11.16 July 2019 Email from AGD to ROC Attachment 1 9.06am.pdf

Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions]
Submission 35
Senate Education and Employment Legislation Committee
Inquiry into the
Fair Work (Registered Organisations) Amendment (Ensuring
Integrity) Bill 2017
Submission of the
Department of Employment
September 2017
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Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions]
Submission 35
Introduction
1. The Department of Employment welcomes the opportunity to make a written submission to the
Senate Education and Employment Legislation Committee (the Committee) inquiry into the Fair
Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 (the Bill).
2. During the 2016 election campaign the Australian Government committed to implement
recommendations 36, 37 and 38 made by the Royal Commission into Trade Union Governance
and Corruption (Royal Commission) and other complementary election commitments relating to
the amalgamation, cancellation and administration of registered organisations.
3. The Bill gives the Federal Court and Fair Work Commission appropriate powers to:
 Disqualify officials of registered organisations who break certain laws, fail to take reasonable
steps to prevent the organisation from repeatedly breaking those laws or are otherwise not
fit and proper persons to hold office in a registered organisation (with automatic
disqualification for serious criminal offences),
 Cancel the registration of an organisation, or remove rights or privileges of part of the
organisation, where officials have acted corruptly, failed to comply with court orders or
injunctions, or have a record of law-breaking (including by its members),
 Place an organisation into administration where its officers have misappropriated funds,
repeatedly broken the law, breached their duties or the organisation has otherwise ceased
to function effectively, and
 Consider the public interest when determining whether to approve an amalgamation of
organisations, having regard to an organisation’s history of compliance with the law and the
effect of the merger on the economy, employees and employers.
4. This submission outlines the key measures in the Bill and the Bill’s compatibility with Australia’s
human rights obligations.
Disqualification from office
5. Currently, people can be automatically disqualified from holding office if they are convicted of
offences involving fraud, dishonesty, violence or property damage or offences relating to the
administration of registered organisations. But people convicted of other serious offences such
as blackmail, extortion, threatening to cause serious harm to public officials, handling stolen
goods or intentionally destroying documents relevant to an investigation can still hold office in
registered organisations.
6. Commissioner Heydon recommended that a general category of serious offences should be
added to the list of offences leading to automatic disqualification. The Bill implements this
recommendation by ensuring that any offence that is serious enough to carry a penalty of 5
years’ imprisonment or more should lead to automatic disqualification.
7. The Bill implements Commissioner Heydon’s recommendation to include new grounds for
disqualification relevant to a person’s ability to properly perform their duties as an officer of a
registered organisation.
8. The Federal Court will be able to make an order disqualifying a person from acting as an officer
of a registered organisation for a period of time it determines if the person:
 contravened a provision of or committed an offence against certain industrial laws (including
the Fair Work (Registered Organisations Act) 2009 (Registered Organisations Act), the Fair
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Work Act 2009 (Fair Work Act), work health and safety laws, the Building Industry legislation
or the restrictive trade practices part of the Competition and Consumer Act 2010)
 committed an offence of harming, impersonating or obstructing a public official
 committed any other offence in the course of performing their functions as an official of the
organisation
 acted in contempt of court (in relation to an industrial law or in the course of performing
their functions as an official)
 repeatedly failed to take reasonable steps to stop their organisation from breaking an
industrial law or being in contempt of court
 is disqualified from managing a corporation or has otherwise contravened parts of the
Corporations Act 2009 (Corporations Act)
 is otherwise not a fit and proper person to hold office.
9. If the Court finds that a person has met one of these criteria it may disqualify them, provided
that it would not be unjust to do so.
Disqualification from office – offence of acting as an officer after
disqualification
10. It is a deficiency of the existing law that there is no consequence for a person who continues to
act as an officer once they have been disqualified. That is why Commissioner Heydon
recommended there be a specific criminal offence for continuing to hold office while
disqualified.
11. The Royal Commission noted several cases where disqualified officers remained heavily involved
in an organisation behind the scenes, acting as ‘shadow officers’, despite no longer officially
holding the position of ‘officer’ within the organisation. For example, despite resigning as
National President of the Health Services Union following fraud allegations, Michael Williamson
continued to exert significant influence and control over the union through its acting General
Manager (Final Report, Volume 2, Chapter 5.2).
12. The Corporations Act makes it a criminal offence for a person to continue to manage a
corporation once that person has been disqualified. The Bill takes a similar approach to officers
of registered organisations.
13. The Bill makes it an offence for a person to act as an officer or act as a ‘shadow officer’ if they
have been automatically disqualified from office or have been disqualified from holding office by
the Federal Court.
14. A person acts as a ‘shadow officer’ by exercising the capacity to significantly affect the financial
standing or other affairs of an organisation or branch, or by giving instructions to an
organisation’s or branch’s committee of management while knowing that the committee of
management usually acts in accordance with their wishes or intending that the committee of
management will do so. Advice provided in a person’s capacity as a professional such as a lawyer
or accountant will be excluded.
15. The penalties for acting as an officer or ‘shadow officer’ once disqualified are based on
recommendations by Commissioner Heydon. Anyone found to have stood as a candidate for
election to office, to have been an officer, or to have acted as a ‘shadow officer’, while
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disqualified, will face a maximum penalty of $21,000 (100 penalty units), 2 years’ imprisonment,
or both.
Cancellation of registration and alternative orders
16. This Bill introduces new and streamlined grounds for cancellation of registration by the Federal
Court. The expanded grounds include a range of behaviours that are inconsistent with the rights
and privileges of registration, including corrupt conduct by a number of an organisation’s
officers, multiple breaches of a wider range of relevant laws by the organisation or by a
substantial number of its members, and serious breaches of criminal law by the organisation.
17. The Bill also simplifies some of the existing grounds for cancellation, including failing to comply
with a court order or injunction by the organisation or a substantial number of its members and
the organisation or a substantial number of members taking obstructive, unprotected industrial
action.
18. The Federal Court will only be able to cancel the registration of an organisation where satisfied
that it would not be unjust to do so. In deciding whether it would be unjust to cancel an
organisation’s registration, the Court will need to consider the best interests of the
organisation’s members, the nature of the conduct that constitutes a cancellation ground,
whether other action has been taken to address the conduct and any other relevant matters.
The Court will also be provided with the power to make alternative orders, such as an order
disqualifying certain people from holding office, if it considers cancellation is not an appropriate
solution.
19. Where the conduct forming a ground for cancelling the registration of an organisation is
contained to one part of an organisation, the Court will be able to make alternative orders
specific to that particular part.
20. The parties with standing to apply for the cancellation of the registration of an organisation or
an alternative order under the new provisions are the relevant Minister, the Registered
Organisations Commissioner and a person with sufficient interest. These are substantially the
same parties with standing under the existing provisions, with the addition of the Registered
Organisations Commissioner as the relevant regulator.
Administration
21. The current framework for placing an organisation into administration, section 323 of the
Registered Organisations Act, is difficult to administer, as 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.
22. The Bill introduces three key measures to address the current limitations. Firstly, the Bill makes
clear that the circumstances in which an organisation can be placed into administration include
where officers have repeatedly broken the law, breached their duties or misappropriated funds.
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23. Secondly, the Federal Court’s power to approve a scheme consequent to the making of a
declaration will be amended to expressly permit the appointment of an administrator, and the
functions of an administrator will be clearly set out.
24. Finally, standing to apply for a declaration that an organisation has ceased to function effectively
will also be extended to the Registered Organisations Commissioner and the Minister. Both
parties may be able to bring a case under the existing provisions, by showing they are parties
with a sufficient interest. However, it can be a difficult and lengthy process to argue standing
even where there is a clear public interest in the regulator or Minister bringing a matter before
the Court. Ensuring that the Minister and Registered Organisations Commissioner have standing
provides clarity and avoids any doubt.
Public interest test for amalgamations
25. The existing framework for approving an amalgamation of registered organisations is narrow,
simply requiring a vote of only a small portion of the members of each registered organisation
endorsing the matter. In some instances, there will not even be a vote of the members of an
organisation that is being joined.
26. Currently there is no capacity for the Fair Work Commission to consider the impact of the
amalgamation of organisations where one may have a history of non-compliance with the law.
For example, when an organisation with a poor compliance record amalgamates with another
organisation, it expands the potential to influence behaviour in the other organisation. The
current framework does not ensure the approval process considers all those affected by the
outcome of a potential amalgamation. There is also very limited scope for any person with a
sufficient interest to raise concerns about a proposed amalgamation.
27. Companies have to satisfy a competition test applied by the regulator, the Australian
Competition and Consumer Commission, when they merge. The Bill would ensure that
registered organisations likewise have to satisfy a public interest test applied by the Fair Work
Commission before they amalgamate.
28. This Bill introduces a new public interest test to be applied by the Fair Work Commission when
registered organisations seek to merge. It will mean that a merger cannot be approved where it
would not be in the public interest.
29. The Commission must have regard to public interest matters, including the impact on employees
and employers in the relevant industries and the history of compliance with the law of the
relevant organisation, and may have regard to other relevant matters which could include the
impact of a merger on the Australian economy.
30. The Bill makes it clear that the existing organisations, other affected organisations and bodies,
the Registered Organisations Commissioner, relevant Ministers and any other person with
sufficient interest have standing to make a submission about the public interest. Currently
submissions on amalgamations may be made by any other person with the leave of the Fair
Work Commission. Leave will generally be granted where the Commission is satisfied that the
person has a sufficient interest.
31. Codifying standing in this way is not novel and reflects similar provisions in the Fair Work laws
under which the public interest or other broader interests and considerations are considered.
Such provisions typically provide standing to affected third parties. For example, under Part 2 of
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Chapter 4 of the Registered Organisations Act ‘an organisation, an employer or the Minister’
may make an application to the Fair Work Commission in relation to a demarcation dispute. Any
person or organisation interested in a proposed amalgamation may make an objection to a
proposed amalgamation where an extension of eligibility rules is proposed. In section 424(2) of
the Fair Work Act an application for an order suspending or terminating protected industrial
action where the action threatens to endanger life or cause significant economic damage may be
made by a bargaining representative for the agreement, the Minister or a relevant Minister of a
State or Territory. In section 426(6) of the Fair Work Act an application for an order suspending
industrial action may be made by a third party that is not a party to the industrial dispute but is
adversely affected by the industrial action.
32.  Under section 590 of the Fair Work Act the Fair Work Commission may inform itself in an
appropriate manner, including by taking submissions. Where parties can demonstrate a
sufficient interest in the matter the Fair Work Commission would generally be expected to
accept submissions from that party in relation to the matter.  The provisions in the Bill seek to
clarify who may make submissions as of right.
33. Various standing provisions under the existing Registered Organisations Act include standing for
parties which the Bill gives standing under the public interest test. For example, standing is
granted to any interested person, any organisation and the Minister in the current cancellation
of registration provisions (section 28), to a person interested in the existing amalgamation
provision (section 53), and to any organisation member, organisation or person with a sufficient
interest in the current administration provision (section 323).
34. In deciding whether the amalgamation is in the public interest, the Fair Work Commission must
have regard to the existing organisations’ records of compliance with the law, taking into
account the incidence and age of any instances of non-compliance. The Fair Work Commission
will consider if the organisation or its officers have broken the law or been in contempt of court,
if the organisation or part of it has engaged in ‘obstructive industrial action’, and if officers have
been disqualified from holding office. Submissions about the public interest may include matters
relevant to an organisation’s record of non-compliance.
35. The Fair Work Commission must also have regard to the impact the amalgamation is likely to
have on employees and employers in the industries concerned. The Commission may also have
regard to other relevant matters which could include the impact of a merger on the Australian
economy. If a merger is found not to be in the public interest it will not take effect and, if before
submission to ballot, a ballot will not be approved by the Commission.
Human rights
36. The Bill is consistent with Australia’s human rights obligations, including the specific obligations
in the International Labour Organization Freedom of Association and Protection of the Right to
Organise Convention 1948 (No. 87).
37. The provisions of the Bill engage the same human rights as existing provisions of the Fair Work
laws. Where the provisions engage the right to freedom of association, they pursue a legitimate
objective, are prescribed by law and are reasonable, necessary and proportionate.
38. The provisions have the objective of protecting the interests of members and guaranteeing the
democratic functioning of organisations and do so by ensuring the leadership of registered
organisations acts lawfully and with integrity.
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Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 [provisions]
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39. The Bill is reasonable and proportionate in that the provisions are supervised by the Federal
Court or the Full Bench of the Fair Work Commission and appropriate limitations on discretion
are put in place. Disqualification must not be unjust in all the circumstances.
Conclusion
40. The Department appreciates the opportunity to provide a submission to this inquiry and is
available to discuss the submission at a hearing of the Committee.
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