A proposed enterprise agreement includes different redundancy terms based on age, but will it hold up under workplace laws?

Q. We are currently drafting a proposed enterprise agreement, which will shortly be put to a vote. Our redundancy scheme provides more generous entitlements to redundancy pay than the National Employment Standards, however it is proposed that a separate (lesser) entitlement will apply to an employee whose employment has gone beyond the employee’s expected retirement date as defined by the employee’s superannuation fund.

The rationale is that an employee made redundant beyond retirement age has immediate access to superannuation.

Is it possible to have two separate redundancy schemes based on the employee’s particular circumstance, or would such a provision not pass the Better Off Overall Test (BOOT)?

A. Under the Fair Work Act (s.195), a term of an enterprise agreement is a discriminatory term to the extent that it discriminates against an employee covered by the agreement because of, or for reasons including, the employee’s race, colour, sex, sexual preference, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction or social origin. A term that provides a less beneficial entitlement based on an employee’s age would be considered an unlawful term and would fail the Better Off Overall Test as it would contravene the Age Discrimination Act 2004 [Cth].

For example, a similar provision was rejected by (then) Fair Work Australia as the redundancy clause provided different benefits based on whether the employee had passed their “normal retirement date.” This was direct discrimination and contravened the Fair Work Act (s195(1)) on the basis of age. The fact that the redundancy scheme was more beneficial than the minimum provisions under the National Employment Standards was irrelevant. See Australian Catholic University Limited t/as Australian Catholic University [2011] FWA 3693.

 

Age Discrimination Act

This Commonwealth legislation protects an employee from discrimination in their employment on the grounds of the employee’s age and applies to every workplace in Australia.

Examples that would be considered age discrimination in the workplace include:

  • who gets selected and interviewed for a job

  • refusing employment

  • dismissal – also protections under the Fair Work Act

  • denying a promotion, transfer, or other employment-related benefits

  • given less favourable terms or conditions of employment

  • denying equal access to training opportunities

  • selection for redundancy

  • harassment

 

However, it is not unlawful for an employer to discriminate on the basis of age when complying with a statute, or a term of an award or enterprise agreement. For example, paying a minimum wage rate based on an employee’s age as prescribed by the applicable modern award or enterprise agreement.

It is also not unlawful for an employer to refuse to employ a person who is incapable of performing the inherent requirements of the job.

 

Bottom line

Proposed terms in an enterprise agreement that provide less beneficial benefits to employees over a specified age would be considered discriminatory and would usually fail the better off overall test unless the term complies with a statute.