Wednesday, 11 September 2019
Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2019; Second Reading
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
The speech read as follows—
The Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill is designed to protect the over $2 billion dollars held for redundancy pay, sick leave and other benefits for workers in some industries. The Bill is aimed at ensuring this money is managed responsibly, transparently and in the interests of workers.
Despite their size, these funds are currently not required to comply with the basic rules of governance that usually apply to such schemes. The Cole Royal Commission in 2003 said the 'repercussions would be enormous should any of these funds diminish or collapse for reasons of mismanagement, misappropriation or abuse.' This concern was repeated by Commissioner Heydon in 2015.
Most of these funds are joint ventures of unions and employer groups, and two royal commissions have warned about clear conflicts of interest. The Heydon Royal Commission and, the Cole Royal Commission before that, found that these funds have funnelled millions of dollars back to the unions and employer groups represented on their boards.
These include payments for services, administration and directors fees, and commissions, however there are also numerous examples of funds simply being transferred to the unions and employer associations represented on these funds' boards. As recently as 2017, one fund transferred over $30 million to its sponsoring union and employer association.
Commissioner Heydon recommended that the funds be properly regulated and required to meet basic governance, financial reporting and disclosure standards. In fact, he said there was a 'compelling case' for reform.
With the passing of this Bill, workers' money held by these funds will need to be responsibly invested and transparently managed by properly trained people. The funds will need to have at least one independent voting director on their boards. They will have to be run by people of good fame and character. They will have to be managed at arm's length. They will be required to treat union members the same as non-members. And they will be required to be open with workers, employers and the regulator about how they spend fund money.
These are basic standards that should apply to people who manage other people's money.
The Registered Organisations Commission will register and monitor the funds and ensure they comply with the law and manage workers' money responsibly.
The funds will still be able to spend money on training and welfare services for workers, such as crisis counselling or health checks. But these payments and donations must be properly approved and disclosed and meet other basic conditions designed to avoid conflicts of interest. These protections are perfectly reasonable, given the funds are spending workers' money.
If workers do not like how a fund manages their money, they will now be able to choose another fund. Organisations will not be able to lock a worker into a fund that benefits the organisation and misspends the worker's money.
In response to concerns from the funds, the Government has amended the Bill to delay the commencement of the provisions that affect them, to give them sufficient time to adjust to the new scheme.
In addition to regulating worker entitlement funds, this Bill makes a number of other crucial changes to the regulation of registered organisations that were recommended by the Heydon Royal Commission. In total, the bill implements 10 recommendations of the Royal Commission aimed at stopping corruption, coercion and financial mismanagement in registered trade unions and employer groups.
Schedule 1 of the Bill introduces a civil penalty for organisations that do not have policies about financial expenditure, and provides that the Registered Organisations Commission can issue model policies that organisations can choose to adopt. To ensure keeping these policies is not a burden, particularly on small organisations with limited resources, the Government has amended the Bill so that organisations will not need to lodge these policies with the regulator.
Schedule 3 of the Bill concerns the 'election funds' that are set up to fund the campaigns of people running for office in a union or employer group. The Bill provides that enterprise agreements and employment contracts cannot include terms that require people to contribute to these funds. These contributions should be truly voluntary, not a condition of working for a union or employer group.
Schedule 4 of the Bill prohibits people coercing employers to contribute to particular superannuation funds, welfare funds and other worker benefit funds. The Royal Commission heard cases of union officials placing extraordinary pressure on employers to use particular funds, basically because the union stood to gain from the arrangement. There is no place for this sort of bullying and coercion in the workplace.
Finally, Schedule 5 of the Bill requires unions and employer groups to disclose any financial benefit they will receive from promoting or arranging an insurance product, welfare fund or other such arrangement. The Royal Commission found that some unions receive very substantial commissions for promoting particular insurance products, and that these commissions were not disclosed properly, if at all, to employers and workers. Requiring organisations to disclose these benefits will help bring to light any conflicts of interest that might arise.
In short, this Bill is about transparency, good governance, and the proper use of worker benefits. It is about exposing conflicts of interest and ensuring that employee benefits are protected and that workers get a good deal from the arrangements other people negotiate for them.