Vicarious Liability is now too expensive to ignore
Ever since the Richardson decision (a decision of Full Court of the Federal Court of Australia) the cost to businesses for vicarious liability for acts by their employees of discrimination, sexual harassment or harassment and bullying can no longer be treated lightly. Until now, the minimal damages awarded in these claims (except for the most extreme cases) meant that for employers, the legal risk management costs were sometimes more expensive than the potential compensation.
All that has changed. Whereas once these matters might have been resolved for a small payment, now the damages awards are becoming significant and complainants will not “go away” for a small payment.
Two recent decisions awarding in excess of $1.3 million and $435,000 respectively make it clear that significant damages awards are here to stay.
Recap – what was the Richardson Decision?
In Richardson, the Full Court of the Federal Court of Australia increased an award of damages for sexual harassment from $18,000 to $130,000.
The reasoning was that community standards now required recognition that the hurt, humiliation and mental distress suffered due to sexual harassment, demanded greater compensation, and that the hurt humiliation and mental distress arising from sexual harassment should not be treated any differently to the compensation awarded in cases of physical injury.
Interestingly, the Federal Court also held that the business’s compulsory online training for sexual harassment at induction was not sufficient to support a defence of taking reasonable steps to prevent sexual harassment – a defence against vicarious liability. In the Richardson case, the online training was held to be too generic (the employer was a global entity and the training was a globally generic training program) and did not sufficiently stress the illegality of sexual harassment nor outline the process to prevent it. The Court also held that “taking all reasonable steps” required regular face-to-face training sessions to reinforce the importance of compliance with the workplace behaviour polices.
Richardson became a wakeup call for employers. An employer’s efforts to prevent sexual harassment, discrimination or harassment and bullying in the workplace takes on much greater importance or the employer faces the risk of significant compensation payments.
The latest cases awarding damages
Since Richardson, two recent decisions further reinforce the need for employers to actively take reasonable (but effective) steps to prevent discrimination, sexual harassment and harassment and bullying, in order to minimise the employer’s vicarious liability risk.
In Victoria, a young female employee was awarded just over $1.3 million after the Court held that she was subjected to abuse, bullying and sexual harassment from colleagues and contractors in a construction business. The damages included $380,000 for general damages (that is the hurt and humiliation component), $283,942 for past economic loss and a further $696,000 for future loss of earning capacity. This was based on evidence that the employee was a good, industrious worker who would have moved up the ladder either at the present employer’s business or elsewhere in the construction industry. The employer had policies – but could not demonstrate reasonable active steps to prevent the harassment. The employer was also dismissive of the woman’s claims when she first raised them.
In Queensland, the Court of Appeal of Queensland accepted that an employee had developed a psychiatric illness (depression and anxiety) as a result of a consistently excessive workload imposed on her, and because of the bullying conduct of her manager. The manager’s conduct included speaking in a stern tone while pointing her finger at the employee and making belittling and intimidate remarks such as publicly telling the employee that she (the manager) had “never met anybody so stupid as you” and telling the employee to “get over it” when she raised genuine work issues. The employee was awarded $435,584 in damages.
What do you have to do?
Damages awards of these amounts mean that employers cannot ignore the risk of vicarious liability because claims are no longer resolved for a quick go away payment. The decisions also tell us that while an online compliance training program is worthwhile, it is not a sufficient defence to a vicarious liability claim. Bullying and harassment, sexual harassment and discrimination training and refreshers have to be practised and provided regularly on a continuing basis.
What your business has to do is:
- ensure it has a clear, plain-language policy about bullying, harassment, sexual harassment and discrimination and a procedure for managing complaints about these matters (which, as a minimum, meets the requirements for such a policy and procedure under the work health and safety legislation);
- provide regular and ongoing (refresher) training to reinforce the message that your business will not tolerate bullying, harassment, sexual harassment and discrimination and about how the business will manage complaints and the consequences of breaching the policy;
- appoint and train appropriate contact officers who can triage and/or manage harassment and bullying, sexual harassment and discrimination claims; and
- regularly consult with the workers about bullying and harassment, sexual harassment and discrimination and what steps and processes are and will work best in preventing it in the workplace.
As we approach the impending end of year celebration period, a face-to-face refresher training reminder of the importance of meeting your business’s legal risk management for vicarious step. Employer vicarious liability is no longer a minor issue with a quick pay out solution.
McKays provides a very good, interactive workplace behaviour refresher training program that can easily be tailored to your business and delivered in a 1 hour lunchtime session for your workforce.
If you want more information about the program, please contact us.