20 June 2011

Enterprise agreement's age-based redundancy benefits fail Fair Work Act's discrimination test

Enterprise agreements cannot contain discriminatory terms – but what is discriminatory? Fair Work Australia has held that age-based redundancy benefits breach the Fair Work Act's ban on discriminatory terms, in a decision which could have important implications not just for similar terms but any term which generates differential treatment (Australian Catholic University Limited T/A Australian Catholic University [2011] FWA 3693).

The redundancy benefits in the proposed enterprise agreement

The employer, the Australian Catholic University, applied for approval of an enterprise agreement which set out generous redundancy benefits for all employees except for those "whose employment proceeded beyond staff member’s normal retirement date as defined by the staff member’s superannuation fund". Those employees would receive lesser benefits.

These sorts of terms are not unusual in industrial agreements, and the Australian Industrial Relations Commission (AIRC) considered several of them over the years, generally not finding any problem with them.

In this case, the unions contended that this term fell foul of the Fair Work Act's ban on discriminatory terms in section 195.

What is a discriminatory term?

"Discrimination" isn't defined in the Fair Work Act, and there is a question as to whether it is limited to direct discrimination, or extends to indirect discrimination.

Fair Work Australia in this case decided that it did extend to terms that are indirectly discriminatory as well as to those that are directly discriminatory.

Is this term discriminatory?

As noted above, there have been several decisions which have found these terms to be a reasonable way to limit the windfall gains that an employee close to retirement age might gain upon redundancy. Why weren't they followed in this case?

The reason ultimately comes down to context. All of these decisions were made at a time that compulsory retirement was relatively common. That position has changed. In addition, the term in this enterprise agreement was not a redundancy cap of the sort the AIRC had considered.

Fair Work Australia found that, in the context of the more generous benefits provided to other employees, this term discriminates against employees who are reaching or who have passed their normal retirement date because of, or for reasons including, the employee’s age.

It considered that this was a case of direct discrimination, but it could be indirect too if "normal retirement date" is not properly to be seen as a reference to age. This is because only older employees can have reached their “normal retirement date”.

Without any evidence that these employees would be able to access their superannuation while working past their "normal retirement date", there was no issue of windfall either.

What does this mean for employers?

First, the assumption that these terms are not discriminatory is wrong. Any such terms in an enterprise agreement should be carefully scrutinised in the light of this decision. This will be important for employers negotiating any new enterprise agreement. Employers that already have such terms in their enterprise agreement should seek further advice as to what impact this decision may have.

Secondly, the expansive meaning given to "discriminatory" means that a greater range of terms might fall foul of section 195.

Lastly, it should be borne in mind that discriminatory terms in an enterprise agreement can otherwise be potentially challenged under anti-discrimination law. The Australian Human Rights Commission is able to refer complaints of discriminatory enterprise agreements to Fair Work Australia and if Fair Work Australia considers that an enterprise agreement contains discriminatory terms in contravention of the Age Discrimination Act 2004 it must take steps to vary the agreement to address the discriminatory content.

 

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