Federal Court imposes penalties on AWU for dishonestly inflating membership

12 August 2020

The Federal Court of Australia today imposed civil penalties against the Australian Workers’ Union (AWU) totalling $148,100 in relation to multiple contraventions of the Fair Work Registered Organisations Act 2009 (RO Act).

The contraventions related to the AWU’s failure to keep an accurate register of members during 2008 to 2013. The Honourable Justice Snaden found that the conduct constituted a serious departure from the important record-keeping standards with which the RO Act requires that all organisations comply.

The contraventions arose out of arrangements in which each of six entities agreed to make payments to the AWU which the AWU accounted for internally as membership revenue, specifically in respect of certain employees or members of those entities. Details of those employees or members were then entered into the AWU’s membership records, often without their knowledge.

In his judgment, Justice Snaden said “Over a period of many years, the Victorian branch of the AWU dishonestly employed the concept of ‘company paid’ membership to artificially inflate its membership ranks.”

The Judgment records that the AWU received 20 payments from six entities totalling in excess of $500,000. He noted that “It appears in some (and perhaps many) cases that the AWU engaged internal protocols to ensure that those who were unwittingly added to its membership register in consequence of those apparently fraudulent endeavours were not, thereafter, alerted to the fact.”

His Honour regarded the conduct “as more serious still in light of the apparently fraudulent documentation that the AWU supplied to many of the entities from which the “company paid” members (or “members”) were sourced and the communication protocols—more accurately, the non-communication protocols—that the evidence suggests were engaged in respect of at least some of those individuals.”

His Honour also found that the AWU “cannot escape sanction for the manner in which it was mismanaged, nor have the sanction that might otherwise be appropriate reduced, simply by pointing out that it was somebody else who was charged with managing it. That is always so in the case of corporate contraveners. Contraventions that are committed through, or with the knowledge or approval of, a corporation’s management are more serious than those effected by agents lower in the chain of command because they tend to reflect managerial complacency or, in the worst cases (as this one is undoubtedly an example), complicity.”

He also observed that the conduct was engaged in deliberately and at the upper echelons of the AWU’s Victorian branch and that “the absence of systemic oversight or accountability—that is to say, systems or processes that guard against incompetence or impropriety—warrant the imposition of penalties more severe than might otherwise apply in respect of the conduct of subordinate agents.”

Ahead of a penalty hearing in December 2019, the AWU admitted that the addition of some 851 non-members to its Register, and its failure to remove more than 1000 unfinancial members from its Register, breached the RO Act.

In imposing the penalties, Justice Snaden noted that “the AWU has taken appropriate steps to address what has occurred and has shown genuine contrition for it.” However he also said that penalties imposed at those levels are "necessary to reflect the seriousness of those contraventions.”

This was the second Federal Court judgment relating to these matters. On 12 November 2019 the Honourable Justice Mortimer delivered reasons for judgment against the AWU’s former Victorian Branch Secretary, Mr Cesar Melhem, arising out of related conduct, ordering Mr Melhem to pay civil penalties totalling $20,590. Click here to read our earlier media statement.

Registered Organisations Commissioner, Mark Bielecki, noted today’s judgment.

“The RO Act outlines the standards of conduct and obligations that registered organisations and their officers must meet. Members of registered organisations rely on their office holders to provide stewardship and oversight of their organisations. Members therefore need to have confidence that organisations and their officers are accountable to them and that decisions are made, and organisations managed, in accordance with their obligations under the RO Act and in the best interests of members,” Mr Bielecki said.

“The conduct identified by the Court had the real potential to disadvantage the very members that the AWU were supposed to protect. The Court noted the importance of it striving to fashion penalties in respect of the AWU’s conduct in the present case that might serve to deter similar conduct in the future, on the part of both the AWU and other organisations that might be minded to replicate it.  This is an important reminder that there are serious consequences for organisations that fail to comply with their obligations under the RO Act, and in their own rules,” he said.

Registered Organisations Commissioner v Australian Workers' Union (No 2) [2020] FCA 1148

Background:

As part of its final report, the Trade Union Royal Commission (TURC) made a number of referrals to the General Manager of the Fair Work Commission (FWC) relating to potentially serious contraventions of the RO Act by the AWU and its former Victorian Branch Secretary Mr Cesar Melhem (the AWU referrals).

On 2 November 2016, the FWC commenced an independent investigation in relation to the AWU referrals. The investigation was transferred to the Registered Organisations Commissioner upon its establishment on 1 May 2017.

Media contact: media@roc.gov.au or 03 9603 0767