"The CFMEU's latest Victorian industry pattern agreement is being marketed by the union as a good deal for businesses and workers. In fact, it is not fair on either. The agreement reportedly includes a doubling of contributions into Incolink, a fund established for the purposes of providing redundancy entitlements to employees. The implementation of appropriate regulatory standards on funds like Incolink, to protect workers and businesses, is long overdue," Australian Industry Group Chief Executive, Innes Willox, said today.
"These days millions of dollars a year passes through Incolink and ends up in the bank accounts of the CFMEU and other organisations represented on Incolink's Board. The contributions by employers into Incolink, and the investment earnings on those contributions, rightly belong to workers, not to the CFMEU or other organisations represented on Incolink's Board. There is a blatant conflict of interest in Board Members of Incolink resolving to transfer funds to the organisations that appointed them to the Board.
"The Royal Commission into Trade Union Governance and Corruption looked at Incolink in detail and, in its final report, identified the following problems with the regulatory framework for such funds:
- The funds are not subject to any mandatory disclosure requirements. For example:
- There is no requirement on worker entitlement funds to disclose the commissions and other payments made by the fund to unions and employer organisations.
- There is no required disclosure of the amounts deducted by the funds by way of fees and charges.
- There is no requirement to explain to workers the circumstances in which they will, or will not, be entitled to a payment from the fund.
- There is no statutory requirement on worker entitlement funds to provide annual reports or accounts to persons with an interest in the fund.
- Entities operating worker entitlement funds are not required to treat workers equally or fairly.
- Nearly all worker entitlement funds distribute the income generated on contributions to unions and employer organisations to be used for purposes they see fit. As stated in the final report: "there is an inherent unfairness in taking contributions paid by employers on behalf of employees, generating substantial income from those contributions, and then distributing the money to other persons in circumstances where many employees will never receive the benefit, either directly or indirectly, of the income generated".
- Most so-called redundancy funds are not limited to making a payment in circumstances of genuine redundancy.
- Although on a proper construction of s.58PB of the Fringe Benefits Tax Assessment Act 1986 (Cth) 'approved worker entitlement funds' are not permitted to distribute income to persons other than to the employers who make contributions and the employees on whose behalf those contributions are made, many 'approved worker entitlement funds' avoid this limitation in practice by treating the income generated in a prior financial year as capital, and they then distribute the capital to industry parties. The Royal Commission described this practice as involving a maladministration of the law.
- The absence of any requirement for one or more independent directors on the board of directors of companies operating worker entitlement funds can lead to significant deadlocks and dysfunctional results.
"The Government's Fair Work Laws Amendment (Proper Use of Worker Benefits) Bill 2019 comprehensively addresses these problems. The Bill needs to be passed by Parliament urgently," said Mr Willox.
