After 21 months, 189 hearing days and its own share of controversy, the Trade Union Royal Commission (Royal Commission) delivered its Final Report into Trade Union Governance and Corruption (Final Report) to the Government on 28 December 2015.

In summarising the Final Report’s findings, Royal Commissioner John Dyson Heydon AC QC described the ‘widespread’ misconduct considered by the Royal Commission as being a ‘small tip of an enormous iceberg’. He also identified a number of common themes that emerged from its inquiry, including the propensity for parties examined to create false records or destroy them entirely, or to commit perjury before the Royal Commission.

Based on the findings reached in the Final Report, Royal Commissioner Heydon:

  • referred a number of persons and entities, including unions, union officials and employers, to other Government bodies, to consider whether either criminal or civil proceedings should be instituted by those bodies
  • made broad ranging recommendations for reform of the legal regulation of registered organisations and their officers.

We summarise some of the key recommendations in the Final Report below.

REGULATION OF REGISTERED ORGANISATIONS AND THEIR OFFICIALS

The legislation that regulates federally registered organisations, the Fair Work (Registered Organisations) Act 2009, should be amended to, among other things:

  1. transfer the responsibility for regulating registered organisations from the Fair Work Commission to a new, stand-alone regulator, the Registered Organisations Commission
  2. introduce criminal liability provisions for officers who dishonestly or recklessly breach their statutory duties (similar to obligations on company directors under s 184 of the Corporations Act 2001)
  3. prohibit a registered organisation from indemnifying, paying or reimbursing any of its officers for any penalty imposed on the officer by a Court
  4. empower the Registered Organisations Commission to apply to a Court to disqualify an officer of a registered organisation from holding office in a registered organisation for a period of time.

ADDRESSING CORRUPTING BENEFITS

The Fair Work Act 2009 (Fair Work Act) should be amended to:

  1. make it a criminal offence for an employer to provide or offer to provide any payment or benefit to a union or its officials, or for any payment or benefit to be solicited by a union or its officials, except in strict and limited circumstances
  2. require an organisation that is a bargaining representative in enterprise bargaining to disclose to all employees, before the vote for an enterprise agreement, all financial benefits that the organisation may receive as a consequence of the enterprise agreement commencing operation.

THE BUILDING AND CONSTRUCTION INDUSTRY

In order to combat the ‘culture of disregard for the law’ within the Construction, Forestry, Mining and Energy Union (CFMEU), the Final Report recommended that:

  1. special legislation be introduced for the building and construction industry that would allow Parliament (rather than the Courts) to disqualify officials of the CFMEU from holding office in that union, for specified periods of time
  2. legislation be enacted that would provide the building and construction industry regulator with compulsory investigation and information gathering powers.

These recommendations echoed the recent comments by Justice Jessup of the Federal Court in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 1462, where his Honour strongly criticised the repeated contravening conduct of the CFMEU, noting that the union had contravened industrial laws on more than 100 occasions since 2003.

REGULATING INDUSTRIAL ACTION AND RIGHT OF ENTRY UNDER THE FAIR WORK ACT

The industrial action, coercion and right of entry laws under the Fair Work Act should be strengthened by:

  1. including ‘picketing’ within the definition of industrial action under the Fair Work Act
  2. increasing penalties for coercion and unlawful industrial action to a maximum of $180,000 for body corporates and $36,000 for individuals
  3. amending the right of entry laws to:
    1. introduce an overarching obligation that right of entry permits only be issued to a ‘fit and proper person’
    2. prohibit right of entry to two or more permit holders of the same organisation, to the same workplace, at the same time.

SECONDARY BOYCOTTS AND CARTEL CONDUCT

To combat anti-competitive conduct on the part of unions (for example relating to secondary boycotts), the Competition and Consumer Act 2010 should be amended, including to:

  1. permit certain anti-competitive provisions to apply to enterprise agreements
  2. broaden the secondary boycott provisions, so a contravention can arise where conduct has the purpose of affecting competition, or would likely affect competition

CHOICE OF SUPERANNUATION FUND

The Superannuation Guarantee legislation should be amended so that all employees can choose their superannuation fund, by removing the provisions in the Superannuation Guarantee legislation that permit this choice to be excluded by an enterprise agreement.

GOVERNMENT’S RESPONSE

The Government has strongly supported the Royal Commission’s findings, and has stated that all of the recommendations for legislative reform are under consideration. It has been reported that the first step towards this will be the reintroduction into Parliament of the failed Building and Construction Industry (Improving Productivity) Bill 2013 and the Fair Work (Registered Organisations) Amendment Bill 2014. If this is unsuccessful, the Government has stated it will seek a mandate for these changes at the federal election, presently due to be held no earlier than 6 August 2016 and no later than 14 January 2017.

IMPLICATIONS FOR EMPLOYERS

The Royal Commission’s recommendations go beyond just the internal regulation of unions and other registered organisations and the building and construction industry. If implemented this year (either before or after a federal election), these reforms, combined with the increasing scrutiny of regulators and the Courts regarding union conduct, are likely to have a significant impact on the role and power of unions in the workplace, and will therefore be strongly resisted by unions and their members.

Employers will need to carefully navigate these issues to ensure they meet their legal obligations.