Was the union Royal Commission really worth it?


Was the union Royal Commission really worth it?

Now that it's all said and done, was the Royal Commission into Trade Union Governance and Corruption really worth it? Peter Punch thinks so.

By Peter Punch*

For almost all of 2014 and 2015, the Royal Commission into Trade Union Governance and Corruption was the best (the only?) show in town for industrial relations “tragics”. It was enmeshed in politics and national personalities; it had its sensational moments, and its embarrassing ones (including one for Commissioner Heydon).

For many, the Commission was purely a political exercise conceived by the Coalition government when in opposition and designed by it to:
  1. Embarrass major figures in the ALP, particularly Julia Gillard and Bill Shorten, and hopefully result in serious adverse findings against them
  2. Focus public attention on infamous conduct within certain trade unions, in order to smear the entire trade union movement and justify legislation to “crack down” on them in various ways;
  3. Distract or deflect public attention away from any union or ALP campaign designed to tar the Coalition with a secret agenda to “bring back WorkChoices”.
To others of course, the Commission was an overdue examination of corrupt and/or illegal practices endemic in the culture of trade unionism in this country, in order to bring that behaviour and those responsible fully into public light and to account.

But with the exercise now over, I would like to think this substantial expenditure of public money will have some enduring value.

First – a disclaimer as to the limits of this article

I have confined myself to examining those parts of the report that provide an opportunity to look for long term value – that means a distinct concentration on two (comparatively slim) volumes of the final report – namely volumes 1 (Overview) and 5 (Suggested Law Reform). I have “dipped into” other parts of other volumes as time and particular interest allowed, but there is a limit to what I could read and absorb.

Nevertheless I hope an examination of these elements of the report against my background of 30-plus years regularly acting for and advising trade unions and employer associations in this area will deliver something of assistance.

The basic facts and figures

The Royal Commission into Trade Union Governance and Corruption ( “the Commission”) was a large publicly funded exercise. Here are some basic facts and figures.
  • The Commission ran from March 2014 to the end of 2015
  • It held 189 days of hearings (155 in public), mostly at its main Sydney premises
  • It examined 505 individual witnesses
  • It issued more than 2000 Notices to Produce
  • It issued an interim report in December 2014 that was in three volumes (one of which remains “confidential”), with the two published volumes comprising more than 1800 pages plus annexures
  • Its final report was in five volumes, comprising more than 3500 pages plus annexures;
  • Its interim report made 12 recommendations for referral of 25 persons and three organisations to law enforcement authorities for consideration of criminal charges and civil penalty proceedings
  • Its final report made 44 referrals to other authorities, mainly law enforcement agencies, 43 of which involved requests to those authorities to consider criminal charges or penalty proceedings against 37 individuals and six organisations
  • The final report made 79 recommendations for law reform
  • Its total cost to the public purse was $45,905,000.

Something about the terms of reference – they grew…

It is worth mentioning the terms of reference, which can be viewed in full here

The original form of the terms of reference, on my reading (and trying to be objective), focused on investigating “Relevant Entities” – with particular attention to be directed to those entities insofar as they were connected to five named unions (ie, the AWU, the CFMEU, the CEPU, the HSU and the TWU). That is, the main focus of the Commission’s remit was various forms of what are called in common parlance “slush funds”.

That was consistent with the political background to the establishment of the Commission – ie the long running and often very public saga over the involvement of Julia Gillard and various figures in the Australian Workers’ Union in the WA incorporated association named “Australian Workers’ Union – Workplace Reform Association Inc.” True it was that there were other “trade union misconduct type” matters in the public gaze coming up to the 2013 federal election – such as the various investigations into the conduct of certain officials associated with the Health Services Union. The original terms of reference did cater for this, but were almost buried in paragraphs (g) and (h). 

As the Commission proceeded in 2014, its putative remit of investigating union “slush funds” started to broaden into other areas that came to its attention, and resulted in various persons associated with certain of the named unions being referred to authorities for the consideration of criminal charges for a range of activities including (without being exhaustive) threats of violence and falsifying of records.

The amendments to the terms of reference on 30 October 2014, apart from extending the reporting deadline by a year to 31 December 2015, introduced a new paragraph (ia) adding this:
“any criminal or otherwise unlawful act or omission undertaken for the purpose of facilitating or concealing any conduct mentioned in paragraphs (g) to (i).”

Whether justified or not, the Commission’s remit became diffuse, revolving around not only slush funds but any significant criminal conduct that might come to light in relation to the five named unions, and some others.

This perhaps explains why a Commission originally constituted primarily to look into corrupt and criminal conduct relating to “slush funds” was able to provide recommendations about whether there should be a separate investigative and regulatory body to deal with the building and construction industry, and whether the CFMEU and various officials should be proceeded against for breaches of various laws, including the secondary boycott provisions of the Competition and Consumer Act 2010 (Cth).

How many “big name scalps”?

A number of individuals who were either public figures or well known in the field of industrial relations were the subject of investigation by the Commission in various connections, sometimes to do with “slush funds”. It seems to me at least that anyone who was expecting a number of “big name scalps” would have been disappointed.

The following table shows individuals who are people “in the public arena” either now or in the recent past who came before the Commission, and what the outcome was in relation to them in terms of the Commission’s findings or recommendations.

(In this context it must be remembered, as the Commission itself emphasises in its final report (paragraphs 97 to 105 of volume 1), that the Commission is not a court; it cannot and does not make findings as to the guilt of individuals or corporate bodies in relation to criminal offences or regulatory (civil penalty) breaches – it simply makes its own assessment of the material before it, records its findings and reasons, and refers suspected offenders to the relevant authorities. Nothing may come of some of its referrals. (But, at least in the short term, the public damage to reputations is done.)

There are many others of course who are “known” to IR “tragics” but I will omit those (eg Bruce Wilson, John Setka, Diana Asmar).
Person      Position(s) Outcome
Julia Gillard Former Slater & Gordon Partner, Former Prime Minister No adverse findings, some criticisms
Bill Shorten  Former AWU National Secretary, Minister, Opposition Leader  No adverse findings, some criticisms
Michael Williamson Former ALP President, HSU East General Secretary Already dealt with in civil
recovery proceedings, and  by CJS*
Craig Thomson Former National Secretary of HSU, Former MHR Already dealt with in civil penalty & recovery proceedings and by CJS*
Katherine Jackson Former National Secretary of HSU, Former National Secretary of HSU Civil damages awarded to HSU by Tracey J – $1.3 million; referral to, but already under investigation by, Victorian Police
Brian Parker Branch Secretary, CFMEU NSW Referral for alleged false Branch Construction Division evidence; also referral to CFMEU internally for consideration of removal from office under the rules
Bernie Riordan Former ALP NSW President; Former ETU NSW Secretary; FWC Commissioner No adverse findings
Dean Mighell Former Victorian Branch Secretary, CEPU Referred for civil penalty proceedings re alleged mala fide Federal Court proceedings against B Riordan & others
Derrick Belan Former Secretary, NUW NSW Branch Referred to CJS*, General manager of FWC and NSW IR authorities re various
    *CJS: criminal justice system

The Commission’s overall assessment

In volume 1 of its final report, the Commission commences with a general overview, which is a mere 116 pages, and a relatively easy read.

The substance of the preamble (paragraphs 1 to 10), in my opinion is to the effect that the Commission’s experience leads it to the view that the trade union movement as a whole is afflicted by a culture of misconduct that is at scandalous levels.

Any person who has had a significant period of time working with or advising trade unions will know that, from time to time, bad behaviour, indeed very bad criminal behaviour, has occurred in those bodies. What else can be expected after all of entities that are comprised of and operated by human beings?

But I respectfully disagree with the overall assessment, as I believe it is simply not justified by any objective measure. That is, the Commission’s report details case studies into eight trade unions, namely:
  • The Australian Workers’ Union
  • The Construction, Forestry, Mining and Energy Union
  • The Communications, Electrical and Plumbing Union
  • The Maritime Union of Australia
  • The Transport Workers’ Union
  • The Shop, Distributive and Allied Employees’ Union
  • The Health Services Union, and
  • The National Union of Workers.
Admittedly, each of these eight unions are among the largest trade unions in this country. But:
  1. There are currently 46 federally registered trade unions (and many more state registered unions)
  2. The overwhelming majority of these unions have multiple (usually geographically based) branches
  3. Most such branches have in their registered rules a “local autonomy” rule so that each such branch has most of the attributes of a separate functioning unit (ie its own officers, rules, finances and employees, and independent governance in all except “national” or “more than one State” matters)
  4. Most such branches have counterpart state registered organisations in the states where separate industrial relations systems still function (ie all states except Victoria and Tasmania)
  5. The report’s focus on the seven trade unions named above is also a focus on the particular parts of each such union – eg the Construction Division of the CFMEU; the NSW Branch (and state union counterpart) of the NUW; the National and NSW Branch of the HSU; and the Queensland Division of the SDAEA.
There is also the serious matter of perjury. Paragraph 6 of the overview asserts that “there has been much perjury” before the Commission. However, of all of the referrals of persons to law enforcement authorities in relation to possible criminal or civil penalty proceedings, only two are for alleged false evidence to the Commission (noting however that two CBUS employees were not referred because they had already admitted their perjury to the Commission and that they would plead guilty to that charge).

In truth, the Commission’s findings disclose serious misconduct by certain persons within certain parts of certain major trade unions at various times. I have no doubt that a Royal Commission into criminal behaviour in corporations would end up with similar results. But corporations do not carry the “political baggage” that trade unions do.

That all having been said, I have to agree with the comment of Professor Anthony Forsyth in his address to the AIRAANZ Conference in Sydney on 12 February 2016 that “In an environment where unions are already battling hard to attract and maintain members, the revelations of the Royal Commission have been toxic.”

That having been said the important things surely is: what can be learnt from this exercise and what can be done, responsibly and fairly, to address the shortcomings that have been identified.

The “recurring themes”

When looking for long term value in the Commission’s report, one of course turns to its recommendations in relation to Law Reform (volume 5). I refer to these below. But the Commission’s overview includes some passages that I believe are actually of long term value.

Paragraphs 53 to 68 of the Commission’s overview are under the heading “Some recurring themes”.

Four “recurring themes” are identified:
  1. Creation of false records or the absence of any or any proper records
  2. Failure of committees of management to “stand up” to strong secretaries
  3. Payments of large sums of money by employers to unions, and
  4. False inflation of membership numbers.

Comment on two of these themes

First, false or inadequate records. I agree entirely that accurate and comprehensive records are an absolute must for all registered organisations, just as is the case with any significant commercial enterprise or not for profit entity. The critical matter is how this is achieved. The law can do some good in this area (eg see recommendation numbers 9 (financial administration policies) and 16 (keeping of meeting minutes and associated papers)), but attitude and culture are just as important, as is proper external scrutiny (and here, the role of auditors must be critical).

Second, the committee of management “standing up” to the secretary. Once again, I agree that it is absolutely critical to the health of a registered organisation (or branch of it) that it have a strong band of committee persons who take their statutory and common law duties seriously and will hold the full time officers to account and scrutiny. But once again, the real question is how this is achieved, particularly when, in the case of trade unions at least, the pool of persons from whom the class is drawn may consist of persons without the skills set that would more likely be found among those who commonly make up the boards of public companies or significant not for profit organisations.

Compulsory financial management training for all committee members is of course one tool (see recommendation 8). But the imposition of large penalties on individual committee members for non compliance by the reporting unit with its financial obligations (see recommendation 11) may not be the answer – it might only deter the pool of people in question (ie “the rank and file”) from taking on this type of role, particularly when it is unpaid or only paid by way of “sitting fees” or “honorariums”.

I certainly believe that the key to a healthy industrial organisation is a robust and independent committee of management. Achieving it in a trade union in a way that encourages participation by the “rank and file” is the challenge.

“Slush funds”

Comment is needed on this subject, bearing in mind that it was after all a major element of the Commission’s remit.

Both the interim and final reports disclose problems with these various categories of “fund”, which it would be in the best interests of the union movement to address itself. A number of recommendations are made to “reform” these entities. An argument for transparency can however be mounted, but needs to be balanced (at least in the case of election funds) against practicalities and privacy of the individuals concerned.

79 recommendations – how many will be implemented?

With respect, many of these recommendations will never see the light of legislative day. With some, the proposals just will never be politically realistic (eg recommendation 1, a single system of registration deregistration and regulation of all registered organisations, federal and state). Others are too politically controversial (eg recommendation 60, calling for specific legislation to bar certain named individuals from holding office in any registered organisation for a specified period). With others, the existing law is sufficiently strong to deal with the “mischief” that is identified (eg most of the recommendations relating to union right of entry to premises).

A number of recommendations however may either be implemented, or may well feature in future legislative “rounds”. For example, those recommendations that relate to the establishment and investigative powers of a separate building and construction industry regulator, and those relating to a “registered organisations regulator” separate from the Fair Work Commission are part of the current government’s “double dissolution” strategy, and thus seem likely to be implemented (one way or another). They thus warrant some comment. (In summary, the empirical evidence to justify these two initiatives does not appear to be strong, but nevertheless they appear to be a forthcoming reality which registered organisations need to come to terms with.).

Some of the recommendations seem relatively uncontroversial (eg recommendation 16, requiring the keeping of minute books and supporting papers).

Others are definitely worth serious consideration, in the long term interest of registered organisations – eg those relating to auditors, to guarantee that they be independent and thorough in their work (recommendations 13 to 15), and (possibly) that one relating to appointing a “financial compliance officer” (recommendation 12).

Separate regulator/investigator for the building and construction industry

This is of course a controversial matter. All I would think it appropriate for me to say is two things. First, an examination of the report’s material on this matter (chapter 8 in volume 5) does not present to me a cogent empirical case for the proposal (see pages 424 to 436), despite the Commission’s conclusion that it is justified.

Secondly, the real issue is what investigative powers the relevant agency has – and if it is to be given the compulsory powers that are conferred on regulators such as ASIC and Workcover NSW, then there has to be safeguards and there has to be balance (eg equal resources should be devoted to investigation of employer breaches of industrial and safety laws, as well as to union conduct).

External scrutiny and internal oversight

There is a need for strong and thorough auditing of the financial administration of unions (which the report suggests has not been present in some high profile cases), and for the appointment of a specialist employee (with appropriate protections) to deal with financial compliance and transparency.

And finally, what about employer organisations?

Even though employer organisations were not the focus of the Commission, many of the recommendations in the final report, if implemented, will impact equally on these bodies, as they are governed by the same law that applies to the trade unions.

* Peter Punch is Partner, Workplace Law, with Carroll & O’Dea Lawyers in Sydney, NSW. This article is an edited version of a presentation to the Industrial Relations Society of New South Wales on 12 April 2016.
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