Legislative changes broaden employers’ vicarious liability

Legislative changes have widened the circumstances in which employers can be found vicariously liable for bullying and harassment in the workplace, says Jessie Murphy-Allen, a senior counsel at Finlaysons.

She told an AILA webinar, chaired by Lani Carter, senior counsel at Sparke Helmore, that 2023 changes to federal laws, the Fair Work Act 2009 and the Sex Discrimination Act 1984, introduced a positive duty to prevent sexual harassment and statutory vicarious liability, which differed from vicarious liability under common law.

Ms Murphy-Allen said reasonable management action was not bullying but, under the Fair Work Act (FWA), repeated unreasonable behaviour and behaviour that created a health and safety risk could be. “Harassment is usually repeated unwelcome behaviour, which must be unsolicited in nature.”

Australia has 16 state, territory and federal acts to protect people against discrimination, including for protected attributes, like age and sex, or broader acts like the FWA.

Ms Murphy-Allen said sexual harassment had received much media attention since the 2020 publication of the Australian Human Rights Commission’s (AHRC) Respect@Work report.

Positive duty

The Sex Discrimination Act (SDA) defined sexual harassment as unwelcome sexual behaviour that a reasonable person would consider offensive, humiliating or intimidating. Since the Respect@Work report, legislative amendments introduced obligations on all organisations to take measures to eliminate unlawful conduct.

Ms Murphy-Allen said the positive duty to eliminate discriminatory behaviour cast a wide net. Under common law, there was strict vicarious liability for employers for wrongs committed by employees “in the course of employment”. The statutory vicarious liability expanded liability for employees’ conduct, although defences were available.

The SDA contained a defence to vicarious liability if a person took “all reasonable steps” to prevent an employee or agent from doing unlawful acts.

In August 2023 the AHRC released lengthy guidelines that were “not binding but instructive for courts when considering if an organisation took all reasonable steps”. The courts relied strongly on the guidelines, which set seven standards:

Leadership
Culture
Knowledge
Risk management
Support
Reporting and response
Monitoring, evaluation and transparency.

Ms Murphy-Allen said organisations with strong leadership and culture were less likely to have instances of harassment, bullying or discrimination.

Onus on employers

Although the FWA and SDA both put the onus on employers to demonstrate they had taken “all reasonable steps” to prevent harassment or discrimination, having separate acts gave employees alternative routes to bring disputes.

Under the SDA, disputes would be referred to the AHRC and, if they couldn’t be resolved, to the Federal Court. Under the FWA, a dispute would go to the Fair Work Commission.

Ms Murphy-Allen said there was a “huge backlog of claims” before the AHRC, so claims could be drawn out for years.

Both acts use “in connection with” employment as a limit to employers’ vicarious liability, which courts had interpreted widely, compared with the common law, which required the tortious act to be committed “in the course or scope of employment”.

Ms Murphy-Allen explored the outcomes of a range of relevant court cases.

Sexual advances

In Richardson v Oracle Corporation Australia Pty Ltd 2014 FCAFC 82, Rebecca Richardson was subjected to “sexual advances and humiliating slurs” on 11 occasions in 2008 by Randol Tucker. The Full Court set aside an $18,000 damages award in favour of $130,000, saying the initial amount was “manifestly inadequate”.

Ms Richardson had been psychologically damaged because she was initially forced to continue working with Mr Tucker and had to endure the trials and had changed jobs, where she initially had a lower salary.

The trial judge described Mr Tucker’s unlawful conduct as “persistent and ultimately callous” and found Oracle vicariously liable, even though it had investigated Ms Richardson’s complaints and taken disciplinary action against Mr Tucker.

Unsolicited acts

In STU v JKL (Qld) Pty Ltd [2016] QCAT 505, a hotel company was found vicariously liable after arranging share accommodation for a 21-year-old employee with a 70-year-old night caretaker.

The young employee awoke to find the older man had entered her room and subjected her to “unsolicited acts of physical intimacy and unwelcome conduct of a sexual nature”. She claimed for economic loss and psychological injury and was awarded $313,316.

In South Pacific Resort Hotels Pty Ltd v Trainor [2005] FCAFC 130, Nanette Trainor was assaulted by a fellow employee at accommodation provided on Norfolk Island. She was awarded $17,500 in damages.

The employer had sought to defend the action on the basis the conduct was not in connection with employment, given both employees were off duty. The argument failed and the employer found liable under s106 of the SDA, which has a wider interpretation of “in connection with” rather than the common law’s “in the scope of employment”.

Ms Murphy-Allen outlined the High Court’s reasoning in the Schokman case, where the employer was found not liable because the offending employee was “on a frolic of their own”. The case is detailed in the December 2023 issue of Resolve.

Offender ‘took advantage’

In Mason v State of Queensland [2023] QDC80, the court found Qld Corrective Services vicariously liable after a supervising prison officer punched another officer “in the guts” after a disagreement. Mr Walker, the offending officer, then told subordinates who witnessed the incident he “did not want to do it to anyone else”.

Corrective Services had argued it was not vicariously liable because Mr Walker was not employed to assault other employees”.

However, the court found Mr Walker’s employment provided the occasion for the assault and he took advantage of his position of authority.

Damages awarded were $207,838, from which workers’ compensation payments of almost $60,000 were deducted. Mr Mason claimed psychological not physical injury, although the court heard the blow was painful and he was “shocked, confused and embarrassed”.