Senate debates

Monday, 17 August 2015


Fair Work (Registered Organisations) Amendment Bill 2014 [No. 2]; Second Reading

8:02 pm

Photo of James McGrathJames McGrath (Queensland, Liberal National Party) Share this | Hansard source

I am speaking here tonight, to those who are listening, on the Fair Work (Registered Organisations) Amendment Bill 2014 [No. 2]. The measures in this bill are a key election commitment of the coalition and a matter of high public concern in light of the ongoing royal commission into registered organisations and the recent investigations into the Health Services Union.

The coalition first released its policy for better accountability and transparency of registered organisations in April 2012 and received widespread public support—so much widespread public support that we won the election in 2013 with this as one of our key election commitments.

The bill will amend the Fair Work (Registered Organisations) Act 2009 to establish an independent watchdog, the Registered Organisations Commission, to monitor and regulate registered organisations with enhanced investigation and information gathering powers. It will strengthen the requirements for officers' disclosures of material personal interests and related voting and decision-making rights and change grounds for disqualification and ineligibility for office. It will strengthen existing financial accounting, disclosure and transparency obligations under the Registered Organisations Act by putting certain real obligations on the face of the Registered Organisations Act and making them enforceable as civil remedy provisions. And it will increase civil penalties and introduce criminal offences for serious breaches of officers' duties as well as introduce new offences in relation to the conduct of investigations under the act.

The government is committed to improving the Fair Work laws so that we can build a more stable, fair and prosperous future for Australia's workers, businesses and the economy. The absolute need for this legislation almost goes without saying. The rorts, the rackets and the rip-offs have been in the media on an almost daily basis, and the wider community is strongly in favour of these reforms. Until this parliament acts, Australia will not have a sufficiently robust system to ensure that corruption of the sort that was revealed during the numerous scandals can be uncovered and eradicated before it becomes systemic, as it did in the infamous HSU case.

It is simply no longer tenable to argue that the present system is adequate to deal with or discourage this kind of behaviour. Unions and employer organisations play a critical role in the workplace relations system and in the economy more broadly, and their members invest a great deal of trust in them. The community expectation is that these registered organisations will operate to the highest of standards. These organisations are given special legislative rights. With these rights come responsibilities.

The government believes that the majority of registered organisations do the right thing and, in many cases, maintain higher standards than those that are currently required. However, the recent investigations into the Health Services Union illustrate that, unfortunately, financial impropriety can occur under the current governance regime for registered organisations.

The charges and allegations against former Labor Party member of parliament Craig Thomson and former Labor Party National President, Michael Williamson, in their capacity as officers of the Health Services Union are shocking and unacceptable. Mr Thomson was arrested in respect of more than 150 fraud related criminal charges and is facing allegations that his 2007 federal election campaign was partly funded by siphoning union money without authorisation. Mr Williamson has pleaded guilty to misusing almost $1 million of Health Services Union members' funds. Mr Williamson has also been accused of destroying documents and hindering investigations. Members of the Health Services Union are asking how this gross breach of trust could happen. Questions have also arisen with numerous other registered organisations. Members of registered organisations are asking whether this could happen in their own organisation.

The government believes the Fair Work (Registered Organisations) Amendment Bill will provide the certainty and high standards of operation that members of registered organisations are entitled to expect. The bill introduces a suite of legislative measures designed to see governance of registered organisations lifted to a consistently high standard across the board. A more robust compliance regime will deter wrongdoing and promote first-class governance of such organisations.

The recent HSU scandals also revealed that the current processes for investigating wrongdoing and ensuring accountability are clearly inadequate. The Fair Work Australia investigations into the Health Services Union took far too long and the ensuing legal proceedings remain ongoing. A KPMG review into Fair Work Australia's investigations into the Health Services Union identified shortcomings in the conduct of those investigations. Members of the union and the community not only want a strong regulatory regime to give them confidence in their organisations but they also want swift action taken when standards are breached. In order to do this, it is necessary to have a robust and strong regulator in place with appropriate powers and resources, together with meaningful sanctions that can be applied when wrongdoing is revealed.

To improve oversight of these organisations, the bill will establish a dedicated independent watchdog, the Registered Organisations Commission, to monitor and regulate registered organisations and provide enhanced investigation and information gathering powers. The new commission will have the necessary independence and the powers it needs to regulate registered organisations effectively, efficiently and transparently. The commission will be headed by the Registered Organisations Commissioner, who will be appointed by the minister.

The commission will have stronger investigation and information gathering powers than those that currently apply. These will be modelled on those available to the Australian Securities and Investments Commission, which will further enhance the ability of the commissioner to provide strong and efficient regulation of unions and employer associations. The commission will have the power to commence legal proceedings and refer possible criminal offences to the Director of Public Prosecutions or law enforcement agencies.

The bill also ensures that there are appropriate sanctions against efforts to hinder or mislead investigations. This will give all members of registered organisations confidence that should they make a complaint to the commission about a registered organisation, that organisation and its officials must comply with the requirements of the investigation process or face sanctions. Members can also have confidence in the fact that under the new legislation, a person convicted of particular offences will not be eligible to be an officer of an organisation or to stand for election to office. The commission will also educate, assist and advise registered organisations and their members in relation to the new obligations, and ensure members are aware of their rights.

The commission will be established within the office of the Fair Work Ombudsman. While it will be located within the offices of the Fair Work Ombudsman, the commissioner will have independence in the exercise of the relevant functions and powers under the law and the authority to direct staff in relation to the performance of those functions. A special financial account will also be established for the commission to ensure financial independence and the commissioner will have responsibility for day-to-day management of the account. The commission will be required to report to the Minister for Employment annually on its activities and that report will be tabled in parliament. The commissioner will appear at Senate estimates.

The activities of the commission will also be subject to the same oversight by the Commonwealth Ombudsman as Commonwealth agencies. This will ensure the appropriate level of transparency and public accountability. As is common with statutory office holders, the minister is able to give directions of a general nature to the commissioner. These directions must be in writing and are a disallowable instrument. For the avoidance of any doubt, it should be made absolutely clear that the minister will not have any powers to give directions as to a particular matter or investigation.

The bill also provides for information sharing between the Fair Work Commission and the Registered Organisations Commission to the extent that is required for both organisations to do their job effectively and efficiently. This is required as several administrative tasks relating to registered organisations will continue to be the responsibility of the general manager of the Fair Work Commission. Transitional arrangements have been included in the bill to ensure any ongoing matters being dealt with by the Fair Work Commission relating to registered organisations can be dealt with by the Registered Organisations Commission.

As well as establishing a strong, independent regulator, the bill introduces reporting and disclosure requirements and enhanced penalties for wrongdoing. Many registered organisations control assets worth millions of dollars. They are effectively dealing with the cash flow and investments similar to those of large businesses. That is why the bill introduces financial and operational reporting requirements for registered organisations that align with those outlined in the corporations law. This will strengthen existing financial reporting, disclosure and transparency obligations for registered organisations and officers. It is entirely appropriate to expect a high standard of financial reporting from our registered organisations given the trust members place in their unions and employer associations to operate honestly, and to use the funds derived from their membership fees to represent their interests rather than for ulterior purposes. Registered organisations have substantial economic, legal and political influence. It is clearly inconsistent with community expectations for such organisations to operate to lower standards than those that apply to corporations or other comparable bodies.

Registered organisations will need to disclose remuneration paid to the top five officers in the head office and any branches. Officers will be required to disclose their material personal interests to all members. This means disclosing the personal interests of officers and their relatives and declaring any payments made to persons or entities in which an officer has declared an interest. This aims to prevent individuals from improperly benefiting from their role in the organisation—for example, by an officer procuring goods or services from a company they hold some interest in without disclosing that interest and without an appropriate and transparent process being followed.

Registered organisations will be required to provide a summary of this information to members in an officer-and-related-party disclosure statement and lodge it with the commission. While corporations law only requires directors to disclose conflicts of interest to their fellow directors, the government believes that officers of registered organisations should be required to disclose such matters to members, as they are elected by members to represent their interests. Members deserve to know who is in control of their money and where any conflicts may exist.

Mr Thomson and Mr Williamson have shown us that the existing regulation does not sufficiently protect members' interests. Unfortunately, there will always be less scrupulous individuals who will seek to take advantage of their positions when standards of accountability are low and the risk of getting caught is also low. In the face of this kind of behaviour, a strong message needs to be sent to discourage wrongdoing by officers and to rebuild the confidence of members and the community.

Enhanced reporting and disclosure requirements and a strong and efficient regulator will have little impact if the penalties for wrongdoing are not high enough to act as a deterrent. Currently, registered organisations and officers do not face the same consequences as companies and directors for wrongdoing. That is why the government is introducing significantly higher civil penalties and a range of criminal penalties for those registered organisations and officials who do the wrong thing. These penalties are in line with those facing companies and directors who break the law.

In relation to civil penalty breaches, the maximum penalty for serious contraventions will be 1,200 penalty units for an individual and 6,000 penalty units for a body corporate. This will apply to serious contraventions. What will constitute a serious contravention is defined in the bill. Other breaches will be exposed to a maximum civil penalty of 100 penalty units for an individual or 500 for a body corporate. By way of comparison, the current maximum penalties for even the worst misbehaviour are only 60 penalty units for individuals. The Federal Court will also have the power to disqualify an officer from holding office where a civil penalty provision has been contravened and the court is satisfied that disqualification is justified. Criminal penalties are being introduced for serious breaches of officers' duties as well as offences in relation to the conduct of investigations under the Fair Work (Registered Organisations) Act. The maximum penalties in these areas are 2,000 penalty units or five years imprisonment or both.

It is the government's expectation and it is the coalition's expectation that the highest penalties will be rarely handed out, but it is important that the courts have the ability to hand down strong penalties should the crime deserve it. We know that the courts have had an issue with the current framework, with the Federal Court's Justice North making almost unprecedented comments last year, saying, 'The penalties'—under the current act—'are rather beneficially low—beneficial to wrongdoers.'

Broadly, these offences relate to officers and employees of registered organisations who fail to exercise their powers or discharge duties in good faith and for a proper purpose. They also apply where an officer uses their position to gain an advantage for themselves or someone else or uses information gained while an officer or an employee to gain an advantage for themselves or someone else.

Criminal sanctions will also apply where an officer does not comply with the commissioner's new investigation powers. These sanctions align with the penalties that apply to noncompliance with an ASIC investigation and will ensure that officers of registered organisations take their obligations and the directions of the commissioner seriously.

Some registered organisations have indicated concern that the new penalties will mean that they will have difficulty persuading people to take on official responsibilities. The government and the coalition do not agree with that. The only people who have anything to fear are those who do the wrong thing. A rigorous structure and process will be in place for investigation and prosecution of alleged wrongdoing. Officers who are operating within the law, which is the overwhelming majority of them, will have no reason to fear taking on official responsibilities. The overwhelming number of officers, who are already doing the right thing, should be comforted in knowing that unlawful behaviour will be dealt with, thus ensuring ongoing member confidence in the registered organisations as a whole. The coalition government firmly believes there should be no difference between the penalties levied against a company director who misuses shareholder funds and a registered organisation boss who misuses members' money.

There is broad community consensus for the government's amendments, including one actually from one of Australia's most prominent union bosses, a certain Mr Paul Howes, formerly of the Australian Workers' Union, who told the ABC in November 2012:

I actually believe there is a higher responsibility for us as guardians of workers' money to protect that money and to act diligently and honestly. The reality is I do not have any issue with increasing the level of requirements and penalties on trade unions for breaching basic ethics like misappropriation of funds.

The government's intention is to see the Registered Organisations Commission begin operation as soon as possible, from early next year, with new disclosure and reporting obligations, higher civil penalties and new criminal sanctions coming into effect as soon as practical. This timing will align with the reporting obligations on a financial year basis and will provide registered organisations and officers with time to become familiar with the new obligations and the penalties associated with those obligations.

In developing the bill the government consulted with the National Workplace Relations Consultative Council members through the Committee on Industrial Legislation, including employer and employee associations. The government has made a number of key changes to the bill, as well as several minor and technical amendments, in response to the feedback received. The government thanks those committee members for taking the time to review the draft bill.

The only people who have anything to fear from these amendments and this bill are those who have done the wrong thing. Anyone in this place who has a regard for the members of registered organisations and their money will support the bill. Any political party that refuses to support this greater accountability and transparency for registered organisations is voting to give the green light to more of the same behaviour that we have seen from the Labor Party's Mr Williamson and the Labor Party's Mr Thomson. It is simply no longer tenable to argue that the present system—


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