Federal government to pay out $2m to settle class action over ?racist? work for the dole program

The federal government will pay a traditional owners corporation representing some of the poorest communities in Australia more than $2m after settling a class action that argued the remote "work for the dole" program was racist.

The Community Development Program (CDP) has required about 30,000 jobseekers in remote communities to work up to 25 hours a week to receive the dole. Participants, 80% of whom were Aboriginal, were said to have faced tougher welfare penalties than those in other parts of Australia.

After sustained criticism from Indigenous leaders who claimed the program was racist and even "modern-day slavery", Western Australia's Shire of Ngaanyatjarraku and the Ngaanyatjarra council launched a class action in 2019 on behalf of 680 CDP participants.

Following a year of confidential mediation, orders issued this month by the federal court Justice Richard White officially approved the settlement, revealing the government will pay $2m to the Ngaanyatjarra council.

The court said the council "represents the interests of around 2,000 Ngaanyatjarra, Pintupi and Pitjantjatjara Traditional Owners (Yarnangu) who reside in the Ngaanyatjarra Communities". It said it intended to use the money for an infrastructure program and an arts project at Warburton, the largest community in the area.

The government also agreed to redesign the CDP scheme for jobseekers in the 10 communities covered by the class action. Without referencing the case, the Indigenous affairs minister, Ken Wyatt, announced in the May budget that the government would overhaul the entire CDP.

The government made no admission or concession of legal liability, while the class action members waived the right to recoup lost welfare payments or damages. The government will also pay the applicants' costs, worth $278,897.19.

The Shire of Ngaanyatjarraku president, Damien McLean, who led the action, said the government's decision to overhaul the program was very welcome.

He said the CDP program had been "just terrible".

"For communities with high costs of living and high levels of poverty, it was very difficult, very stressful," McLean said. "That's why we're glad the commonwealth has had a good look at it and seen the problems it is causing."

He said the CDP required people to be "punished", which "upended their families and their lives".

The class action represented 10 remote Aboriginal communities who told the court their residents' per capita income was the lowest on mainland Australia.

They alleged the CDP breached sections 9, 10 and 13 of the Racial Discrimination Act.

The class action argued it was tougher for those in the Ngaanyatjarra communities to meet their obligations due to "remoteness of their communities, their low levels of education and literacy, and other aspects of their socio-economic status".

The communities, based in sparsely populated land near the Northern Territory and South Australia borders, first raised concerns about the program to the Australian Human Rights Commission in 2016. They filed a lawsuit when mediation at the commission failed.

It is the second time in 12 months the Morrison government has settled a class action over claims its welfare programs were unlawful, after it reached a $1.8bn deal over the robodebt scandal in June.

The CDP followed a similar trajectory to that scandal, with the government steadfast for years despite sustained criticism from Aboriginal leaders, the Australian National Audit Office, a former Liberal Aboriginal affairs minister and even the government's own review, which found 36% of participants said their communities were worse off under the scheme.

Northern Territory Labor MP Chansey Paech labelled the CDP "modern-day slavery" in 2018, while John Paterson of the Aboriginal Peak Organisations Northern Territory called in 2019 for the CDP to be abandoned and replaced with a "positive Aboriginal-led model".

The CDP was introduced in 2015 by the Coalition government and contracted organisations, including the Ngaanyatjarra council, to run employment services for jobseekers in remote areas under the scheme.

It soon sparked outrage, with analysis showing a 740% increase in financial penalties for jobseekers compared to the previous remote job and communities program.

CDP participants who failed to meet their mutual obligations requirements - such as work for the dole activities, job search or meetings with an employment services provider - had their payments docked by $50 a day. Repeated "non-compliance" could result in eight weeks without any payments.

Crucially, analysis by Australian National University researchers found people in remote areas were 25 times more likely to face these penalties than those in non-remote areas.

In its orders handed down this month, the federal court noted that the 680 CDP participants involved in the class action had lost $1,291,438 in welfare income, or an average of $1,793.29 a person.

Taking into account the class action group definition of the lawsuit, however, the court said "the probable total" that group members could have tried to claim back was $534,628.77, an average of $786.22.

There were also "risks" or "even the probability" many would not be able to make out the case they should be paid back by the government, he added.

White said there was "extensive community engagement in the mediation process" which gave him confidence of "wide community support" for the settlement.

McLean told Guardian Australia recouping lost welfare payments for the class action members "wasn't on the table".

"That would have required the commonwealth to agree that the program had been discriminatory, which they insisted it hadn't been," he said.

Indigenous affairs minister, Ken Wyatt, said in May the program would be replaced by a new remote jobs program in 2023 following a re-design.

The Shire of Ngaanyatjarraku is among the sites hosting a trial of the new program, which is voluntary and will see people in work-like placements receive supplementary payments of up to $190.

Wyatt's office was approached for comment.