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Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model

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Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model JOBNAME: No Job Name PAGE: 1 SESS: 1 OUTPUT: Thu Jul 17 11:41:04 2003 /journals/journal/ajll/vol13/07−00224 Trade Union Regulation and the Accountability of Union Office-Holders: Examining the Corporate Model Anthony Forsyth* Australian trade unions have traditionally been subjected to high levels of legal regulation. This has resulted in the development of a substantial body of federal law imposing standards of accountability on unions, and regulating the conduct of their officials. In recent years, the federal government has suggested that unions should be subjected to further regulation. In particular, the government has proposed that new accountability measures borrowed from corporations law should be imposed on unions. This article examines the government’s proposals, focussing on those that would fix union officials with fiduciary and other duties similar to those applying to company directors. The conclusion is reached that the many differences between unions and companies — in terms of the reasons they exist, the purposes they serve, the interests created in their members and the role and functions of their managers — are such that the imposition of a corporate model of regulation on trade unions is inherently flawed. For this and other reasons, including the decline of the arbitration system and the statutory support it provided to unions, it is argued no justification can be made out for the government’s proposals. Introduction In recent years, Australian trade unions have been confronted with a series of legislative changes, at both state and federal level, which have challenged their traditional role and influence in the workplace. For example, laws have been introduced with the aim of dismantling some of the pillars of ‘union security’ (such as preference clauses in awards), and to provide for ‘voluntary unionism’ or ‘freedom of association’.1 These changes have usually been implemented as part of ‘reform packages’ that have fundamentally re-shaped * Centre for Employment and Labour Relations Law, The University of Melbourne. This article emanates from a research project I conducted between July and December 1999, which was jointly sponsored by the Centre and my then employer, the Transport Workers’ Union of Australia (Vic/Tas branch). I am extremely grateful to the Branch Secretary, Bill Noonan and the Branch Committee of Management of the TWU for allowing me to undertake this research. I also wish to thank those who, in one way or another, assisted me with the research project including Prof Richard Mitchell (who supervised the research), Helen Bird (who provided invaluable assistance on the corporate law aspects of the research), Prof Keith Ewing, Justice Peter Gray, Prof Ron McCallum, Linda Rubinstein and Susan Zeitz. The comments of the Journal’s anonymous referee were also appreciated. 1 See, eg, R Naughton, ‘Sailing into Uncharted Seas: The Role of Unions under the Workplace Relations Act 1996 (Cth)’ (1997) 10 AJLL 112; M Otlowski, ‘The Industrial Relations Amendment (Enterprise Agreements and Workplace Freedom) Act 1992 (Tas)’ (1994) 7 AJLL 77 at 86-8; R J Owens, ‘Legislating for Change: The Industrial and Employee Relations Act 1994 (SA)’ (1995) 8 AJLL 137 at 150-1; and A Coulthard, ‘Workplace Relations Act 1997 (Qld) and Industrial Organisations Act 1997 (Qld) — Workplace Bargaining and Freedom of Choice’ (1998) 11 AJLL 120 at 127. 1 JOBNAME: No Job Name PAGE: 2 SESS: 1 OUTPUT: Thu Jul 17 11:41:04 2003 /journals/journal/ajll/vol13/07−00224 2 (2000) 13 Australian Journal of Labour Law Australia’s industrial laws and institutions, primarily by weakening (or altogether abolishing) long-standing conciliation and arbitration systems and ousting award regulation of terms and conditions of employment in favour of individual work agreements, with unions being sidelined in these new bargaining arrangements.2 A feature of this process that has received little attention to date is the extent to which it has also involved increased legal regulation of the internal affairs of unions, and the imposition on unions of standards of accountability borrowed from laws regulating corporations. This has been the effect of legislative changes introduced in a number of Australian states in the last few years. These state laws, and recent proposals by the federal government to adopt a similar approach, invite renewed consideration of the nature and extent of trade union regulation in Australia. The notion that unions should be regulated in the same way as companies appears to be based on the premise that they are similar types of organisations. In this article I wish to question that premise, and consider whether the ‘corporate model’ of regulation is really suitable for unions. In this context, I will focus in particular on the legal duties imposed on union office-holders. Before doing so, it is first necessary to consider how unions have traditionally been regulated in Australia, and the rationale for such regulation. The Historical Context: Trade Union Regulation and the Arbitration System From the commencement of the federal conciliation and arbitration system in 1904, Australian unions have been subjected to a much higher degree of state regulation of their affairs than their counterparts in comparable overseas countries.3 The types of legal controls imposed on unions over the course of the last century or so have included: regulation of the scope and content of union rules; extensive requirements to keep and lodge accounts and records; measures to ensure accountability of union leaders to their members (such as provision for the striking down of union rules that are considered ‘oppressive, unreasonable or unjust’, and allowing members to make application to a court for observance of the rules); provisions regulating the conduct of union elections (including supervisory powers for the courts through ‘election inquiries’) and union amalgamations; and the capacity for unions to be deregistered in certain circumstances.4 However, unions have traditionally accepted this extensive level of regulation as the price to be paid for the substantial benefits that they have obtained from participation in the formal industrial relations framework. 2 See M Vranken, ‘Demise of the Australasian Model of Labour Law in the 1990s’ (1994) 16 Comparative Labor Law Journal 1; and A Coulthard, ‘The Individualisation of Australian Labour Law’ (1997) 13 International Journal of Comparative Labour Law and Industrial Relations 95. 3 RC McCallum, ‘Federal Controls Upon Trade Unions: The Australian Enigma’ in Changing Industrial Law, D Rawson and C Fisher (Eds), Croom Helm, Sydney, 1984, pp 174-5, 194. 4 For a detailed account of the development of these and other legal controls on Australian unions between 1904 and 1983 see McCallum, above n 3, at pp 177-94. See also A Boulton, ‘Government Regulation of the Internal Affairs of Unions’ in Power, Conflict and Control in Australian Trade Unions, K Cole (Ed), Penguin Books, Ringwood, 1982, pp 216-36. JOBNAME: No Job Name PAGE: 3 SESS: 1 OUTPUT: Thu Jul 17 11:41:04 2003 /journals/journal/ajll/vol13/07−00224 Trade Union Regulation and the Accountability of Union Office-Holders 3 Australia’s federal arbitration system, from its inception, promoted and encouraged unions5 and unionism in a number of ways. Once registered under the federal statute, unions could force employers into either negotiation or the making of an award in settlement of a log of claims, giving unions a de facto right of recognition. Registered unions also obtained corporate legal personality, exclusive representational rights over all workers within their area of constitutional coverage, rights of ‘preference’ for their members in respect of employment and other matters (effectively, a form of compulsory unionism), and the legal right to enter employers’ premises and inspect records to ensure compliance with awards and other industrial instruments.6 While ‘(T)he founders of compulsory arbitration supported the participation of unions in bargaining and awards because they believed that the protection and representation of workers’ interests could only be achieved on a collective basis’,7 they also considered it necessary to subject unions to extensive legal regulation.8 If unions were to enjoy rights and privileges under the system, they would also have to accept the imposition of legal measures in the public interest aimed at ensuring that they remained democratic and properly managed, and did not abuse their power.9 However it has been suggested that, despite the high level of state interference in their affairs, the considerable legal and institutional support unions obtained from the arbitration system contributed greatly to the growth and organisational security of the Australian trade union movement for much of the twentieth century.10 Current Federal Law on Union Accountability and the Duties of Union Office-Holders An important dimension of the legal regulation of Australian unions since the commencement of the arbitration system has been the development of a 5 In fact it was for many years a principal object of the federal industrial statute to ‘encourage the organisation of representative bodies of employers and employees’: Conciliation and Arbitration Act 1904 (Cth) s 2. Mills and Sorrell suggest that the encouragement of employers’ organisations was a ‘lesser’ purpose of the federal legislation than the encouragement of unions, while noting there had been early judicial acknowledgement (in Federated Engine Drivers and Firemen’s Assn v BHP Co Ltd (1911) 5 CAR 9) that ‘the arbitration system depends on such organisations’: CP Mills and GH Sorrell, Federal Industrial Law, 5th ed, Butterworths, Sydney, 1974, p 15. 6 The benefits and privileges obtained by registered unions under the arbitration system are explored in greater detail in A Frazer, ‘Trade Unions under Compulsory Arbitration and Enterprise Bargaining: A Historical Perspective’ in Enterprise Bargaining, Trade Unions and the Law, P Ronfeldt and R McCallum (Eds), The Federation Press, Sydney, pp 60-5. 7 Above n 6, p 80.
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