The Fair Work Act 2009 (Cth) requires that before approving an enterprise agreement, the Fair Work Commission must ensure that the agreement does not include unlawful terms, which includes discriminatory terms. Section 195 of the Act states that a discriminatory term is a term that "discriminates" against an employee because of a protected attribute, including their race, colour, sex, sexual orientation age, family or carer's responsibility or religion.
The word "discriminates" is not defined in the Act and it is unclear whether "discriminates" means only direct discrimination or also includes indirect discrimination. The former meaning to treat people unfavourably by reference to a protected attribute and the latter meaning to impose a condition or requirement, that despite appearing facially neutral, disadvantages people with a particular attribute and is not reasonable in the circumstances.
The Fair Work Commission, in Application by Metropolitan Fire and Emergency Services Board  FWC 106, has recently considered this issue and found that terms in a proposed enterprise agreement which indirectly discriminated against women and those with family and carer's responsibilities did not provide a basis to refuse to approve the agreement.
Intervenors contest agreement approval
In April 2018 the Metropolitan Fire and Emergency Services Board (MFB) lodged an application with the Fair Work Commission for approval of the Metropolitan Fire and Emergency Services Board, United Firefighters Union of Australia, Operational Staff Agreement 2016. The content of that proposed agreement has been the subject of much public and media scrutiny and controversy.
Subsequently, the Fair Work Commission allowed the Commonwealth Minister for Jobs and Industrial Relations and the Victorian Equal Opportunity and Human Rights Commissioner (VEOHRC) to intervene in the approval proceeding to argue that, amongst other things, the Agreement should not be approved because it contained discriminatory terms within the meaning of section 195 of the Act and therefore approval was precluded. Specifically, the Minister and the VEOHRC submitted that clauses in the agreement restricting part-time employment and opportunities for part-time employees, which adversely affect women and those with family or carer's responsibilities in a disproportionate manner, were indirectly discriminatory.
Indirectly discriminatory terms are not "discriminatory terms"
The Minister and VEOHRC did not argue, and the Commission did not find, that any of the terms in the agreement were directly discriminatory. The Fair Work Commission was therefore required to determine whether "discriminates" includes indirect discrimination.
The MFB contended that "discriminates" is limited only to direct discrimination, referring to the Federal Court decision of SDA v National Retail Association (No 2)  FCA 480. That decision considered the definition of "discriminates " under section 153 of the Act (prohibiting discriminatory terms in modern awards) which is expressed and operates in substantially the same way as section 195. In this case the Federal Court construed "discriminates" to mean only direct discrimination and did not include indirect discrimination.
The Commission considered that it was bound to apply the Federal Court decision as it was on point, not plainly wrong (though doubt has previously been cast on it), had not been overruled and could not be distinguished from the current case. In doing so, the Commission noted that it, as an administrative tribunal, lacks the power to make determinative findings of law and could not simply ignore the decision. Accordingly, the Commission found that, because no argument had been advanced that the terms of the proposed agreement were directly discriminatory, there were no discriminatory terms for the purposes of section 195 to prevent approval.
The Commission stated that, were it free to conclude otherwise, it would have found that that "discriminates" includes both direct and indirect discrimination. Applying the principles of statutory construction, the Commission stated that such an interpretation is supported by:
- the ordinary meaning of "discriminates";
- the context of the provision;
- the broader statutory context in which the provision operates; and
- the objects of the Act.
The Commission then went on to express the view that the agreement contained terms which were indirectly discriminatory towards women and those with family and carer's responsibilities. Having made that finding, the Commission was left in the unfortunate position of having to determine that the indirectly discriminatory terms did not provide a basis to refuse to approve the proposed agreement. However, for unrelated reasons, the Commission determined that the Agreement should not be approved and gave the MFB 21 days to provide undertakings to address its concern.
Take away for employers
This decision demonstrates that the definition of discriminatory terms under the Act remains unclear, and it is therefore unclear whether enterprise agreements that contain indirectly discriminatory terms may be approved, or whether such terms in existing agreements are of any effect.
Despite the outcome of this case, this is a contentious area of law, and may be subject to change pending a Federal Court challenge, which may be considered likely given the well-documented contentiousness which has attended the process for approving this particular enterprise agreement.
Employers should accordingly seek advice regarding the terms of proposed enterprise agreements, and in particular whether any terms directly or indirectly discriminate against employees.