Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017

Tuesday 24 October 2017 @ 10.30 a.m. | Corporate & Regulatory | Industrial Law | Legal Research

Last Thursday the 19th of October, the Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017 (the Bill) was introduced to the House of Representatives. As explained in the Explanatory Memorandum:

“The Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017 (the Bill) will amend the Fair Work (Registered Organisations) Act 2009 (the RO Act) and the Fair Work Act 2009 (the FW Act) to protect workers through greater governance and transparency of worker entitlement funds consistent with recommendations made by the Royal Commission into Trade Union Governance and Corruption (the Royal Commission).”


On 13 March 2014, the Royal Commission into Trade Union Governance and Corruption (the Royal Commission) was established by the former Governor-General of the Commonwealth of Australia, Her Excellency the Honourable Quentin Bryce AC CVO. The Royal Commission was established as a means of inquiring into alleged financial irregularities associated with the affairs of trade unions. The inquiry itself lasted approximately 21 months, and included 155 days of public hearings, as well as 46 days of private hearings and over 500 submissions of evidence from individual witnesses.

The final report of the Royal Commission was released in December 2015. The overall finding of the Royal Commission was that there was a “widespread and deep-seated” misconduct by a great number of union officials in Australia. This conduct included “multiple examples of bribery, extortion and blackmail in the nation’s construction industry”, examples of which were reported to have occurred in every jurisdiction of Australia except for the Northern Territory. As summarised in the final report of the Royal Commission:

52. In very brief terms the conduct uncovered by the Commission in 2015 has included:

  1. a former lead organiser for the CFMEU ACT conceded during hearings in Canberra that he had personally received $100,000 in secret payments from employers;
  2. a former president of the CFMEU QLD received approximately $150,000 worth of free work on his home, arranged or facilitated by a senior employee of a major building company with the knowledge of his superior;
  3. serious misappropriations of members’ funds were revealed in the NSW branch of the National Union of Workers, those responsible being at least the Secretary, his brother, who was an organiser and their niece, who was a junior employee;
  4. the AWU and a large cleaning company agreed to extend a WorkChoices enterprise agreement, thereby saving the company some $2,000,000 per year it would otherwise have had to pay its casual workers in penalty rates under the relevant Award. In exchange, the cleaning company paid the AWU $25,000 per year and provided lists of 100 bogus ‘members’ – the great majority of whom were unaware that they had been included in these lists;
  5. the CFMEU in Queensland caused a number of tonnes of documents to be removed from the CFMEU’s Brisbane office and disposed of on the same day that the CFMEU received a notice to produce from the Royal Commission;
  6. the AWU and the joint venture responsible for the EastLink Tunnel project in Melbourne, Thiess John Holland, entered into an agreement pursuant to which the joint venture paid  $110,000 inclusive of GST per year to the AWU for the three year life of the project, disguised by a series of false invoices;
  7. an organiser in the CFMEU NSW received $2,500 per week in secret and possibly unlawful cash payments;
  8. a company operating a mushroom farm in Victoria agreed to pay the AWU $4,000 a month for a number of months in exchange for industrial peace;
  9. a construction company in Victoria paid membership dues for its employees to the AWU, disguised for a number of years by false invoices;
  10. both the incoming Secretary and the outgoing Secretary of the WA branch of the TWU arranged the purchase of two luxury four wheel drive vehicles by the Union for their own benefit. The outgoing Secretary also received a generous redundancy payment, without the approval of the BCOM; and
  11. union officials commenced and maintained two proceedings in the Federal Court of Australia against their political rivals in what may have been an abuse of process.

Governmental Response

In the Final Report of the Royal Commission, 79 recommendations were made on how to improve governance, management and regulation of trade unions, as well as financial accountability and transparency particularly of registered organisations and associated entities. Therefor, over the last couple of years,  the Federal government has initiated a number of legislative responses to the Royal Commission, including the Fair Work Amendment (Corrupting Benefits) Bill 2017 released on 22 March 2017, aimed at recommendations 40, 41 and 48 of the final report, and aimed at promoting better governance of registered organisations.

The Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2017

In the second reading speech for this bill, presented by Mr Pitt – Assistant Minister for Trade, Tourism and Investment – to the House of Representatives:

“The Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill is designed to protect—for the workers—the hundreds of millions of dollars held in these funds for workers' redundancy pay, sick leave and other employee benefits and to ensure these funds are spent for the benefit of workers and not for other purposes.

In 2015, the Royal Commission into Trade Union Governance and Corruption estimated that worker entitlement funds hold close to $2 billion. Since that time they will have grown.

The Heydon royal commission, and the Cole royal commission before that, found that, while on the face of it these funds look like they are run for the benefit of workers, these funds in fact funnel millions of dollars back to the unions and employer groups which make up their boards.

Given there is little governance of these funds, Commissioner Heydon found that there was a 'compelling case' for reform and that new laws were needed to comprehensively deal with governance, financial reporting and disclosure in worker entitlement funds.”

The current bill is aimed at responding to recommendations 45 and 46 of the Final Report. These are:

Recommendation 45

Legislation, either standalone or amending the Corporations Act 2001 (Cth), be enacted dealing comprehensively with the governance, financial reporting and financial disclosures required by worker entitlement funds. The legislation should provide for registration of worker entitlement funds with the Australian Securities and Investments Commission, and contain a prohibition on any person carrying on or operating an unregistered worker entitlement fund above a certain minimum number of persons. Key recommended features of the legislative scheme are explained at paragraphs 93 and 95 above.

Recommendation 46

In consequence of the enactment of the above legislation, Class Order [CO 02/314] not be extended. In further consequence, s 58PB of the Fringe Benefits Tax Assessment Act 1986 (Cth) be repealed and the fringe benefits tax exemption in s 58PA(a) be amended to refer to registered worker entitlement funds.

Certain steps that the Bill proposes to implement in regards to the above recommendations include a number of amendments of the Fair Work Act 2009, as stated on page (i) of the Explanatory Memorandum to the Bill:

  • prohibit terms of a modern award or an enterprise agreement requiring or permitting contributions for the benefit of an employee to be made to any fund other than a superannuation fund, a registered worker entitlement fund or a registered charity (giving effect to recommendation 49 of the Report);
  • require any term of a modern award or enterprise agreement that names a worker entitlement fund or insurance product to allow an employee to choose another fund or insurance product,
  • prohibit any term of a modern award, enterprise agreement or contract of employment permitting or requiring employee contributions to an election fund for an industrial association (giving effect to recommendation 43 of the Report); and
  • prohibit any action with the intent to coerce an employer to pay amounts to a particular worker entitlement fund, superannuation fund, training fund, welfare fund or employee insurance scheme (giving effect to recommendation 50 of the Report).

As such, Schedule 1 of the Bill proposes to improve financial management and accountability through amending the Fair Work (Registered Organisations) Act 2009. These amendments include, in section 5, repealing subsection 237(1) of that Act and substituting a new subsection requiring organisations to lodge a statement to the Commissioner within 90 day after the end of each financial year, setting out certain financial expenses and outputs of the organisation with the aim of increasing transparency and accountability in the financial output of organisations.

Other ways the Bill aims to amend the Fair Work (Registered Orgnisations) Act 2009 include to:

  • require registered organisations to adopt, and periodically review, financial management policies (giving effect to recommendation 9 of the Report); 
  • require registered organisations to keep credit card records and to report certain loans, grants and donations (responding to recommendations 10 and 39 of the Report);
  • require specific disclosure by registered organisations and employers of the financial benefits obtained by them and persons linked to them in connection with employee insurance products (giving effect to recommendation 47 of the Report), welfare fund arrangements and training fund arrangements; and
  • introduce a range of new penalties to ensure compliance with financial management, disclosure and reporting requirements (giving effect to recommendations 9, 10, 17 and 45 of the Report).

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