22 Dec 2016

Skeletons in the cupboard: Australian Human Rights Commission finds drug conviction sacking discriminatory

By Nathan Moy and Ben Kelly

If you want to take an employee's criminal record into account, you must be able to show why that's part of the inherent requirements of the job.

A recent Australian Human Rights Commission (AHRC) decision confirms that employers should exercise caution when relying on an employee’s criminal convictions for disciplinary proceedings.

Data#3 Ltd terminated the employment of Mr AW, an IT Solution Specialist, after the company discovered he had a criminal record relating to drugs.

After investigating a complaint by Mr AW, the AHRC found that Data#3 Ltd discriminated against Mr AW on the basis of his criminal record when it terminated his employment. While Data#3 Ltd’s conduct was not unlawful, it did breach his human rights — namely, Data #3 Ltd took into account his criminal record when it wasn’t relevant to the inherent requirements of his job.

The AHRC made a number of recommendations to Data#3 Ltd, including that it review its policies, provide training to staff, and pay compensation to Mr AW.

Data#3 Ltd declined to follow the AHRC recommendations. Although it was open to the company to do so, the AHRC decision highlights the potential issues that employers may face in making decisions based on an employee’s criminal record — including the potential for reputational risk in being named by the AHRC in a public report.

The proceedings before the AHRC

Mr AW was an IT Solution Specialist with Data#3 Ltd.

Data#3 terminated Mr AW's employment in 2014 after discovering he had been convicted for selling an illicit drug in New Zealand in 2011.

Mr AW was still on probation when Data#3 terminated his employment.

Mr AW made a complaint to the AHRC. The AHRC dealt with Mr AW's complaint through its power to inquire into workplace discrimination under the Australian Human Rights Commission Act 1986 (Cth) (AHRC Act)).

The focus of the AHRC’s investigation was whether Data#3 Ltd had discriminated against Mr AW by taking into account his criminal history when terminating his employment, which under the AHRC legislation is deemed to be discriminatory because it "has the effect of nullifying or impairing equality of opportunity or treatment in employment or occupation”

The most controversial issue in the inquiry was whether the decision to terminate on the basis of Mr AW's criminal record was based on the inherent requirements of Mr AW's position. If so, Data#3 Ltd would have been able to claim this exemption, which allows employers to rely on the inherent requirements of the job to take matters such as criminal history into account.

Data#3 Ltd argued that:

  • liaising with customers, and integrity, trust and credibility were inherent requirements of Mr AW's position. Data#3 Ltd submitted that Mr AW’s drug conviction meant he didn’t satisfy those requirements;
  • the ability to obtain a security clearance was an inherent requirement of the job, and Mr AW wouldn’t be able to obtain the clearance because of his drug conviction.

AHRC's finding

The AHRC found that Data#3 discriminated against Mr AW on the basis of his criminal record.

In summary, the AHRC's reasons were:

  • The decision to terminate Mr AW's employment was an "exclusion" from employment, and therefore discriminatory.
  • The decision was made "on the basis of" Mr AW's criminal record (even though his criminal record was not the sole reason for termination).
  • The decision impaired Mr AW's equality of opportunity and treatment in employment.
  • The decision was not based on the inherent requirements of Mr AW's position.

In making those findings the AHRC accepted that integrity, trust and credibility were inherent requirements of Mr AW’s position, as well as the ability for him to liaise with customers.

The AHRC did not accept, however, that the ability to obtain a security clearance was an inherent requirement. In reaching this conclusion, the AHRC noted:

  • The fact that Data#3's clients (for example, a Federal or State Government) may potentially require a security clearance does not mean that a security clearance is an inherent requirement for every person holding Mr AW's position.
  • An inherent requirement must be an "essential" or a "defining" characteristic. That the requirement to have a security clearance varies from client to client indicates that it is not an inherent requirement.
  • An inherent requirement must be "specific and definable". Data#3 did not specify what is required to pass a security clearance and it was unclear whether Mr AW's criminal record would prevent him from obtaining a security clearance.
  • There was no reference in the employment contract or position description to a requirement that Mr AW pass a security clearance or police check.

The AHRC concluded that there was not a sufficiently close connection between the reason for termination and the inherent requirements that he liaise with clients and demonstrate integrity, trust and credibility.

In reaching that conclusion, the AHRC took into account the mitigating factors set out in the sentencing judge's remarks, including that there was no significant risk of reoffending, the offending was not for financial gain and Mr AW's clients and colleagues attested to his technical skill, honesty, reliability and trustworthiness.

Key takeaway for dealing with employees with a criminal record

While the AHRC's decisions are not legally binding, a finding that an employer has breached an employee's human rights can cause reputational damage. In particular, if the AHRC cannot settle a complaint where it considers a person’s human rights have been breached, it is bound to make a public report on its findings.

Proceedings before the AHRC can also be time-consuming and resource intensive.

Some States also make it unlawful for employers to take into account spent criminal convictions, which may attract liability for compensation.

Employers who intend to take into account the criminal records of potential employees should:

  • have clear policies on discrimination and train HR / management on discrimination laws and processes;
  • tie considerations of criminal history to the inherent requirements of the job. The link must be clearly demonstrated by reference to what the employee is required to do, and their position in the organisation;
  • clearly indicate how a criminal record is relevant to the inherent requirements of a job when they advertise the position; and
  • include the inherent requirements of the job in the employment contract (eg. if a security clearance is required).


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.