The Government’s Bill to amend the Registered Organisations Act passed the House of Representatives on its last sitting day for 2013.

The Bill seeks to create a new Registered Organisations Commission to monitor and regulate registered organisations and to provide it with enhanced investigation and information gathering powers and to:

• amend disclosure requirements for officers of registered organisations, including regarding salaries paid to office holders
• increase financial accounting, disclosure and transparency obligation
• increase civil penalties and introduce criminal offences for serious breaches of officers’ duties.

The Bill and the powers in it are based on those available to ASIC, the corporate watchdog, and is intended to apply a regime similar to that under corporations legislation and to publicly listed companies. This approach will apply to organisations of both workers and of employers.

In introducing the Bill, the Government has justified it by reference to the activities of certain officials of the Health Services Union and the new legislation is clearly directed towards unions, rather than organisations of employers, although it will apply equally to both. A number of employer organisations are concerned about its implications for their officer holders and have made submissions opposing some of its terms.

The Bill went before a Senate Committee of Inquiry which produced a Report on 2nd December 2013. The Report of the majority recommends that the Bill be passed, with some amendments. The Bill as passed by the lower house does not yet include these proposed amendments.

The AIER’s Australian Charter of Employment Rights (“the Charter”) provides for freedom of association, declaring at Charter clause 6 that:

Workers have the right to form and join a trade union for the protection of their occupational, social and economic interests.
Workers have the right to require their union to perform and observe its rules, and to have the activities of their union conducted free from employer and governmental interference…

Freedom of association is a core labor standard, recognised by the International Labour Organisation, embodied in a Convention which has been ratified by Australia.

Freedom of association does not imply that unions and employer associations are free to do as they please. It is intended to ensure that these organisations reflect and are responsive to the objects for which they were formed and the desires of their members without external interference.

Specific industrial legislation already governs the ability of unions in particular to exercise their freedom of association and the related right to collectively bargain. The Fair Work Act provides how unions can bargain and when they can take industrial action without the threat of punitive legal action at common law.

Since 1904, successive Acts of the Australian Parliament have required federal unions to be registered, have rules which comply with the Act and to elect officer bearers. These rules have been progressively extended over the past century.

They are currently set down by the Fair Work (Registered Organisations) Act which contains more than 350 substantive clauses, supported by Regulations and Compliance Guidelines. Compliance is currently overseen by public officials employed by the Fair Work Commission, an independent government agency with the power to investigate the activities of registered organisations and their officials and to ensure that those officials perform their duties in accordance with the organisation’s rules, which must conform with the Act.

Is it necessary to apply the provisions of the Corporations Act to registered organisations?

The AIER fully supports the right of members of unions and employer associations to see that their union or association observes its rules and carries out its functions in the best interest of members. However, it is not readily apparent to AIER why legislation and regulation applying to corporations and publicly listed companies are appropriate to organisations of employers and employees.

Employers and employees form their organisations on a voluntary basis. These organisations are not formed for the purpose of investment or profit. Eligibility for membership is limited around the purpose of the organisation. Courts have been loath to interfere in the workings of voluntary associations (the leading case in Australia is Cameron v Hogan (1934) 51 CLR 358). A fundamental reason for this approach is that organisations such as employer and employee associations involve a compact voluntarily entered into between members and on the basis that the members do not acquire any proprietary right in the organisation. The arrangement is entered into in pursuit of a common interest, in this case, industrial representation. This does not involve private gain or material advantage. The distinction with shareholders of companies is clear.

The premise of the Bill is flawed in applying to voluntary associations the same form of regulation that applies to companies conducted for profit and in which shareholders invest funds. An inherent consequence of this flaw is that the Bill if enacted would operate contrary to the right to freely associate. The right of employers and employees to freely associate with each other around common objectives is fundamental. The Charter adopts the approach of the ILO which has expressed grave concern about overly detailed, excessive and restrictive regulation of organisations.

The first point of focus of legislation should be to facilitate the ability of members to exercise democratic control of the organisation. The Charter supports the independence and autonomy of voluntary associations formed to pursue industrial purposes and the ability of members to exercise democratic control over an organisation.

The Financial reporting and accountability requirements of the Act have been regularly increased over the past 100 years, and particularly in the late 1970s and early 1980s, often in response to inquiries into the activities of a small number of unions.[1]

The Act was significantly changed in 2002 by the then Coalition Government. The Minister at the time was Minister for Workplace Relations Tony Abbott who produced a revised legislative package about which he said:

“This bill provides a stronger focus on disclosure to members in ways consistent with modern accounting and auditing practices and enhances transparency and accountability in a manner broadly consistent with the Corporations Law.

“The bill establishes statutory fiduciary duties for officers and employees of organisations modelled on duties applicable to company directors under the Corporations Law. These provisions will provide members of organisations with increased protection against financial mismanagement. This protection is appropriate, given that officials of registered organisations are entrusted with substantial funds on behalf of their members.

“The bill makes significant changes to the enforcement arrangements for financial accounting, auditing and reporting obligations. Under the Workplace Relations Act, breach of most financial requirements is a criminal offence. This bill would replace many of these offences with civil penalty provisions and allow the Industrial Registrar to apply to the Federal Court for penalties.” [2]

Writing about that legislative regime which has not since been much changed, Crichton and Stewart observed;

“Australian legislatures seem to have found it very difficult to strike a fair balance between these competing interests ( public interest in accountability and democratic right of members to decide upon their own form of governance). Most have insisted upon a degree of regulation of the internal affairs of trade unions which, on any reasonable assessment, is far in excess of what is required in order to protect the legitimate public interest in the constitution and governance of such organisations, and indeed in excess of that to which unions are subject in any of the other liberal democracies”. [3]

The Gillard Government also increased the penalties applicable for misconduct by officials of registered organisations via the Fair Work (Registered Organisations) Amendment Act 2012 which provided

• increased financial and accountability obligations of registered organisations and their office holders;
• strengthened the investigative powers of Fair Work Australia (FWA); and
• enhanced remedies under the Registered Organisations Act.
The current reporting obligations of registered organisations are significant, as spelled out by the Fair Work Commission’s Fact Sheet summarizing the legislation. Whistleblower protection is also part of the regulatory regime.

There is a role for reporting requirements including of financial information. These have been in place in Australia for many years and recently enhanced. Members have entitlement to access financial information from the organisation’s records.

Apart from the ability of members to vote in elections, the legislation has always provided for members to take action to have the organisation and its officials performance and observe the rules. The problem in recent times has been the ability of members to access funds by way of legal assistance under the legislation in order to take that type of action. This should be a policy priority. Resourcing members upholds the principle of democratic control of organisations.

Any policy proposal is to be tested by whether it is reasonable to ensure the democratic control and functioning of organisations and protection of the interests of members (see Charter Right 6 – Union Membership and Representation). Overly zealous and ill-conceived regulation will threaten the autonomous operation of these voluntary organisations and has the capacity to undermine freedom of association of both employers and employees. For instance, any requirements to disclose personal information, including of spouses or partners, would be extremely concerning to the Institute. These measures invade privacy and threaten the capacity of workers and employers to freely associate.

The ACTU commissioned an Independent Panel to Report on Best Practice for Union Governance, which made a significant number of recommendations for improvements in union governance including a code of conduct.

The HSU – generalizing from the particular

The Coalition Government has based the need for the current Bill solely on the activities of certain officials of the Health Services Union. The history of conservative governments has often been to seek to impose additional regulatory and compliance burdens on unions in response to the activities of a few [see Endnote 1].

HSU officials have been investigated by the Fair Work Commission, although this investigation took too long. However, as a result of those investigations, HSU officials have been charged by police and in one case at least, guilty pleas have been entered and convictions recorded. Other charges are yet to be heard and determined. The Fair Work Commission is taking its own civil action against the Union and officials, using its own powers and where necessary referring matters to independent prosecutors.

This is appropriate, but one example of inappropriate behavior does not require the introduction of a regime that would transgress international labour standards and impose inappropriate restrictions.

AIER is of the view that current regulatory provisions governing registered organisations already tend towards the highly prescriptive. We accept that members of registered organisations deserve the best governance of their organisations and officials within these organistions have an obligation to behave solely in their members’ best interests. It would appear that the measures such as that now proposed by the Coalition Government are in fact intended attack the union movement which would be an improper purpose. The Bill as it stands and as should be rejected by the Parliament.

End Notes:

[1] In particular, the Royal Commission into Alleged payments to Maritime Unions [Sweeney Royal Commission] which led to amendments to the Act in 1977 and 1980 and the Royal Commission into the BLF [Winneke Royal Commission].
[2] Hansard, House of Representatives Thursday 21 March 2002 page 1835.
[3] Labour Law, Breen Crichton and Andrew Stewart, Federation Press 2005 at 17.04.