences and minor infractions. For example, the ICTUR stated:
[T]he legislation conflates criminal fraud and other serious crimes with minor infractions of industrial laws. By distilling such a broad spectrum of unlawful activity into the same category of offence, the legislation would permit equal punishments for unlawful acts that are not of comparable gravity, and lead to unacceptably disproportionate outcomes.
3.47
The Victorian Government commented that the grounds based on a designated finding were 'too broad and could include technical breaches such as late lodgement of financial reports and other routine aspects of industrial law'. The CPSU (SPSF Group) listed what it believes constitutes ‘low level’ offences which could fall under the definition of a designated finding:
A failure to provide the [Australian Electoral Commission (AEC)] with a declaration that the membership register is maintained in accordance with the Fair Work Act;
A failure to provide a statement of membership on request of a member in 28 days;
Failure to respond to a post-election report within 30 days;
Late filing of financial or other records;
Officer changing office and is unable to complete the required financial training within six months;
The contravention of an award or agreement;
Contravention of a bargaining order;
Contravention of an order to cease taking industrial action under s418 of the RO Act;
Failure to return a right of entry permit on expiry;
Failure to give 24 hours’ notice of exercise of a State or Territory WHS right of entry.
3.48
In response to concerns that the bill captures minor contraventions Ms Volzke provided the following explanation of the actual steps required in order for a designated finding to occur and the safeguards in the legislation to prevent unjust outcomes:
Other scenarios raised in the submissions concerning the grounds for disqualification of officers involved committing what has been described as minor or technical contraventions such as failing to return a right-of-entry permit or not lodging an annual report on time. Where this has occurred, a ground will only be enlivened where there has been a designated finding. A designated finding would always be contingent on legal proceedings being successfully brought against the person, usually by the relevant regulator. Such proceedings are unlikely for minor or technical contraventions of this type. There are also a range of more suitable remedies and measures that could be available to a relevant regulator—for example, compliance notices. However, even if a case is taken to a court by a regulator, any designated finding would be subject to any applicable defence, and this would depend on the alleged contravention and how it's framed. In the circumstances where that may apply, there would be no designated finding.
Lastly, even if there is a designated finding made against a person, a relevant application that meets the statutory prerequisites would still need to be made to the court, and the court would need to be satisfied that an order should be made and that it is not unjust in all the circumstances. In making this decision, the court is empowered to take into account a range of matters, including the nature of matters constituting the ground and the circumstances of the person's involvement in those matters.
3.49
The view that the regulator might pursue other remedies for minor or technical contraventions was reinforced by Mr Chris Enright, Executive Director of the ROC. Mr Enright confirmed that the vast majority of contraventions are dealt with through other means:
I would add that the Registered Organisations Commission brings proceedings in a minuscule number of matters in which contraventions are identified. We see hundreds upon hundreds upon hundreds of contraventions, but we deal with them, overwhelmingly and the vast number, by other means. We deal with them by remediation, education and—once we identify contraventions, and, as I say, we identify many hundreds—when we see adequate and appropriate responses, which is in the vast majority of cases, then that's the end of the matter. So the ROC has commenced three proceedings. And we see hundreds upon hundreds of contraventions and we work very productively with registered organisations to resolve them, and to educate and help them to improve compliance.
Effect on organisations
3.50
In addition to the orders that a court or the FWC could make, the committee heard evidence that the broad standing provisions, combined with the minor grounds, could have other unintended consequences for unions. One concern was that it would provide employee associations with the ability to use litigation as a tactic against unions. This was explained by Ms Nadine Flood from the CPSU (PSU Group):
Because what we will see is repeated tactical legislation to tie up the resources of unions, to limit what our volunteers and what unions can do. The aim of an employer won't necessarily be to get the orders, and they won't necessarily mind if they lose. We've seen that repeatedly in the Commonwealth and we see it with some private sector corporations—what they call tactical litigation. It's not just about the court outcome.
3.51
This view was shared by Ms Emily Howie from the HRLC who commented that regardless of the outcome, the litigation would have the effect of damaging the relevant union:
We are concerned that the extent to which the bill would create broader grounds on which cases can be brought and widen the standing provisions so that more people can bring those cases would inevitably lead to more litigation. It would create what we see as a new litigious paradigm that in itself creates damage. We know that courts might ultimately find for the unions but, nonetheless, significant damage is already wreaked in terms of cost and time in bringing these court cases. This is ultimately members' time and money being used fighting litigation instead of advocating on behalf of legitimate workplace issues.
3.52
Some witnesses also expressed concern that the combined effect of the standing provisions and the broad grounds could have a chilling effect on unions' ability to improve the working conditions of their members. Ms Hurley expressed these concerns:
The bill in its current form could have a chilling effect on strike action, because, where unprotected strike action might lead to contraventions of civil penalty provisions, that can therefore result in designated findings being made, and then a raft of really significant consequences can flow from that. For example, a designated finding can be the basis for a person being disqualified from their role in a union. More than one designated finding made against a number of union members can be the basis for cancellation of registration of the union as a whole. Designated findings being made against a union or union official can impact on compliance record events, which can impact on the decision about whether or not unions can merge with each other. So what the bill means is that it can trigger some most drastic consequences that could potentially see a union deregistered as a result of strike actions that should be protected as a matter of international law.
3.53
Ms Emily Shephard from the Australian Nursing and Midwifery Federation (ANMF) Tasmania argued that the bill could also led to poorer outcomes for the community:
ANMF holds concerns that, if this bill is passed, it will limit the ability of our organisation to provide support to our members to advocate for their patients and clients and that this will eventually lead to poorer outcomes and degradation of both private and public health services in our state.
3.54
In contrast, Mr Schmitke from the MBA argued that:
[T]he overwhelming majority of registered organisations and officials in this country know that in order to look after the interests of their members they don't need to repeatedly and deliberately break the law day in, day out. I'm sure all the other unions that appear in front of this committee will say that they don't break the law and they don't do the wrong thing, in which case, there's absolutely nothing to worry about. This bill creates consequences that are real and meaningful only for those people who currently break the law and intend to continue breaking the law in the future. If you're going to play by the rules, then you've got nothing to worry about.
3.55
Ms Lawrence shared a similar view:
This bill will ensure all registered organisations work in their members' best interests and within the bounds of the law. We do not think that is too much to ask. We want to acknowledge at this point that the vast majority of unions and employer associations have people who do the right thing, but we need to do more to ensure that all comply with the law.
Corporate equivalence
3.56
Submitters also argued that similar provisions do not apply to companies. The ACTU explained that these provisions would only be equivalent if 'designated finings' were restricted to contraventions of the Act. Noting that the Act deals with the formation, registration and management of industrial organisations, the ACTU made the point that it was the equivalent to the Corporations Act for companies. The ACTU explained:
By extending the range of contraventions that can ground a disqualification order to industrial laws and work health and safety laws, the court-ordered disqualification regime in the Bill goes beyond that applicable in the corporate context. For example, the ‘designated findings’ might relate to conduct that contravenes an FWC order to stop unprotected industrial action, regardless of whether or not the union members considered that such action was in their best interests, or to a failure to give 24 hours’ notice of entering a workplace to investigate a suspected contravention of a work health and safety law, because the union officer knows that if they give the requisite notice the employer will hide the evidence. On the other hand, directors of companies that engage in systematic wage theft as part of their business model, or that recklessly expose workers to risk of serious illness or injury or death, are not exposed to disqualification.
3.57
In response to concerns relating to corporate equivalency, Ms Volzke explained how the bill has been amended to address issues of corporate equivalency:
Changes have been made to the bill based on feedback from the previous iteration to ensure parity, as far as possible, with Corporations Act equivalents, noting that the bill has been appropriately adapted to the regulation of registered organisations. In particular, the definitions of 'designated laws' and 'designated findings' have been amended and are now limited to core workplace laws. The concept of wider criminal findings has been removed from the bill entirely. These are core definitions which flow through the various schedules of the bill.
Schedule 1 – Automatic disqualification
3.58
As outlined in chapter 2, the automatic disqualification provisions give effect to recommendation 36 of the Royal Commission.
3.59
Submitters expressed concern that unlike the Corporations Act, an official can be automatically disqualified regardless of whether gaol time was served or whether the offence was unrelated to the person's role as a union official. For example FSU stated:
A person convicted of such an offence may not even be sentenced to any term of imprisonment, but they will still be disqualified. The offence may be totally unrelated to their duties and obligations. For example, an official or volunteer member may be convicted of a driving offence that carries a sentence of 5 years or more. That person would be automatically disqualified from holding office even though the conduct had nothing to do with their duties.
3.60
Additionally, submitters such as Unions WA raised concern that the bill would capture 'a law of another country' as a ground for automatic disqualification and explained why this would be problematic:
The inclusion of offences under ‘a law … of another country’ is particularly problematic, given that a prescribed offence is a ground for automatic disqualification. Automatic disqualification allows no discretion for a court to assess whether there is an equivalent offence under Australian law or whether such an offence is punishable by an equivalent penalty.
This section assumes that other countries have similar legal and political systems as Australia. Thus a conviction in one country is as sound as a conviction in any other. This is demonstrably not the case. Around the world workers are at risk of persecution by state authorities.
3.61
The ACTU shared these concerns and explained how the current Act limits offences related to a law of another country:
The effect is that a person may be held to a standard that does not reflect the expectations of the Australian community as reflected in our legal system. Where the current definition of prescribed offence includes offences under a law of another country, it is limited to particular types of offences. This limitation is important, because it ensures that the provision does not inadvertently import a standard that is not relevant or acceptable to the Australian legal system.
3.62
In contrast, a number of submitters supported the introduction of this offence, citing the recommendations of the Royal Commission, as well as the repeated contraventions of particular unions, as the basis for their support.
3.63
On the issue of corporate equivalency, the department noted that as the current Act allows an official to continue to hold office when they have been convicted of serious offences, the bill seeks to close this loophole:
Under the current Act, people can be automatically disqualified from holding office if they are convicted of categories of offences involving fraud, dishonesty, intentional violence or property damage, or particular offences relating to the administration of registered organisations. However, an individual can continue to be an officer of an organisation despite being convicted of a range of other serious offences such as blackmail, extortion, threatening to cause serious harm to public officers, handling stolen goods, certain corrupting benefits offences or intentionally destroying documents relevant to an investigation.
3.64
The department explained that under section 206B of the Corporations Act, a company director could potentially be automatically disqualified for conduct relating to blackmail and extortion if the conduct 'involves dishonesty and is punishable by imprisonment by at least three months'.
3.65
The department also outlined that Part 4 of the Act includes a mechanism whereby a disqualified person can apply to the Federal Court for leave to continue to hold office.
Schedule 1 – Court ordered disqualification
3.66
As stated in chapter 2, the bill would expand the grounds for a court ordered disqualification to 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.
Not a fit and proper person
3.67
In addition to concerns raised relating to a designated finding, submitters were also concerned that an official could be disqualified on the basis that they are not a fit and proper person. A number of submitters argued that the current criteria is too broad and that some of the grounds for determining whether a person is not fit and proper would not require a conviction. The CFMMEU stated:
Notably, the ‘fit and proper person’ criteria do not all require a person to be actually convicted in order to fall foul of the test. Adverse findings against individuals in proceedings for certain offences involving violence or damage to property, and even civil matters involving dishonesty, may be sufficient.
3.68
This concern was shared by the Queensland Law Society (QLS):
We are concerned that the current drafting of these provisions leaves it open to the possibility that a person could be acquitted, or have a hung jury yet still fall within the language of “found to have engaged in”. For instance, a judge might make a finding of fact that an accused person committed an act of violence, but acquits them because they have raised a defence or because the proceeding ends for another reason. It would seem more appropriate that there should be a conviction before the disqualification provisions can be invoked.
3.69
The QLS also explained their concerns with the current drafting of the grounds in proposed paragraph 223(6)(d) of the bill:
In respect of subsection (6)(d) our concerns are that a finding in a civil proceedings would include a tribunal finding - not necessarily a judicial finding - and that 'any action against the person by an agency of the Commonwealth or a State or Territory', could extend to a finding by a government agency made during the course of the agency performing regulatory functions. That is, it seeks to cover an extremely broad range of minor and more serious civil and criminal conduct.
3.70
Inquiry participants further argued that there is no corporate equivalence to the fit and proper person test as proposed under the bill. The Victorian Government stated:
… the proposed disqualification regime for registered organisation officials goes beyond the regime which is applicable to company directors who can only be disqualified for dishonest offending, bankruptcy and in relation to foreign court orders. There is also no general ‘fit and proper person test’ for company directors under the Corporations Act 2001 (Cth). The proposed disqualification provisions create an unjustifiable inequality of standards for registered officials compared to company directors.
3.71
However, the BCA considered that requiring officials to be fit and proper was key to restoring confidence in the system:
Individuals entrusted with important responsibilities in the system should be fit and proper persons. Businesses are deterred from engaging in bargaining when they are concerned that the other party is not abiding by the rules…
3.72
In relation to concerns that directors of companies are not subject to a similar test, the department advised:
Examples of fit and proper tests in the corporate sphere include:
to gain a license to engage in credit activities under the National Consumer Credit Protection Act 2009 (Cth);
to perform the functions of an auditor for the purposes of the Corporations Act 2001 (Cth) to gain an Australian financial services license from ASIC; and
to obtain a license to operate as a labour hire provider in Queensland under the Labour Hire Licensing Act 2017 (Qld).
Process relating to disqualification
3.73
As explained by the department, the process for disqualification involves two stages—firstly, a ground for disqualification must be satisfied; secondly, the court must consider whether it would be unjust to disqualify the person.
3.74
Proponents of the bill commented that the formulation of the 'unjustness' provisions would be an easier test to satisfy than what was recommended by the Royal Commission. The ACTU explained:
Proposed new s 222(2) provides that the Court may make an order disqualifying a person from holding office in an organisation if the Court is satisfied that a ground for disqualification applies in relation to the person and ‘does not consider that it would be unjust to disqualify the person’. This formulation is different from the current regime, the Corporations Act regime and the regime recommended by the Royal Commission, each of which empower the Court to make a disqualification order if a ground is made out and ‘the Court is satisfied that the disqualification is justified’. While the formulation in the Bill does not change the legal onus of proof, it has the practical consequence of effectively shifting the onus onto the defendant to satisfy the Court why the order is unjust if a ground is made out. No explanation is provided for why the amendment is formulated in this way.
3.75
However, the department clarified that the current formulation is more narrow then the alternative as Ms Volzke explained:
…the unjustness formulation, which is already reflected in existing provisions of the cancellation provisions, is formulated in that way because it is a narrow judicial consideration that the court makes in relation to determining unjustness. 'Justified' actually invites a broader inquiry.
3.76
The ACTU further argued, that even in circumstances where the court ultimately decides that the disqualification would be unjust and therefore declines to make an order, the damage would have already been done as the union and the officer would have been forced to use significant resources to defending the litigation.
3.77
In contrast, the view expressed by employer bodies was that officials who do not break the law have nothing to fear from this bill. For example, AMMA stated:
The threat of potential disqualification from office, or at the very least the prospect of having to defend their actions before a Federal Court, could provide an important safeguard ensuring individuals in privileged official positions are incentivised to demonstrate a level of appropriate behaviour and accountability that their members and the broader community are entitled to expect.
Schedule 2 – Cancellation of registration
3.78
In addition to the expansion of grounds through the introduction of a 'designated finding', Schedule 2 of the bill also provide additional grounds for the deregistration of an organisation, as summarised in chapter 2.
3.79
The CPSU (SPSF Group), referred to the deregistration provisions proposed by the bill as the 'nuclear option'. The HRLC similarly stated that the cancellation provisions 'make the most punitive outcome – deregistration of the union – the default response, rather than a last resort following the exhaustion of alternative options'. The AIER referred to the broadening of the grounds for cancellation as 'unjustified' and 'unnecessary' due to the following reasons:
(a)
the Royal Commission recommended against the deregistration of the union;
(b)
the existing deregistration provision (section 28(1)(b) of the Act) could be used to deregister the CFMMEU;
(c)
the deregistration of a union is a very serious step and the current wording of section 28J of the bill states that the federal court 'must' cancel the registration of an organisation if it considers that it would not be unjust to do so;
(d)
the provisions of Schedule 2 are too broad, referring to the standing provisions and the expanded grounds; and
(e)
the deregistration provisions erodes the compact that was initially formed in 1904 when unions agreed to be regulated by the federal Government.
3.80
Some of the above issues have already been canvassed in this report, while the other issues will be discussed below.
3.81
MBA provided a contrary view to that of the AIER. It argued that these amendments would provide positive outcomes:
…it is Master Builders view that there are a range of other positive outcomes that would flow from the passage of this measure. The most significant of these are:
That a further incentive is created for ROs and their officials to comply with the law;
It would provide greater protections for members of an RO, and ensure (where relevant) that any consequence for breaking the law is targeted at the part of an RO so involved; and
It would improve the standard of industrial conduct while protecting RO members and the public more generally.
3.82
ACCI supported the provision but acknowledged that deregistration of an organisation is action that should not be taken lightly:
The Chamber acknowledges that cancellation is not a step that can be taken lightly and employers do not aspire for these powers to be used. Rather we want to see all registered organisations comply with the law. However, it is clear that effective measures are needed to drive improved conduct and behaviour, and the ultimate sanction of cancellation of registration must be part of a more effective and functioning regulation of organisational conduct.
Deregistration and evidence of the Royal Commission
3.83
The department explained that the cancellation regime proposed by the bill responds to evidence received by the Royal Commission regarding 'organisations, and sometimes branches within organisations, where there was a culture of contempt for the rule of law'.
3.84
A number of inquiry participants made the observation that the Royal Commission did not contemplate expanding the cancellation provisions under the Act. This was highlighted by the AIER:
Deregistration, especially when made subject to much easier statutory tests as proposed in the EI Bill, is a blunt instrument. Commissioner Heydon himself observed that: ‘Cancellation of the registration of [a] whole union may have a disproportionate effect on union members who have not been involved in illegal activity.’
3.85
Supporters of the bill outlined key evidence provided to the Royal Commission, or statements made by judicial officers, in relation to the actions of particular unions, as the justification for schedule 2 of the bill. It was argued that the current sanctions were not effective in dealing with the repeated non-compliance of some unions.
28C – Conduct of affairs of organisation or part of organisation
3.86
Subsection 28C(1) of the bill would provide a new ground for the cancellation of registration of an organisation on the basis that the organisation, or part of the organisation, was being managed in a manner that is oppressive, unfairly prejudicial or discriminatory against, or contrary to the interests of the members or part of the members.
3.87
Submitters raised concerns that this ground runs contrary to the very nature of unions. Unions NSW stated:
This ground runs contrary to the nature of diverse, democratically run organisations like unions. It is impossible to simultaneously meet the interests of members collectively and individually. The nature of unions requires them to balance the needs and interests of individuals against those of the broader collective. How effectively a union is able to do this, is determined by the membership of the union through union elections and internal decision making bodies. The proposed ground 28C(1)(b) is ill conceived and is not suitable for the collective and democratic nature of unions.
3.88
One such example was provided by Mr Thomas Lynch from the CPSU (SPSF Group) Tasmania:
I am particularly concerned about the provisions in section 28C, which provide grounds for deregistration or other orders to deal with the union discriminating between groups of members or contrary to the interests of part of the union. We are required to constantly balance competing interests within our diverse membership. One example of this I'd like to put to you is our pursuit over the last 20 years of fair parental leave provisions within our awards and agreements. At this stage we have 14 weeks paid maternity leave that we have gradually negotiated over that period. To win that paid entitlement, we have had to accept lower wage outcomes at times. And there are parts of our membership, particularly older female members who have had their children without the benefit of any paid leave, who consider this to be contrary to their interests. We pursue these conditions because they are in the overall best interests of members. They are supported by the majority of members. But, under 28C, we could be challenged and potentially deregistered for doing something as important as improving paid maternity leave for our members.
3.89
Ms Elyane Palmer from the ACTU added that this ground would not require any law-breaking to have occurred:
It's also not the case that all of the grounds require any lawbreaking. One of the grounds for deregistration does not require any unlawful conduct at all; I'm talking about the ground in 28C. That ground is to do with the way that the affairs of the organisation are conducted. If the affairs of the organisation are conducted in a way that discriminates between members, that's a ground for deregistration.
3.90
However, the department argued that the unlawful conduct entail an individual 'acting in their own interests as opposed to the interests of the organisation or the membership as a whole.' Ms Volzke also went on to explain that in relation to proposed paragraph 28C(1)(c):
…there has to be the necessary nexus between how the affairs of the organisation or a part thereof are being conducted, and they have to result in an organisation or a part thereof having a record of not complying with the law. So 'not complying with the law' is unlawful.
28G – Obstructive industrial action
3.91
Proposed section 28G would provide for the deregistration of an organisation where the organisation, a part of the organisation or its members, have engaged in obstructive industrial action. It was noted that a similar ground currently exists in the Act.
3.92
Inquiry participants commented that industrial action was sometimes necessary to ensure the safety of their member or the community, or the fair working conditions of their members. Numerous unions provided examples of where they felt it necessary to take industrial action, which led to positive outcomes for their members and the community as a whole.
3.93
Additionally, the ANMF observed that it can sometimes be difficult to determine whether industrial action is 'protected' industrial action:
The determination of what constitutes industrial action and the scope of protected industrial action is the subject of judicial interpretation. Because of the complexities surrounding what is or is not “protected” industrial action and the uncertainty about the nature of industrial action, it is inevitable that grounds for deregistration will arise in the normal ebb and flow of industrial negotiations and bargaining.
3.94
Ms Ingrid Fraser from ACCI observed that a similar provision currently exist under the Act and that the courts have applied a high bar to the current provision:
That provision doesn't apply to protected industrial action. It applies only to unlawful industrial action that is having a substantial adverse effect on the safety, health and welfare of the community or prevents, hinders or interferes with the activities of a federal system employer or any other public service. It's important to note that that provision already exists in the current registered organisations act in existing section 28(1)(b) and 28(1)(c). To my knowledge it hasn't been used to bring a cancellation of registration application so far, even in relation to the unprotected industrial action undertaken in recent years mentioned by the previous witnesses from the AMWU. In my view it wouldn't be likely that it would lead to cancellation of registration.
In addition, if an application was to be brought to cancel the registration on those grounds, the court would need to consider whether it would not be unjust to cancel registration in the circumstances and it would take into consideration things such as the nature of the ground, for example any justification that the union might have for it, and whether it's in the best interests of the members of the organisation to cancel that union's registration. Given that, I'd say that it would be quite unlikely.
3.95
Ms Volzke explained how proposed section 28G would operate:
As I said in my opening statement, that particular ground in 28G is broadly modelled on existing 28(1)(b) and (c). What has occurred with the new 28G is that it has consolidated those two previous existing grounds into one. But for the ground to be enlivened there has to first of all be the unprotected industrial action occurring. But subsection (2) makes it clear that the industrial action also has to prevent, hinder or interfere with the activities either of the federal system employer, or the provision of any public service by the Commonwealth, state or territory or an authority thereof, or is or is likely to have a substantial adverse effect on the safety, health or welfare of the community or part of the community. Then subsection (3), like existing 28(1)(b), also says that a finding of fact could be admissible as prima facie evidence of unprotected industrial action occurring. Again, in the absence of a court or the commission making an order either to stop unprotected industrial action or some sort of court order—whether it be by way of injunction et cetera—it's not enough for there to be a mere assertion by the applicant. As I said, there is a legal onus that rests with the applicant to be able to demonstrate that the ground has actually crystallised.
Alternative orders
3.96
Schedule 2 of the bill provides for the court to make a range of alternative orders. However, the proposed alternative orders regime was described by the CFMMEU as 'remarkably intrusive'. This view was shared by a number of submitters, including the ACTU who argued that the alternative orders proposed by the bill could also have significant consequences for the democratic operation of unions:
Schedule 2 also enables the Court to make a range of so-called ‘alternative’ orders, which in fact can be made either as alternatives to cancellation of registration or as orders applied for in their own right, without a concurrent application for cancellation. These orders can have farreaching intrusion into the democratic and autonomous functioning and control of organisations. Proposed s 28M provides a new and additional avenue for the disqualification of persons from holding office in a registered organisation that again goes well beyond the disqualification regime proposed by the Royal Commission. Proposed s 28BN allows the Court to exclude certain members from eligibility of a union. Proposed s 28P allows the Court to suspend, or give directions as to the exercise of, any rights, privileges and capacities of the organisation or members or part thereof, including the right to take protected industrial action, and despite the organisation’s own rules.
3.97
Dr John Martin from the QCU also argued that providing for alternative orders was not proportionate:
The way the bill reads is that it says, 'If the Federal Court says this doesn't justify the deregistration, here are a range of other things that we can do to you,' and, again, that discretion is there for fairly trivial matters. It's not proportionate. It's an overkill.
3.98
The United Firefighters Union stated:
Even where the union satisfies the court that cancellation of registration would be unjust, the court may make alternative orders. This could provide courts with the broad power to make various adverse orders, such as those that effectively dictate who can lead a union or who can be a union member. This would be a direct violation of the democratic rights and freedoms of trade unions and their members.
3.99
A number of submitters cited the ability of the court to make an alternative order rather than cancel the registration of an organisation, as one of the safeguards contained within the bill. For example, AMMA stated:
The provisions of the EI Bill achieve a balance between the necessity of sanctioning officials for lawbreaking behaviour and adversely impacting members of the Registered Organisation who may not have been involved in the activities which may form the grounds for cancellation. The capacity of the Federal Court to make alternative orders where it considers the cancellation of registration would be unjust, strikes this balance.
3.100
Ai Group similarly expressed the view that schedule 2 would provide the court with some flexibility:
The provisions in the Bill would give the Federal Court considerable flexibility in determining what orders are appropriate in any particular case. For example, the Court is able to make orders relating to particular divisions and branches of unions.
3.101
The department also relevantly noted that considerations of whether or not an order would be unjust equally apply in relation to alternative orders, such that ‘the court is able to look at all of the circumstances in determining whether or not to exercise its discretion'.
Requirement to cancel the registration where a ground is met
3.102
Concerns were also raised that the bill instructs the court to cancel the registration of an organisation where a ground has been established and the organisation does not satisfy the court that deregistration is unjust. This was explained by Mr Michael Clifford, Acting General Secretary of the QCU:
…the way this provision is written is that it's basically directing the court—it's saying, 'You must do this unless you can find a reason not to.' It's not providing discretion to a court to say, 'You take into account whatever you think is fair and just.' It's directing it. It does the same with amalgamations.
3.103
This concern was elaborated on by Ms O'Neil:
The way the bill is drafted is to tell the court that the bar to establish a ground is very low. It basically instructs the court that single breaches that aren't required to be serious and that aren't systematic are the grounds. That's the basis of how the bill has been drafted. The bill also tells the court that, if a ground for deregistration is established, the court must cancel the registration, unless the organisation itself can convince the court that it would be unjust to do so. It puts a mandatory obligation, if you like, on the court to cancel the registration if the ground has been found. Then, rather than the person making the application, such as an employer or the minister or an interested person having to make out the grounds as to why it would be unjust to do so, it puts the onus back on the union to make out the grounds that it would be unjust to do so—which, as you can see, would be difficult, given the drafting provisions in the bill and how low the bar has been set.
3.104
Ms O'Neil also argued that if it was not the intention for minor grounds to be justification for a severe penalty to be imposed, then the legislation should not have be drafted in this way:
You don't draft a bit of legislation to provide a remedy that is the whole shutting down of the union if it's not the case that you want to have that available to the court. If we had legislation that said one of the remedies for shoplifting is life imprisonment, you might say, 'That's not going to happen,' but why draft legislation that provides such an extreme, unjustifiable remedy if you do not want to provide the capacity for the court to consider and act on that penalty within its deliberations? None of the grounds for industrial action that could trigger the deregistration of a union need to be serious. There's no requirement that they be serious.
3.105
Witnesses also raised concern that schedule 2 shifts the onus of proof onto the organisation. Ms Ellie Bassingthwaighte from the QLS explained:
Section 28J of the bill also shifts the onus of proof to the organisation if the organisation does not satisfy the court that it would be unjust to cancel its registration. This proposed penalty of deregistration as the primary penalty is unjustified in the circumstances, and it ought properly to be considered as the last resort rather than the default response to a wide range of infractions.
3.106
However, a number of submitters, explained that the current cancellation process as 'lengthy and costly'. In a joint submission, the NSW Business Chamber and the Australian Business Industrial (NSWBC and the ABI), concluded that schedule 2 of the bill provides a 'common sense' approach:
Under the current regime if a court is not minded to take the step of cancelling the registration of a registered organisation, the current Act only allows the court to make alterations of the eligibility rules or declare that the persons are excluded from eligibility for membership.
The Bill put forward common sense amendments that give the courts greater discretion and scope to take appropriate action against a registered organisation, or parts of an a registered organisation, including a more ‘surgical’ approach to cancellation of registration of recalcitrant parts of an organisation leaving the majority of those law abiding officers unaffected.
3.107
AMMA noted that courts are still required to consider the best interests of members of the organisation:
The Courts are still required to consider the best interests of members as a whole when determining whether cancellation of registration is appropriate. These amendments highlight the EI Bill’s objective to protect the interest of members and restore public confidence that Registered Organisations are operating lawfully and to standards that are expected by the broader community.
3.108
The department provided some information about the court's consideration when determining the cancellation of an organisation's registration:
An unsubstantiated allegation will not suffice. Where the Federal Court is satisfied that a ground for cancellation exists, the Federal Court has the discretion not to deregister an organisation in circumstances where that deregistration would be unjust. This ensures cancellation remains a measure of last resort. In considering whether deregistration would be just, the Court is expressly required to take into account the nature of the matters constituting the ground, any action taken by or against the organisation or its members, and the best interest of the members. There are also protections against frivolous and vexatious claims, including the Federal Court’s existing powers to dismiss vexatious claims and order costs.
Schedule 3 – A remedial scheme
3.109
The main concerns with regard to schedule 3 of the bill related to the broad standing provisions, the expansion of the grounds that would allow the court to put in place a remedial scheme and that the schedule conflict with ILO principles. A number of submitters also noted that the ground in schedule 2, relating to the actions of an organisation being conducted in a manner that would be prejudicial or contrary to the interest of parts of its membership, is essentially replicated in proposed section 323 of schedule 3 of the bill. These issues were covered earlier in this chapter.
3.110
In addition to these issues, submitters argued that while the grounds under schedule 3 are said to have been modelled on the Corporations Act, they are much broader. The concern was explained by the ACTU:
The Government claims that two of the grounds, being the ‘officers acted in own interests’ and ‘affairs conducted in an oppressive etc manner’ grounds, are adapted from ss 461(e) and (f) of the Corporations Act.210 However, those Corporations Act provisions ground the winding up of a company, not the appointment of an administrator. Under the Bill, these grounds can support the cancellation of registration of an organisation and alternative orders discussed above under Schedule 2, and the imposition of an administrative scheme including the appointment of an administrator under Schedule 3. The difficulties in transposing the oppressive conduct ground into the regulation of registered organisations, particularly in the way that has been done in the Bill (which is not faithful to the equivalent provisions in the Corporations Act), are discussed above in paragraphs [77] to [80].
3.111
However, AMMA explained that these measures 'seek to address public concern over cases of financial mismanagement and fraud by Registered Organisations'. AMMA continued:
As with corporations, where an independent arbiter can no longer be satisfied those charged with the oversight of an organisation established to pursue the interests of its membership and funded from the pockets of such members, it is a community expectation that steps be taken to protect the interests and financial contributions of such members.
The amendments in the EI Bill seek to more closely align the governance arrangements of Registered Organisations with those of corporations.
3.112
Submitters again noted that the Act already provides an effective mechanism as the HSU explained:
The HSU’s story tells us some important things about the existing legislation and the amendments proposed in the Bill. First, the existing administration regime already gives the court significant powers, discretion and flexibility in dealing with most of the officer conduct contemplated by expanded grounds. The difference is that the thrust of the current provisions is to provide support to a union or branch when it becomes, for whatever reason, unable to look after its own affairs. In making the orders, the Court was not required to make any findings of wrongdoing—that was a task for other bodies and mechanisms, including civil proceedings for compensation under the RO Act, and criminal proceedings. By contrast, the Bill focusses on misconduct and wrongdoing, and in so doing radically changes the nature of the provisions from remedial to punitive. …
Second, the discretion already conferred on the court is wide enough to allow the court to make the types of facilitative orders for the operation of an administrative scheme proposed in the Bill. For example, in the HSU matters the Federal Court made orders for the appointment of an administrator (proposed s 323A(2)(a)), a timetable for elections (proposed s 323A(2)(d)), the functions of the administrator (proposed s 323F), and an order directing an individual former office holder to assist the administrator (proposed s 323G). The Bill does not require an administrator to have any particular qualifications or any experience with registered organisations.
3.113
The HSU case study was also used by the department to illustrate the need for the amendments proposed in Schedule 3 of the bill. The department stated:
The current framework for placing an organisation into administration under section 323 of the Act is difficult to administer. This was demonstrated in the case of the Health Services Union (Brown v Health Services Union [2012] FCA 644). The case was ultimately resolved because the parties largely agreed about the facts in issue. However, there were numerous court applications, which resulted in a confusing process that could have been extremely lengthy had the facts been contested.
Schedule 4 – amalgamation of organisations and the public interest test
3.114
Schedule 4 of the bill would introduce a new two stage test for the amalgamation of organisations. The first stage would require the FWC to make a finding that the amalgamation is not in the public interest if the organisation has a record on not complying with the law. As outlined in chapter 2, one of the grounds that constitute a 'compliance record event' is a contravention of a designated law. Additionally, provisions relating to an 'obstructive industrial action' as set out in schedule 2, proposed section 28G, are similarly replicated in schedule 4 when considering a 'compliance record event'.
3.115
Submitters raised concerns that where the FWC makes a finding 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. The HRLC explains that the first stage effectively requires the FWC to 'block' an amalgamation on minor grounds:
The first stage of this test allows the Fair Work Commission to block the democratic mandate of union members on potentially quite minor or technical grounds. The second stage allows for the Fair Work Commission to consider any objections from employer organisations and anyone with a “'sufficient interest in the amalgamation”.
3.116
Ms Elyane Palmer from the ACTU explained how the public interest test proposed by the bill is broader than the competition test applied to companies:
Firstly, company mergers are not required to be approved by a regulator. Companies merge and take over every day without any scrutiny by the regulator at all—there's no mandatory notification scheme and they're not required to submit their merger for approval. If they think there is a potential that the merger might substantially lessen competition, then they can voluntarily seek an opinion from ASIC, where ASIC will apply a public interest test where they consider whether the overall benefits of the merger will outweigh the effective lessening of competition. Whether either of the companies or their directors have a record of not complying with the law, or what impact the merger might have on workers in the industry, is not part of the consideration of the regulator. …
The amalgamation provisions for unions in the bill are, firstly, that it's mandatory—every amalgamation will have to be approved by the tribunal; secondly, the so-called public interest test occurs in two stages. The first is not in fact a public interest test at all; it requires the commission to consider whether any of the amalgamations have any previous breaches of industrial or work health and safety laws and whether their members or their officers do. And if the Fair Work Commission finds that there's any record of not complying with the law then it is required to refuse the amalgamation from going ahead. If you jump that hurdle, then the Fair Work Commission is required to apply a broader public interest test where it considers the impact of the amalgamation not only on the members and the workers but also on the interests of companies and employers in the industry. We would love to have the opportunity to talk to ASIC about the effect of company mergers on workers, but that's not how the company merger provisions apply.
So they're the two distinctions: firstly, that with company mergers the test is voluntary, not mandatory, and, secondly, that there is this sort of automatic fail on the test if you have a record of not complying with the law, and that does not come into it for companies.
3.117
However the department submitted that the public interest test under schedule 4 of the bill 'is not dissimilar to company mergers'. The department stated:
In some instances, companies have to satisfy a competition test applied by the regulator, the Australian Competition and Consumer Commission, when they merge to ensure that the merger would not substantially lessen competition, or that the merger would benefit the public and this benefit would outweigh any detriment to the public.
3.118
The department also noted that a public interest test for registered organisations is not a new concept:
Applying a public interest test to the mergers of registered organisations is not a new concept. Under predecessor legislation, the former Australian Industrial Relations Commission was required to take into account the public interest when performing its functions in relation to registered organisations.
3.119
The ABI and the NSWBC highlighted the point that the public interest test for organisations is not a new concept and explained its benefits:
A public interest test for various activities as they relate to registered organisations is not a foreign concept and has been a feature of previous legislation, including the Industrial Relations Act 1988, Workplace Relations (Registered and Accountability of Organisations) (Consequential Provisions) Act 2002 and Workplace Relations Amendment (Work Choices) Act 2005.
Naturally, the prohibition on an amalgamation proceeding if the public interest is adversely affected is a simple way in which to confer discretion on a court to prevent amalgamations where consequences deleterious to the public are clearly identified by the Court.
These deleterious consequences may not presently be known or easily be able to be prescribed in advance by legislation. By addressing these possible consequences through a broad public interest test, that allows a broad range of interested parties to be heard on the amalgamation, the legislature can have confidence that a sufficient layer of protection is implemented to prevent inappropriate amalgamations through the exercise of the court’s discretion and transparent decision making process.
Committee view
3.120
As part of a comprehensive inquiry, the Royal Commission found that some unions and officials act with complete contempt for the rule of law. Moreover, the Royal Commission determined that the current penalties are not providing a sufficient deterrent to tackle this law-breaking behaviour. As a result, it made detailed recommendations to address these issues.
3.121
During this inquiry, the committee received extensive and compelling evidence that this culture of lawlessness has continued within registered organisations. It is this type of behaviour, which continues today, that is the impetus for this bill.
3.122
The committee acknowledges that a number of significant amendments were introduced in 2016. This included the commencement of the BCIIP Act, the re‑establishment of the ABCC, and the commencement of the Act which established the ROC. A number of witnesses argued that it is too early to determine if the 2016 amendments have been effective in addressing the serious unlawful behaviour of registered organisations, and therefore, that the amendments contained in this bill are premature. The committee does not accept this contention.
3.123
The committee acknowledges that since the 2016 amendments were introduced the number of proceedings involving the CFMMEU has decreased. However, the committee also notes the department’s advice that this may be influenced by the time taken for the investigation process to be properly conducted and delays between a contravention being alleged and a court decision to be made. Moreover, information provided by the department brought to light the fact that the number of cases brought by the ABCC, involving the CFMMEU, has increased each year—with four cases brought in 2017, nine in 2018 and to date, 19 in 2019. The committee is concerned that these figures will continue to increase if decisive action is not taken immediately. Furthermore, the committee reiterates the evidence it has received, that despite the 2016 amendments, certain organisations have continued to act with total contempt for the law.
Standing
3.124
The committee notes the concerns raised relating to the standing provisions. However, it considers these concerns to be misguided. The standing provisions within the bill have been expanded to provide the ROC with standing to apply for certain orders. The committee considers it appropriate for the regulator to have standing in these cases.
3.125
In relation to the Minister having standing to apply to the court and the FWC, it is noted that the Minister currently has standing to apply to disqualify an official as well as standing under the current cancellation regime. Arguably, the Minister would also have standing under the current regime governing the administration of dysfunctional organisations on the basis of having a 'sufficient interest'. This is therefore, effectively a continuation of existing arrangements. The public interest tests for the proposed amalgamation of organisations are new provisions. Consequently, it is reasonable that the same standing rules also apply to this new section. Additionally, the committee considers that it is appropriate for the Minister to have standing in relation to the FWC's determination of the 'public interest' given the Minister’s responsibility to protect the public interest.
3.126
Concerning a 'person with sufficient interest' having standing, the committee notes that the current cancellation regime and the administration of dysfunctional organisations regime already provide standing to a person interested. It is noted that the current standing rules have been present since the Act was first legislated by the former Labor government. The committee heard that these terms are analogous and would be interpreted by the courts in the same way. Furthermore, the department advised that an objective of the bill was to standardise the standing rules across the four schedules. The committee considers this to be a reasonable intention.
3.127
Finally, the committee notes that the standing provisions only allow the specified groups to apply to the court and the FWC for certain orders and it is these independent institutions that will determine the applications. That is, the only bodies with decision-making capacity under the bill are the court or FWC—not the Minister, the regulator or the persons with sufficient interest. The committee is therefore satisfied that the standing rules are reasonable and appropriate.
Grounds
3.128
The committee received considerable evidence in relation to the grounds that enable an application to be made to the court or the FWC for certain orders. Of significant concern was that the grounds do not distinguish between serious contraventions and minor infractions. Also that certain grounds such as obstructive industrial action, goes to the very nature and purpose of unions. Witnesses, many of them unions, argued that given the gravity of these orders the expansion of these grounds should not be permitted.
3.129
However, the evidence indicated that a number of the grounds, such as the ground related to an obstructive industrial action, are based on existing provisions of the Act. Additionally, the department advised that the court would still be able to deal with applications that may be vexatious through its existing powers, and to order costs where it considers it appropriate. Moreover, a designated finding would always be contingent on legal proceedings being successfully brought against the person, usually by the relevant regulator, including, the ROC.
3.130
Responding to concerns that minor infractions could lead to significant orders being made against unions, the ROC stated that it sees 'hundreds upon hundreds of contraventions', which it largely deals with through other means. The ROC also confirmed that since its commencement, it has only instituted three proceedings.
3.131
In the unlikely event where a party attempts to litigate a so called 'low level' offence as a ground for disqualification or cancellation of registration, the bill contains a further safeguard. It would require the court to determine whether the disqualification or cancellation would be unjust. This would enable the court to consider, in all the circumstances, the nature of the matter constituting the ground and any other matters the court considers relevant. In practice, and combined with other safeguards previously noted, this means that applications for disqualification or cancellation of registration must satisfy a number of requirements. The committee reiterates that the ultimate decision rests with the court. In light of these reasons, the committee considers that sufficient safeguards are in place to ensure that registered organisations will not be disproportionately affected by minor infractions.
Schedule 1
3.132
In relation to the automatic disqualification provision, the committee notes that this gives effect to the recommendation 36 of the Royal Commission which identified that officials are able to continue to be an officer in their organisation even if convicted of serious offences such as blackmail, extortion, and threatening to cause serious harm to public officers. The department advised that these types of offences are not covered under the current automatic disqualification provisions. The committee is of the view that it is appropriate and reasonable that officials of registered organisations who commit these types of offences can be held accountable under the Act. The committee notes, moreover, that it would be an expectation of the public, that such individuals be removed from office.
3.133
Concerning court ordered disqualifications, the committee notes that the proposed amendments are not novel but draw upon established regimes including those that currently exist under the Corporations Act.
3.134
The committee also notes that the bill will separately give effect to recommendation 37 of the Royal Commission, which concerns closing the current loophole in the law that allows those disqualified from holding office in a registered organisation to continue to hold office.
3.135
The amendments would require an independent body—the Federal Court—to firstly determine whether a ground for disqualification has been satisfied, and secondly, whether the disqualification would be unjust. Schedule 1 will provide the relevant authorities the necessary powers to appropriately deal with officials of registered organisations who wilfully and repeatedly commit serious offences. The committee takes the view that such officials are not being sufficiently deterred and cannot be appropriately dealt with under the law as it stands.
3.136
For the same reasons as stated above, the committee is satisfied that officials will not be disqualified based on minor offences. Furthermore, the committee reiterates that the requirement for the court to consider whether the disqualification of an official would be unjust provides an additional safeguard to ensure that registered organisations will not be unfairly effected by the disqualification. Having regard to these considerations, the committee is of the view that the proposed amendments are necessary while also providing a reasonable check and balance on the disqualification regime.
Schedule 2
3.137
The committee acknowledges that the cancellation of a registered organisation's registration can have serious consequences and that these powers should, therefore, be used as a last resort. However, the committee has heard persuasive evidence that the current powers and offences under the Act do not provide sufficient deterrent. Submitters have highlighted judicial statements about some unions that have continued to act with a blatant disregard for the law and consider the current monetary penalties imposed upon them by the court as ‘the cost of doing business’.
3.138
Similar to schedule 1 of the bill, the independence of the Federal Court will ensure that cancellation decisions will be fairly litigated, with the court being expressly required to only make an order to cancel an organisation's registration if the court is not satisfied that it would be unjust to do so, taking into account, among other things, the best interests of its members of the organisation as a whole. As a further safeguard, the committee notes that the court will be given additional flexibility to make alternative orders to cancellation that allow for a more surgical approach to misconduct that is contained to certain parts of an organisation, rather than taking action against the organisation more broadly. This will provide the court the tools required to deter serious criminal offences, while also enabling the courts to issue appropriate penalties, proportionate to the offence and targeted to the groups of individuals involved.
Schedule 3
3.139
The committee notes that schedule 3 will make clear when a registered organisation may be declared dysfunctional and puts in place a clear process, through a remedial scheme, to manage such organisations. The committee notes in particular that the amendments in this schedule are modelled and adapted from corporations law, leave any decision about a declaration up to the court and are designed to ensure that governance issues within an organisation, or individual branches or divisions, can be addressed promptly and transparently to ensure that the interests of members are protected. The HSU case is a telling example of the uncertainties and gaps within the current Act. Fortunately, the parties to the HSU case mainly agreed with the facts. Nevertheless, the department advised that there were numerous court applications that resulted in a confusing process. Having considered the evidence, the committee has concluded that it is proper and prudent for these processes to be clearly set out.
Schedule 4
3.140
Evidence was provided that public interest tests have a long-standing precedent in industrial relations law. Additionally, the public interest test applied by the FWC will not be dissimilar to the competition test that is sometimes applied to companies by the ACCC, which determines whether the merger of companies would lessen competition. In the case of registered organisations, the FWC will firstly be required to consider the organisations record of compliance. At the second stage, the FWC will have regard to the impact that the amalgamation will have on employees and employers in the relevant industries.
3.141
The committee is convinced that the FWC is the right organisation to oversee proposed amalgamations and make decisions on matters concerning the public interest. Given the significant benefits and responsibilities afforded to registered organisations, combined with the strong desirability that organisations with a law-breaking culture not spread their practices to other organisations without any examination whatsoever of the public interest of them doing so, the committee is supportive of the introduction of a public interest test for the amalgamation of registered organisations.
3.142
For the reasons outlined above, the committee is of the view that the amendments as proposed by the bill will ultimately restore balance to the industrial relations system and will strengthen compliance with the law.
3.143
The committee recommends that the bill be passed.
Senator the Hon James McGrath
Chair