Branch dishonestly inflated its membership by adding hundreds of non-members to its register

Case Name

Registered Organisations Commissioner v Australian Workers’ Union (No 2) [2020] FCA 1148 External link (opens in new window)

What were the issues?

A branch of a registered organisation took payments from employers that it dishonestly used as membership fees to add hundreds of employees to its register of members (in many cases without the employees’ knowledge).

The branch did not remove over 1,000 members from its register who had not paid membership fees for more than three years.

Sections 230 and 172 of the Fair Work (Registered Organisations) Act 2009 (the RO Act) require organisations to maintain up-to-date and accurate records of their members. The organisation admitted it had breached these sections.

What happened?

The Victorian Branch of the Australian Workers’ Union (AWU) artificially inflated its membership numbers by adding 851 non-members to its register. It did this for over five years by dishonestly using ‘company paid’ memberships.

The Branch added lists of employees from six employers or associations to its register of members. Those employees had not applied to join, and some were also added without the knowledge of the employer or association. The Branch hid the true nature of many of the transactions with fraudulent invoices for services that were often not provided. The Court described this as ‘apparently fraudulent endeavours’. The Branch received payments exceeding $500,000 from the six employers or associations which the Branch improperly treated as membership revenue.

The Branch intentionally did not tell the people involuntarily added to its membership register that they had been made members. Rather, the Branch deliberately excluded them from receiving correspondence. This meant that many of the members falsely added to the register never received a membership card and did not know that they were enrolled as members.

The AWU admitted that the Branch had failed to keep an accurate and up-to-date register of members as was required by the RO Act.

The AWU also admitted that the Branch had failed to remove from its register the names of an additional 1,022 people who had not paid any membership fees to the AWU in over three years. The RO Act requires organisations remove from their register, within 12 months, the names of any members who have been unfinancial for the previous two years.

What can organisations learn from this?

Organisations must keep an accurate and up-to-date register of members and ensure they add to the register only the names of people who:

have applied in writing and
are entitled to join the organisation.

There are corrupting benefits sections in the Fair Work Act 2009. Organisations must be aware of the risks associated with accepting payments from employers, which in some circumstances could give rise to civil or criminal penalties under the corrupting benefits provisions.

Organisations should have governance processes that ensure systemic oversight and accountability by senior office holders for the proper discharge of their management duties.

Organisations must also remove from their register, within 12 months, the names of members who have not paid their membership fees for the previous two years.

What did the judge say?

The Honourable Justice Snaden described (at [95]) the Branch’s conduct as ‘a serious departure from the important record-keeping standards’ with which all organisations are required to comply which:

… qualifies 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.

In accepting the Commissioner’s claim that the conduct very significantly undermined the integrity of the AWU’s membership register, the Judge found (at [107]) that:

… the undermining of the AWU’s Membership Register was significant because it was effected over a long period of time and involved many hundreds of people.

In rejecting the AWU’s argument that it was the victim of misconduct by the former Victorian Branch Secretary, who it argued should bear the bulk of the Court’s disapproval, the Judge stated (at [101]):

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... 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.

What was the outcome and the penalty?

Justice Snaden awarded a total penalty against the AWU of $148,100 for its breaches relating to the improper addition of 851 non-members to its register of members and its failures to remove 1,022 unfinancial members from the register.

In an earlier related decision, the Honourable Justice Mortimer had awarded a civil penalty of $20,950 against the AWU’s former Victorian Branch Secretary in respect of their involvement in the AWU’s conduct.

Court reference

VID 583 of 2018

Date of final orders

12 August 2020