B. In addition to the above conditions the applicant will:

(a) maintain comprehensive anti-discrimination policies governing all aspects of the work and Workforce, including management, and with particular regard to race discrimination, vilification, harassment and victimisation;

(b) establish concise and comprehensive dispute resolution and grievance procedures to receive, investigate and resolve discrimination complaints and grievances and, in particular, those relating to race discrimination, vilification, harassment and victimisation;

(c) implement training programs, including at induction, to ensure that all members of the applicant's Workforce, including management, are fully informed of their rights and obligations under such policies and procedures, particularly with regard to issues of race discrimination, vilification, harassment and victimisation;

(d) ensure that all members of the Workforce, including management, receive regular education and training in issues of discrimination, particularly race discrimination, vilification, harassment and victimisation;

(e) take steps to fully inform the Workforce, including management, of their rights under the Act and, in particular, but not limited to, the complaints procedure under that Act;

(f) notify the Tribunal if the discriminatory terms and provisions Security Requirements are amended or become inoperative, so that the exemption may be revoked or amended.

1. The applicant will take all reasonable steps to ensure that any employees adversely affected by the exemption retain employment with the applicant, and do not suffer a reduction in wages, salary or opportunity for advancement.

1. If the applicant, in order to enable it to comply with the Security Requirements, moves a member of the Workforce from one project to another, the applicant must take reasonable steps both to explain to that person why the transfer has occurred and to avoid any race-based hostility that might result from the transfer.

1. Where prospective employees adversely affected by the exemption would otherwise have been acceptable to the applicant as employees, the applicant will consider and, if feasible, implement reasonable and practicable alternatives to rejection, such as employment in other work for the applicant.

1. The Applicant must report in writing to the Commission and the Tribunal six months after the commencement of this exemption, and every twelve months thereafter while the exemption is in force detailing in respect of the period to which the report relates, and in respect of the matters covered by this exemption -

(a) the steps taken by the applicant to comply with the EO Act and the terms and conditions of this exemption, including training and education given to its Workforce, compliance audits, and any complaints made under the EO Act;

(b) the number of applications to join its Workforce rejected under the exemption and whether any (and if so, how many) were subsequently appointed to other roles;

(c) the number of members of its Workforce redeployed or retrenched in accordance with the exemption, and any steps taken to minimise harm or loss to those people arising from the redeployment or retrenchment;

(d) the number of Workforce vacancies advertised or offered under the exemption.

1. Linfox Australia Pty Ltd (Linfox) is Australia's largest privately owned logistics business with operations across the Asia Pacific region and expertise in providing warehouse and transport solutions and services. It employs over 19,000 people in the region. Linfox's business is divided into industry sectors including government and defence. That division provides warehousing, disposal, distribution, information technology, logistics and supply chain solutions and services (contracted services) to the Australian Defence Force (ADF).
2. In order to provide the services described above to the ADF, the contract between Linfox and the ADF requires that Linfox meet certain security requirements which concern the handling of and access to material, data and technology used by the ADF and/or owned by the Commonwealth of Australia (defence material). In summary, the effect of the requirements, which arise under the contract and under statute, is that Linfox may only engage personnel who are able to obtain an Australian security clearance. Unless individuals fall within a very limited exception, only Australian citizens are entitled to obtain a security clearance.
3. Making decisions about employment on the basis of someone's citizenship may amount to prohibited discrimination under the Equal Opportunity Act 2010 (EO Act). Section 6 of the EO Act makes 'race' a protected attribute and the term is defined to include nationality. Making decisions about whether to engage a person on the basis of their citizenship may breach the section 16, 18 and 21 of the EO Act prohibitions on discrimination against job applicants, employees and contract workers (workforce). Section 107 of the EO Act prohibits requesting discriminatory information, such as someone's citizenship. Section 182 of the EO Act makes it an offence to publish or display or authorise the publication or display of discriminatory advertising.
4. The consequence is that, in order for Linfox to meet its contractual obligations and be able to provide the contracted services to the ADF, it may only engage employees and contract workers who are Australian citizens and that involves race based discrimination contrary to the EO Act. In order to avoid acting in breach of the EO Act, Linfox has applied for an exemption from the above provisions of the EO Act. The Tribunal has the power to grant such an exemption under section 89 of the EO Act.
5. For the following reasons, I have decided to grant Linfox an exemption in the terms sought.

1. On 15 December 2014, I granted Linfox an interim exemption in the terms sought in the application to allow it to provide the contracted services while the application was being heard and determined. That interim exemption will expire on 30 April 2015.
2. A copy of the exemption application was sent to Victorian Equal Opportunity and Human Rights Commission (Commission). The Commission did not seek leave to intervene in the application.[1]
3. Directions were made requiring Linfox to put a notice about the application on its website and advertise the application in specified newspapers. Linfox was also required to give notice of the application to its employees and contractors and to the unions who represent its employees. The notice stated that those persons may make submissions to the Tribunal about the exemption application. Neither the Tribunal nor Linfox received any submissions about the application.
4. Affidavits sworn by Lysa Davey, HR Manager, and Andrew Collett, in-house counsel were before the Tribunal, together with confirmation that the directions as to notice referred to above had been complied with. Mr Collett attended the hearing and provided a further explanation of certain matters.

1. The affidavits contained material relating to Linfox's business, the contract with the ADF and the various security requirements to which Linfox is subject. I accept the evidence produced which is summarised below.

1. I have described above the contracted services which are the subject of the contract between Linfox and the ADF.
2. Linfox's government and defence division has a workforce of about 685 people with 36 located within its head office in Victoria and 110 others working in Victoria. Each of the 110 workforce members have been engaged solely to meet the requirements of the contract.
3. The contract was entered into in December 2013. The initial term of the contract is eight years with an option up to three years at the discretion of the Commonwealth. The total value of the contract is estimated to exceed $100 million per annum with about 27% of that sum attributable to Victoria.
4. The contracted services involve the workforce handling or accessing defence material and/or accessing ADF sites. If a workforce member does not have a security clearance then they are required to sign in each day as a visitor and are required to be escorted and supervised at all times by someone with a security clearance. Such arrangements lead to duplication in labour requirements for the time the 'visiting' workforce member is working.
5. Prior to Linfox entering into the contract, some or all of the services were provided to the ADF by BAE Systems Australia (BAE). Linfox understands that BAE did so under the terms of an exemption granted by this Tribunal.
6. Ms Davey's affidavit explained that each of Linfox's divisions operates independently and so, in the event that it engaged a workforce member who could not obtain the necessary security clearance, there are unlikely to be opportunities for re-deployment. She further explained that the other business units have a number of contracts which are due to expire shortly and so there are or will be a number of staff already seeking redeployment who may not be able to be accommodated.

1. The security requirements which are applied to defence materials or attendance at ADF sites arise from:
   • The terms of the contract;
   • The Defence Trade Controls Act 2012 (Cth) (DTC Act) and the Defence Trade Controls Regulations 2013 (Cth) (DTC Regulations);
   • The laws of the United States of America including the Arms Export Control Act, the International Traffic In Arms Regulations (ITAR) and the licence and other requirements of those laws which apply to Linfox;
   • Linfox's membership of the Defence Industry Security Program (DISP); and
   • The Commonwealth's Defence Security Manual (DISM).
2. While the complete contract was not before the Tribunal, Mr Collett summarised in his affidavit the various clauses which impose on Linfox security related requirements.
3. In summary, the relevant clauses require Linfox to ensure that all workforce members performing services under the contract hold, at minimum, baseline security clearances by their agreed start date. Linfox is also required to ensure that all workforce members (including sub-contractors) comply with Commonwealth security requirements which apply to its sites, Linfox's sites or a Commonwealth place, area or facility. The requirements include a prohibition on the release of certain information to persons from other countries and to workforce members who do not have the appropriate security clearances.
4. The contract also requires Linfox to comply with the DTC Act and Regulations, the DISM and the ITAR and Defence Trade Cooperation Treaty between Australia and the US (Treaty).
5. The DTC Act makes provision for entities to become members of what is termed the 'Australian Community'. This concept arises from the Treaty, which is in part designed to facilitate access by the Australian government and other entities to US defence materials and information. The contract required Linfox to become a member of the Australian Community and it was granted membership in August 2014. Under the DTC Act, it is an offence for Linfox to supply certain defence articles and services to a person who is not a member of the Australian or US Communities. Some, but not all, of the defence material handled by Linfox under the contract is subject to the DTC Act.
6. In order to comply with the DTC Act (including obligations arising from it being a member of the Australian Community), Linfox's individual workforce members will only be considered to be members of the Australian Community if they are Australian citizens (unless a waiver has been granted) and hold a current security clearance. Waivers are understood to only be available in exceptional circumstances, such as where no Australian citizen has the required skills or expertise for the role. Ms Davey's affidavit says that there are no roles under the contract which would qualify for a waiver of this kind. The evidence was that Mr Collett and Ms Davey believe that there is no practical prospect of a waiver being obtained for any role to be performed under the contract.
7. The practical effect of the DTC Act and Linfox's membership of the Australian Community is that its workforce must be Australian citizens so they can obtain the required security clearance.
8. The operation and consequences of the ITAR and related US laws have been discussed in a number of decisions.[2] It is unnecessary to say more here other than to note that the Commonwealth has been authorised to release ITAR related defence material to Linfox but that authorisation only allows Linfox to access the material if the individual is an employee who is an Australian citizen and if she or he holds an Australian security clearance.
9. The DISP is a risk mitigation program which is intended to ensure the defence industry maintains its security responsibilities and safeguards the supply chain. As an ADF contractor, Linfox is required to be a member of the DISP. Members of the DISP must comply with the DSM. That manual requires that all personnel who access defence material possess the appropriate security clearance.
10. I am satisfied that, taking these security requirements together with the evidence that all roles under the contract require security clearances to be held, in order for Linfox to provide the contracted services, it may only engage Australian citizens as workforce members.

1. If the exemption sought is not granted and Linfox engages a workforce member who is not an Australian citizen, it will breach the security conditions referred to above. Such a breach would lead to significant penalties and potential imprisonment for involved officers, Linfox being barred from handling ITAR related material and the termination of the contract with the ADF.
2. Aside from the financial and corporate impacts on Linfox, the consequences would include the loss of Victorian jobs, at least in the short term, and the loss of experience and expertise from the defence industry. This is not work that can be relocated to another State where an exemption has been granted. That is because the ADF has and requires sites in Victoria and requires the contracted services to be performed in Victoria. The ADF would have to re-tender the contract and the national interest may be compromised while that occurs.
3. In addition to avoiding these adverse outcomes, the granting of the exemption is said to be of benefit to the Commonwealth as it will allow Linfox to comply with security measures the Commonwealth has deemed as necessary to protect national security.
4. It is Linfox's position that, in order to comply with the terms of the contract and the other security requirements, including the DTC Act, it is required to discriminate on the basis of race. In order to avoid engaging in prohibited discrimination in Victoria, it seeks an exemption to engage in specific kinds of conduct.

1. The exemption terms are set out on pages 2 to 6 of these reasons. As will be seen, those terms describe the particular conduct in which Linfox wishes to engage. Mr Collett produced a table which sets out each aspect of the conduct it seeks an exemption for and the source of the discriminatory obligation.
2. Most of the clauses are self explanatory. The record keeping and reporting related conduct described in clauses 3(b) and (c) goes to ensuring that Linfox can demonstrate compliance with the ADF's requirements and, where applicable, those of the Commonwealth and the US.
3. The wording of clause 3(d) of the exemption was the subject of discussion at the hearing. It has been amended to ensure that the means of allowing access to relevant parts of the ADF and Linfox sites does not include a visible reference to or indicator of citizenship.
4. It is my understanding that it is unlikely that Linfox will need to rely on clause 3(j) regarding the termination of workforce members. However, it is included at present on the basis that it will only be used if a workforce member does not obtain Australian citizenship or there is a change in their citizenship. Despite the evidence that redeployment of workforce members is unlikely to be practicable, there is a condition that course of action be considered before anyone is terminated (clause 3(j)(ii)).
5. Like other exemptions granted by this Tribunal, there is a condition that Linfox provide a report to the Tribunal and the Commission on the following matters every twelve months:
   • (a) the steps taken by the applicant to comply with the EO Act and the terms and conditions of this exemption, including training and education given to its workforce, compliance audits, and any complaints made under the EO Act;
   • (b) the number of applications to join its workforce rejected under the exemption and whether any (and if so, how many) were subsequently appointed to other roles;
   • (c) the number of members of its Workforce redeployed or retrenched in accordance with the exemption, and any steps taken to minimise harm or loss to those people arising from the redeployment or retrenchment; and
   • (d) the number of workforce vacancies advertised or offered under the exemption.
6. This reporting requirement ensures that, should the Commission have concerns about the way in which the exemption is being used or about whether it is still required, it may raise the matter with the Tribunal under section 89(5)(a) of the EO Act. I note that policies of the kind described in condition B(a) to (d) are already in place.
7. Having reviewed that material before me and particularly the table, I am satisfied that in respect of each type of conduct, there is a requirement contained in one or more of the following which requires discrimination on the basis of citizenship: the contract, the DTC Act, the Regulations, a requirement arising from Linfox's membership of the Australian Community or the DISP.
8. I will now turn to the Tribunal's power to grant exemptions.

1. I have referred above to the prohibitions on discrimination contained in the EO Act raised by this application. Section 13 says that the EO Act does not prohibit discrimination if an exemption applies. The consequence of section 13 is that, the conduct may be discriminatory under the EO Act, but there is no breach of law when that conduct is engaged in, as it is not prohibited discrimination. In other words, that conduct is taken out of the Act.
2. The provisions dealing with exemptions are found in sections 89 and 90 of the EO Act.
3. Section 89 says that the Tribunal may, by notice published in the Government Gazette, grant an exemption from any provisions of the EO Act in relation to a person or classes of persons or an activity or class of activities or any other provision in any other circumstances specified by the Tribunal. An exemption may be granted for any period of not more than five years. An exemption may be renewed from time to time for a period of not more than five years. Exemptions may be granted or renewed subject to any conditions the Tribunal considers fit.
4. Section 90 of the EO Act sets out mandatory considerations for the Tribunal when exercising the power under section 89. Section 90 says:

In deciding whether to grant, renew or revoke an exemption, the Tribunal must consider -

(a) whether the proposed exemption is unnecessary because -

(i) an exception or exemption in this Act already applies to the conduct sought to be exempted; or

(ii) the conduct sought to be exempted would not amount to prohibited discrimination; and

(b) whether the proposed exemption is a reasonable limitation on the right to equality set out in the Charter of Human Rights and Responsibilities; and

1. As a consequence of section 32(1) of the Charter of Human Rights and Responsibilities Act 2006 (Charter), the Tribunal must interpret section 89, so far as it is possible to do so, compatibly with human rights. The Tribunal is required to undertake the usual interpretative process to identify the meaning of section 89 and also to consider whether the purpose of section 89 can be interpreted compatibly with human rights.[3] Section 32(1) seeks to ensure that Charter rights are kept in mind when a statute is construed but does not require the language of a section to be strained to effect consistency with the Charter.[4]
2. The plain words of section 89 indicate that the purpose of the section is to empower the Tribunal to exercise a broad discretion to grant, renew or revoke exemptions from provisions of the EO Act. The Tribunal may apply conditions to the exemption and determine its term. Section 90 requires that the Tribunal take into account the listed matters when exercising the discretion.
3. Section 90(a) requires an assessment of whether one of the general or specific exceptions contained in the EO Act applies to the conduct in issue so that an exemption is not necessary.
4. Section 90(b) directs the Tribunal to one of the human rights created by the Charter. As section 90(c) is open-ended, the Tribunal may also take into account any other human rights which arise in the circumstances. In this way, the purpose of section 89 can be interpreted compatibly with human rights.
5. When exercising the discretion created by section 89 of the EO Act, the Tribunal must consider the matters listed in section 90. Further, under section 38(1) of the Charter, as a public authority, when making that decision the Tribunal must not fail to give proper consideration to a relevant human right.[5] The section 8 right to equality is considered as a mandatory consideration under section 90(b). In the context of this matter, the right to privacy contained in section 13 of the Charter may also be relevant.
6. When considering whether to grant an exemption it is also appropriate that the Tribunal have regard to the objectives of the EO Act. The onus of establishing that it is appropriate to grant an exemption falls on the applicant.

Section 90(a) - applicable exception under the EO Act?

1. I asked Linfox's counsel whether the requirements of the DTC Act might mean that an exemption was unnecessary because section 75 of the EO Act might apply. Section 75 of the EO Act says that a person may discriminate if it is necessary to comply with or is authorised by a provision of another Act. So, my question was whether, if the DTC Act has the effect that Linfox's workforce must be Australian citizens or be entitled to Australian security clearances, the section 75 exception would apply and so the exemption may be unnecessary.
2. I was informed that, while the DTC Act deals with some of the US defence material to which the ITAR and other US security requirements apply, it does not apply to all of the relevant defence materials nor does it cover all of the obligations arising under Linfox's membership of the DISP and the content of the DSM. Accordingly, the DTC Act does not cover all of the contracted services and so it does not require or authorise discrimination in respect of all of the conduct in issue.
3. While I accept that explanation in this case, in any future exemption application it would be appropriate for Linfox (or another applicant) to ensure that the possible application of section 75 of the EO Act is considered and evidence is produced about whether it may apply. That is important because, as set out in section 90(a) of the EO Act, an exemption is not to be granted where an exception already applies. Further, consideration of the DTC Act or like legislation may allow for an exemption to be granted which is reduced in scope.
4. The current exemption will expire on 30 April 2015. I am satisfied that there is no exception under the EO Act which applies and so, in the absence of an exemption, the conduct the applicant seeks to engage in would amount to prohibited discrimination. The proposed exemption is not unnecessary under section 90(a) of the EO Act.

Section 90(b) and (c) - Charter and other considerations

1. In BAE Systems Australia Limited and Raytheon Australia Pty Ltd,[6] I discussed the Tribunal's approach to exemption applications of this kind and the Charter. Those decisions also discussed the other matters which are to be considered under section 90(c) of the EO Act.
2. In respect of the Charter and the question whether any limits on human rights are justified under section 7, in summary, the matters for consideration include:
   • The need to take into account the importance of the human rights which are or may be engaged but noting that they are not absolute and may be limited on reasonable grounds;
   • The purpose for which the exemption is sought and the importance of the resulting limitation on human rights. Here, allowing Linfox to comply with contractual conditions and laws which the Commonwealth has determined are appropriate having regard to its security requirements in the context of the particular contracted services;
   • The nature and extent of the limitation and the relationship between the limitation and its purpose. Here, the terms of the exemption have been designed to ensure that it goes no further than necessary to achieve compliance with the contractual and other legal requirements imposed by the ADF and the Commonwealth while allowing Linfox to operate its business which benefits the Commonwealth and Victorians; and
   • The absence of any less restrictive means to achieve the purpose of the exemption. As the security clearance is a precondition to any workforce member being able to undertake the work of the contracted services and where, in effect, Australian citizenship is a requirement for the grant of a clearance, there is no way to avoid making decisions about engaging and using workforce members based on their nationality and seeking that information from time to time.

1. Applying the same approach as discussed in the earlier decisions to the considerations which arise under section 7 of the Charter, I am satisfied that the limitation on the rights to equality and privacy which may result from the granting of the exemption are justified in this case.
2. For the reasons discussed in those decisions and above, I am satisfied that the interests served by the exemption justify taking the described conduct out of the prohibitions in the EO Act. I have had particular regard to the security interests of Australia, noting that the contracted services to be provided to the ADF are necessary and cannot be carried out in another State. I have also considered the employment and economic interests of a number of Victorians who will be engaged by Linfox for the lengthy period the contract will run.
3. As has been mentioned in other similar cases, the reason why the nationality based information is sought and used is most relevant in my mind. I am satisfied that Linfox would not seek and make use of the citizenship of its workforce if the contract with the ADF did not require it. Unlike a number of other exemptions, Linfox does not seek to discriminate because of a person's country of birth. In a number of other matters dealt with by the Tribunal, applicants have sought to discriminate in respect of a person's country of birth because the US has designated specified nations as presenting a risk to its interests. Subject to the requirements of the Commonwealth, any person from any nation may apply to become an Australian citizen or obtain a security clearance. While the necessity to qualify and obtain a security clearance is a hurdle, it not of the same order as excluding individuals from employment simply because they were born in a specified country.
4. Linfox has been granted a similar exemption in New South Wales and similar exemptions have been granted here and in other States to its main competitor, BAE. I consider it appropriate to give weight to the fact that equivalents of this Tribunal have reached the view that the exemptions are, under the terms of similar legislation, appropriate. For the sake of consistency and predictability in decision-making, in the absence of a marked difference in circumstances or some particular matter relevant to this case, it is appropriate that the exemption be granted.
5. I have concluded that the exemption ought to be granted in the terms sought, with the amendments discussed at the hearing, and subject to the conditions set out, including requiring reports to the Tribunal and the Commission every twelve months. I am satisfied that the appropriate term for the exemption is five years commencing on the expiry of the interim exemption.

[1] The Commission may seek leave to intervene under section 159 of the EO Act.

[2] BAE Systems Australia Limited [2012] VCAT 349, Raytheon Australia Pty Ltd [2014] VCAT 1370 and Thales Australia Limited and ADI Munitions Pty Ltd [2014] VCAT 1441.

[3] Momcilovic v The Queen [2011] HCA 34.

[4] Momcilovic per Crennan and Keifel JJ at paragraph [565]; see also Slaveski v Smith & Legal Aid [2012] VSCA 25 at paragraphs 20 and 24.

[5] The Tribunal is a public authority for the purposes of making decisions regarding exemptions under the EO Act - see Lifestyle Communities Pty Ltd (No 3) [2009] VCAT 1869.

[6] BAE Systems Australia Limited [2012] VCAT 349 and Raytheon Australia Pty Ltd [2014] VCAT 1370.