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.

*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.

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: 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.

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.

*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.

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.

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.

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.

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.

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.