Australia: Government responds to Trade Unions Royal Commission with the Corrupting Benefits Bill 2017

On 22 March, the Coalition Government introduced the Fair Work Amendment (Corrupting Benefits) Bill 2017 (Corrupting Benefits Bill or Bill) into Parliament, which seeks to implement a number of key recommendations from the 2015 Royal Commission into Trade Union Governance and Corruption (Trade Unions Royal Commission or TURC) – particularly to outlaw 'sweetheart deals' between unions and employers.

In this article, we examine the main features of the Corrupting Benefits Bill, including the significant new obligations it would impose on employers in respect of their relationships with unions and in the negotiation of enterprise agreements under the Fair Work Act 2009 (Cth) (FW Act).

WHAT WERE THE TURC RECOMMENDATIONS?

The TURC Final Report (December 2015) identified widespread corruption on the part of Australian union officials, and financial arrangements entered into between unions and employers which were (in many instances) detrimental to union members' interests.1

For example, TURC identified an agreement reached between the Australian Workers Union and Cleanevent Pty Ltd, which involved payments of $25,000 per year to the union and an arrangement to maintain an enterprise deal that deprived employees of penalty rates under the relevant award.2

TURC recommended that these problems be addressed in two main ways:

  1. By creating new criminal offences relating to the giving or receiving of 'corrupting benefits' to or by a union official, and employer payments to a union or its officials, with strong maximum penalties including imprisonment (Recommendations 40-41).
  2. By requiring the disclosure of financial benefits that a union, any of its officials or a related entity stand to gain, directly or indirectly, under a proposed enterprise agreement (Recommendation 48).

When introducing the Corrupting Benefits Bill into Parliament, Prime Minister Malcolm Turnbull stated that:

"Any union leader who accepts secret – let alone corrupt – payments from the employers of their members is betraying the obligation they have to represent faithfully, honestly and diligently the workers who are members of their union. It is a breach of faith.

A business that makes payments of that kind is also seriously compromised. As [TURC] found: 'Corrupt receipt implies corrupt payment.' ...

These secret deals have the real potential to corrupt union leaders, corrupt employers and seriously disadvantage workers. They are wrong. They need to be outlawed, and this is exactly what this bill will do."3

THE CORRUPTING BENEFITS BILL: PROHIBITIONS ON CORRUPTING BENEFITS

The Corrupting Benefits Bill will insert a new Part 3-7 in the FW Act dealing with corrupting benefits to or in relation to organisations. This would enable Part 3-7 to operate in conjunction with State or Territory laws which also outlaw corrupting benefits (e.g. laws criminalising secret/corrupt commissions, rewards or bribes).4

Under Part 3-7, two new criminal offences would be created:

  1. Giving, receiving or soliciting a corrupt benefit (proposed ss 536D-536E).

The provision of a benefit with the intention of influencing a registered organisations officer or employee to perform their functions improperly, or to gain an illegitimate advantage5 for the person providing the benefit (or their spouse or an associated entity), would be captured by this offence.6 So too would the request for, or receipt of, a benefit with a similar intention.7

In either case, there is no need to establish that the registered organisation officer or employee has actually been influenced or engaged in improper behaviour.8 The relevant 'benefit' would include any advantage, including but not limited to property.9

The maximum penalties for breaches of s 536D(1) or (2) proposed by the Bill would be 10 years' imprisonment and/or a fine of $900,000 for an individual, and a fine of $4.5 million for a body corporate.

An example of conduct that would be caught by proposed s 536D(1) is where an employer (or its representative) offers to make a payment to a union or union official, 'on the proviso that [the union/officer] attempt to convince their members to accept lesser terms and conditions of employment in an enterprise agreement than the organisation would otherwise have advocated for'.10

The s 536D(2) offence would be breached, for example, where a union officer solicits 'a building company to renovate a house owned by the officer's spouse on the understanding that the [union] will not enter building sites on which the building company is performing work'.11

Australian Industry Group (AiGroup) has argued that the proposed offences are in some respects vague and uncertain (e.g. the concept of illegitimate advantage), and are modelled on federal law offences relating to bribery of foreign officials whereas those applicable to bribery of Commonwealth public officials are more appropriate (including the lower maximum penalties for those offences).12

  1. Giving cash or in kind benefits to unions (proposed ss 536F-536G).

It would be an offence for a national system employer (i.e. an employer covered by the FW Act, other than a union) to provide (or cause/offer to provide) a cash or in kind payment, to a union or 'prohibited beneficiary'– where the employer, or its spouse or associated entity, employs members of the relevant union.13 The receipt of such payments would also be an offence (s 536G). The maximum penalties would be 2 years' imprisonment and/or a fine of $90,000 (for an individual); and a $450,000 fine for a body corporate.

However, several types of payments would be excluded from potential liability, including payments to a union by way of deductions of union fees from members' wages, payments solely for the benefit of the relevant employees, tax deductible gifts or contributions, and payments at market value for goods or services supplied to the employer by the union.14

AiGroup has raised concerns that the fairly common provision of certain benefits by employers or employer associations would not fall within any of the s 536F(2) exclusions, and therefore could be caught by the new offence provisions – e.g. meals provided at a meeting with union officials, small gifts to union officials for speaking at a conference, and invitations to attend industry events or functions.15

THE CORRUPTING BENEFITS BILL: NEW DISCLOSURE REQUIREMENTS

The Corrupting Benefits Bill will introduce new disclosure requirements on employers and unions which must be complied with in the process of informing employees before they vote on a proposed enterprise agreement.16

Under the Bill, a union that is a bargaining representative for an agreement must take all reasonable steps to ensure that each employer to be covered by the agreement is given a document outlining any 'beneficial terms'.17 A beneficial term is a term of the agreement which has as a direct or indirect consequence of its operation the receipt or obtaining of a financial benefit for the union (or a related entity).

The document must be given to the employer(s) no later than the end of the fourth day of the seven-day access period prior to the designated date for employees to vote on the agreement.18

When this occurs, the employer must then take reasonable steps to ensure that employees are given a copy of the document as soon as practicable, and that employees have access to the document for the remainder of the access period.19

In addition, an employer must prepare and provide to employees (by the end of the fourth day of the access period) a document outlining any beneficial terms in the agreement.20

These new requirements are intended to ensure that employees who will be covered by an agreement are aware of any financial transactions between the negotiating parties when they vote on the agreement.21 Failure to comply with these disclosure provisions will not be grounds for precluding approval of an enterprise agreement by the Fair Work Commission.22 However, the new requirements will be civil remedy provisions, with maximum penalties of up to $10,800 for an individual and $54,000 for a body corporate.

WHAT ARE THE IMPLICATIONS FOR EMPLOYERS?

The Corrupting Benefits Bill follows the passage, late last year, of the Fair Work (Registered Organisations Act 2016 (Cth), which implemented other recommendations of TURC to enhance the governance and financial accountability rules for registered unions and employer associations.23

This included new protections for union corruption 'whistleblowers', and the establishment of a Registered Organisations Commission (ROC) to oversee regulation of registered organisations.

The Government recently indicated that the ROC will commence operating on 1 May 2017, with its new powers coming into effect the next day. This follows the appointment of former ASIC regional commissioner Mark Bielecki as the Registered Organisations Commissioner.

The Corrupting Benefits Bill has been referred to a Senate Committee, which is due to report on 9 May 2017. It is unclear whether or when the legislation may be passed in the Senate.

Despite this, it would be prudent for employers to anticipate that the legislation will pass in some form, with the result that substantial new penalties will apply to illegitimate payments made by an employer to a union or union official. It should also be remembered that such payments may already constitute an offence under applicable State or Territory legislation.

There is also a wide range of circumstances where employers might make legitimate payments to unions, e.g. as part of arms-length commercial transactions between the parties. Employers should consider how the proposed new offences in the Corrupting Benefits Bill might apply to such payments, whether any of the exclusions in proposed s 536F(2) would apply, and whether the new disclosure requirements would apply if payments are made in the context of enterprise agreement negotiations with a union.

Employers should also consider that if these disclosure obligations come into effect, they have the potential to further complicate agreement-making and will need to be factored into the processes for ensuring that employees are properly informed before voting on a proposed agreement.

Footnotes

1 See: http://www.corrs.com.au/publications/corrs-in-brief/reports-of-the-productivity-commission-and-trade-unions-royal-commission-will-set-the-workplace-reform-agenda-in-2016/

2 For other examples of 'corrupt and secret payments' identified by TURC, see Department of Employment, Submission to Senate Education and Employment Legislation Committee Inquiry into the Fair Work Amendment (Corrupting Benefits) Bill 2017 (April 2017), Attachment A.

3 Prime Minister Malcolm Turnbull MP, Second Reading Speech: Fair Work Amendment (Corrupting Benefits) Bill 2017 (22 March 2017).

4 Proposed s 536C; These laws differ across the various jurisdictions and do not apply in a straight-forward manner to unions and their officials: Department of Employment, Submission to Senate Education and Employment Legislation Committee Inquiry into the Fair Work Amendment (Corrupting Benefits) Bill 2017 (April 2017), 4.

5 See also proposed s 536D(6) on the concept of an advantage not being legitimately due, for purposes of s 536D(1)-(2).

6Proposed s 536D(1).

7 Proposed s 536D(2).

8 Proposed (s 536D(3).

9 Proposed (s 536D(7).

10 Explanatory Memorandum to the Fair Work Amendment (Corrupting Benefits) Bill 2017, para [23].

11 Explanatory Memorandum to the Fair Work Amendment (Corrupting Benefits) Bill 2017, para [29].

12AiGroup, Submission to Senate Education and Employment Legislation Committee Inquiry into the Fair Work Amendment (Corrupting Benefits) Bill 2017 (10 April 2017), 5-6.

13See proposed s 536F(4); This includes an entity controlled by the union, union officers or employees, their spouses or entities they control, etc (proposed s 536F(5)); see proposed s 536F(1).

14 Proposed s 536F(2).

15 AiGroup, Submission to Senate Education and Employment Legislation Committee Inquiry into the Fair Work Amendment (Corrupting Benefits) Bill 2017 (10 April 2017), 8-9.

16 See FW Act, current ss 180-182.

17 Proposed new s 179.

18 See current s 180(4).

19 Proposed s 180(4A).

20 Under proposed ss 179A and 180(4B),

21Prime Minister Malcolm Turnbull MP, Second Reading Speech: Fair Work Amendment (Corrupting Benefits) Bill 2017 (22 March 2017).

22Under proposed s 188A.

23See: http://www.corrs.com.au/publications/corrs-in-brief/registered-organisations-bill-passed-into-law-with-unexpected-whistleblower-protections/

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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