RAYTHEON AUSTRALIA PTY LTD - [2011] SAEOT 6

EQUAL OPPORTUNITY TRIBUNAL
(District Court Administrative and Disciplinary Division)
In the Matter of AN APPLICATION FOR EXEMPTION UNDER THE EQUAL OPPORTUNITY ACT 1984
RAYTHEON AUSTRALIA PTY LTD
[2011] SAEOT 6
Reasons for Decision of His Honour Judge Costello, Member Ms H Jasinski and Member Mr R Altman
26 August 2011
DISCRIMINATION LAW
Application for renewal of exemption from operation of sections 52 and 54 of the Equal Opportunity Act 1984 (SA) - Exemption sought to permit discrimination on the grounds of nationality of employees, prospective employees and contract workers - Applicant requires access to sensitive defence technology controlled by government of the United States of America - in order to access technology Applicant is obliged to discriminate against certain persons on the basis of their nationality - In exercising its power to exempt Tribunal entitled to take into account wider public interest including interest of South Australia maintaining a viable defence-based industry - Application granted upon conditions
Equal Opportunity Act SA 1984, referred to.
Pulteney Grammar School v Equal Opportunity Tribunal & Ors (2007) SASC 308, discussed.

RAYTHEON AUSTRALIA PTY LTD
[2011] SAEOT 6
Introduction

Raytheon Australia Pty Ltd (“Raytheon”) has applied, pursuant to s 92 of the Equal Opportunity Act 1984 (SA) (“the Act”), to renew an exemption from the provisions of ss 52 and 54 of the Act, which exemption was granted to it by this Tribunal on 28 April 2008.
The Acting Commissioner for Equal Opportunity has appeared on the application through her counsel, Mr Love. Although she does not oppose the application, she does not consent to it.
Sections 52 and 54 of the Act provide as follows:
52—Discrimination against applicants and employees
(1)     It is unlawful for an employer to discriminate against a person on the ground of race—
(a)     in determining, or in the course of determining, who should be offered employment; or
(b)     in the terms or conditions on which employment is offered.
(2)     It is unlawful for an employer to discriminate against an employee on the ground of race—
(a)     in the terms or conditions of employment; or
(b)     by denying or limiting access to opportunities for promotion, transfer or training, or to other benefits connected with employment; or
(c)     by dismissing the employee; or
(d)     by segregating the employee from persons of other races; or
(e)     by subjecting the employee to other detriment.
…
54—Discrimination against contract workers
(1)     This section applies to a principal for whom work is done by persons (contract workers) under a contract between the principal and another where the contract workers are employed or engaged by a person other than the principal.
(2)     It is unlawful for a principal to enter into a contract or arrangement with another for work to be performed by contract workers under which a person is to discriminate against a contract worker on the ground of race.
(3)     It is unlawful for the principal to discriminate against a contract worker on the ground of race—
(a)     in the terms or conditions on which the contract worker is allowed to work; or
(b)     by not allowing the contract worker to work; or
(c)     by denying or limiting access to a benefit connected with the employment or position concerned; or
(d)     by subjecting the contract worker to other detriment.
Section 5 of the Act defines “race” as follows:
race of a person means the nationality, country of origin, colour or ancestry of the person or persons or of any other person with whom he or she resides or associates.
Section 92 of the Act is, relevantly, expressed in these terms:
(1)The Tribunal may, on application under this section, grant exemptions from a provision of this Act in relation to—
(a)     a person, or class of persons; or
(b)     an activity, or class of activity; or
(c)     circumstances of a specified nature.
(2)     An exemption under this section—
(a)     may be granted unconditionally or on conditions; and
(b)     may be revoked by the Tribunal on breach of a condition; and
(c)     subject to revocation, remains in force for a period, not exceeding three years, determined by the Tribunal, but may be renewed from time to time for a further period, not exceeding three years, determined by the Tribunal.
(2)     An exemption under this section—
(a)     may be granted unconditionally or on conditions; and
(b)     may be revoked by the Tribunal on breach of a condition; and
(c)     subject to revocation, remains in force for a period, not exceeding three years, determined by the Tribunal, but may be renewed from time to time for a further period, not exceeding three years, determined by the Tribunal.
…
(6)     In determining an application under this section, the Tribunal may—
(a)     have regard (where relevant) to the desirability of certain discriminatory actions being permitted for the purpose of redressing the effect of past discrimination; and
(b)     have regard to other factors that the Tribunal considers relevant.
Whilst we do not regard it as necessary to go into the background of the application exhaustively (in circumstances where a previously granted exemption is sought to be renewed on similar terms), some reference to it is appropriate in order to give context to the application.
Background
Raytheon is a leader in the Australian defence sector, providing mission systems integration and mission support solutions, primarily to the Commonwealth of Australia, through the Department of Defence.
Raytheon has facilities located across Australia and has an Australian workforce of over 1350 persons. The Company’s 2010 revenue was $699 million and the vast majority of this was generated through the sale of defence-related products, services and technology.
As a subsidiary of the United States (U.S.) based Raytheon Company, Raytheon has access to the global resources of Raytheon Company and its relationships with other private and government organisations both in Australia and around the world. Raytheon Company, which is traded on the New York Stock Exchange, is among the largest American defence companies, with an annual turn-over of US$25 billion in 2010. From this base, Raytheon delivers tailored local mission systems integration and mission support solutions to its customers.
Raytheon currently occupies offices, aviation workshops, aircraft maintenance and component manufacturing facilities and calibration laboratories in Techport, Osborne, RAAF Base Edinburgh and Mawson Lakes, South Australia. At these facilities, Raytheon employs approximately 412 personnel, including permanent full time, part time, casual, fixed term and contract labour hire employees. Of those personnel approximately:
a). 293 employees work at Raytheon Australia’s offices and facilities at Techport, Osborne and Mawson Lakes, in the Adelaide metropolitan area, on the Air Warfare Destroyer (AWD) program;
b).52 employees work at the RAAF Base Edinburgh north of Adelaide in support of the Aerospace Operational Support Group;
c).2 employees work at RAAF Base Edinburgh providing in-service support to the Emulation Pod In-Service Support program, under contract to BAE Systems Australia;
d).54 employees work at RAAF Base Edinburgh on the Avionics Workshop Deeper Maintenance program;
e).4 employees work on the Australian Defence Force Calibration Services program at Mawson Lakes; and
f).7 employees work on the Collins Class Submarine program in the Adelaide metropolitan area.
It is unnecessary to refer to these programs in detail. It will suffice to observe that the contracts involved in the programs are valued at between $10 million and $1.5 billion. It is also anticipated that, apart from the current workforce, Raytheon will need to employ, at least, an additional 70 employees in order to meet its responsibilities under these contracts over the next few years.
Need for Exemption
In order for it to fulfil its obligations in relation to these programs, Raytheon, its employees and contractors require access to a significant amount of US-origin defence data, information and technology (“ITAR Controlled Material”). Access to ITAR Controlled Material is regulated by the US International Traffic in Arms Regulations (ITAR) and the ITAR authorising legislation, the Arms Export Control Act (“AECA”).
Access to ITAR Controlled Material is obtained through approvals granted by the US Director of Defence Trade Controls (DDTC) in the form of Technical Assistance Agreements, Manufacturing Licence Agreements and other similar documentation (“Agreements”) entered into between Raytheon and various US exporters of ITAR Controlled Material.
In order to comply with the requirements of the ITAR, only eligible Raytheon personnel can be granted access to ITAR Controlled Material. In order to determine which personnel are eligible, Raytheon must be able to obtain certain personal information from employees and job candidates in South Australia.
The personal information that Raytheon must obtain to determine a person’s eligibility includes their:
a.      current and past citizenship;
b.     country of birth;
c.      current and past passports held; and
d.current and past residential status in any country other than the US or Australia.
(collectively, Personal Information)
For ITAR purposes, “Australian nationals” are Australian citizens by birth or naturalisation. Australian permanent residents, landed immigrants, or other persons who have been granted a temporary or permanent visa permitting them to reside in Australia, are not considered “Australian nationals”, but are considered “third-country nationals” or “foreign nationals” under the ITAR.
Under the ITAR, section 124.8(5), Raytheon is prohibited by US law from transferring ITAR Controlled Material to any person who is not an “Australian national” or a “US person”.
To comply with the ITAR requirements, and to avoid significant penalties for failing to do so, Raytheon must be able to:
a.obtain Personal Information from its actual employees and contract workers that would allow the Company to identify who may access, or be eligible to access, ITAR Controlled Material;
b. request Personal Information from applicants for new positions;
c. if required, use the Personal Information to apply for and obtain authorisations to access, use or receive ITAR Controlled Material.
Thus, Raytheon needs the Personal Information to ensure it is not violating the ITAR by entering into these Agreements and thereafter providing access to ITAR Controlled Material to persons who are not authorised or eligible for such access. Furthermore, the need to verify ITAR access-eligibility for employees is not a one-time requirement. As new employees require access to ITAR Controlled Material, or existing employees transfer onto programs that require working with ITAR Controlled Material, nationality verification needs to be conducted on an ongoing basis because each program is authorised under a separate ITAR export authorisation.
Ramifications of No Exemption
Failure, on the part of Raytheon or its US exporter to obtain and comply with appropriate ITAR export authorisations and regulations, would result in Raytheon being denied access to ITAR Controlled Material, and could expose Raytheon, as well as the US exporter, to substantial penalties, both civil and criminal, under US law.
We accept the Applicant’s submission that the following are possible consequences to which Raytheon could be subject for failing to comply with the ITAR or any ITAR export approval:
(i)     Revocation of Approvals
Under ITAR section 126.7, DDTC may revoke, suspend or amend a license, approval or exemption granted under the ITAR without prior notice whenever DDTC believes that the terms of any export authorisation have been violated by any party to the export or other person having a significant interest in the transaction.
(ii)    Debarment
Pursuant to ITAR section 127.7, the DDTC may prohibit a person from participating directly or indirectly in the export of defence articles, including access to technical data, or in the furnishing of defence services for which a license or approval is required.
(iii)   Civil and Criminal Penalties
Penalties under US law for violating the ITAR include:
a.   civil fines and penalties of up to US$500,000 for each violation; and
b.   criminal penalties of up to US$1 million or 10 years imprisonment or both.
(iv)   Risk to Australia’s Defence Capability
If Raytheon were to be debarred or face having specific export licences revoked, Raytheon’s inability to continue to access the ITAR Controlled Material, needed to complete the contracts, could impact Australia’s defence capability and in the case of some contracts, could impact the readiness of Australia’s Defence Forces as a result of delays or impossibility of performance.
(v)    Staff Losses
If Raytheon violates the ITAR and loses US export privileges or is unable to obtain new ITAR export authorisations, in addition to being unable to complete the contracts, Raytheon might not be able to perform new contracts requiring access to ITAR Controlled Material. The resultant loss of business would impact its ability to hire and continue to employ current personnel.
In summary, on the basis of its current and prospective business activities in South Australia, Raytheon submits that it needs an exemption from the provisions of the Act to avoid potential breaches of the legislation when it requests and uses Personal Information relating to its employees, job applicants and contract workers.
The renewal of the exemption would, it is submitted, also prevent Raytheon from violating the requirements of ITAR and breaching its current and prospective contractual obligations.
Other Matters
In coming to our decision we take into account that Raytheon has operated under an exemption since 2008 and that during that time no employees or applicants were adversely impacted by the terms of the Exemption Order.
We are also aware that as a result of the grant of the previous exemption the Applicant has changed its employment policies to make it clear to those potentially affected employees that the request for personal information is solely for the purpose of meeting the requirements of US legislation.
Although we have not referred to them specifically we have also taken into account and relied upon the material set out in and exhibited to the affidavits of Ms Troy, (Raytheon’s Director of Legal Affairs and Corporate Secretary) and Mr Evans (General Manager of Raytheon’s Air Warfare Destroyer program) together with the contents of a letter from the Premier of South Australia outlining the Government’s support for this application, albeit subject to the safeguards constituted by the conditions contained in the existing exemption and current application.
Finally, we note that since the existing exemption was granted, amendments to the ITAR have come into effect, namely on 15 August 2011.
We accept that these amendments do not remove the need for Raytheon to make the present application and do not alter the terms of the exemption that is required. It was submitted (and we accept) that there will continue to be circumstances where Raytheon must obtain and use the Personal Information of its prospective and existing employees and contract workers for the purposes of complying with the ITAR, although it may only need to rely on the exemption in a narrower range of circumstances than is presently the case.
Discussion
In s 92(6) of the Act, Parliament has set out the matters to which the Tribunal may have regard in determining whether to grant an exemption.
In the case of Pulteney Grammar School v Equal Opportunity Tribunal & Others (2007) SASC 308, White J, for the Full Court, referred to the long title of the Act.
His Honour noted that the prevention of discrimination was not the sole object of the Act, but that its objects included:
The promotion of equality of opportunity between the citizens of this State, and the facilitation of the participation of citizens in the economic and social life of the community.
The Court concluded that the purposes of the Act went beyond the prevention of discrimination simpliciter. His Honour said at paragraph 33:
In my opinion it is also natural to construe the EOA as intending to achieve some larger purpose than the mere elimination of discrimination for its own sake. The elimination of discrimination is a means of achieving the wider purpose of equality of opportunity amongst all citizens of the State.
Although his Honour made it clear that he did not intend to state exhaustively the circumstances which would justify the granting of an exemption, he referred to three circumstances as follows at paragraph 14:
The exemption is desirable, if not necessary, to achieve a purpose of the EOA; the general prohibition would be unreasonably harsh or burdensome in the applicant's particular circumstances; or there is some wider public interest (perhaps to be found in other legislation) which the grant of the exemption will serve.
It is clear from the above that an exemption may be granted or renewed (in the exercise of our discretion) where, amongst other things, the general prohibition against discriminatory conduct under the Act would be unreasonably harsh or burdensome in the applicant’s prospective circumstances or where there is some wider public interest.
Subject to any other mechanisms available to the applicant, (which mechanisms are to our knowledge not currently available) we accept that it is necessary in a practical as well as a commercial sense for the applicant to obtain an exemption pursuant to s 92.
We also accept that it would be unreasonable to refuse an exemption, if otherwise justified, when to our knowledge, similar exemptions have been granted to competitors of the Applicant within this State and interstate.
At present the discriminatory conditions imposed by the US Government in the ITAR remain prerequisites, unless otherwise exempted, for any access being permitted to the subject technology.
We are satisfied that, at present, there are no other reasonable alternatives open to the applicant which would enable it to avoid the effects of the ITAR.
There can be no doubt that it is in the commercial interests of the Applicant that an exemption be renewed.
In our opinion it is also in the wider public interest that Australians gain access to high levels of US defence technology. It is further an interest of the State of South Australia for it to develop and maintain a viable defence-based industry. This will ensure that its workers have the opportunity to undertake tertiary education and develop skills in areas previously unavailable to them.
We accept that if the Applicant was unable to access US technologies or, more correctly, was unable to employ that technology in South Australia, it would have significant adverse consequences for the defence-based industry in this State.
Against these factors must be weighed the fact that if an exemption is renewed, conduct which is unlawful and seen as being discriminatory, will continue to be deemed as lawful.
In our opinion the wider public interest in addition to Raytheon’s private interest, in the renewal of the exemption ought to prevail as they outweigh the detriment flowing from the discriminatory conduct. Having said that, as with the previous exemption, the scope of the renewed exemption should be restricted to the extent necessary to enable the applicant to comply with the ITAR.

As part of its application, the Applicant has handed up a Schedule of Conditions which record, inter alia, that the Exemption will only apply to conduct by the Applicant where
· that conduct is necessary to enable it to enter into, perform and ensure compliance with contractual undertakings and the ITAR where access to ITAR Controlled Material is required for performance of contracts.
As counsel for Raytheon noted, the ambulatory nature of this condition both limits the scope of the exemption as currently sought and should ensure that the need for the exemption will diminish in line with any future relaxation in the discriminatory restrictions imposed by the ITAR.
Accordingly, upon the Applicant undertaking to report to the Equal Opportunity Commissioner, commencing from 31 December 2011 and every

six (6) months thereafter, for the duration of the exemption period, on its compliance with the exemption requirements and changes in its procedure to reflect amendments to the ITAR, and as to how its employees and contractors are affected, in the context of the protections afforded by the Act, we order that:
Under the provisions of section 92(1) of the Equal Opportunity Act 1994 (SA), but for the purposes only of meeting the Applicant’s contractual obligations and the International Traffic in Arms Regulations (ITAR), the Applicant is granted a renewal of the exemption (originally granted to it on 19 May 2008 under section 92(1) from the provisions of sections 52 and 54 of the Act, for a period of three years) in the following terms:
A.Pursuant to section 92(6)(b) of the Act, the Applicant is exempt from compliance with the provisions of ss 52 and 54 of the Act to the extent that it may:
1.1request Personal Information from existing and potential    employees and contract workers and require employees to provide details of any changes to their Personal Information;
1.2take the Personal Information into account in determining         who should be offered employment or contract work in areas requiring access to ITAR Controlled Material and when making decisions as to the participation of employees or contract workers in such work;
1.3maintain records of Personal Information of all employees and contract workers who have or may have access to ITAR Controlled   Material;
1.4ensure that ITAR Controlled Material is disclosed only to persons who are authorised by ITAR controls to receive it;
1.5impose limitations or prohibitions on persons of particular nationalities having access to ITAR Controlled Material;
1.6disclose to other defence contractors for whom the Applicant performs work and to the USA and Australian governments, the Personal Information of all employees and contract workers who will have access to ITAR Controlled Material in the performance of their work; and
1.7establish security systems which will prevent the unauthorised re-export or re-transfer of ITAR Controlled Material.
B. This exemption will be granted for a period of three (3) years from the date of this Order, but will be subject to the following conditions:
1.1             It will apply only to conduct by the Applicant where:
(a)that conduct is necessary to enable it to enter into, perform and ensure compliance with contractual undertakings and the ITAR where access to ITAR Controlled Material is required for performance of contracts;
(b)it has taken all steps that are reasonably available (including steps which might be taken in negotiating and performing the terms of their agreements with contractors in the USA) to avoid the necessity for engaging in conduct which would otherwise be in breach of sections 52 and 54 of the Act.
1.2Where, in the exercise of this exemption, an employee or contract worker is moved from a project involving the use of ITAR Controlled Material to any other work controlled by the Applicant or any of its related entities, the Applicant must, through a duly authorised officer, explain to the person why he or she is being transferred and must otherwise take all reasonable steps to avoid or limit harm or loss to that person.
1.3 Where the Applicant uses a system of security passes to reflect the fact of access to ITAR Controlled Material or levels of access to any security-sensitive material by employees and contract workers, the passes may be coded but not in such a way as to identify the nationality of the person or the reasons for that person’s level of access.
1.4All information relating to security passes, security     clearance levels and access to ITAR Controlled Material shall be restricted to designated authorised company personnel with responsibility for export/import operations, Human Resources, legal, compliance and similar functions, or their properly appointed nominee, on a “need to know” basis.