Nibbling away at the rorts

Joshua Slocum, famous for being the first sailor to single-handedly sail around the world (in the late 19th century) wrote of the slow but gradual progress his yacht, Spray, made up the east Australian coast. He referred to Spray ‘nibbling away at the miles.’

In a modern day version of slow but purposeful progress, the Commissioner of the Royal Commission into Trade Union Governance and Corruption has delivered his own version of nibbling away at the rorts. Justice Dyson Heydon AC, QC, delivered his report to the Governor-General on 28th December 2015. An odd day, perhaps, given that most Australians prefer to be at the beach at this time, or sailing the east Australian coast, and paying attention to a weighty report that carries 79 recommendations for law reform is not so easy. Nonetheless, the GG is made of sterner stuff and the report is now available to the public. One of the recommendations (#51) gives the Government the necessary ammunition to kill off what has been an unconscionable restriction on employee freedom of choice for the last twenty years. 

‘Choice of fund’ refers to the concept, in law since 1995, that employees have the right to choose the superannuation fund to which their employer must pay contributions required by the Superannuation Guarantee obligations (generally, 9.5% of earnings). However, for any employee employed under a collective agreement, enterprise bargaining agreement, workplace agreement, award etc (ie a collective instrument), choice of fund was not permitted. Instead, the employer was obligated to pay the contributions to the fund or funds named in the agreement. Lo and behold, the funds named were almost without exception what we know as industry funds. The governance of industry funds varies, but the worst examples include egregious cases of seriously questionable behaviour. The funds have half their directors appointed by unions. The withholding of choice is, at best an anachronism, or at worst a rort. Nothing positive can be said for it.

The Commissioner has recommended that this restriction be removed and that even if employed under a collective agreement, the employee shall have a choice as to where the contributions are paid.

This recommendation, if legislated, will be to the benefit of many employees in the community. It will be to the detriment of union officials who have viewed the captive contributions as a means of increasing industrial power for their own ends rather than the retirement savings of their members. The change has been a long time coming. It will give strength to the nibbling process.