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The ROC’s regulatory role

Driving compliance through regulation

Helping organisations to develop a culture of good governance and voluntary compliance with the RO Act is a priority for the ROC. To do this, we provide education, assistance and advice to organisations, their officers and members, to promote self-regulation and appropriate internal management systems by organisations.

In December 2019 the ROC published its updated and simplified Compliance and Enforcement Policy outlining its approach to compliance.

In the event of accidental or trivial non-compliance by organisations and individuals who try to comply, the ROC’s primary approach will be to provide guidance and assistance, including to work with organisations on the adequacy of their systems to help ensure future compliance. However in more serious cases involving systemic, repeated, opportunistic or deliberate non-compliance, a limited number of other regulatory tools are available to us. Enforcement action is the primary additional tool available to the ROC.

The degree of co-operation by an organisation and actions taken to remedy contravening conduct inform how we progress potential non-compliance. Where a suspected non-compliance issue exists we take a forensic, evidence-based approach to gathering and analysing the relevant facts, to identify the cause, decide the likelihood a contravention has, or contraventions have, occurred (or may occur or reoccur), the degree of seriousness and the likely consequences. We then take a risk-based approach to determine the appropriate regulatory response to non-compliance. The vast majority of the matters we assess, or inquire into, or investigate do not result in litigation. However we will commence court proceedings if, after consideration of all the circumstances, it is warranted and in the public interest.

Inquiries

The Commissioner has the power to make inquiries into whether financial obligations or civil penalty provisions in the RO Act have been contravened by registered organisations. We seek to take a collaborative approach to inquiries and aim to work with registered organisations to ensure compliance is achieved and any harms, so far as is possible, are remedied.

Inquiries initiated and closed under chapter 11, part 4 of the RO Act in 2019–20

No. open as at 30 June 2019

No. commenced during 2019-20

No. concluded during 2019-20

No. open as at 30 June 2020

Inquiries

0

4

1

3

Inquiries under chapter 11, part 4 of the RO Act 1 July 2019 to 30 June 2020

Name

Type*

Commencement date

Issue

Completion date or estimated completion date

Outcome

Master Builders Association of Victoria

s. 330

31 July 2019

Inquiry considering alleged failure to keep records that are required to be retained by organisations

22 May 2020

Inquiry completed

The Australian Workers’ Union, WA Branch

s. 330

31 July 2019

Inquiry considering alleged reprisals relating to a whistleblower disclosure

Estimated completion: by 31 July 2020

Inquiry continuing

Queensland Real Estate Industrial Organisation of Employers

s. 330

14 January 2020

Inquiry considering alleged non-compliance of financial reporting and record keeping obligations and a number of potential breaches of officer’s duties

Estimated completion: by 31 October 2020

Inquiry continuing

Restaurant and Catering Industrial

s. 330

25 February 2020

Inquiry considering alleged non-compliance with record keeping obligations, requirement to retain records and to lodge records with ROC

Estimated completion: by 31 July 2020

Inquiry continuing

*Types: s.330: inquiry as to whether contravention of financial obligations and/or civil penalty provisions

Investigations

If satisfied there are reasonable grounds for doing so, the Commissioner is empowered to conduct investigations into compliance by registered organisations with their financial obligations, or to ascertain whether there has been a breach of a civil penalty provision. The table below provides an overview of investigations that either commenced, concluded or were continuing during 2019–20.

Investigations initiated and closed under chapter 11, part 4 of the RO Act in 2019–20

No. open as at 30 June 2019

No. commenced during 2019–20

No. concluded during 2019–20

No. open as at 30 June 2020

Investigations

7

0

5

2

As at 1 July 2019, the Commissioner was conducting seven investigations (under ss. 331 and 332 of the RO Act) into organisations regarding the alleged contravention of financial and/or civil penalty provisions. During 2019–20, no new investigations were commenced and five were concluded under s. 331. See the table below for details of investigations.

Investigations under chapter 11, part 4 of the RO Act in 2019–20

Name

Type*

Commencement date

Issue

Completion date or estimated completion date

Outcome (as at 30 June 2020)

Construction, Forestry, Maritime, Mining and Energy Union, Mining and Energy Division, Queensland District Branch

s. 331 & 332

14 March 2018

Whether there has been inappropriate credit card usage and loans to officers and employees

Estimate: September 2020

Still under investigation

The Australian Workers’ Union, National Office and Victorian Branch

s. 331

20 October 2017

Alleged unapproved donations

Quashed by order of Court on 26 November 2019

Decision subject to Full Court appeal heard on 29 and 30 June 2020

National Union of Workers, New South Wales Branch

s. 331

13 July 2018

Referral from the TURC. Alleged misappropriation of Branch funds and governance failures

Concluded 7 November 2019

Completed with no further action

Australian Property Services Association

s. 331

9 August 2018

Compliance with financial reporting obligations and officers’ duties

Concluded 16 January 2020

Application for deregistration in process

Clubs Victoria Inc.

s. 331

1 November 2018

Appointment of unregistered auditor

Concluded 11 July 2019

Organisation deregistered

Motor Traders’ Association of NSW

s. 331

5 November 2018

Compliance with financial reporting obligations and officers’ duties

Estimate: November 2020

Still under investigation

Health Services Union Victoria, No. 1 Branch

s. 331

16 January 2019

Whether current or former office holders complied with obligations to act with due care and diligence

Concluded 4 June 2020

Completed with no further action

Investigations: whistleblowers

The Commissioner is required to investigate qualifying protected disclosures made by whistleblowers (s. 337CA). The whistleblower scheme, introduced in May 2017, expanded the categories of people protected when whistle-blowing about potentially unlawful conduct by officers and employees of registered organisations. Criminal penalties also apply for taking a reprisal against a whistleblower.

The ROC co-ordinates the regulatory approach under this scheme across Commonwealth agencies and law enforcement bodies receiving, allocating or investigating whistleblower disclosures under the RO Act. We meet regularly with those agencies to ensure a consistent approach to each aspect of the scheme.

Protected disclosures under chapter 11, part 4A of the RO Act 2019–20

No. open at 30 June 2019

No. opened 1 July 2019 – 30 June 2020

No. closed 1 July 2019 – 30 June 2020 because ineligible disclosure

No. closed – ROC did not consent to allocation

No. allocated to authorised official external to the ROC

No. allocated to the RO Commissioner

No. closed with no investigation conducted

No. closed with investigation completed

No. closed with investigation discontinued

No. open as at 30 June 2020

11

32

10

0

0

24

5

22

1

5

Royal Commission into Trade Union Governance and Corruption

The Final Report of the Royal Commission into Trade Union Governance and Corruption (TURC) was tabled in Parliament in December 2015. It made 30 referrals to the Fair Work Commission (FWC), of which 24 were transferred to the ROC in May 2017. All of these are in progress, or have been completed, save for one, which is in abeyance pending criminal proceedings.

Status summary of referrals from the Royal Commission into Trade Union Governance and Corruption

Determined by the Federal Court

Before the Federal Court

Subject to formal investigation by the ROC/FWC under s. 331 of the RO Act

Closed by the ROC with no further action

In abeyance, pending criminal proceedings

6

7*

0

16

1

*Note: The remaining referrals before the Federal Court relate to a single proceeding against the AWU and Mr Melhem, which were the subject of penalty hearings in 2019. The judgment on penalty against the AWU is currently reserved. The judgment against Mr Melhem was delivered in November 2019.

Enforcing provisions of the RO Act

At the end of an inquiry or investigation, the Commissioner will make a decision on what, if any, enforcement action is considered appropriate. We can pursue a variety of enforcement remedies, depending upon the seriousness and consequences of the misconduct. We will pursue the enforcement remedies best suited to the circumstances of the case and what is sought, or able, to be achieved. We will only commence legal proceedings if there is sufficient evidence or appropriate grounds to do so and it would be in the public interest.

In 2019–20, three penalties were imposed as the result of the ROC’s court actions. This included $445,000 on the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) for 86 contraventions of the RO Act between March 2015 and May 2017, including on four occasions failing to keep accurate lists of officers and office holders and on 82 occasions failing to lodge notifications of changes about offices and office holders within the prescribed time. The CEPU has subsequently filed a notice of appeal against the amount of the penalty imposed by the Federal Court, which is listed for hearing in August 2020.

The Federal Court also imposed civil penalties totalling $157,250 on the Australian Hotels Association. This comprised of $106,500 in respect of the Queensland Branch’s failure on 16 occasions between 2003 and 2016 to lodge prescribed information to enable the conduct of elections and $50,750 in respect of the Queensland Branch’s failure on 17 occasions between 2005 and 2017 to keep accurate records of its list of officers, and on 17 occasions to lodge timely notifications of changes to its list of officers.

As a result of a TURC referral, proceedings against the Australian Workers’ Union (AWU) and the former Victorian Branch Secretary Mr Cesar Melhem were heard in the Federal Court, relating to the AWU’s failure to keep an accurate register of members during the period from 2008 to 2013 – which covered most of the time Mr Melhem was the Victorian Branch Secretary – and involved 851 people who were not members of the union being entered on the register of members, and the failure to remove 2534 unfinancial members from their register. Mr Melhem was ordered to pay $20,590 in November 2019 for failing to exercise his powers and discharge his duties in good faith and in what he believed to be in the best interests of the organisation, and for failing to exercise his powers and discharge his duties with the degree of care and diligence that a reasonable person would exercise if they were in Mr Melhem’s position. A separate penalty hearing against the Australian Workers’ Union was heard in December 2019, and the judgment is currently reserved.

The allegations, orders sought and outcomes (if finalised) of legal action are detailed in the table below.

Alleged contraventions and orders sought under s. 310(1)(a) of the RO Act (completed 2019–20 and still ongoing)

Name

Date

Alleged contraventions

Orders applied for

Date of completion

Outcome

Registered Organisations Commissioner v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [NSD802/2018]

10 May 2018

Failure to keep an accurate record of office holders

Failure to notify changes to records

Declarations, civil penalties and any other order the Court deems appropriate

Ongoing

Judgment ordering a penalty of $445,000 delivered on 27 February 2020. Notice of appeal against amount of penalty imposed by the Court filed by the CEPU listed for hearing in August 2020

Registered Organisations Commissioner v The Australian Workers’ Union & Melhem [VID583/2018]

16 May 2018

Entering on the register of members, without their knowledge, 851 people who were not members and failing to remove 2534 unfinancial members from their register.

Declarations, civil penalties and any other order the Court deems appropriate

Ongoing

Penalty hearing for first respondent heard on 12 December, judgment reserved. Second defendant ordered to pay civil penalty of $20,590 by judgment delivered 12 November 2019

Registered Organisations Commissioner v Australian Hotels Association [VID 1442/2018]

13 November 2018

Failing over an extended period of time to lodge prescribed information to commence elections and failing to notify changes to the office holders relating to Queensland Branch

Declarations, civil penalties and any other order the Court deems appropriate

17 September 2019

Penalty imposed on Australian Hotels Association totaling $157,250

Action taken against the ROC

On 20 October 2017, the ROC commenced an investigation into allegations concerning donations made by The Australian Workers’ Union. By order made on 26 November 2019, the Court quashed the investigation. The decision is under appeal, which was heard by the Full Court of the Federal Court on 29 and 30 June 2020, with judgment reserved.

Service standards

The ROC works to ensure that annual returns, financial reports, elections and auditor registrations are assessed in a timely manner. In 2019–20, all timeliness targets were met or exceeded.

Financial reports

Our service standard for financial reports is that, of those lodged under the RO Act, 95% are assessed for compliance within 40 working days. Assessing a financial report for compliance means that the financial report has been reviewed against a primary review checklist or an advanced review checklist. For the assistance of organisations and their auditors, primary and advanced review checklists are published at www.roc.gov.au.

Performance of financial reports function against timeliness target

Year and agency

Number assessed

Number within KPI

Result

2019-20

363

363

100%

2018-19

370

370

100%

2017-18

369

369

100%

Annual returns

The service standard for annual returns of information required to be lodged under the RO Act is that 95% of those lodged are assessed for compliance within 40 working days. Assessing an annual return for compliance means that it is assessed against the ROC checklist for compliance with the RO Act. For the assistance of organisations, the annual return checklist is published at www.roc.gov.au.

Performance of annual returns function against timeliness target

Year

Number assessed

Number within KPI

Result

2019-20

102

99

97%

2018-19

106

105

99%

2017-18

109

109

100%

Elections

The service standard for the ROC to deal with prescribed information for elections lodged by registered organisations or their branches is that 95% are dealt with within 40 working days. Dealing with prescribed information for elections means that the Commissioner (or Delegate) made arrangements for the conduct of an election, or decided not to make arrangements, or the prescribed information was withdrawn.

Performance of election function against timeliness target

Year

Number dealt with

Number within KPI

Result

2019-20

177

176

99%

2018-19

235

223

95%

2017-18

211

210

99%

Registration of auditors

The service standard for applications for registration by auditors is that 95% are dealt with within 40 working days. Dealing with applications for registration means that the Commissioner (or delegate) registered an auditor, or decided not to register an auditor, or the application was withdrawn.

Performance of the registration of auditors function against timeliness target

Year

Number dealt with

Number within KPI

Result

2019-20

19

19

100%

2018-19

24

24

100%

2017-18

81

80

99%

In addition to meeting all of our timing targets in 2019-20, comparison with previous years shows constant achievement of 100% timeliness for the assessment of financial reports. Dealing with applications for registration of auditors within 40 working days has also remained at 100%. Our ability to meet or improve upon our timing targets means that documents lodged by organisations are promptly assessed and published, ensuring ‘real time’ transparency of lodged information.