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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

The Coalition must heed Heydon’s powerful message

Tuesday, January 05, 2016

The Coalition parties have a history of failing whenever they attempt workplace reform. Yesterday I explained that the Turnbull government is positioning itself for a fall by promoting the Heydon report as being anti-union.

The report isn’t anti-union; it’s anti-corruption. But by focusing on the report as if it is anti-union, the Coalition presumably believes this will give it political advantage. Wrong!

Since 1974 there has been on average a Royal Commission into union corruption every 8 years. There’s always shock at the extent of the exposed corruption. Legislation is proposed, sometimes passed, frequently then repealed or watered down by subsequent Labor governments. More often, unions simply learn to reposition over time. Nothing changes.

This current expose by Heydon is slightly different. What’s been uncovered this time is the end result of two decades of a refocused strategic organising model used by Australian unions.

Adapted from United States union campaigning, the centrally co-ordinated ‘Organising Works’ doesn’t try to organise workers. What unions target is to organise employers. Surprised?

Organising employers has two prongs. First, unions heavy a company or industry. This may be physical (strikes, abuse etc) but as frequently the target is corporate brand damage. Brand damage terrifies large companies. It’s more devious and sophisticated than physical attack.

In the second prong, companies are offered a deal. Problems will go away if the company makes payments to the union. Payments can be cash, deposits into union funds, jobs in companies and so on.

Unions are now businesses. This new revenue stream, certainly in the hundreds of millions of dollars annually, explains why unions have twice as many officials (4000) as they did in 1975 with only half the membership (1.6 million).

Heydon has found this income stream to be heavily corrupted. As a starter he has recommended that 45 individuals and organisations face potential prosecution. The offences include criminal coercion, intimidation, obtaining property and financial advantage by deception, larceny, fraud, false accounting, procuring, aiding and abetting corrupt commissions, breaching officer duties, carrying on a financial service business without a license and more.

Importantly, prosecution recommendations are made against unions, officials and businesses and executives. Big companies are named including Mirvac, John Holland, Downer EDI, Thiess and ACI Glass. The list reaches to the top of corporate Australia.

In recommending corporate prosecution, Heydon is saying that corruption involves two players, the payer and the receiver.

This is where Heydon is different. Prior Royal Commissions have only focused on the receiver (unions). Heydon focuses on both.

But the historical pattern has been that corporates (and Coalition politicians) infer as an excuse that because business people were allegedly forced into paying unions, somehow this is supposed to relieve them of responsibility. This excuse mindset is at the core of the Coalition’s workplace reform failures. Justice Heydon rejects this.

Heydon’s Recommendation 41 calls for legislation “ … making it a criminal offence for an employer to provide, offer or promise to provide any payment or benefit to an employee organisation or its officials”. This is an Australian breakthrough.

Justice Heydon recognises that to minimise the prospects of future corruption, company executives need to be highly aware that any payment or inducement made to a union puts the individual executive at risk of criminal sanction.

But there is more to this ‘iceberg’ of corruption identified by Heydon.

The unions Organising Works (employers) model also offers businesses protection from competitors and competition. This was startlingly revealed in admissions to the Heydon Commission by the transport business Toll that it was paying the transport union TWU to harass Toll’s competitors.

Anti-competition in commercial construction, organised by major companies doing deals with unions, is a dominant reason for Australia having the most expensive construction costs in the world. I detailed this in my submission to the Productivity Commission on construction costs in 2014.

Heydon has recognised the competition corruption in construction. He has recommended strengthening the anti-boycott provisions but left it to the competition regulator, the ACCC, to further explore remedies.

What Justice Heydon has identified is widespread corruption in the Australian business community. Heydon has identified that when Australian businesses and unions get together, the outcome is too frequently corrupt. He has identified how to close loopholes in the law that allow and almost facilitate the corruption. This is the powerful message by Justice Heydon.

Yet the Turnbull Government has chosen to pick only part of that message: corruption in unions. This will backfire on the government.

Tomorrow I will explain what the government should do. 

[First published in Business Spectator, January 2016]

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