Error of Law in Royal Commission Submissions on the AWU?

By Associate Professor Jill Murray

Does a union official owe a fiduciary obligation to members of an individual workplace in relation to the process of enterprise bargaining? The Counsel Assisting the Royal Commission into Trade Union Governance and Corruption (hereafter TURC) in his Submission on the AWU (hereafter the Submission) argues that this is the case but there are strong arguments to the contrary.

What is a fiduciary?

Fiduciary obligations are imposed in certain circumstances to ensure that one party acts solely in the interests of another: the archetypal fiduciary is a trustee, who must not without the informed consent of the beneficiary act in conflict with the beneficiary’s interests or make a profit from their role. The duties are strictly applied, so that even if a trustee’s breach improves the position of the beneficiary, they must still account for any personal profit made through their role.

Are union officials fiduciaries?

Courts have held that the federal secretary of a trade union owes fiduciary obligations to the union itself on the grounds that their position is analogous to that of company director, a recognised category of fiduciary. (Allen v Townsend [1977] FCA 10) Craig Thomson was recently found to have breached his fiduciary duty to the union when, as National Secretary, he deployed an HSU staff member to work for his own benefit and not that of the union. (General Manager of Fair Work Commission v Thomson (No 3) [2015] FCA 1001). Thomson’s actions also breached his statutory duties as a union office holder to act with propriety.

What about enterprise bargaining?

People may owe fiduciary obligations in one context but not in another: not all of the duties of a trustee are fiduciary in character, for example. The court will always consider the context in which an alleged breach of fiduciary duty arises before determining whether or not to intervene, even where some aspects of the role in question are recognised as fiduciary in character.

The question is whether or not a union official acting in relation to enterprise bargaining under the federal labour statute is subject to a fiduciary obligation to the individual union members to whom the agreement would apply? The decision in Allen v Townsend notes that there is a difference between the union official’s fiduciary obligation to the organisation and their obligations in relation to the complex representative function of the union:

For the position of federal secretary unusual qualities are required….it is necessary that the federal secretary be a capable negotiator and have sufficient personality to press for advantage for his members when appropriate and to quench the tide of militancy when appropriate. [para 107]

Implicit in this statement is a recognition that the interests and wishes of members may need to be overridden in the interest of the union as a whole and its members, current and future.

The Submission argues that during enterprise bargaining, the role of the union is akin to that of an agent. Characterising unions as agents is problematic (Ryan v Textile Clothing and Footwear Union of Australia [1996] VicRp 67) but there are more compelling arguments against the imposition of fiduciary obligations in bargaining.

The statutory processes of enterprise bargaining themselves militate against the imposition of a fiduciary obligation. Under the Act, any proposed bargain must be agreed to by a majority of the affected workers. It is literally not possible for a union official to adhere to the fiduciary standard in such circumstances. Say one member opposes the making of an agreement, and 99% of the other workers want it implemented immediately: is it a breach of a fiduciary obligation to act in the interests of that single member? If so, then would the official be breaching an obligation to the majority?

Further, the statute permits and encourages concession bargaining: workers are able to give up legally binding conditions of employment provided they are better off over all. It is common for enterprise agreements to strip away award conditions in ways which have a variable impact on individual members, even if all affected are no worse off. For example, trading away shift penalties in exchange for a wage increase may result in a better outcome for day workers than shift workers. Given that Parliament has spoken on the desirability of such bargaining, including such differential outcomes within a single workplace, it is difficult to argue that the union official overseeing such a deal has breached a fiduciary obligation to the shift workers. The Submission does not argue that the AWU breached the statute in relation to this aspect of the impugned agreement.

The reality is that collective labour relations involve pragmatism, strategy and compromise, and the juggling of workplace and union objectives. Union officials cannot control the outcomes of bargaining, which is the art of the possible from the union perspective. This is a world away from the absolute duty of loyalty envisaged in the fiduciary concept. Wrongs may have been committed by the AWU officials examined by the Royal Commission, but fiduciary law is not an appropriate legal lens through which to view their actions.

Dr Jill Murray is an Associate professor at La Trobe Law School.

La Trobe