ASP Ship Management Pty Ltd

[2019] FWCA 7847

[2019] FWCA 7847

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

ASP Ship Management Pty Ltd
(AG2019/2974)

ASP SHIP MANAGEMENT/RTM OFFICERS ENTERPRISE AGREEMENT 2017

Maritime industry
COMMISSIONER MCKINNON	MELBOURNE, 22 NOVEMBER 2019

Application for approval of enterprise agreement – discriminatory term – undertaking not likely to cause financial detriment – application approved.

[1] ASP Ship Management Pty Ltd operates at least four vessels in Australian and international waters. It has made a single enterprise agreement with its employees known as the ASP Ship Management/RTM Officers Enterprise Agreement 2017. It seeks approval of the Agreement under the Fair Work Act 2009 (the Act). The Australian Institute of Marine and Power Engineers and the Australian Maritime Officers’ Union were bargaining representatives for the Agreement.

[2] Clause 13.4 of the Agreement deals with compensation for seafarers who have lost their ability to revalidate certificates of competency required under federal navigation law. The question is whether clause 13.4 is a discriminatory (and unlawful) term because it directly discriminates against employees on the basis of age. Even though terms of that kind have no effect in enterprise agreements 1, the Commission must be satisfied before an enterprise agreement is approved that it does not include any unlawful terms.2

[3] The arrangement has a long history in the maritime industry. It emerged at a time when both airline pilots and maritime officers were facing the introduction of new health testing regimes as a condition of continuing employment.

[4] Early iterations of the arrangement were found in the Maritime Industry Seagoing Award 1981 Compensation for Loss of Certificate of Competency Agreement and later in the Shipping Industry Loss of Certificate of Competency Award 2003, one year before the federal Age Discrimination Act 2004 (Cth) became law. The 2003 Award was terminated in 2011. There is no equivalent provision in the Seagoing Industry Award 2010 but arrangements of this kind are commonly found in maritime industry enterprise agreements. The purpose is to provide financial support for seafarers who are no longer fit to work at sea, having regard to loss of earning capacity and propensity for retraining.

[5] Clause 13.4 sets out a sliding scale of ‘one-off’ compensation for eligible employees who have:

1. been refused revalidation of their certificate of competency due to:

a. failure to meet the medical requirements of federal navigation law; and

b. inability to demonstrate that they can nevertheless perform their duties satisfactorily; and

2. been declared by independent medical examination as permanently unable to carry out duties / revalidate a certificate of competency; or

3. been certified compliant with medical requirements and/or capable of carrying out duties but are unable to achieve a certificate of competency.

[6] The amount of compensation depends on the age of the person:

Age	Number of Months’ Salary
UNDER 30	24 months
30 but less than 35	21 months
35 but less than 40	18 months
40 but less than 45	15 months
45 but less than 50	12 months
50 but less than 55	9 months
55 but less than 60	6 months
60 and over	3 months

[7] In my view, clause 13.4 is a discriminatory term to the extent that it discriminates against employees covered by the Agreement because of their age. It is an unlawful term.

Clause 13.4 discriminates against employees covered by the Agreement

[8] Section 195 of the Act makes enterprise agreement terms “discriminatory” and “unlawful” to the extent that they discriminate against an employee covered by the agreement on the basis of age. A term is not discriminatory if the reason for discrimination is the inherent requirements of the particular position concerned. There are no other potentially relevant exceptions in section 195.

[9] In dealing with whether a term is directly discriminatory, the Commission has previously adopted 3 the following approach:

1. First, determine the position of the employee covered by the enterprise agreement with the protected attribute.

2. Second, determine the position of an employee covered by the enterprise agreement without the protected attribute or with a different attribute.

3. Is there an identified differential or less favourable treatment by or as a necessary consequence of the operation of the term of the enterprise agreement in circumstances that are the same or not materially different?

4. Is the differential or less favourable treatment because of, or for reasons that include, the first employee’s attribute?

5. Are any of the exemptions identified in s.195 applicable? As terms of an enterprise agreement apply subject to the various anti-discrimination laws identified in s.27(1A), it may also be necessary to consider the operation of the Agreement subject to relevant anti-discrimination laws.

[10] In applying this approach to clause 13.4, it is illustrative to consider the position of two employees covered by the Agreement who are 29 and 30 years of age. Each has the same medical condition and is unable to obtain their certificate of competency on medical grounds. Each has been approved for compensation under clause 13.4. The employee who is 29 years old is entitled to three months more compensation than the 30 year old employee, even if the age difference between them is a single day. In other words, the 30 year old employee receives less favourable treatment than the 29 year old employee under the Agreement. The difference arises solely by reason of their age because under the Agreement, the amount of compensation is determined by age.

[11] A similar scenario would play out across a range of age groups under the Agreement, where two employees who otherwise share the same attributes are required to be treated differently under the Agreement – one less favourably than the other – because of their age.

[12] There is a relationship between the inherent requirements of the position and the discrimination found in clause 13.4, because the compensation scheme only operates where an employee can no longer gain their certificate of competency which is an inherent requirement for seafarers. However, inability to achieve a certificate of competency is not the reason for the discrimination found in clause 13.4. The reason for discrimination is the age of the person concerned.

[13] In my view, clause 13.4 discriminates against employees on the basis of age. None of the exemptions in section 195 apply.

The discrimination is not appropriate to a relevant difference

[14] The legal concept of discrimination does not extend to different treatment that is appropriate to a relevant difference. 4 I am not persuaded that there is any relevant difference here that would make different treatment based on age appropriate, accepting of course that there will invariably be differences in the cases which come under clause 13.4 for consideration. There is, for example, no statistically likely scenario that would help explain why age alone is an appropriate discrimen. The need for compensation in a particular case will depend on a range of matters, including the characteristics of the individual, their support network and their environment.

[15] If the purpose of compensation under clause 13.4 was directly related to the age of the beneficiary group, one might expect some common or likely characteristic of the group to emerge such that age discrimination could be said to be appropriate. However, the purpose of the provision is to support employed seafarers of any age who are affected by loss of competency. It is not because of, or for reasons generally pertaining to, a certain age or age group that some seafarers may gain access to the entitlement where others would not. Age is a secondary consideration, determinative only of the value of the benefit conferred.

[16] There are a range of medical conditions that might render a person unfit to work at sea, from serious cardiac conditions to asthma and hepatitis. Many such conditions would not prevent a person from engaging in meaningful employment in a different environment. As the Australian Maritime Officers’ Union submits, seafarers are often required to work at sea for long periods in confined settings, with limited access to medical attention. Their relative isolation means they must be capable of responding to emergencies at sea. While not unique to the maritime environment, these are features and expectations of work that do not pertain to all or even most Australian workplaces.

[17] In a similar vein to what might be considered appropriate discrimination, section 33 of the Age Discrimination Act 2004 deals with positive discrimination. This protected form of discrimination is defined as an act that provides a bona fide benefit to persons of a particular age, or one that is intended to meet a need that arises out of the age of persons of a particular age, or that is intended to reduce disadvantage experienced by people of a particular age. The legislative example given in the latter regard is of additional notice of termination on retrenchment for older workers, which is intended to reduce the disadvantage older people are more likely to experience in finding alternative employment.

[18] As discussed above, the discrimination in clause 13.4 affects employees across ages – from under 30 to over 60. It is not targeted at a particular demographic because of characteristics that are likely to pertain to that group. To the extent that it might be said to be akin to a longer period of notice for older workers, the mechanism in clause 13.4 is the opposite - it provides a benefit that reduces with age.

[19] I am not satisfied that clause 13.4 manifests positive discrimination or discrimination that is appropriate to a relevant difference.

The discrimination is not reasonable in the circumstances

[20] Differential treatment or differential impact which is reasonable in the circumstances will not be discriminatory. 5

[21] Section 18 of the Age Discrimination Act 2004 makes it unlawful for an employer to discriminate against a person on the ground of their age in connection with offers of employment 6 and the terms or conditions on which employment is offered.7 It is also unlawful to discriminate against an employee on the basis of age in the terms or conditions of employment afforded to the employee8, or by restricting access to opportunities or benefits associated with employment,9 by dismissing the employee10 or by subjecting them to any other detriment.11

[22] There is an exemption from unlawful age discrimination by employers if the person is unable to carry out the inherent requirements of the particular employment because of their age. However, the exemption only applies in connection with who should be offered employment and in relation to dismissal. It does not extend to discrimination in the terms or conditions of employment offered or afforded to employees. 12

[23] Section 39 of Age Discrimination Act 2004 clarifies that a thing done in direct compliance with an enterprise agreement made under the Fair Work Act 2009 is not unlawful. The obvious caveat is that one cannot comply with a term of an enterprise agreement that has no effect, such as an unlawful term. There are various other exemptions to age discrimination under the federal statute, including in relation to health and social security benefits, but none are directly relevant.

[24] That it is unlawful under section 18 of the Age Discrimination Act 2004 to discriminate against a person on the grounds of age in the terms or conditions of employment that are offered or afforded to employees tells against a conclusion that clause 13.4 of the Agreement differentiates between employees in a way that is reasonable in the circumstances. 13

[25] In my view, the discrimination in clause 13.4 is not reasonable in the circumstances.

The discrimination is not covered by a relevant exemption

[26] I have discussed above that the exemptions in section 195 of the Actdo not operate in relation to clause 13.4, including the inherent requirements exemption. There is also no basis to conclude that age itself is an inherent requirement of any of the roles covered by the Agreement. ASP Ship Management submits that the sliding scale of compensation is intended to reflect the period of time in the industry until retirement that a seafarer loses by becoming incapacitated. That may be so, but the underlying assumptions are hypothetical at best. They do not take into account individual prospects for employment in other roles or industries where there is a loss of competency at sea, but not total or serious loss of capacity to work generally. They do not take into account actual average retirement ages in the industry – or if they do, there is no evidence of that before me. There is no mandatory retirement age for seafarers and no obvious connection between the diminishing scale of compensation and assumed earnings capacity among particular age groups of employees covered by the Agreement. The submissions received confirm that some seafarers work well beyond the age of 60.

[27] ASP Ship Management is based in Victoria, where age is also a protected attribute under the Equal Opportunity Act 2010 (Vic). Similar exemptions apply under Victorian law in relation to discrimination on the basis of age to those that apply under federal law. There are exemptions for genuine occupational requirements including some that are likely to apply to the Australian Maritime Safety Authority which is responsible for the issue of certificates of competency, but the exemption does not apply to the company. Section 29 provides an exemption to discrimination in relation to early retirement schemes. It permits employers to take age and eligibility for superannuation retirement benefits into account in deciding the terms on which to offer an employee an incentive to resign or retire. It is a different concept to the subject matter of clause 13.4, as it involves the offer of incentives to resign or retire as opposed to the creation of an enforceable entitlement in circumstances where loss of competency effectively frustrates the contract of employment.

[28] Section 87 provides that a person may provide benefits, including concessions, to another person based on age. The exemption is similar to the protection for positive discrimination in the Age Discrimination Act 2004. It does not apply to clause 13.4, which provides benefits to employees based on loss of competency. Age is not the basis of the benefit but rather the criteria by which the value of the benefit is set.

Can the discrimination be cured by undertaking?

[29] ASP Ship Management has offered an undertaking to the effect that clause 13.4 will have no effect. Accepting such an undertaking is not likely to result in substantial changes to the Agreement.

[30] The unions oppose the undertaking on the basis that it is likely to cause financial detriment to employees. ASP Ship Management submits that the effect of accepting the undertaking is not likely to cause financial detriment to an employee covered by the Agreement because the prospect of a claim for compensation under the clause is inherently unlikely. It can point to one instance in its business in the past 5.5 years where such payments have been accessed. The company also notes the limitations on access to compensation under clauses 13.4.4 and 13.4.5.

[31] The Australian Maritime Officers’ Union submits that it is currently working on two applications for payment under similar clauses in the maritime industry. The Australian Institute of Marine and Power Engineers accepts that there is a low incidence of claims under the term, but the clause still has work to do as it provides a contingent benefit for employees in particular circumstances.

[32] Clause 13.4 must be taken to have some intended operative effect. I cannot simply disregard the potential for financial detriment to employees on the basis that claims for compensation under clause 13.4 are statistically unlikely.

[33] However, section 190(3) of the Actallows an undertaking to be accepted if I am satisfied that the effect of doing so is not likely to cause financial detriment to any employee covered by the Agreement. The unchallenged submission from ASP Ship Management is that only one employee has made a claim under clause 13.4 in the past 5.5 years. There is no evidence of any other pending or anticipated claims. There is no evidence of any employee who will, or is likely to, suffer financial detriment if the undertaking is accepted.

[34] So far as the limitation on accepting undertakings applies to the future circumstances of employees, section 253 of the Actrenders clause 13.4 of no effect - with or without an undertaking that it will not apply. In those circumstances, the only effect of accepting the undertaking is to remove an impediment to approval because I can now be satisfied that the Agreement does not include unlawful terms.

[35] I am satisfied that the effect of accepting the undertaking is not likely to cause financial detriment to an employee covered by the Agreement.

Other matters

[36] Clause 66 of the Agreement contains a consultation term that does not comply with the Act. Undertakings cannot be given to cure deficiencies in consultation terms. The model consultation term will apply as a term of the Agreement in addition to the agreed consultation term.

[37] Clauses 50.1.2 and 54 of the Agreement appear to exclude the National Employment Standards – the former in relation to the definition of ‘child’ for the purposes of adoption leave and the latter in relation to provision of compassionate leave for members of an employee’s household. An acceptable undertaking has been given to address the concern.

Conclusion

[38] The Agreement is approved because I am satisfied that each of the requirements of ss.186, 187, 188 and 190 have now been met in relation to the application.

[39] The undertakings given by ASP Ship Management are at Annexure A and are taken to be terms of the Agreement.

[40] In addition to ASP Ship Management and its employees, the Agreement covers the Australian Institute of Marine and Power Engineers and the Australian Maritime Officers’ Union.

[41] The Agreement will operate from 29 November 2019 until its nominal expiry date of 31 July 2021.

COMMISSIONER

Appearances:

A Crocker of counsel for ASP Ship Management Pty Ltd

N Niven for The Australian Institute of Marine and Power Engineers

M McEvilly for The Australian Maritime Officers’ Union

Hearing details:

2019.

Melbourne and Sydney (video hearing):

October 23.

Printed by authority of the Commonwealth Government Printer

<AE506127 PR714362>

ANNEXURE A

 1   Fair Work Act 2009 (Cth), s.253.

 2   Fair Work Act 2009 (Cth), s.186(4).

 3   Budd v Australian Federal Police[2018] FWCFB 6095.

 4   Woolworths Group Limited [2019] FWCA 7 at [123], citing Budd v Australian Federal Police[2018] FWCFB 6095.

 5   Woolworths Group Limited [2019] FWCA 7 at [123], citing Budd v Australian Federal Police[2018] FWCFB 6095.

 6   Age Discrimination Act 2004, s.18(1)(a) and (b).

 7   Age Discrimination Act 2004, s.18(1)(c).

 8   Age Discrimination Act 2004, s.18(2)(a).

 9   Age Discrimination Act 2004, s.18(2)(b).

 10   Age Discrimination Act 2004, s.18(2)(c).

 11   Age Discrimination Act 2004, s.18(2)(d).

 12   Age Discrimination Act 2004, s.18(4), which operates in relation to s.18(1)(a), (b) and (2)(c).

 13   Woolworths Group Limited [2019] FWCA 7 at [123], citing Budd v Australian Federal Police[2018] FWCFB 6095.