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Australia – How Do You Compensate Sexual Harassment?

22 July, 2014

 


In Brief

 

  • Last week, the Full Court of the Federal Court significantly increased the damages which an employer was required to pay to an employee who was sexually harassed by a co-worker – from AUD 18k up to AUD 130k.
  • The Full Court explained the proper basis on which damages for sexual harassment must be calculated. It found that, in this case, the employee was entitled to both general damages for ‘pain, suffering and loss of enjoyment of life’, and damages for economic loss, which resulted from her decision to resign, following the harassment.
  • The Full Court also observed that damages awarded in sexual harassment cases in Australia have lagged behind the amounts awarded in other comparable cases, such as personal injury, and do not reflect the community’s current appreciation of the loss, humiliation and pain caused by such conduct.
  • This case suggests that, going forward, courts and tribunals may adopt a more ‘generous’ approach than they have in the past, when assessing damages for employees who succeed in claims made under anti-discrimination laws.

 

Background

 

Last year, we wrote about the decision in Richardson v Oracle Corporation of Australia.1

 

In that case, Justice Buchanan found that Ms Richardson had been subjected to sexual harassment by one of her co-workers, and that her employer, Oracle (which failed to take all reasonable steps to prevent the harassment) was vicariously liable for that conduct.

 

Oracle was ordered to pay Ms Richardson AUD 18k in general damages, for the pain and suffering she experienced as a result of the harassment. Ms Richardson was not awarded any damages for economic loss.

 

Notwithstanding that she ‘won’ the sexual harassment case, in a subsequent decision, Ms Richardson was ordered to pay Oracle’s legal costs. 

 

Ms Richardson appealed Justice Buchanan’s decision, arguing (among other things) that the amount of general damages awarded to her (AUD 18k) was ‘manifestly inadequate’ and that she was also entitled to damages for economic loss.

 

This week, the Full Court handed down its appeal decision.2

 

Findings Of The Full Court

 

Ms Richardson’s appeal on these matters succeeded.

 

The Full Court set aside Justice Buchanan’s original order for damages (AUD 18k) and replaced it with an order requiring Oracle to pay Ms Richardson AUD 130k, comprising:

 

  • AUD 100k in general damages – to compensate her for the pain and suffering and ‘loss of enjoyment of life’ which she suffered after being sexually harassed, and
  • AUD 30k in damages for economic loss – which she sustained after resigning from her job at Oracle, in response to the sexual harassment.

 

The Findings On The General Damages Awarded To Ms Richardson

 

The Full Court made two findings in relation to the general damages awarded to Ms Richardson.

 

First, it found that, contrary to the findings made by Justice Buchanan at first instance, the evidence presented at hearing did establish that the sexual harassment at work had caused damage to Ms Richardson’s personal sexual relationship with her partner – and that this was something which Ms Richardson should be compensated for in the award of general damages. 3

 

Second, the Full Court agreed with Ms Richardson that Justice Buchanan’s award of AUD 18k general damages was ‘manifestly inadequate’. Justice Kenny (with whom Justices Besanko and Perram agreed) found that, taking into account prevailing community standards, AUD 18k could not be fairly seen as reasonable compensation for the loss and damage which Ms Richardson suffered, as a result the sexual harassment.

 

The Full Court held that an award of AUD 100k was appropriate, to reflect the pain and suffering, loss of enjoyment of life and psychological injury which Ms Richardson suffered as a result of the sexual harassment.

 

In increasing the amount of general damages awarded from AUD 18kto AUD 100k, Justice Kenny made some interesting comments about compensation awarded in cases made under anti-discrimination legislation.

 

Her Honour noted that a review of past sexual harassment decisions shows that the amount of general damages awarded in these cases has ‘scarcely altered since 2000 and does not reflect the shift in the community’s estimation of the value to be placed on these matters’. 4

 

Her Honour noted that general damages historically awarded in sexual harassment cases are consistently and significantly less than the amounts awarded for pain and suffering in other cases where individuals suffer comparable personal loss or injury – such as in personal injury cases or breach of employment contract cases where employers have been held liable for bullying / failure to provide a safe workplace. Her Honour referred to various academic literature which recognised this anomaly and concluded that damages awarded in sexual harassment cases were out of step with the community’s current appreciation of the loss, humiliation and pain suffered by such victims.

 

The Findings On Damages Awarded To Ms Richardson For Economic Loss

 

Ms Richardson also appealed Justice Buchanan decision on the basis that His Honour should have awarded her damages for the economic loss she sustained as a result of the sexual harassment. Ms Richardson argued that the sexual harassment caused her to resign from Oracle and that the job she subsequently took on paid AUD 10k per annum less than her role at Oracle for a period of 2 years (after which her salary increased to the same amount she was paid by Oracle) – and that she should be compensated for that AUD 30k shortfall.

 

Justice Buchanan rejected this argument, finding that Ms Richardson’s decision to resign was her own – and was not caused by the sexual harassment. On that basis, His Honour refused to make any award for economic loss.

 

The Full Court reversed this finding, accepting that there was evidence that Ms Richardson’s decision to resign from Oracle and take on a less lucrative role at another organisation was attributable to the sexual harassment. Accordingly, the Full Court awarded Ms Richardson AUD 30k damages for the economic loss she sustained as a result.

 

Implications For Employers

 

  • Following this decision the message for employers in relation to managing sexual harassment in the workplace remains the same – under State, Territory and Federal anti-discrimination laws, employers can be held vicariously liable for sexual harassment which their employees engage in.
  • To ensure that employers are meeting their legal obligations and providing their staff a safe and discrimination/harassment free workplace, employers must ensure that, at a minimum they:This decision however provides a ‘wake up call’ to employers in relation to their potential exposure for acts of sexual harassment in the workplace. the decision indicates that, going forward, courts and tribunals may adopt a more generous approach than they have in the past, when assessing damages for employees who succeed in claims made under anti-discrimination laws.
    • have a comprehensive workplace behaviour policy in place which prohibits sexual harassment at work,
    • regularly train and educate staff on the policy and their rights and responsibilities under it, and
    • ensure they have a sound complainants mechanism in place to deal with any complaints promptly and fairly.
  • This decision however provides a ‘wake up call’ to employers in relation to their potential exposure for acts of sexual harassment in the workplace. the decision indicates that, going forward, courts and tribunals may adopt a more generous approach than they have in the past, when assessing damages for employees who succeed in claims made under anti-discrimination laws.
  • Based on this decision, employers cannot assume that compensation for sexual harassment will be limited to the ‘range of AUD 10k to AUD 20k’ which has historically been awarded.
  • The decision suggests that the Full Court now accepts that modern societal standards demand that, where an employee suffers psychological injury and there is evidence that their personal life has been significantly impacted by sexual harassment, the employee ought be compensated adequately for their loss of enjoyment of life, pain and suffering – and that awards in the ‘AUD 10k to AUD 20k range’ are likely to be considered ‘manifestly inadequate’ to compensate loss of this kind.
  • The decision also gives clear guidance on the process which courts and tribunals will follow, in calculating compensation for pain and suffering in sexual harassment cases.

 

End Notes:

 

  1. [2013] FCA 102. 
  2. Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 – Justices Kenny, Besanko and Perram.
  3. Justice Kenny reviewed relevant case law and noted that, in determining whether discriminatory conduct (in this case, the sexual harassment) has caused compensable loss or injury, it is not necessary for the conduct to be the sole cause of the loss or injury. If there is evidence that the unlawful conduct contributes to the loss or injury, even if it is only one of a number of contributing factors, this will be enough to justify a finding that the loss or injury was caused (in part) by the unlawful conduct – and can be compensated with an award of general damages.
  4. At [117].

 

herbert smith Freehills

 

For further information, please contact:

 

Patricia Low, Herbert Smith Freehills

patricia.low@hsf.com

 

Herbert Smith Freehills Labour & Employment Practice Profile in Australia

 

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