Employment law implications of reporting on gender diversity in the workplace

These obligations are not technically triggered until a listed entity’s first financial year commencing on or after 1 January 2011 (meaning the 2012 reporting year). However, companies will need to lay the groundwork soon, if they haven’t already, to be prepared in time.

This article will look at the practical effect these new obligations will have from an employment law perspective.

The Principles

Before we begin, it is worth reminding ourselves how the Principles operate, and what the changes actually are.

The Principles themselves are not mandatory, but under ASX Listing Rule 4.10.3, all companies listed on the ASX must provide a statement in their annual report about how they have implemented the various Recommendations contained in the Principles. If it has not followed a particular Recommendation, a listed company will need to disclose the reason it has for not doing so - the ‘if not, why not’ system[2] This approach avoids an overly legalistic or prescriptive regime, while nevertheless engendering greater transparency and better corporate governance for shareholders[3].

It is important to remember that it is only the specific ‘Recommendations’ within the Principles with which companies need to comply, or explain in their annual reports why they have not complied. However, the Principles also deal with many other matters, particularly in the ‘commentary’ sections, which go well beyond the limited matters specifically set out as Recommendations. Their purpose is to encourage companies to pursue even better, or more progressive, corporate governance practices overall, without obligations being tied to Listing Rules requirements — which would otherwise be too onerous. This article will deal in the main with the Recommendations, but will also make comment where appropriate on the broader, no-obligation suggestions raised in the ‘commentary’ sections of the Principles.

The new diversity obligations

We are concerned here with only the new diversity amendments made to the Principles in 2010, but readers should be aware that other amendments were made to the Principles in that year outside of the diversity context for which they may need to seek advice.

The Recommendations within the Principles concerning diversity are as follows:.

• that companies disclose the proportion of female employees in the whole organisation, in senior executive positions, and on the board, in each annual report[4]
• that companies introduce a diversity policy and disclose it, or a summary of it, to the public[5], and
• that boards establish ‘measurable objectives for achieving gender diversity’[6], and disclose them along with an assessment of their progress in achieving them, in each annual report.

It is somewhat surprising to note how minimal these obligations are when boiled down to bulletpoint form in this way. For instance, companies are required to introduce a diversity policy, but there are no obligations on what such a policy should contain.[7] Of course, the ‘spirit’ of the Principles is much broader. The commentary sections contain substantial guidance on many additional issues concerning diversity, not least of which involves consideration of diversity beyond merely gender (for example, age, ethnicity, disability etc), in addition to suggestions on such other matters as what to include in a diversity policy.[8]  

Overlap with Equal Opportunity for Women in the Workplace Act

There are obvious parallels to be drawn between the new gender diversity obligations set out in the Recommendations and the statutory obligations that are already imposed on employers with over 100 employees by the Equal Opportunity for Women in the Workplace Act 1999 (Cth). In basic terms, the Act requires employers to:

• prepare a workplace profile of the composition of their workforce
• prepare an analysis regarding matters such as recruitment procedures, promotion and termination of staff, training programs, and arrangements for dealing with sex-based harassment
• develop, implement and review a workplace program (taking into account the findings of the above analysis) which is designed to ensure appropriate action is taken to eliminate discrimination against women, and
• report on the outcomes of that workplace program for each annual reporting period.

• the duty to furnish statistics on female participation within an organisation set by the Principles is more onerous than the equivalent requirements under the Act[9], with the Principles imposing specific obligations on reporting on participation at higher executive and board levels
• the Act does not specifically require companies to introduce a diversity policy, and
• the ‘workplace programs’ required to comply with the Act may not necessarily contain specific ‘measurable objectives for achieving gender diversity’ that are required by the Principles. Those measurable objectives also need to be established by the board (or an appropriate board committee, such as the nomination or remuneration committee), whereas workplace programs under the Act may be established by anyone in the company with ‘sufficient authority and status within management’.[10]

It is perhaps this emphasis of placing the obligations of the Principles in the hands of the board, along with the increased publicity that will flow from disclosures being mandatory for company reports, that signals the greatest divergence between the two sources of obligations.

However, what exactly are ‘measurable objectives for achieving gender diversity’? Some suggestions include:

• establishing a diversity committee or appointing a diversity manager
• having at least one woman (possibly external) on the nomination/remuneration committee
• ensuring directors and employees are selected from diverse candidate pools and are interviewed by a diverse selection/interview panel
• advertising vacancies more widely and in sectors where women are more prevalent
• requiring at least one serious female candidate to be present on every shortlist
• developing a culture that takes account of the domestic responsibilities of employees
• setting targets to improve the number of women in particular areas of the business where women are not well represented
• introducing mentoring and coaching programs
• undertaking employee surveys on diversity
• arranging executive mentoring programs for women
• inviting women to events and activities that will assist them to build business networks
• supporting and encouraging women to join a board as part of their professional development, and
• adding diversity indicators to board, CEO and senior management KPIs to ensure the issue gets traction.[11]

Obviously these can/should be extended to incorporate non-gender-based categories of diversity as well if companies wish to adopt the broader ‘spirit’ of the commentary sections of the Principles. Companies should therefore look to their obligations under the Principles with a fresh eye, and not assume that their existing practices designed to comply with the Equal Opportunity for Women in the Workplace Act will be sufficient.

Interaction with other equal opportunity and discrimination laws

There are myriad equal opportunity and anti-discrimination statutes across Australia. Federally, these  are comprised of the Sex Discrimination Act 1984, the Racial Discrimination Act 1975, the Disability Discrimination Act 1992, the Age Discrimination Act 2004, and the Fair Work Act 2009.

Each state also has its own anti-discrimination legislation, and while there are a lot of similarities across the jurisdictions, there are also many important differences. For instance, discrimination on the basis of things such as criminal or medical record, or transgender status, are prohibited by the laws of some of the states and territories, but not others. Perhaps more relevant, however, are the ways in which the specific wording of each statute has been drafted, the different tests applied to the various prohibitions on discrimination and the defences available to respondents.

This is particularly important for present purposes when we consider special measures introduced by companies that are intended to achieve equality (sometimes referred to, unsatisfactorily, as ‘positive discrimination’ or ‘affirmative action’). Measures taken that favour a particular minority to achieve overall fairness may, strictly speaking, constitute discrimination against the majority as ‘intent’ is irrelevant to a finding of discrimination.

Clearly, many of the steps boards will need to take in order to fulfil the ‘measurable objectives for achieving gender diversity’ referred to above fall within this category (for instance, the examples provided above of targets and executive programs for women are clearly ‘special’ measures intended to achieve equality for women).

Restricting ourselves for the moment to special measures taken to promote gender diversity, this potential exposure is not a problem at a federal level, as the Sex Discrimination Act expressly allows such measures to be taken without constituting illegal discrimination. The only requirement is that the purpose for doing so is truly to achieve substantive equality between the sexes.[12]

However, in NSW the position is much less straightforward. The Anti-Discrimination Act 1977 (NSW) contains no similar provision to protect special measures in a sex discrimination context. Rather, it is up to individual companies to apply in advance to the President of the Anti-Discrimination Board, or the Minister, for an express exemption before they introduce any ‘special measures’ aimed at positively benefiting women.[13] Without such an exemption, the measures taken may be susceptible to challenge by disenfranchised men (assuming they can meet the usual tests for proving direct or indirect discrimination under the Act), with companies at risk of injunctions or damages claims as a result. 

There may be some argument that compliance with the Recommendations would not require such preapproval by the President or Minister in order to be legal. That argument would go as follows: 

• A listed company introduces a ‘measurable objective for achieving gender diversity’ (say, a target of hiring 50 per cent females for all executive roles within five years) in order to put into effect the Recommendations.
• They comply with the Recommendations in order to comply with the ASX Listing Rules.
• They comply with the Listing Rules to avoid a breach of the Corporations Act 2001.[14]