How employers can manage risk of sexual harassment claims

by Paul O'Halloran
14 September 2017

In brief - Training and compliance is a must 

Sexual harassment claims continue to be a significant corporate governance risk for employers. Along with reputational damage, employers can be held vicariously liable for acts of sexual harassment committed by employees and be faced with having to pay substantial damages, unless employers have taken all reasonable preventative steps.

Sexual harassment payouts on the rise since Richardson v Oracle 

In Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, the Full Court of the Federal Court awarded $130,000 in damages to a female employee for sexual harassment, finding the employer vicariously liable for the actions of one of its male employees. Comments made by the harasser included:
 
  • Gosh, Rebecca, you and I fight so much ... I think we must have been married in our last life"
  • "So, Rebecca, how do you think our marriage was? I bet the sex was hot"
  • "We should go away for a dirty weekend sometime"
  • "I love your legs in that skirt. I'm going to be thinking about them wrapped around me all day long"
The damages awarded in Oracle are no longer the high watermark. In Collins v Smith [2015] VCAT 1992, the Victorian Civil and Administrative Tribunal almost tripled the amount in Oracle, awarding a complainant over $330,000 in damages for sexual harassment.
 
A few months ago in the Queensland decision of STU v JKL (QLD) [2016] QCAT 505, a woman was awarded $313,000 in damages due to sexual harassment by a contractor in the workplace causing her to suffer post-traumatic stress disorder. The employer had taken no steps at all to prevent sexual harassment from occurring. The judicial officer hearing the case said (at [76]) if steps had been taken to educate the workforce the employer may not have been liable for paying the compensation:
 
If the [employer] had taken steps to inform its workers of their legal obligations and to provide the education and training necessary to ensure compliance, then it may have avoided responsibility for the unlawful acts of its worker.

Sexual harassment needs to be eliminated from the workforce 

There is absolutely no doubt judges are willing to award large sums of money to employees subject to proven sexual harassment at work in order to send the message that sexual harassment must be eliminated from the workplace. It is therefore essential that employers make sexual harassment training and compliance a mandatory component of corporate governance practices this year and into the future.
 
Training should ensure that employees clearly understand what sexual harassment is and is not, so as to reduce misconceived complaints. 

Misconceived complaints prove costly for complainants 

Several decisions over the last few years have shown complainants will suffer the consequences if a claim is brought where the allegations do not meet the definition of sexual harassment. For example:
 
  • In Chen v Monash University [2015] FCA 130, a female professor who filed some 53 claims of sex discrimination and sexual harassment against a colleague at Monash University, was ordered by the Federal Court to pay her employer’s legal costs in the staggering sum of $900,000 when she lost the case. In dismissing all claims, the Court found that the professor had engaged in a “subjective reconstruction of innocent events through the prism of unsatisfied expectations of a personal and professional nature”.
  • A similar outcome occurred in Yeoh v IBM Australia Ltd [2015] FCCA 724, in which the unsuccessful employee was ordered to pay her employer’s legal costs of $150,000.

Employers should take reasonable steps to reduce claims 

To reduce the risk of employers being held vicariously liable for the sexual harassment and exposure to reputational damage and legal risk, we encourage employers to take the following steps:
  • have an up-to-date sexual harassment policy compliant with the judicial expectations emerging from the case law 
  • ensure that detailed face-to-face or interactive webinar training is conducted for all employees preferably bi-annually or at minimum once a year 
  • educate senior executives and board members of the legal and reputational risks of sexual harassment and the need for vigilant compliance 
  • undertake prompt, transparent and appropriate investigations into allegations using qualified and experienced investigators in order to identify and resolve complaints

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.