Parliament passes Corrupting Benefits Legislation and preserves Building Code

After agreeing to an array of amendments from Labor and cross-bench Senators, the Government last week secured passage of the Fair Work Amendment (Corrupting Benefits) Bill 2017 (Bill) through Federal Parliament. 

Also last week, the Senate voted down a Labor motion to disallow the Code for the Tendering and Performance of Building Work 2016 (Code), which would have generated considerable uncertainty for the construction industry ahead of the 1 September 2017 deadline for enterprise agreements to be Code-compliant.

The Fair Work Amendment (Corrupting Benefits) Bill 2017

The Bill implements recommendations of the Royal Commission into Trade Union Governance and Corruption aimed at prohibiting ‘sweetheart deals’ between unions and employers, including enterprise agreements under which some unions obtained organisational benefits while agreeing to outcomes that were detrimental to employees.[1] The Bill does this by introducing:

• a range of criminal offences relating to various types of ‘corrupting benefits’ under new Part 3-7 of the Fair Work Act 2009 (Cth) (FW Act); and
• new requirements for employers and unions to disclose to employees any ‘beneficial terms’ (for a union) under a proposed enterprise agreement.

Corrupting Benefits Offences

The new criminal offences include the dishonest giving, receiving or soliciting of a corrupt benefit. This includes a benefit with the intention of influencing an officer or employee of a registered organisation (i.e. union or employer association) in the exercise of their functions, or to gain an advantage for the person providing the benefit.

Given the significant proposed penalties for this new offence,[2] concerns had been raised (e.g. by Senator David Leyonhjelm) that it would be a strict liability offence. The Government agreed to amendments in the Senate requiring addition of the element of dishonesty to establish commission of an offence.

The other main type of criminal offence introduced by the Bill prohibits an employer from making a cash or in kind payment to a union (or other prohibited beneficiary), where the employer employs members of the relevant union. Exclusions would apply in relation to payments such as deductions of union membership fees, tax deductible gifts and market value payments for supply of goods or services.

Organisations including the Australian Industry Group had suggested that certain legitimate payments or benefits provided by employers to union officials could be caught by this offence, e.g. meals or gifts related to attendance at industry events. In response, the Government moved amendments to exempt token gifts of up to $420 in value from liability for the new offence, along with travel/hospitality payments associated with consultation or bargaining up to the same value.

Disclosure Requirements

Under changes introduced by the Bill, a union bargaining representative must take all reasonable steps to provide each employer to be covered by an enterprise agreement with a document outlining any beneficial terms in the agreement (i.e. terms giving the union a direct or indirect financial benefit).

That document must be given to the employer no later than the fourth day of the seven-day access period prior to the vote on the proposed agreement. At that point, the employer must provide employees with the document and further information about any beneficial terms, so the employees are informed prior to voting on the proposed agreement.

What do the changes mean for employers?

The Bill will take effect on a date to be proclaimed (but no more than six months from Royal Assent).

In preparation for commencement of the new legislation, employers should:

• carefully consider whether any arrangements they currently have in place with unions (e.g. provision of direct or indirect benefits or payments) could come within any of the new criminal offences, or whether an exclusion will apply; and
• prepare for the impact of the new disclosure requirements on the process for negotiating enterprise agreements. Both employer and union claims in bargaining negotiations will need to be assessed to determine whether disclosure is required. As disclosure and provision of information to employees about any proposed union benefits must occur during the seven-day access period before the vote, this must be factored into existing processes utilised to meet the agreement approval requirements under the FW Act.

The Code for the Tendering and Performance of Building Work 2016

The Code was introduced in December 2016 under the Building and Construction Industry (Improving Productivity) Act 2016 (Cth). Together, these reforms are intended by the Coalition Government to ‘restore the rule of law’ in the Australian construction industry.[3]

The Code specifies requirements that must be met by companies wishing to be eligible to tender for and be awarded Commonwealth-funded building work. These requirements include detailed restrictions on the content of enterprise agreements, aimed at ensuring that these agreements do not impede workplace efficiency or provide various forms of support for building industry unions.

Under amendments to the Code in February 2017, Code-covered entities must have in place enterprise agreements which are fully compliant with the Code by 1 September 2017 (subject to detailed transitional rules).[4]

Last week, the Labor Opposition attempted to move for the disallowance of the Code (which is a legislative instrument) in the Senate. However, cross-bench senators (One Nation, Nick Xenophon Team and Senators Bernardi, Leyonhjelm and Gighuhi) supported the Government in defeating the disallowance motion.

In the Senate debate, Senator Xenophon stated that, as a general principle, one industry should not be singled out for separate regulation. However, the many court findings of unlawful conduct by the Construction, Forestry, Mining and Energy Union (CFMEU) necessitated intervention to drive cultural change:

‘If Commonwealth money is involved on [building] sites, then it is reasonable to expect a reasonable standard of behaviour. … The conduct and the behaviour has not changed; therefore, the building code should not change.’[5]

What does this mean for employers?

The defeat of the Code disallowance motion means that building industry employers should proceed with efforts to put in place Code-compliant enterprise agreements ahead of the 1 September deadline.

This requires variation or termination of existing agreements in a way that meets the requirements of the FW Act, including:

• obtaining approval by a valid majority of employees;
• taking into account the views of any unions covered by an agreement; and
• approval by the Fair Work Commission.

Given the tight time-frame, employers will need to move quickly in order to remain Code-compliant from 1 September 2017.

Assessment of proposed agreement variations or new agreements by the Australian Building and Construction Commission must also be factored into this process.