Sexual harassment in the workplace: courts increasingly prepared to award significant damages

23 September 2014
by Kristen Lopes, Candice Fraser

In brief - Damages awarded to victims reflect changing community attitudes

Two recent Federal Court decisions show that the courts are taking sexual harassment claims seriously. They are recognising the significant impact on victims, awarding considerable sums as damages and taking a broad view of what constitutes the "workplace". 

Federal Court of Appeal finds award "manifestly inadequate"

On 15 July 2014, in the case of Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, the Federal Court of Appeal overturned a damages award of $18,000 against an employer found to be vicariously liable for sexual harassment. 

It was held that the award was "manifestly inadequate" and the Court of Appeal increased the damages award to $130,000.

Manager lodges sexual harassment complaint against colleague

Ms Richardson was employed as a consulting manager in Oracle's Sydney office. Mr Tucker was employed as a sales representative in Oracle's Melbourne office. He was attempting to secure a contract with the ANZ Bank and Ms Richardson was a member of the bid team that was assembled in 2008.

From April to November 2008, Ms Richardson alleged that she was subjected to eleven incidents of sexual harassment by Mr Tucker, which included sexual advances and humiliating slurs made in front of others. 

Ms Richardson lodged a complaint with Oracle's human resources team and an investigation was undertaken.

Manager resigns and commences proceedings against former employer

During the four-week investigation, Ms Richardson was compelled to remain in email and telephone contact with Mr Tucker to fulfil her work duties, despite her request to the contrary. 

As a result of the investigation findings, Mr Tucker received a first and final warning. 

In March 2009, Ms Richardson resigned from her employment with Oracle. She claimed to have suffered psychological and emotional distress as well as a decline in her intimate relationship with her partner.

Ms Richardson commenced proceedings against Oracle in the Federal Court in 2013 alleging breach of conduct, indirect discrimination, victimisation and vicarious liability for the unlawful sex discrimination that she suffered at the hands of Mr Tucker. 

Employer failed to take all precautions required under Human Rights Act

In the original case in the Federal Court, Richardson v Oracle Corporation Australia Pty Limited [2013] FCA 102, the trial judge, Buchanan J, found on the evidence that Mr Tucker's conduct amounted to sexual harassment.

His Honour acknowledged that an employer would generally not be liable for the actions of its employees if they were acting outside the scope of their actual and ostensible authority. However, if Oracle failed to take all precautions required under the Human Rights Act 2004 to prevent sexual harassment from occurring, Oracle could be found liable for Mr Tucker's actions.

His Honour found that the training that Oracle had in place for its employees:

  • did not make reference to the legislation that prohibits sexual harassment 
  • did not assert sexual harassment to be unlawful
  • did not inform employees that Oracle may be vicariously liable for employee misconduct

As a result, it was found that Oracle's training package did not comply with Human Rights Commission guidelines released in 2004.

Employer vicariously liable due to failure to provide appropriate training

Ms Richardson failed in her claims for breach of contract, indirect discrimination and victimisation. However, Oracle was found to be vicariously liable for Mr Tucker's conduct due to its failure to provide appropriate training and thereby take all reasonable steps to prevent sexual harassment.

The trial judge calculated damages by reference to previous comparative case law spanning 2009 and 2010. On that basis, Oracle was ordered to pay damages in the sum of $18,000.

Ms Richardson brought an appeal on thirty grounds and succeeded on three.

Causal connection sufficiently demonstrated - first successful ground of appeal

Ms Richardson submitted that the trial judge erred in not finding that sexual harassment affected her intimate relationship with her partner. On appeal it was found that the trial judge did not disclose a real basis for finding that there was a lack of causal connection between the sexual harassment and the decline in sexual intimacy. It found that Ms Richardson's evidence was sufficient to demonstrate a causal connection.

Damages deemed manifestly inadequate - second successful ground of appeal

Ms Richardson submitted that the trial judge erred by awarding manifestly inadequate general damages to Ms Richardson. The court of appeal was satisfied that the damages awarded could not be seen as reasonable compensation for the loss and damage suffered by Ms Richardson. 

It was held that damages are intended to compensate the victim and that "community standards now accord a higher value to compensation for pain and suffering and loss of enjoyment of life than ever before". 

Economic loss claim upheld - third successful ground of appeal

Ms Richardson submitted that the trial judge erred in concluding that there was no causal link between the unlawful conduct of Mr Tucker and Ms Richardson's decision to resign from Oracle. The court of appeal upheld Ms Richardson's claim for economic loss and awarded her $30,000 for the reduction in salary she suffered over a period of three years.

Damages awarded in line with shifting community standards 

This case illustrates that courts are prepared to award significant damages to victims of sexual harassment. The courts recognise that although community standards have shifted, damages awarded for sexual harassment have not increased over the past 15 years.

Federal Court interprets "workplace" broadly

In another recent decision of the Federal Court in the case of Ewin v Vergara (No. 3) [2013] FCA 1311, an employee was awarded $476,163 for sexual harassment by a fellow employee, making it one of the largest court-ordered sexual harassment awards.

The court interpreted the term "workplace" broadly in the Sex Discrimination Act 1984 (Cth) to include "a place at which a workplace participant works or otherwise carries out functions in connection with being a workplace participant".

Accountant alleges sexual harassment by contractor colleague

Jemma Ewin and Claudio Vergara were accountants working for Living and Leisure Australia in its Melbourne office. Ms Ewin was employed as the Group Financial Controller and Mr Vergara was an employee of a labour hire firm retained by Living and Leisure Australia. 

Ms Ewin and Mr Vergara worked on the same floor and often worked on the same matters. Their desks were just metres apart. Over the course of several days in May 2009, Ms Ewin alleged that Mr Vergara sexually harassed her.

In deciding this matter, Bromberg J considered the evidence of what transpired over the period from 12 to 15 May 2009 and further considered the position taken by Living and Leisure Australia and Mr Vergara.

Invitation to dance not sexual harassment

After work on 12 May 2009, Ms Ewin alleged that Mr Vergara invited her to go to the pub to discuss a work issue. At the pub, Mr Vergara suggested that they dance and Ms Ewin declined.  

Justice Bromberg found that this was not sexual harassment as it was an invitation for social interaction that was not sexual in nature.

Public places, taxi and client's office fall within definition of "workplace"

Ms Ewin and Mr Vergara were working late, alone in the office on 13 May 2009. Mr Vergara said he was going to the bathroom and turned off the lights. Ms Ewin then felt Mr Vergara's hand on hers. Ms Ewin asked him to turn the lights back on and he agreed to do so on condition that they talk. 

Ms Ewin suggested that they go to the Waterside Hotel to talk since it is a public place. At the hotel Mr Vergara made a number of sexual advances which Ms Ewin declined. Ms Ewin alleged that Mr Vergara tried to kiss her while they were walking back to the office.

Bromberg J found the entire course of events to constitute sexual harassment. Although the Waterside Hotel and King Street are public places, they were found to fall within the definition of a workplace.

Ms Ewin and Mr Vergara went to a client's office on 14 May 2009 to discuss a matter. In the taxi and in the meeting room, Ms Ewin alleged that Mr Vergara made sexually suggestive comments.

These comments were found to constitute sexual harassment within the context of a workplace.

Victim intoxicated and not in a state to provide consent

After a work function held at the Melbourne Aquarium, staff went to a bar on Flinders Street on 15 May 2009. Ms Ewin asserts that she consumed a lot of alcohol and went to the bathroom. She alleged that when she came out, Mr Vergara put his face into hers and she blacked out. Mr Vergara's evidence was that Ms Ewin approached him and kissed him passionately. They then went back to the office.

Although unsure as to whether they had sexual intercourse, Mr Vergara gave evidence that they were hugging, kissing and touching.

Bromberg J found that they had sexual intercourse at the office. As Ms Ewin was intoxicated, she was not in a state to consent to the conduct and therefore it was unwelcome.

Employer fails to respond appropriately to complaint

After the assault on 15 May 2009, Ms Ewin lodged a sexual harassment complaint with Living and Leisure Australia. Ms Ewin's supervisor initially laughed off her complaint and joked that he had never had the pleasure of being a target of sexual harassment, and further suggested that she speak to Mr Vergara.

Approximately two weeks after the assault, Ms Ewin contacted Human Resources and then decided to resign from her employment.

Ms Ewin commenced proceedings alleging sex discrimination against both Leisure and Living Australia and Mr Vergara. Ms Ewin argued that Leisure and Living Australia had failed to respond appropriately to her complaints which amounted to sex discrimination.

Leisure and Living Australia entered into a private settlement with Ms Ewin. She continued her claim against Mr Vergara.

Interpretation of "workplace" and "workplace participant" by Federal Court

In response to Ms Ewin's claim, Mr Vergara asserted that he was not covered by the Sex Discrimination Act on the basis that he was a contractor, not an employee. This argument failed and the court held that he was a "workplace participant".

Mr Vergara then alleged that the incidents did not occur in the workplace. The court also rejected this argument and found that a narrow definition of "workplace" would undermine the purpose of the Sex Discrimination Act.

Damages awarded for past and future economic loss

Ms Ewin was awarded damages for past economic loss in the sum of $293,000, as well as future economic loss in the sum of $63,000. It was noted that Ms Ewin had changed jobs seven times in nine years. Therefore, it was likely that she would have worked for a further six months at Leisure and Living Australia, with an average annual salary of $120,000 had she remained employed. In addition, Ms Ewin was awarded $10,000 for general damages.

Employers must take steps to minimise risks from sexual harassment claims

These two recent decisions of the Federal Court highlight the importance of employers taking steps to minimise the risks and exposure arising from sexual harassment claims. We advise employers to:

  • review your policies to ensure that they are up to date and reference the statutory obligations of the organisation and employees
  • conduct regular staff training on sexual harassment
  • take allegations of sexual harassment seriously and conduct an effective investigation when complaints are lodged
  • ensure that labour hire providers and contractors have sexual harassment policies in place and train their staff