The federal government’s remote work-for-the-dole scheme is racially discriminatory and fails to address the key issues behind high unemployment in remote Indigenous communities, legal groups have said.

The Human Rights Law Centre and the North Australian Aboriginal Justice Agency both provided submissions to the federal inquiry into the community development program, which was launched in July 2015. The CDP requires participants to do 25 hours a week of “work-like” activity to receive welfare payments.

The Indigenous affairs minister, Nigel Scullion, has repeatedly defended the CDP, which he said provided greater flexibility for people, empowered communities, and would re-engage the 60% of participants who left the previous remote job program and ended up on “passive welfare”.

But the organisations said the program forced people into positions which should be fully paid real jobs, was vaguely defined, poorly regulated and overly punitive.

“The cultural, language and health barriers Aboriginal people in remote communities face accessing support and services are well known,” said the law centre’s director of legal advocacy, Adrianne Walters.

“Taken with all the extra obligations under the program, it should come as no surprise to the government that Aboriginal people in remote communities are being unfairly and disproportionately penalised and left vulnerable.”

The legal organisations said the program failed to address a key issue behind unemployment in remote communities – a lack of jobs – and in fact stifled employment because the CDP positions replaced paying jobs that would have workplace protections.

They also criticised the program’s requirement of “work-like activity” as vague or not adequately regulated.

“People are doing activities which should be paid employment or perceive activities as being the same as work,” Naaja’s submission said.

A senior Naaja lawyer, Harley Dannatt, said the program was “not fair”. “If you live in a remote Aboriginal community, you can be doing three times more work for the same amount of money as someone living in town.”

Naaja said the premise of the program was racially discriminatory because it placed higher obligations on people living in remote Indigenous communities, and Centrelink failed to properly communicate with clients.

The agency said clients were coming to it on a weekly basis to say they couldn’t keep up with the demands, and were being penalised with payment suspensions of up to eight weeks – a “punitive” measure which Naaja said was “harsh, unreasonable, and causes poverty”.

More than 80% of people covered by the CDP are Indigenous and according to federal government data participants are about 20 times more likely to face financial penalties for non-compliance than those in the non-remote JobActive program.

More than 200,000 fines have been issued since the program was launched but last month Scullion reportedly said 90% had been waived.

Dannatt said: “People want to work and they want to be employed to work, rather than receiving below-minimum wage payments through this discriminatory program.”

Naaja’s submissions acknowledged there were positives in the CDP, including an increase in training and work-like activity, but said feedback from its clients emphasised “a strong and compelling sense of unfairness”.

“This dual acknowledgement – of the positive aspects and challenges of CPD – was observed in a community consultation: ‘There are good things and bad things about [CPD] activities. It’s good to try and get a job. But a lot of the good jobs out here, they go to white people, the young girls can’t get those jobs.’”

The law centre suggested the CDP could be breaching the Racial Discrimination Act and human rights obligations, and called for it to be scrapped.

It endorsed a plan put together by Aboriginal Peak Organisations Northern Territory as a viable alternative.

The submissions have backed up findings in a 2016 report by Jobs Australia which raised concerns that the hours required amount to an effective income of $10.50 an hour.