‘Tis the Season to be Vicariously Liable – Sexual Harassment in the Workplace

Introduction

Most HR Managers get a little nervous this time of year, and they have good reason.

End of year functions are traditionally a riskier time of year for complaints about sexual harassment. Harmless banter between work colleagues can quickly turn into unwelcome and offensive behaviour constituting sexual harassment with a drink (or two) in hand.

From a legal perspective, there are increasingly more obligations on employers to stamp out sexual harassment and sex-based harassment, including at end of year functions. A review of case law also reveals just how difficult, and expensive, it is for employers to defend and deal with claims of vicarious liability for sexual harassment.

In this article we provide a snapshot of federal law covering sexual harassment and sex-based harassment. Employers should carefully consider their obligations as ‘tis the season to be vicariously liable.

Positive Duty

A positive duty for all employers and persons conducting a business or undertaking to ‘take reasonable and proportionate’ measures to eliminate unlawful sex-based harassment and sexual harassment was inserted into the Sex Discrimination Act 1984 (Cth) (Positive Duty).

Several factors are relevant to assessing what are ‘reasonable and proportionate’ measures. These include the size, nature and circumstances of the business or undertaking; the duty holder’s resources, whether financial or otherwise; and practicability and costs associated with the reasonable and proportionate steps.

Importantly, from yesterday the Australian Human Rights Commission (AHRC) can make inquiries into compliance with the Positive Duty by employers and provide recommendations to achieve compliance. The AHRC can also enter into enforceable undertakings with organisations or businesses. Further, the AHRC President may issue compliance notices and apply to the Federal Court or the Federal Circuit and Family Court for an order to direct compliance with a notice.

The AHRC can commence an inquiry when it ‘reasonably suspects’ that an employer is not complying with the Positive Duty. The Commission has indicated that potential breaches of the Positive Duty may come to its attention from impacted individuals, information received from unions, and reports in the media and social media (amongst and other ways).

Vicarious liability

Employers should be mindful of how vicarious liability can hold them legally responsible for sexual harassment and sex-based harassment perpetrated by their employees that occur in the workplace or in connection with a person’s employment.

An employer will be vicariously liable for sexual harassment and sex-based harassment perpetuated by its employees, unless the employer took all reasonable steps to prevent the conduct from occurring.

‘All reasonable steps’ is a high bar to meet, with the Federal Court describing it in one case as ‘a difficult one to satisfy.’ The cases also suggest that having a policy will not, of itself, avoid vicarious liability.

New dispute resolution pathway

From 6 March 2023, applications can be made to the Fair Work Commission (FWC) to deal with sexual harassment disputes.

In most cases, the FWC would deal with the dispute by conciliation or mediation. The FWC can also arbitrate by consent. Where the dispute remains unresolved, applicants can apply to the Federal Court or the Federal Circuit and Family Court.

If a court application is successful, a Judge may make any order that they consider appropriate – including compensation and the imposition of a penalty.

The latter is an important development.

Given the courts’ likely focus in deciding penalties will be deterrence following the High Court decision in Pattinson, it appears likely courts can be persuaded to order penalties far beyond nominal amounts.

The new dispute pathway is also likely to be a comparably quick way for complainants to seek a resolution through conciliation or mediation. Businesses named as a party in an application for the Fair Work Commission to deal with a sexual harassment dispute should seek legal advice promptly.  

General damages

Compensation in sexual harassment matters can often be amongst the highest of employment-related claims.

Compensation sought by complainants will typically include general damages (or non-economic loss) for pain and suffering and loss of enjoyment of life. Damages can also be sought for economic loss, such as lost wages amongst other forms of damages.  

The seminal decision of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 (Richardson) marked a shift in how general damages are determined in sexual harassment cases. In Richardson the Court found that community expectations warranted higher value to compensation for pain and suffering and loss of enjoyment of life.

These principles are reflected in decisions post-Richardson. They can result in awards of general damages well exceeding $100,000.

This was evident in the recent decision of Taylor v August and Pemberton Pty Ltd [2023] FCA 1313.

In that case, a female employee of a jewellery business was sexually harassed by the company Director and victimised for complaining about it. The harassment involved the Director slapping the employee on her bottom and declaring his romantic feelings for her. She subsequently developed a  chronic psychiatric disorder.

General damages of $140,000 were awarded to the former employee for the sexual harassment portion of the claim alone. In total, the Court awarded the former employee in excess of $260,000 in damages.

The case is a timely reminder of the high cost of sexual harassment cases, for all parties involved.

Conclusion

Given the fast pace of change in the area of sexual harassment, employers should be mindful of their obligations and the risks involved during this time of year.

While paying close attention to the case law, it is evident that employers should approach sexual harassment matters with a watchful eye. As high sums of general damages and the imposition of penalties are on the table, risk mitigation is key.

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This article in no way constitutes legal advice. It is general in nature and is the opinion of the authors only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.