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Can Not-for-Profits lawfully discriminate when appointing Board members?

There are a variety of reasons why boards would want to limit the composition of their board to a certain sex or ethnic background. While diversity should always be encouraged, cultural and religious factors may encourage some degree of discrimination within acceptable parameters. In this Insight, we explore whether or not boards can lawfully discriminate when appointing board members and constructing relevant governance frameworks.

Last updated 6 July 2022

There is growing research in Australia and overseas that Boards with diverse membership, whether on gender, ethnicity, or age, produce better results and reduce exposure to costly decisions.[1]

Not-for-Profits who want to take steps towards equality, like introducing diversity quotas, are protected by law.[2] Affirmative action programs are generally supported.

On the other hand, some Not-for-Profits want to limit their Board to one sex or ethnic background for different reasons. Those reasons might be cultural, religious or suit the nature of the community they serve. As Not-for-profits grow in size and take on the delivery of public and community services, they must be confident their decisions about governance are supported by the law.

When is it lawful for an Australian Not-for-Profit to restrict the Board to one gender or race?

To answer this question, we need to look at the law in New South Wales and at the Federal level. If you operate in another State or Territory, feel free to reach out to consider your circumstances.

Exemptions for Not-for-Profits in New South Wales law

In New South Wales, it is unlawful to discriminate based on a person’s race, sex, transgender, marital or domestic status, disability, carers’ responsibilities, homosexuality, Aids/HIV status, age. It is also unlawful to force a person to retire because of their age. 

However, there is a special exemption for voluntary, not-for-profit bodies. Not-for-Profits (but not a registered club) may admit members or restrict membership based on race, gender, or another attribute.[3]

While Registered clubs have no exemption and must comply with discrimination laws, a registered club may limit membership benefits to a specific race if it meets their special needs or promotes ‘equal or improved access for them.’[4]

Where Not-for-Profits in NSW require that their Board members also be general members of their body, the limits applied to membership will naturally flow to the Board.

But suppose a body’s Constitution allows Directors beyond their membership or that the general membership is more open. In that case, the NSW special exemption for Not-for-Profits does not enable an organisation to limit their Board to one gender or race.

Furthermore, certain religious bodies are exempt from discrimination laws in New South Wales. The appointment of a person in any capacity by a body established to propagate religion cannot be contested under NSW discrimination protections.[5]

Similarly, any action necessary to ‘avoid injury to the religious susceptibilities of the adherents of that religion’ is lawful.[6] 

To succeed under this exemption, a Not-for-profit would need to argue that having an all-male Board is necessary to avoid such injury. Claiming that male board members would not like to participate alongside female board members would not necessarily be enough to meet that test. For the exemption to be met, female board members would need to injure the religious susceptibilities of their faith community at large and this shield only extends to religious bodies that propagate religion.

Other religious bodies that deliver community services are unlikely to legally dismiss applications from women where women are allowed to be part of the general membership.

Exemptions for Not-for-profits at the Federal Law level

At the Federal level, the situation is different. Why is it important to consider what our Federal laws say?

Bodies registered under federal laws or operating at a national level naturally attract the focus of Federal regulation. Suppose that a Not-for-Profit operates under federal legislation [7]. In that case, a discrimination complaint may be actionable under Federal law.

Even if a Not-for-Profit is incorporated under state or territory legislation, it is open to the Australian Human Rights Commission to consider a complaint against it under Federal law.[8]

The Commonwealth Government is primarily responsible for satisfying Australia’s obligations under international human rights. Ultimately, where there is an inconsistency between State and Federal laws, Commonwealth law prevails.[9]

Various laws at the Federal level make it unlawful to discriminate on the grounds of gender, race, disability, and age.

The Sex Discrimination Act contains an exemption for voluntary bodies. It says that voluntary bodies can discriminate against persons on grounds connected to gender when admitting members or providing benefits, facilities, or services to its members. Similar to the NSW law, this exemption doesn’t include registered clubs. The federal Act doesn’t count associations that provide credit, grants, or loans to their members or unions/ employer bodies as voluntary bodies.[10]

Meanwhile, the Racial Discrimination Act has no exemption for voluntary bodies. Still, any measure found to be a special measure to address racial inequality is acceptable.[11]

The Religious Discrimination Bill 2021 considers some limited exemptions for religious bodies. 

The Bill defines ‘Religious body’ as any of the following bodies that follow the doctrines, tenets, beliefs, or teachings of a particular religion:

(a) an educational institution; 

(b) a registered charity; 

(c) any other kind of body (other than a body that engages solely or primarily in commercial activities).

This Bill provides broader coverage than the NSW laws for religious organisations that don’t necessarily propagate religion. However, these bodies are not given extensive exemption from discrimination legislation as the NSW exemption does.

To summarise, our laws are designed to address inequality. There is scope for Not-for-Profit bodies to restrict their Boards by gender or race under state NSW and federal laws – but they will have to meet some tests.

If your organisation is looking for fresh eyes on its governance arrangements to ensure it complies with discrimination law, get in touch with the Birchgrove Legal team. We work with our clients to understand their values and goals. Our extensive experience with the Not-for-Profit sector means we identify solutions quickly.

[1] Research and Reports (companydirectors.com.au)

[2] Sex Discrimination Act 1984 (Cth) s7D; Racial Discrimination Act 1975 (Cth) s 8.

[3] Anti-Discrimination Act 1977 (NSW) section 57.

[4] Ibid, section 21.

[5] Ibid, section 56(c).

[6] Ibid, section 56(d).

[7] Corporation Act 2001 (Cth)

[8] See for example, Sex Discrimination Act 1984 (Cth) section 10.

[9] Constitution of Australia, Section 109

[10] Sex Discrimination Act 1984 (Cth) s 39.

[11] Racial Discrimination Act 1975 (cth) s 8.

Birchgrove Legal is a boutique Sydney law firm that specialises in the not-for-practice sector. Its market-leading practice is at the cutting edge of innovative approaches to serving NFP sector organisations across the spectrum of entity types. Get in touch with one of our authors to discuss your needs further.

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