The Fair Work (Registered Organisations) Amendment Act 2014 (Cth) (ROC Act) was passed on 22 November 2016, introducing better governance and financial accountability of registered organisations (both unions and employer groups). 

Background to the ROC Act

Since 2013 the Federal Government has attempted to pass legislation introducing a Registered Organisations Commission (ROC), an independent watchdog tasked with the role of monitoring and regulating registered organisations (both unions and employer groups). The Bill establishing the ROC, seen as a critical step in improving transparency and oversight of registered organisations and their officials, was rejected twice by the Senate.

In 2014 the Abbott Government announced a Royal Commission into Trade Union Governance and Corruption, tasked specifically with enquiring into the governance arrangements of trade unions. In Volume 5 of the Final Report the Hon. J.D. Heydon AC QC identified a number of problems with the existing regulatory framework. The Final Report commented on the previous ROC bills considered by Parliament and recommended additional law reform options to address some of the governance inadequacies identified.

Earlier this year, the bill for the ROC was one of the triggers for the double-dissolution of Parliament. That bill was re-introduced into the Parliament in August 2016 in the same form as the earlier bills. It was passed by both houses of Parliament on 22 November 2016.

An overview of the key provisions - so what does it mean?

The legislation amends the Fair Work (Registered Organisations) Act 2009 (FW(RO) Act) and the Fair Work Act 2009 (FW Act). The major changes introduced include:

• the establishment of the ROC, to monitor and regulate registered organisations (both unions and employer groups) with enhanced investigation and information gathering powers to carry out this purpose and the transfer of the regulatory functions which currently sit with the General Manager of the Fair Work Commission to the Registered Organisations Commissioner;
• the introduction of new criminal offences for serious breaches of officials' duties and the introduction of new offences in relation to the conduct of the ROC's investigations;
• increased penalties for breaches of the FW(RO) Act, including penalties for breaches of officials' duties to bring those into line with penalties that apply to company officers;
• increased financial accounting and disclosure obligations for registered organisations and their officers to enhance financial accountability and transparency; and requirements relating to the disclosure by officials of material personal interests to the registered organisation's branch or wider organisation; and
• the introduction of broad protections and provisions relating to whistleblowers, including the introduction of criminal offences and the possibility of exemplary damages being awarded for breach of the whistleblower protections.

The key changes are explained in more detail below.

A new watchdog

The legislation introduces the ROC – a new regulator that will assume the investigative and enforcement responsibilities formerly held by the General Manager of the Fair Work Commission in relation to registered organisations and their office holders and officials.

New investigation and enforcement powers have also been introduced to ensure that the ROC has sufficient power to carry out its investigations. These powers have been modelled on those held by ASIC and include the power to:

• require a person to attend and answer questions, including on oath or affirmation;
• conduct questioning in private and to limit the people who are present at the questioning, although the amendments recognises that a person's lawyer can be present at this questioning;
• the power to require a person to produce documents to the ROC;
• the power to apply for a search warrant to enter and search and to seize documents on any premises;
• the power to require a person to tell the ROC where documents can be found and who has the documents, and the power to require a person to tell the ROC what property belongs to the organisation. 

In addition, new offences have been introduced in relation to the ROC's investigations which make it an offence if a person does not attend the ROC and answer questions or does not produce documents when asked to do so. It is now also an offence if a person obstructs the ROC's investigations or conceals documents from it.

Significant new protections have also been introduced for whistleblowers. The new protections:

• extend the class of persons who can make a protected disclosure, and extends to both those within the registered organisation (current or former members, employees or officers) and those outside of the organisation (such as suppliers and those who have contracted with an organisation);
• introduce a broad definition of a reprisal, which includes causing 'any detriment' where a person has, is proposing to, or is suspected of making a protected disclosure; and
• include civil and criminal penalties, and other orders as sanctions for taking reprisals against whistleblowers, such as:
  • orders for exemplary damages, compensation or reinstatement;
  • maximum civil penalties of up to 100 penalty units for an individual (currently $18,000) and 500 penalty units for a body corporate (currently $90,000); 
  • maximum criminal penalties of 120 units (currently $21,600) and / or two years imprisonment.

New criminal offences and tougher penalties for non-compliance with the FW(RO) Act

One of the former significant differences between the regime governing corporate officers under the Corporations Act 2001 (Cth) (Corporations Act) and the regime governing officers of registered organisations was the absence of criminal sanctions for breaches of duties by officials of registered organisations.

The ROC Act has addressed this by reinforcing to officers and employees of registered organisations the importance of complying with their duties under the FW(RO) Act. Its provisions have been modelled on the provisions in the Corporations Act 2001 (Cth) and impose criminal sanctions where:

• an officer recklessly or intentionally dishonestly fails to exercise their duties in good faith in the best interests of the organisation or for a proper purpose;
• an officer or employee uses their position to dishonestly gain an advantage for themselves or cause a detriment to the organisation or is reckless as to whether their use of position will have this effect; or
• an officer or employee uses information obtained in their role with the organisation and uses that information to dishonestly gain an advantage for themselves or cause a detriment to the organisation or is reckless as to whether their use of this information will have this effect.

Penalties for these offences are a maximum of 2,000 penalty units (currently $360,000) and / or 5 years imprisonment.

Penalties for breaches of the civil penalty provisions of the FW(RO) Act have also dramatically increased, particularly those that apply to a breach of duty by an official. Previously the maximum penalty for these breaches was 60 penalty units ($10,800). However, the ROC Act has introduced a tiered system of maximum penalties, which includes:

• first, significant penalties for a serious contravention of the FW(RO) Act. A serious contravention includes a contravention that materially prejudices the interests of the organisation or its members. The maximum penalty for a serious contravention is now 1,200 penalty units for individuals (currently $216,000) or 6,000 penalty units for a body corporate (which is currently $1,080,000); and
• secondly, increased penalties for 'non-serious' contraventions. These penalties have been increased to 100 penalty units for individuals (currently $18,000) or 500 penalty units for a body corporate (which is currently $90,000).

Importantly, the ROC Act has also introduced the ability for the Federal Court to make orders banning an official from holding an office with a registered organisation for a period of time if the officer has breached a civil penalty provision of the FW(RO) Act and if the Federal Court 'is satisfied that the disqualification is justified'. Specific factors the Court will take into account in considering an official's disqualification will develop based on case law. Essentially, only the ROC Commissioner or the General Manager of the Fair Work Commission will have standing to seek a disqualification order.

An increase in financial transparency and accountability

Additional financial accounting and disclosure obligations have been introduced. These obligations include both additional disclosure requirements, additional conflicts of interest measures for officers of registered organisations and a raft of new financial accountability measures.

The additional disclosure obligations include the obligation on:

• officers of registered organisations to disclose to the branch or organisation any remuneration the officer or a related party of the officer receives because of any board positions they hold a consequence of being an officer of a registered organisation.
• officers of registered organisations to disclose to the organisation any material personal interest; and
• organisations to disclose to members the remuneration of the five highest paid officers of the branch and organisation.

Officers of registered organisations will also be required to undertake approved financial training.

On the financial accountability side, organisations will now be required to keep copies of minutes and resolutions of committee of management meetings, will be obliged to report on certain categories of expenditure, including donations to political parties and legal costs, financial reports of organisations are now required to be audited by a 'registered auditor' registered under the FW(RO) Act and auditor rotation policies have been introduced.

Where to from here?

The bill which became the ROC Act was re-introduced in the same form put to Parliament in 2014. This means that a number of the reforms recommended by the Heydon Royal Commission have not yet been picked up. These include the following:

• First, although provisions have been introduced that allow the Federal Court to make orders disqualifying an officer for a period of time, these are limited to circumstances where the official has breached the civil penalty provisions of the FW(RO) Act. The Heydon Royal Commission recommended that the courts should have the ability to ban officials if they have been found to be in contempt of court, if they have engaged in repeated breaches of the FW Act (for example, repeated breaches of the right of entry provisions) or if they are not otherwise a fit and proper person to hold office within a registered organisation. 
• Secondly, recommendations that all payments of corrupting benefits (including secret commissions or facilitation payments) given to or received by officials of registered organisations be banned and criminal offences be put in place for making such payments.
• Thirdly, the recommendation that registered organisations be banned from indemnifying or reimbursing officers for any fines or penalties imposed for breached of the FW(RO) Act or the FW Act.
• Fourthly, the recommendations of the Heydon Royal Commission to bring the duties of officers of registered organisations into line with those of corporate officers. At the moment, the duties of officers of registered organisations are confined to acts done in relation to the financial management of the organisation. This is both vague and uncertain and creates a gap in the obligations of an officer that is not recognised at common law and one which will make any investigation or enforcement by the Commission more complex.

While the ROC Act is an important step in improving governance and accountability of registered organisations, there is still more work still to be done to implement the main recommendations for reform from the Heydon Royal Commission.