Legal Insights

Damages and location: the new world of liability in sexual harassment claims

By Ross Jackson

• 09 September 2014 • 7 min read
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Two recent decisions of the full Federal Court of Australia have substantially changed the sexual harassment landscape in Australia. Both decisions concerned claims brought under the Sex Discrimination Act 1984 (Cth) (SD Act) and together they impact:

  • when sexual discrimination will be considered to be covered by the SD Act
  • the damages payable for a breach of the SD Act.

Richardson v Oracle [2014] FCAFC 82

The first case was Richardson v Oracle [2014] FCAFC 82. Ms Richardson brought an action against Mr Tucker, a colleague, and Oracle Corporation Australia Pty Ltd, her employer, claiming that Mr Tucker subjected her to a ‘humiliating series of slurs, alternating with sexual advances… which built into a more or less constant barrage of sexual harassment’. Ms Richardson claimed Oracle was vicariously liable for Mr Tucker’s conduct.

Although Ms Richardson was successful at first instance and awarded $18,000 damages in compensation, she appealed from this decision on a number of grounds. On appeal, the Court:

  • raised the general (compensatory) damages to be awarded to Ms Richardson from $18,000 to $100,000
  • awarded Ms Richardson $30,000 for economic loss.

The Court awarded the economic loss damages as it found there was a causal nexus between Ms Richardson’s resignation, the reduction in salary in her new employment and Mr Tucker’s unlawful conduct.

The Court found that the general damages awarded at first instance were manifestly inadequate to compensate Ms Richardson and rejected Oracle’s submission that there was a ‘permissible range’ of damages in sexual harassment cases that should, in most cases, be followed. The Court determined the extent of damages payable to Ms Richardson by reference to her injuries and prevailing community standards.

In coming to its decision, the Court considered the history of the sexual harassment jurisdiction in Australia and compared damages awarded in sexual harassment cases to those awarded for pain and suffering in other jurisdictions such as bullying. The Court commented that the uncertainty surrounding early sexual harassment decisions as to the damages payable for loss of enjoyment of life and/or pain and suffering had resulted in damages in sexual harassment cases being fixed at a conservative level. This approach had resulted in damages awards that reflected a context of 30 years ago, rather than contemporary societal expectations. The Court’s decision in this case indicates this ‘conservative level’ should now be considered a thing of the past.

Vergara v Ewin [2014] FCAFC 100

Next came the case of Vergara v Ewin [2014] FCAFC 100. Ms Ewin was an employee of Living and Leisure Australia Limited (LLA). Mr Vergara was employed by a labour hire firm to perform work for LLA. Ms Ewin brought an action against Mr Vergara claiming that on a number of occasions in May 2009 she was sexually harassed by him. A number of the alleged acts of sexual harassment occurred outside the LLA office, including in a hotel and on the street.

At first instance it was found that the acts (including the acts in the hotel and on the street) had occurred within the ‘workplace’ and sexual harassment had been demonstrated for the purposes of the SD Act. A total of $476,163 plus interest was awarded ($110,000 for general damages and the remainder for loss of past and future earning capacity, past expenses and future expenses).

Mr Vergara appealed this decision including on the basis that neither the hotel or the street should have been regarded as 'a workplace' for the purposes of the SD Act, as it could not reasonably be said that either he or Ms Ewin were carrying out functions in connection with being workplace participants at the hotel or in the street.

The majority of the Full Court found that the judge at first instance was correct to find that the visit to the hotel by both Ms Ewin and Mr Vergara 'was to deal with what had commenced at the workplace'. The majority found that the determination of the function both Mr Vergara and Ms Ewin were carrying out at the particular times was to be determined objectively. Therefore, whilst the subjective motive of Mr Vergara may have been to solicit sexual favours from Ms Ewin, what was actually occurring was the continuation of Ms Ewin's attempt to deal with the sexual harassment which had occurred at the office by moving to a safer place, where Mr Vergara's actions could be viewed by others.

Key insights for employers

Ross Jackson, Partner in our Employment, Safety and People team, recently joined a panel of employment law experts invited by the Melbourne Law School Centre for Employment & Labour Relations Law to discuss Oracle and what it means for damages in discrimination cases. Ross provided key insights for employers arising from the above decisions, including:

  • The quantum of general damages awarded in Oracle, together with the breadth of what may now be considered to be workplaces (in accordance with Vergara) means that the stakes for employers in defending sexual harassment claims have never been higher.
  • Whilst Vergara's case only involved the individuals, under both state and federal legislation, employers are liable for the actions of their employees or agents unless the employer can show that it took all reasonable precautions to prevent the employee or agent from sexually harassing their fellow 'workplace participant'.
  • Because the definition of 'employee' is much broader than the term is usually understood, employers can be vicariously liable for the actions of a person who is neither an employee nor an agent of the employer. For example, under both state and federal legislation an ‘employee’ includes independent contractors engaged under a contract for services.
  • It is now more important than ever for employers to review policies and ensure that not only they are up to date, but also universally applied with training recorded for all workplace participants. This should be high on every employer's agenda.
  • Once a complaint is made, it is not an option for it to be treated as 'informal' and not subject to investigation and action pursuant to the employer's policies.
  • The conduct of investigations is vital. In Oracle, it was critical to the amount of damages awarded that Ms Richardson, rather than the alleged harasser, was removed from her usual work whilst the investigation was undertaken.
  • The increased scope of locations that can be 'workplaces' is alarming. On the reasoning in Vergara, it is likely that each employee's home will also be a relevant workplace. For example, if a pattern of sexual harassment which began at work is continued in the privacy of each individual's home at night, via Facebook.
  • There are unresolved questions that will trouble employers. For example, where do these cases leave employers who on the one hand risk being found to have unfairly dismissed an employee on the grounds of sexual harassment (see McDonald v TNT Australia Pty Ltd [2014] FWC 4246, particularly where there is said to be insufficient connection between the misconduct relied upon and the workplace) and on the other hand can be liable for acts committed in hotels or even in private homes which are held to be 'workplaces'? How can employers demonstrate taking all reasonable precautions against actions committed at such locations? Is this again a case of employers being damned if they do, yet damned if they don’t?

Learn more

Our Employment, Safety and People Team will monitor developments in this area and provide you with updates. If you would like to discuss these cases further, please contact Ross Jackson or another member of our Employment, Safety and People team.

By Ross Jackson

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