Government cracks down on secret company payments to unions

The government has announced legislation to ban secret payments between employers and unions, with companies facing criminal penalties of up to A$4.5 million for breaches when the payment could have a corrupting influence.

While payments for “genuine” purposes will be permitted, they will have to be disclosed.

The crackdown was announced by Prime Minister Malcolm Turnbull and Employment Minister Michaelia Cash. Meanwhile the opposition continued to ramp up its campaign against the government over penalty rates, with Bill Shorten introducing a private member’s bill to protect them.

The government will make a written submission this week to the Fair Work Commission’s consideration of the transitional arrangements for introducing its cut to Sunday penalty rates. It will have a hearing on the arrangements in early May.

Turnbull and Cash challenged Shorten to support the government’s legislation, to be introduced on Wednesday. Cash said it should be “relatively uncontroversial” – it was a test for Shorten and Labor.

The Australian Workers’ Union under Shorten received secret employer payments, stories about which were widely aired at the Heydon royal commission into trade unions. The commission recommended a ban on payments.

Turnbull told a news conference that during the royal commission, “Australians were horrified to see the extent of secret payments made by employers, big business very often, to trade unions, and in particular the Australian Workers Union”.

These had very often been in circumstances where, in an industrial agreement, the union had agreed to trade away workers’ entitlements, Turnbull said.

Under the proposed legislation, those who make, receive, solicit or offer payments or benefits intended to corrupt a union official will face up to ten years jail, and fines of up to A$900,000 for an individual or A$4.5 million for a company.

Penalties for payments or benefits other than specified legitimate payments – such as genuine membership fees – will be two years jail, up to a $90,000 fine for an individual or $450,000 for a company or union.

The royal commission said, on the basis of case studies, that “the existing criminal laws do not appear to operate as much of a deterrent to employers giving and union official taking bribes, secret commissions and other unlawful payments, particularly in the building and construction industry”.

Turnbull and Cash stressed that penalties would apply equally to employers and unions. “The person offering or making the benefit will be subject to the same penalties as the person soliciting or receiving it,” they said in a statement.

Cash said transparency was vital. Where legitimate payments were being made in the negotiation of an enterprise agreement, the legislation would require disclosure so employees would know about them when they voted on the agreement.

“If money changes hands between an employer and a union, both parties have an obligation to honestly declare what has occurred and why,” she said.

Cash rejected the suggestion that corruption was already covered under the existing law.

She said the royal commission had noted that across the country there were different laws in relation to bribery. “There is no consistency and it is difficult to prove. Commissioner Heydon recommended a Commonwealth offence be introduced, and an offence that outlawed all payments, full stop, unless they are legitimate. It is what we have done, so you have consistency across the board.”

She said that for a service payment to be legitimate, it would have to be shown that it was a genuine service. For example, for a payment into a safety training fund, it would need to be shown not only that a program was undertaken, but also that the service was charged at a market rate.

Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.