Even with the best of intentions, employers and HR leaders can skip over important compliance points when designing a diversity and inclusion policy, making it unlawful. Two lawyers share some important factors for HR to keep in mind.

We have seen a market-driven push for companies to embrace diversity and inclusion (D&I) policies over the last few years, which reflects a key shift in social and cultural norms for many organisations. 

Increasingly, consumers, employees and senior business leaders expect proactive steps to be taken for D&I objectives. Research from McKinsey & Co demonstrates a strong business case for promoting diversity, although some suggest that viewing it through a lens of fairness is more effective. Regardless of the rationale, there are very sound reasons for companies to be embracing a diverse and inclusive workforce.

In pursuit of this objective, global businesses might assume that diversity reporting obligations apply in Australia in the same way they do in other jurisdictions, and that overseas policies will be suitable for use here. With the best of intentions, following guidance from reputable external organisations focused on general strategies to promote D&I, businesses might default to policies and practices designed to be used in overseas companies.

Localise your policies and procedures

So what’s the problem? Many companies are unaware of the local compliance issues in Australia that need to be met when collecting diversity data and implementing these programs.

For example:

• Under the Privacy Act 1988, and state and territory health records laws (where they apply), the collection of ‘sensitive information’ and ‘health information’ is strictly regulated. A very common requirement is that the collection of the information be ‘reasonably necessary’ for, or directly related to, the company’s functions or activities. 
• D&I programs will often be unlawful where they involve making employment decisions on the basis of anti-discrimination protected attributes, unless they fall within one or more of the ‘special measures’ exemptions (also known as ‘positive discrimination’ or ‘affirmative action’).
  
  ‘Special measures’ exemptions are only available in limited circumstances and some states (e.g. NSW) require a formal order of a Tribunal. Editor’s note: Under the Secure Jobs, Better Pay Bill, three new ‘protective attributes’ were added to the Fair Work Act, making it easier for employees who feel they’ve been discriminated against to seek legal recourse. 
• Some anti-discrimination laws also make it unlawful to collect information that will be used for unlawful discrimination, meaning that if the D&I program is unlawful then collecting the data to support it could be considered as a separate breach.

Creating compliant D&I policies

While it may be ironic that anti-discrimination laws pose roadblocks to genuine D&I initiatives, the fact remains that careful legal assessment is needed before proceeding to roll out global policies locally.

For example, while it is becoming more common for people to disclose diversity attributes, it may be very difficult to justify any practice of generally asking for or collecting this information for future unknown D&I purposes, without having any specific need for the information at the point when it is collected. 

“While it may be ironic that anti-discrimination laws pose roadblocks to genuine D&I initiatives, the fact remains that careful legal assessment is needed before proceeding to roll out global policies locally.”

Aside from Workplace Gender Equality Agency reporting in relation to gender (for entities with 100 or more employees), there are no other general D&I reporting obligations in Australia that would justify collecting data about diversity attributes. (This is in contrast to some overseas jurisdictions where this information is required to be collected and reported on).

Many businesses are not aware that this increasingly common practice could be unlawful. It may also expose the business to unnecessary legal risk where job applicants are asked about diversity before recruitment decisions have been made, because an unsuccessful job applicant may more easily believe they were discriminated against on this basis.

To be compliant, businesses should:

• Consider anonymised collection strategies in preference to identified data where there could be a question about whether it is ‘reasonably necessary’ or not.
• Only collect sensitive information about individuals where there is a business case supporting the fact that it is ‘reasonably necessary’ and all privacy and health records obligations for its collection are met.
• Ensure D&I initiatives based on protected attributes are supported by a business case that can be relied on to show that the applicable requirements for ‘special measures’ in each jurisdiction have been satisfied, noting that this may require applications to be made to a Tribunal beforehand (e.g. in NSW).

These steps can add complexity and red tape to D&I initiatives. However, ensuring that D&I steps are all locally compliant, in our view, demonstrates real commitment to these laudable goals and will position businesses to become more diverse and inclusive in the long term.

Erin Hawthorne and Rachel Bernasconi are Partners at Seyfarth law firm. This article was originally published on Seyfarth’s website and has been republished with permission. You can view the original article here.

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