Royal Commission into Australian trade union governance.

10 March 2014

By Tim Wetherell, an employment lawyer at UNISON who has also worked for trade unions in Australia

On 10 February 2014 Australian Prime Minister Tony Abbott announced the creation of a Royal Commission into the governance of trade unions. Controversy surrounds the decision primarily because of the extraordinary powers of a Royal Commission to gather evidence, the open-ended nature of the government’s terms of reference and its thinly veiled political benefits to a conservative government.

The announcement followed a maelstrom of allegations about union officials in recent years, albeit with varying degrees of credibility and gravity.

Prior to the 2013 election of the conservative coalition government, Tony Abbott pledged a judicial inquiry into the Australian Workers’ Union so-called ‘slush fund scandal’, to which the Murdoch-owned Australian newspaper and the then Abbott-led opposition attempted to connect prime minister Julia Gillard. Those efforts arose from her time as a partner at law firm Slater & Gordon.

In addition to the AWU case, there have been other scandals, which the Abbott government used as political justification to initiate an estimated A$100 million Royal Commission.

The Royal Commission is to be headed by self-confessed black-letter lawyer and former High Court judge Dyson Heydon QC. Its precise purpose is difficult to pin down. At first Abbott announced that it was to inquire into alleged financial irregularities of the unions, but its Terms of Reference and Abbott’s own rhetoric tell a different story.

“The inquiry will be able to go wherever the evidence leads it”, Abbott said.

“This means that union officials, employers and any other persons who are involved in such conduct will be subject to equal scrutiny”.

The breadth of the terms of reference makes the government’s end of year reporting deadline seem unlikely.

In brief, the Royal Commissioner will inquire and report on:

1. The governance arrangements of any “separate entities” established by unions or their officers with regard to:

• Their financial management;
• The adequacy of existing laws relating to such
• Whether they are being used for an unlawful purpose; and
• The use of funds solicited in the name of any such entities, for the purpose of furthering the interests of:
  a) a union; b) its officers; c) its members; or d) any other person, association or organisation (ie anyone).

2. The alleged activities relating to the establishment or operation of “separate entities” of five listed unions, including: the AWU; CFMEU; HSU; Electrical Trades Union; and Transport Workers Union; and any other person, association or organisation.
3. The circumstances in which funds are sought from third parties and paid to “separate entities”.
4. The extent to which union members, where “separate entities” exist, are:

• Protected from any adverse effects or negative consequences arising from their existence;
• Informed of their existence; and
• Able to influence or control their operation.

5. Bribes, secret commissions or other unlawful payments between unions, their officers and other persons.
6. The adequacy of effectiveness of existing regulations and law enforcement.
7. Any issue incidental to the above.

Since 1977 there have been 20 national Royal Commissions on matters as broad as Aboriginal deaths in custody to British nuclear testing in Australia. And while this inquiry will not focus solely on the building industry, there is a sense of déjà vu about it, given that it’s the fourth Royal Commission during that time aimed at curbing the activities of the construction unions.

In 2003 then Howard government employment minister Tony Abbott ushered in a suite of changes to workplace laws, including the introduction of a specialist taskforce with extraordinary powers to police the industry, taken from the 212 recommendations of Terrence Cole QC’s A$60 million Royal Commission into the construction industry. Ten years earlier, the New South Wales government setup a A$25 million Royal Commission into the building industry. Heydon was also a member of that Commission, which also recommended a taskforce to police the industry. This followed the 1982 Royal Commission into the same industry set up by Malcolm Fraser’s national government.

Opinion is predictably divided on the necessity and motivations of the latest Royal Commission. Critics call it unnecessary, politically inspired and disproportionate. Supporters call it overdue. University of NSW law professor George Williams, wrote in the Herald the day after the government announcement that by virtue of the Royal Commissions Act 1902 (RCs Act), such inquiries are granted coercive powers that exceed those of a court, putting the collection of information ahead of a person’s reputation or liberty. At times they are referred to as “modern day star chambers”. Examples of such powers include:

• The ability to compel people to give evidence or produce documents, or face six months in jail.
• No right to silence, as witnesses cannot refuse to answer a question or produce a document even if it incriminates them, or makes them liable to a penalty.
• It can search for evidence by seeking a warrant permitting the police to enter and search any premises for documents or items connected with the inquiry.
• Anyone who conceals or destroys a document that may be sought by the commission can be jailed for up to two years.

So where might this inquiry end up in regulatory terms? As for the building industry it is hard to see how the government can go further than its Building and Construction Industry (Improving Productivity) Bill 2013 put to parliament on 14 November 2013 and expected to be law from 30 June this year. The Bill seeks to restore the Australian Building and Construction Commission to further scrutinise and prosecute construction unions with the return of a beefed-up inspectorate with coercive powers similar to those recommended by the Cole Commission in 2003. The ABCC was abolished and replaced with another body by the Gillard Labor government in 2012 with reduced powers and lowered the penalties courts could impose for breaches of industrial laws.

Perhaps more controversially though may be a proposal that trade unions be given the status of corporations and regulated accordingly. Currently unions are regulated by the Fair Work (Registered Organisations) Act 2009, which includes mainly civil penalties. But should Heydon recommend that the government introduce legislation which treats unions as corporations, as he recommended following the NSW Commission in 1992, it may be a proposal too attractive to resist for the Abbott government. Indeed, Abbott signalled his desire for this reform during the pre-election period.

If unions become corporations their senior officials will face criminal penalties including five year prison sentences rather than civil penalties such as fines, and face stricter governance and reporting requirements. This will shift the emphasis from the democratic processes whereby members vote out bad leaders to one of policing and prosecution. And at best will be cumbersome for the regulator, at worst unworkable, given the substantial differences between unions and companies.