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The Royal Commission into Trade Union Governance and Corruption: A Brave New World

12 August 2014


The Royal Commission into Trade Union Governance and Corruption: A Brave New World

Sina Mostafavi, Senior Associate

The Abbott Government’s Royal Commission into Trade Union Governance and Corruption is in full swing and will result in a brave new world for trade unions and employers.

What is it?

Further to the Coalition’s election promise made prior to the 2013 Federal Election into union “slush funds”, the Government has established the Royal Commission into Trade Union Governance and Corruption (the “Commission”), led by former High Court judge, John Dyson Heydon AC QC (the “Commissioner”).

Terms of reference

The Commission is inquiring into the following:

  1. The governance arrangements of separate entities established by unions or their officers, purportedly for industrial purposes or for the welfare of their members, including so-called “slush funds” (the “Entities”), including a focus on:
    1. how the Entities are financially managed;
    2. whether the Entities are used for an unlawfulpurpose; and
    3. the adequacy of current laws in relation to the:
      1. financial integrity of the Entities; and
      2. accountability of union officers in relation to the use of Entity funds.
  2. Alleged activities of the following regarding setting up or operating Entities:
    1. the Australian Workers’ Union (“AWU”);
    2. the Construction, Forestry, Mining and Energy Union (“CFMEU”);
    3. the Electrical Trades Union (“ETU”);
    4. the Health Services Union (“HSU”);
    5. the Transport Workers Union (“TWU”); and
    6. any other person,association or organisation in respect of which credible allegations of involvement in such activities are made.
  3. The circumstances in which funds are sought from any third parties and paid to the Entities.
  4. The extent to which union members:
    1. are protected from any adverse effects or negative consequences arising from the existence of the Entities;
    2. are informed of the Entities’ existence;
    3. are able to have influence or control of the Entities’ operation; and
    4. have the opportunity to hold union officers accountable for any alleged wrongdoing.
  5. Any conduct which may amount to a breach of any applicable law, regulation or professional standard by any officer of a registered employee association in order to:
    1. procure an advantage for themselves or another person, association or organisation; or
    2. cause a detriment to a person, association or organisation.
  6. Any conduct by union officers responsible for the Entities which may amount to a breach of any applicable law, regulation or professional standard.
  7. Any bribes, secret commissions or other unlawful payments or benefits arising from contracts, arrangements or understandings between unions/ union officers and any other party.
  8. The participation of any persons, associations or organisations other than unions/union officers in relation to any of the above conduct.
  9. The adequacy and effectiveness of existing systems of regulation and law enforcement in dealing with any of the above conduct, including the means of redress available to unions and union members who have suffered a detriment as a result of such conduct.
  10. Any issue or matter reasonably incidental to the above.

How does the Commission operate?

The Heydon Commission has broad terms of reference, with a focus on alleged improper conduct (including the use of “slush funds”) and governance issues associated with unions.

The Heydon Commission is required to prepare its final report in relation to the above by 31 December 2014, however the Government has indicated that this will be subject to the Commissioner’s discretion.

Practice Directions

The Commission has issued a number of practice directions setting out how its hearings will be conducted. Among the procedures set out in those documents is a restriction on cross-examination of witnesses brought before the Commission. Such cross-examination is not automatically permitted, and will only be allowed where (amongst other things):

  • a contradicting witness provides a written statement of evidence, upon which the cros-examination of the Commission’s witness would be based;
  • written grounds for cross-examination of the Commission’s witness is provided in advance; and
  • the contradicting witness is available to be cross-examined.

The effect of the above regime is that in practice cross examination may not take place until weeks or potentially months after the initial examination of the Commission’s witnesses, meaning that ensuing press coverage will in those cases be focused on the evidence obtained by the Commission in the first instance, before any such evidence may be challenged by contradicting witness and/or their legal representative.

Parties who believe they are “substantially and directly interested” in relation to evidence before the Commission have the opportunity to apply for advance warning of such evidence and related documents.

The Commission is empowered to depart from its practice directions where it deems appropriate.

The Commission is not bound by rules of evidence which would otherwise apply in civil and criminal trials, and is able to draw inferences which bodies hearing those trials are not able to draw. Statements made during evidence in the Commission are not admissible in civil or criminal proceedings.

Telecommunications interception powers

In June 2014, the Federal Government granted the Commission the power to intercept and access phone calls and emails, as per similar powers granted to the current Royal Commission into child sex abuse.

Penalties

The law defines a range of criminal conduct in relation to the Commission’s affairs, including:

  • a refusal to attend or enter questions when summoned;
  • intentionally giving false and misleading evidence;
  • failing to produce documents when required; and
  • tampering with, destroying or concealing documents.

The penalties associated with these breaches range from $1000-$20,000, and jail terms of between six months and five years.

What has happened to date?

Pre-hearing

Prior to the commencement of the Commission’s hearings, the Australian Council of Trade Unions (“ACTU”) expressed concern that the Commission would engage in the practice of providing advance release of allegations to the media, as they alleged was done with regard to the Cole Royal Commission into the construction industry, which reported in 2003. The Commission has denied engaging that it engages in these practices.

Preliminary hearing

The Commission held a preliminary hearing in April 2014. At this juncture, the Commissioner noted that while the Commission’s terms of reference were broad in some regards, that these terms rested on “certain assumptions which are not hostile to trade unions”. Rather, the Commissioner noted that the Commission would be enquiring into whether unions were performing their role well and lawfully, and how their performance of this role could be improved.

Counsel assisting the Commission, Jeremy Stoljar SC, emphasised at this juncture that the Commission would be looking at both sides of an alleged slush fund-related transaction, that is, both the union and any facilitation and contributions made to the slush fund by employers.

“The Heydon Commission is required to prepare its final report in relation to the above by 31 December 2014”

AWU hearings

The Commission’s public hearings began in Sydney in May 2014. The Commission focused on the allegations relating to the AWU/Workplace Reform Association matter, involving former AWU leader Bruce Wilson and former AWU official Ralph Blewitt. On this occasion, the Commission departed from its practice directions in relation to cross-examination, and allowed for cross- examination of Mr Blewitt by Mr Wilson’s Counsel.

HSU hearings

The Commission commenced public hearings into the HSU in June 2014, including evidence being obtained from former HSU leader Kathy Jackson.

Among the issues considered by the Commission during these hearings were:

  1. how HSU officials treated whistleblowers;
  2. what duties were owed by union officials to HSU members; and
  3. funding of HSU union elections.

TWU hearings

In June 2014, the Commission commenced its hearings in relation to the TWU. Matters heard to date include:

  • whether a TWU enterprise agreement which provided for the payment of superannuation contributions exclusively to a TWU superannuation fund raised potential conflicts of interest; and
  • alleged contributions by Toll Holdings Ltd to a training company established by the TWU, ostensibly on the basis of ensuring that its 2011 enterprise agreement would be approved. This was allegedly done pursuant to a confidential side deed between Toll and the TWU, which also provided for the TWU to “audit” Toll’s major competitors’ operations, including with regard to wages and other compliance measures.

CFMEU hearings

In July 2014, the Commission commenced its hearings in relation to the CFMEU, examining amongst other things allegations into standover tactics and other corrupt conduct.

Issues papers

The Commission has released three issues papers, respectively:

  1. Noting that it would likely be recommending firmer regulation and scrutiny of unions, including providing for greater protection for whistleblowers, such as the ability for police to be able to receive protected disclosures in relation to alleged corrupt or unlawful behaviour by unions or union officials, including on a confidential or anonymous basis;
  2. Seeking comment as to measures that could be undertaken to improve governance mechanisms and laws relating to union officials’ conduct and accountability; and
  3. In relation to the funding of trade union elections, including a consideration of whether unions and union officials should be allowed to accept contributions from employers, and whether a compulsory register of employer contributions should be maintained.

What is happening next?

Submissions in relation to the Commission’s issues papers closed on 11 July 2014. The ACTU has boycotted this process, arguing that the deadline imposed provided them with insufficient time to consult with their members, and that the issues papers had “predetermined” the issues being dealt with.

Hearing schedules for the last of the five nominated unions, the CEPU, are yet to be announced.

The Commissioner is understood to be eager to meet the required timeframe of 31 December 2014.

What does this mean for your business?

The Commission’s broad terms of reference, and focus on employers as well as unions and union officials, and evidence heard to date, strongly suggest that the Commission will be making findings which will have broad implications for employers across Australia.

A key issue for many employers is in the enterprise bargaining sphere. It is more important than ever to ensure that enterprise bargaining with unions and/or employees involves a proper consideration of whether the matters being negotiated legitimately relate to the employment relationship, rather than being measures put in place to “keep the peace” and/or benefit other bodies, for example the payment of funds to union- affiliated training bodies above prevailing market rates.

While commercial imperatives are likely to increase the temptation for employers to agree to union demands simply for the purposes of getting enterprise agreements across the voting line, it is critical that employers always remember that enterprise agreements, and all dealings with unions be compliant with all applicable legislation, and also able to withstand the “front page test”.

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