Australia: Significant changes to sex discrimination laws: consequences for employers and insurers

The Federal parliament is likely to implement significant changes to Australian law, in light of the Sex Discrimination Commissioner's 2020 Respect@Work Report (the Report).

These changes have far reaching implications for employers and their management liability/employment practices liability insurers.

Employers will need to get ready for the changes early, by taking steps to review and update policies, procedures and training to prevent sex discrimination and hostile work environments, amongst other things.

ML/EPL insurers need to consider whether their wordings cover the new types of claim and claimants, whilst preparing for greater numbers of sex discrimination claims and potentially higher claim costs. Statutory liability insurers should also consider whether new sex discrimination compliance notices may trigger cover under their policies.

What will change?

On 27 September 2022, the Federal government introduced the Anti-Discrimination and Human Rights Legislation Amended (Respect at Work) Bill 2022 (Bill). This follows changes introduced in June 2021, on which we reported on previously here.

The Bill seeks to implement seven more recommendations from the Report. The key changes to be effected by the Bill, which would amend the Sex Discrimination Act 1984 (Cth) and the Australian Human Rights Commission Act 1986 (Cth), are:

• A new prohibition against conduct that subjects another person to a workplace environment that is hostile on the ground of sex
• A positive duty on employers to actively take reasonable steps to eliminate sex discrimination, sexual harassment, and victimisation at work
• New powers for the Australian Human Rights Commission to inquire into systemic unlawful discrimination and enforce compliance with the positive duty, including by issuing compliance notices
• Changes to standard costs orders - the default rule will be for parties to bear their own costs in claims under federal anti-discrimination laws
• Unions and other representative bodies will be able to bring court claims for groups of claimants for unlawful discrimination matters.

Other changes proposed by the Bill include: increasing the time for making age, race and disability discrimination complaints to 24 months; clarifying that victimising conduct can form the basis of a civil action for unlawful discrimination under age, race and disability anti-discrimination legislation; and lowering the bar for proving harassment on the grounds of sex.

Prohibition on subjecting a person to a hostile workplace environment on the ground of sex

The Bill, if enacted, will prohibit subjecting a person to a hostile workplace environment on the grounds of sex. Such conduct is not directed towards a particular person, unlike existing forms of unlawful sex discrimination such as sexual harassment. Instead, the conduct results in a generally hostile environment based on sex - not directed to anyone in particular.

If a workplace has obscene or pornographic materials displayed, is replete with general sexual banter, sexual innuendo or offensive jokes based on sex, it could well be a hostile work environment based on sex.

The test is whether a reasonable person, having regard to all the circumstances, would have anticipated the possibility of the conduct resulting in the workplace environment being offensive, intimidating or humiliating to a person, by reason of:

• the sex of the person or
• a characteristic that appertains generally to persons of the sex of the person or
• a characteristic that is generally imputed to persons of the sex of the person.

Employers and persons conducting a business or undertaking (PCBUs) will need to consider the following when assessing whether any conduct is unlawful: the seriousness of the conduct; whether the conduct was continuous or repetitive; the role, influence or authority of the person engaging in the conduct; and any other relevant circumstance.

Introduction of a positive duty to eliminate unlawful sex discrimination

Employers and PCBUs will have a new positive duty to prevent unlawful sex-based discrimination.

Employers and PCBUs will have to take reasonable and proportionate measures to eliminate sex discrimination, sexual and sex-based harassment, hostile work environments and victimisation, as far as possible.

The 'reasonableness' of the measures will vary from employer to employer, depending on the size, nature and circumstances of the organisation, as well as resources, practicability and costs.

Employers and PCBUs must take these measures to prevent unlawful conduct by their organisations, their employees, workers and agents, and third parties (such as clients or customers). Otherwise, they will fail to meet the positive duty and will contravene the law. Additionally, failing to meet the duty will mean employers/PCBUs will be vicariously liable for unlawful conduct by employees and agents.

The positive duty is similar to the duty for PCBUs under work health and safety legislation to eliminate or reduce risks to health and safety, so far as is reasonably practicable. The safety and sex discrimination duties are intended to operate concurrently. Employers and PCBUs should approach the new duty in the same way they approach safety duties.

New powers for the Australian Human Rights Commission

The Australian Human Rights Commission (AHRC) will have new powers to monitor and assess compliance with the positive duty to eliminate unlawful sex discrimination. The powers will include conducting inquiries, issuing compliance notices, applying to federal courts for orders to direct compliance with the compliance notices, and entering into enforceable undertakings.

Employers and PCBUs will be entitled to procedural fairness mechanisms in relation to compliance notices. They will be able to seek internal reconsideration within the AHRC or apply to a federal court for review of a compliance notice.

The AHRC will also have powers to conduct inquiries into systemic unlawful discrimination or suspected systemic unlawful discrimination. Systemic unlawful discrimination means unlawful discrimination that affects a class or group of persons and is continuous, repetitive or forms a pattern. The AHRC may commence an inquiry after receiving a complaint or on its own accord.

The AHRC's new powers will only commence 12 months after the changes commence. This is to allow employers and PCBUs sufficient time to understand their obligations under the positive duty and implement changes, if necessary.

Changes to costs orders in claims under federal anti-discrimination laws

Standard costs rules currently in Federal anti-discrimination Court claims. Costs follow the event, meaning the unsuccessful party usually pays the costs of the successful party. The changes to the costs regime will not apply to any court application made before the changes commence.

The Bill would change this, making the default position that each party is to bear their own costs. However, Courts would still be able to award costs for a party, depending on the circumstances and conduct of the parties. Other factors influencing costs orders will include whether a party has been wholly unsuccessful and whether settlement offers were made during the proceedings or previously.

The reason for the default cost neutrality approach is to provide complainants with a greater degree of certainty about their costs in legal proceedings. Complainants will know that generally, they would only have to pay their own costs. Respondent employers will also have to bear their own costs, resulting in commercial settlements even where a good defence is available.

This important change is likely to mean more people bring discrimination Court proceedings, as claimants will be able to litigate without the threat of adverse cost orders. Experience from other 'no costs' jurisdictions tells us this is likely to result in more claimants bringing unmeritorious or vexatious court proceedings.

However, costs orders would still be easier to obtain in discrimination claims than in proceedings under the Fair Work Act 2009 (Cth). The Fair Work Act restricts costs orders to circumstances where the proceedings were made or responded to vexatiously or without cause, or a party's unreasonable act or omission caused the other party to incur costs.

New powers for unions and other representative bodies

Representative bodies, such as unions, can already make a representative complaint in the AHRC on behalf of one or a group of persons. However, they cannot then make a court application on behalf of the group. The Report found that the complexities of the court system can be difficult and costly for applicants. Representative applications provide a mechanism for courts to hear genuine cases.

The Bill would enable representative bodies, such as unions, to make representative court applications on behalf of groups of people who have experienced unlawful discrimination. For example, a union could lead a representative complaint from the AHRC in the federal courts for a group of employees subjected to a hostile work environment based on sex.

Unions are likely to be keen to flex their new muscles and bring discrimination court proceedings for groups of workers. Employers need to be ready for this and EPL/ML insurers need to consider whether their policy wordings would respond to such a claim.

What do employers need to do?

Employers and PCBUs will need to review and update their implementing policies and procedures, collect and monitor data about sex discrimination, provide appropriate support to workers and employees, and deliver training and education on a regular basis.

Practical steps employers can take include updating policies and procedures to reflect the new laws; instituting registers of complaints and risks; and reviewing their training programs to ensure training addresses the new positive duty and hostile work environments.

Employers should use the same approach to eliminating sex discrimination as they do for health and safety. This includes conducting hazard and risk assessments, using job safety environmental analysis and even creating safe work method statements specifically dealing with hostile work environments based on sex.

Implications for management liability, statutory liability and EPL insurers

The proposed changes have a number of important implications for ML and EPL insurers, including:

• increased numbers of claims, resulting from new claim types and changes to costs rules
• changes in costs rules will increase incentives to reach commercial settlements, even where a good defence is available
• the 'each bears own costs' default position will make it more costly to successfully defend claims (though cheaper to lose claims)
• considering whether existing policy wordings will respond to the new claim types, representative claims by unions, and defence costs arising from compliance notices.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.