The buck stops here: Federal Government enacts corrupting benefits legislation

• Parliament has amended the Fair Work Act 2009 (Cth) to prohibit the giving and receiving of particular benefits intended to influence officers or employees of registered organisations in the performance of their duties and functions.
• Parliament has also prohibited national system employers giving cash and in kind payments to employee organisations (or prohibited beneficiaries of those organisations) which are not the subject of a statutory exemption.
• A breach of a 'corrupting benefits' prohibition is a criminal offence.  The maximum penalties for such offences are very significant and include imprisonment for individuals.
• The corrupting benefits provisions will commence operation on a date to be fixed by Proclamation, which cannot be more than six months from the Bill receiving Royal Assent. 
•  The amendments also require employers and unions to disclose particular benefits arising from a proposed enterprise agreement.  These requirements will apply to proposed enterprise agreements for which the access period begins on or after a date to be fixed by Proclamation.

What you need to do

• Take steps to ensure that any existing and proposed arrangements or transactions with unions, union officials and their affiliated entities do not fall foul of the new corrupting benefits prohibitions.  Given that a failure to comply with the new provisions will give rise to criminal liability and potentially very significant penalties, employers and their employees will need to exercise a high degree of caution in relation to such arrangements and transactions. 
• Identify whether any claims made by your organisation during enterprise bargaining will give rise to an obligation to disclose  to employees who will be covered by the enterprise agreement. 
• Seek clarity from union bargaining representatives, from early on during bargaining, about any disclosable benefits arising from the union's log of claims (such as the use of union-nominated income protection insurance products) and any revisions to those claims. 
•  If your organisation proposes to rollover an existing enterprise agreement, consider whether any of the terms of that agreement are likely to give rise to a disclosure obligation for the employer or a union bargaining representative.

Overview of the Corrupting Benefits Prohibitions

Last night, the Senate passed the Fair Work Amendment (Corrupting Benefits) Bill 2017.

The Bill outlaws the giving, receiving or solicitation of corrupting benefits, and employers giving cash or in kind payments to employee organisations or prohibited beneficiaries of such organisations, in particular circumstances.

Giving, receiving or soliciting a corrupting benefit

The new offence provisions are intended to prevent similar scenarios to those identified in case studies examined by the Royal Commission into Trade Union Governance and Corruption.

Giving a corrupting benefit

A person will commit an offence if he or she dishonestly gives, offers or causes to be provided a benefit to another person with the intention of influencing a registered organisations officer or employee :

• in the performance of his or her duties or functions as an officer or employee
• in the exercise of his or her powers or functions under the Act or the Registered Organisations Act; or
• to give an advantage of any kind in connection with the relevant affairs of the officer or employee, which would not be legitimately due to the accused, a spouse of the accused, an associated entity of the accused or any person having a prescribed connection to the accused (Corrupt Conduct).

Receiving or soliciting a corrupting benefit

A person also commits an offence if he or she dishonestly requests, receives, obtains or agrees to receive or obtain a benefit from a person (the provider) for themselves or another person, with the intention (or the intention that the provider of the benefit believes) that the receipt of the benefit or expectation of the receipt of the benefit will influence a registered organisations officer or employee to engage in Corrupt Conduct.

Dishonesty

The Act defines 'dishonest' to mean dishonest according to the standards of ordinary people, and known by the defendant to be dishonest according to those standards.  It is a matter for the judge or jury to determine whether the defendant has been dishonest.

Actual influence not necessary

For a giving or receiving offence to be proven, it is not necessary that any person actually be influenced, or for the defendant to have intended to influence a particular union officer or employee.

For a receiving offence to be proven, it is also not necessary for the provider of the benefit to actually believe anything.

Impropriety and illegitimate advantage

It is a matter for the trier of fact (i.e. the judge or jury) to determine whether a performance or exercise of duties, functions or powers would be improper, or whether an advantage would not be legitimately due.

However, the Bill makes clear that:

• an advantage can be given in any way, including by doing or not doing something, or causing or influencing another person to do or not do something; and
• in working out whether an advantage would not be legitimately due to a person, you must disregard the value of the advantage, any official tolerance of the advantage or whether the advantage might be (or be perceived to be) customary, necessary or required in the situation.

Employers not to make cash or in kind payments

Section 536F of the Bill makes it a criminal offence for a national system employer (other than an employee organisation) to provide, offer, promise, or cause to be provided a cash or in kind payment to an employee organisation or prohibited beneficiary of the organisation, provided that:

• the employer (or an affiliated person or entity) employs a person who is a member of the employee organisation, or is entitled to be a member; and
• the employee organisation is entitled to represent the industrial interests of the employee.

A cash or in kind payment is a benefit in cash or any other form of money, goods, services, or any other benefit prescribed by the regulations.

A person is a prohibited beneficiary if they are controlled by the organisation, an officer or employee of the organisation, a spouse or entity controlled by such an officer or employee, or a person or entity to whom the organisation or a prohibited beneficiary requests or directs the employer to provide a cash or in kind payment.

It is also an offence for employee organisations and their employees and officers to request, receive, obtain, or agree to receive or obtain a cash or in kind payment for themselves or for other persons if:

• the provider of the benefit is a national system employer (other than an employee organisation); and
• the provider, a spouse or associated entity of the provider, or a person who has a prescribed connection with the provider, employs a person who is, or is entitled to be, a member of the organisation and whose industrial interests the organisation is entitled to represent, unless the payment is an exempt payment (described below).

Based on our experience in relation to the Royal Commission proceedings, and the findings and recommendations of Commissioner Heydon, it is likely that any investigation of an alleged offence under  section 536F will look at the broader circumstances and motivations relating to an employer agreeing to make payments to, or obtain goods and services (such as training) from, trade unions.  Employers should exercise caution before contemplating entering into, or maintaining, any such arrangements with trade unions.

Exempt payments

Importantly, the Bill identifies a range of cash or in kind payments which employers can provide to unions without committing an offence under section 536F. These include:

• the payment of union membership fees deducted from the wages of employees who have agreed in writing to become members of the union
• a payment made at no more than market value for goods and services supplied to the employer in the ordinary course of the union's business
• a benefit of nominal value (no more than $420) associated with travel or hospitality during consultation, negotiation or bargaining
• a token gift, event invitation or similar benefit of nominal value (no more than $420) given in accordance with common courteous practice among employers and organisations; and
• a benefit provided in accordance with an order, judgment or award of a court or tribunal, or in settlement of a matter before the Fair Work Commission or a genuine legal dispute.

Maximum penalties 

Additional disclosure during enterprise bargaining 

The Final Report of the Royal Commission identified that enterprise agreement terms that give rise to financial benefits for registered organisations and their officers and related entities "can give rise to actual and potential conflicts of interest, breaches of fiduciary duty and potential for coercion". The Final Report noted that disclosure was a "basic first step" to avoid such issues and ensure that employees who are asked to vote for a proposed enterprise agreement are properly informed about its effect. 

Disclosure by organisations that are bargaining representatives

The Bill requires disclosure by any organisation bargaining representative for a non-greenfields enterprise agreement who, as a direct or indirect consequence of the operation of one or more terms of the agreement will, or can reasonably be expected to, receive or obtain a section 179 disclosable benefit.  In those circumstances, the organisation must take all reasonable steps to ensure that each employer to be covered by the agreement is given a disclosure document. 

A "section 179 disclosable benefit" is any financial benefit, other than a financial benefit that is payable to an individual as an employee covered by the enterprise agreement, payment of a fee for membership of the organisation or a benefit prescribed by the regulations.

This disclosure document must:

• itemise the beneficial terms
• describe the nature and (as far as reasonably practicable) the amount of each benefit in relation to each beneficiary
• name each beneficiary
• be in accordance with any other requirements prescribed by the regulations; and
• be given in a manner (if any) prescribed by the regulations.

The document must be provided no later than the fourth day of the access period for the agreement.

Upon receipt, the employer must take all reasonable steps to provide a copy of the disclosure document to the relevant employees or to give those employees access to the document for the remainder of the access period.  However, given that the Act mandates an access period of seven days immediately prior to the start of the ballot, we expect that in many instances employers (and therefore employees) will receive section 179 disclosure statements with little time to consider their  contents and the implications of their contents.

Disclosure by employers

The Bill also requires an employer who:

• will be covered by a proposed non-greenfields enterprise agreement; and
• will, or can reasonably be expected to, receive or obtain (directly or indirectly) a section 179A disclosable benefit as a direct or indirect consequence of the operation of one or more terms of the agreement,

to prepare a disclosure document containing the same information as a section 179 disclosure document.

A section 179A disclosable benefit is any financial benefit, other than a financial benefit that is received or obtained in the ordinary course of the employer's business or prescribed by the regulations.

A failure by an employee organisation or employer to provide a disclosure document will constitute a breach of the Act and give rise to civil penalties.  However, it will not impact upon the approval of an enterprise agreement by the Fair Work Commission.

Authors: Steven Amendola, Partner; Dominic Fleeton, Senior Associate; Tess Birch, Graduate; and Geoffrey Giudice, Consultant.