Australia: Major changes to Federal law regulating registered organisations, including new Registered Organisations Commission

On 24 November 2016 the Fair Work (Registered Organisations) Amendment Act 2016 (Cth) (the Amending Act) was given assent. The Amending Act substantially amends the Fair Work (Registered Organisations) Act 2009 (Cth) (FWRO Act) and makes consequential amendments to the Fair Work Act 2009 (Cth). The Amending Act will come into effect by 24 November 2017 at the latest, but we believe it is likely to take effect by proclamation in the earlier rather than the later part of 2017.

The Amending Act, which has been in the legislative pipeline for almost three years, will have a significant impact on both trade unions and employer associations registered under Federal law (hereafter "organisations").

Important aspects of the Amending Act include the following significant features, without being exhaustive.

The establishment of the Registered Organisations Commission (Commission) and the position of the Registered Organisations Commissioner (Commissioner)

  1. The Commission and the Commissioner will assume many of the functions currently performed by the Fair Work Commission (FWC) and the General Manager of the FWC (GM).
  2. The key stated functions of the Commission and Commissioner include:
    1. promoting:
      1. the efficient management of organisations;
      2. the high standards of accountability of organisations and their office holders to their members;
      3. compliance with financial reporting and accountability requirements;
      4. providing education, assistance and advice to organisations and their members; and
    1. monitoring acts and practices to ensure compliance with the FWRO Act in connection with the democratic functioning and control of organisations.

Mandatory organisation rules

  1. The rules of an organisation / branch must provide for the keeping of minute books in which the proceedings and resolutions of meetings of committees of management of the organisation and its branches are recorded. All organisations and their branches will have to alter their rules to comply with this new requirement.

Organisation / branch reporting requirements

  1. An organisation / branch end of financial year general purpose report must include a report showing the total expenditure incurred by reporting units during the financial year in connection with each of the following items of expenditure:
    1. remuneration, and other employment-related costs and expenses, in respect of employees;
    2. advertising;
    3. operating costs;
    4. donations to political parties; and
    5. legal costs.

Auditors of organisations / branches

  1. Auditor arrangements with an organisation / branch will change including:
    1. auditors must be registered with the Commissioner; and
    2. auditors must regularly rotate (an auditor cannot audit the same organisation / branch for more than 5 consecutive years or for more than 5 years in any 7 consecutive years).

New criminal offences in relation to duties of officers of organisations / branches

  1. It is an offence for officers to recklessly, or intentionally dishonestly, fail to perform their duties in good faith in the best interests of the organisation / branch or for a proper purpose.
  2. It is an offence for officers or employees of an organisation / branch to dishonestly use their position with the intention of, or recklessly, gaining an advantage for themselves or causing detriment for the organisation / branch.
  3. It is an offence for past or present officers or employees who obtain information because of that position, to use that information with the intention of, or recklessly, gaining an advantage for themselves or someone else or causing detriment for the organisation / branch.
  4. Officers can include the position of president, vice president, secretary or assistant secretary, voting members of a collective body of the organisation / branch, and persons that hold property on behalf of the organisation / branch.
  5. Penalties for breach of these new provisions are potentially very severe: up to $346,000 in monetary penalty or up to 5 years imprisonment, or both.

Statutory Disclosure requirements for officers and organisations / branches

Officers to disclose remuneration paid to them

  1. Officers must disclose to the organisation / branch any remuneration paid to the officer:
    1. (a) because they are a member of a board that they are a member of because:
      1. they are an officer of the organisation / branch; or
      2. they were nominated for the position on the board by the organisation / branch / peak council; and
    1. by a related party of the organisation / branch in connection with the performance of the officer's duties as an officer.

Organisation / branch to disclose remuneration of five highest paid officers

  1. An organisation / branch must disclose to its members and branches in respect of a financial year:
    1. the identity of the five officers who received the most remuneration in that financial year; and
    2. for each of those five officers:
      1. the actual amount of the officer's relevant remuneration for the financial year; and
      2. the value and form of the officer's relevant non-cash benefits for the financial year.

Officers to disclose material personal interests

  1. Officers who have duties relating to the financial management of the organisation / branch must disclose to the committee of management of the organisation / branch any material personal interest that the officer has or acquires in a matter that relates to the affairs of the organisation / branch.
  2. If a disclosure is made, the organisation / branch must record the disclosure if it was made at a meeting, or otherwise record the disclosure at the first meeting after the disclosure is made.
  3. The organisation / branch must provide details of the disclosure made to the committee of management within 28 days of request in writing from a member of the organisation / branch.

Officers with material personal interests not to participate in decision making

  1. An officer of an organisation / branch who has a material personal interest in a matter that relates to the affairs of the organisation / branch must not:
    1. be present during any deliberation by the organisation / branch on the matter; or
    2. take part in any decision of the organisation / branch with respect to the matter,
    3. unless:

    4. the interest does not need to be disclosed under the FWRO Act; or
    5. members of the committee of management of the organisation or branch who do not have a material personal interest in the matter have passed a resolution that:
      1. identifies the officer, the nature and extent of the officer's interest in the matter and its relation to the affairs of the organisation / branch; and
      2. states that those members are satisfied that the interest should not disqualify the officer from being present and taking part in a decision with respect to the matter.

Disclosure of payments made by an organisation / branch to a related party or a declared person or body

  1. An organisation / branch must disclose to its members and branches details of each payment made by the organisation / branch during the financial year:
    1. to a related party of the organisation / branch; or
    2. to a declared person or body of the organisation / branch.
  1. A declared person or body means a person or body in which:
    1. an officer of the organisation / branch has disclosed a material personal interest in the person of body; and
    2. the officer has not notified the organisation / branch that the officer no longer has the interest.
  1. If an organisation / branch considers the disclosure obligations are too onerous because there are special circumstances in relation to the organisation / branch, and there is evidence of the high standards of financial accountability and controls of the organisation / branch, it can propose an alternative disclosure arrangement which is appropriate for the organisation / branch that provides appropriate transparency having regard to its special circumstances. The Commissioner may accept the alternative disclosure arrangement.

Officer and related party disclosure statements

  1. An organisation / branch must cause an officer and related party disclosure statement to be prepared within 6 months of the end of the financial year, and provide it to its members and branches and lodge it with the Commissioner.
  2. The statement must include details of the disclosures referred to above in relation to:
    1. the top 5 remunerated officers of the organisation / branch;
    2. payments by organisation / branch to related entities and declared persons or bodies;
    3. any disclosure made under an alternative disclosure arrangement.

Training of officers of organisations / branches

  1. Each officer of an organisation / branch who has duties in relation to the financial management of the organisation / branch must undertake training:
    1. approved by the Commissioner; and
    2. that covers each of the officer's financial duties.
  1. The organisation / branch must ensure the officer completes the training within 6 months of commencing office.
  2. Officers are exempt from the training if the Commissioner is satisfied that the officer has a proper understanding of the officer's financial duties within the organisation / branch.

Penalties, offences and disqualification from office

  1. Many of the maximum penalties for contraventions of the FWRO Act have been significantly increased (in some instances up to a maximum of $360,000 and/or jail). But in addition, substantial penalties have been introduced for contravention of obligations that previously did not specifically carry penalties. For example, disclosure obligations in organisation rules in relation to remuneration of officers (including Board fees), material personal interests and third party transactions that were required to be inserted into every organisation's rules by the 2012 Amendments to the FWRO Act are now (along with other new obligations) made specific statutory obligations, breach of which carry monetary penalties that can be as high as $216,000 for a "serious contravention".

Disqualification orders

  1. In addition to the FWRO Act's existing provisions for the disqualification of officers who have committed "prescribed offences", the Federal Court may now make an order disqualifying a person from holding office in an organisation for a period that the Court considers appropriate if:
    1. the person has contravened a civil penalty provision of the FWRO Act; and
    2. Court is satisfied that the disqualification is justified having regard to:
      1. the person's conduct in relation to the management, business and property of any organisation; and
      2. any other matter the Court considers appropriate.
  1. This provision gives the Court an extraordinarily broad power to order the disqualification of an officer who has merely contravened one of the very many "civil penalty" provisions of the FWRO Act – by comparison, currently the FWRO Act simply provides that an officer is disqualified from office if he or she commits a "prescribed offence" (which are all serious offences), and all the Court could do is decide whether it would exempt a particular officer from the effects of the disqualification in his or her case if good grounds to do so are made out.

Investigations

  1. The Commissioner, unlike the GM, is not limited to investigating officers, employees, former officers, former employees, or auditors of an organisation / branch. The Commissioner can now investigate any person provided the Commissioner believes on reasonable grounds that the person has information or a document relevant to an investigation or is capable of giving evidence the Commissioner has reason to believe is relevant to an investigation.
  2. Further offences have been introduced for non-compliance with an investigation, such as a person refusing to take an oath or affirmation.

Powers in relation to documents

  1. The Commissioner may apply for warrants to search premises for documents if the Commissioner has reasonable grounds to suspect that there are, or may be within the next 3 day period, on particular premises in Australia, documents whose production could be required for the purpose of an investigation.
  2. Further offences have been introduced in relation to documents relevant to an investigation, such as a person concealing documents.
  3. The expanded powers of the Commissioner in relation to the search for relevant documents, coupled with substantial penalties being available for non-compliance or obstruction of an investigation, will significantly enhance the investigative armoury in this area, compared to the previous regime under the GM.

Greater whistleblower protection

  1. a person who has or had a contract for the supply of services or goods to, or any other transaction with, an organisation / branch;
  2. a person who has or had a contract for the supply of services or goods to, or any other transaction with, an officer or employee of an organisation / branch who is or was acting on behalf of the organisation / branch;
  3. an officer, former officer, employee or former employee of a person referred to above.
  1. Whistleblowers will no longer be limited to making disclosures in relation to the FWRO Act and will be able to disclose information in relation to the contravention of the Competition and Consumer Act 2010 (Cth) or any law of the Commonwealth.
  2. Whistleblowers will obtain greater protection from reprisals from any person who may be affected by a disclosure made by the whistleblower. Significant civil and criminal penalties can be imposed by a court on any person found guilty of taking a reprisal against a whistleblower (eg imprisonment for up to 2 years, or a fine of up to $21,600), and whistleblowers (referred to in the legislation as "targets") can obtain monetary compensation, an injunction and/or in the most serious cases, exemplary damages against the person found to be at fault.

More detail to come

  1. There is a significant amount of detail to be still worked out before proclamation, including the selection of the Commissioner, the regulations to complement the amended FWRO Act, administrative arrangements and the transitional provisions.
  2. The Minister is given the power to make rules about the transitional arrangements by legislative instrument.
  3. Bearing in mind that the intent of the Government is to get the new regime under the Commissioner up and running in the earlier part of 2017, both trade unions and employer associations will need to get across the detail of the Amending Act soon, so that they can ensure they are compliant once the FWRO Act is amended.
  4. We will provide further updates over coming weeks and months.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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