Duties placed on officers under the Fair Work (Registered Organisations) Act 2009 (the RO Act) are central to the good contemporary governance and effective operation of organisations.
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They also seek to encourage high standards of accountability of organisations to their members. The duties owed under the RO Act apply in relation to the financial management of the organisation and are called general duties.
General duties extend to all officers
General duties don’t just apply to senior officers but extend to all officers in an organisation. Some of these duties also apply to employees.
You can think of the duties as a minimum standard of conduct for officers and employees of a registered organisation. There may also be duties that must be followed under your rules.
Good governance is the systems and processes that are put in place to reinforce and support the requirements of the legislation. Together the RO Act and good governance work to build a culture of compliance, accountability and transparency.
Care and diligence (section 285)
Officers must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were an officer holding an equivalent position. This obligation is subject to a ‘reasonable judgment’ rule.
The members of the committee of management must exercise care and diligence in dealing with financial matters, including when considering and approving financial reports. If the committee members approve a financial report at the end of a financial year without adequately considering it, and the financial report contains significant errors, they may be liable for a penalty.
To assist officers to fulfil care and diligence, organisations could:
- provide materials well ahead of meetings to allow appropriate time for reading
- encourage questions at meetings or even in advance of meetings
- promote that individual officers are responsible for collective decisions
- provide information and (where appropriate) experts to help officers to understand the decisions they are being asked to make
- ensure all officers are up to date on their financial training including any refreshers
- provide financial report comprehension training.
ASIC v Healey
In the case of ASIC v Healey, the directors of a company called Centro were found to have breached the equivalent duty under the Corporations Act 2001 by approving financial statements that had substantially understated Centro’s short-term liabilities.
The court found that the liabilities omitted from the financial statements were well known to the directors of Centro, or if not, they should have been due to their position as directors.
The court found that if the directors had exercised care and diligence each director would have noticed that short term liabilities of a significant amount were missing and questioned the omission.
This case provides a good example for officers of registered organisations who are responsible for considering financial matters such as the approval of the financial reports.
Good faith and proper purpose (section 286)
Officers must exercise their powers and discharge their duties in good faith for what the officer believes to be the best interests of the organisation, and for a proper purpose.
This involves the subjective question as what the officer believes, and the objective question as to whether the conduct discloses a proper purpose.
To assist officers to act in good faith and purpose, organisations should:
- ensure multiple officers are responsible for signing off purchases
- have standard agenda items in meetings to disclose conflicts of interest
- keep records of who leaves meetings when conflicts are disclosed
- ensure that any large purchases and projects expressly include information of how it furthers the organisation’s interests
- have forms and standard templates for identifying conflicts or risk for big decisions
- have clear policies requiring large decisions to be brought before the Committee of Management
- encourage a speak-up culture.
Fair Work Commission v McGiveron and Burton
In the case of Fair Work Commission v McGiveron and Burton, it was alleged that the officers changed an internal policy concerning redundancy payments to the benefit of one of the officers and purchased luxury vehicles for their own use.
The court found they hadn't adequately disclosed their interest in these matters to the committee of management, including personal benefits that they would receive, and had participated in the decision-making processes in which they had a personal interest. They had therefore breached their duties as officers and were each ordered to pay penalties.
No misuse of position (section 287)
To assist officers to use their financial position properly, organisations could:
- have clear policies around credit card use and organisation spending
- educate officers that personal spending is not allowed on organisation credit cards and enforce policies around repayment if it accidentally occurs
- maintain a register of interests and standing disclosures
- regularly reconcile bank or credit card accounts
- use panels for hiring, pay increases or internal promotion.
Officers and employees mustn't improperly use their position to gain an advantage for themselves or someone else or to cause detriment to the organisation or another person.
Health Services Union v Jackson
In the case of Health Services Union v Jackson, a former National Secretary of a union was found to have used union funds for personal expenditure including travel, food and entertainment, authorised overpayment of her salary, signed and cashed cheques in an unauthorised manner and engaged legal representation for allegations made against her without authorisation.
The court ordered the officer to pay more than $1.4 million in compensation due to multiple breaches of the duty not to misuse position.
The case demonstrates that officers cannot use members’ funds for personal expenditure.
No misuse of information (section 288)
Officers and employees must not misuse information they have obtained as a result of being an officer or employee of an organisation to gain an advantage for themselves. This includes misusing information for someone else, cause detriment to the organisation or another person.