An employer has been found to be vicariously liable for sexual harassment of employee where a director received verbal notice of the harassment and failed to act.


Implications for employers

This judgment demonstrates that verbal discussions with a company director about a workplace harassment issue may constitute sufficient notice to require the employer to act. If a director or a person embodying the controlling mind and will of the employer is made aware of harassment in the workplace, the employer has a duty to take reasonable steps to stop that behaviour as part of its duty of care to its employees.

Background

Ms Trolan was an aviation underwriter employed by WD Gelle Insurance and Finance Brokers Pty Ltd (Employer). Her supervisor Mr Gelle was a director of the Employer.

Between August 2008 and December 2008, Ms Trolan was subjected to systematic sexual harassment, bullying and intimidation by Mr Gelle. This included Mr Gelle touching Ms Trolan inappropriately on a number of occasions, making lewd comments and shouting at her.

As a result of this conduct, Ms Trolan developed a psychiatric illness and took sick leave from work in September 2008. During this time, she received a phone call from Mrs Gelle, who was the wife of Mr Gelle and also a director of the Employer. Ms Trolan explained that her absence from work was due to Mr Gelle putting his hand up her dress and squeezing her bottom. Mrs Gelle assured her that she would ‘sort it out’.

Mr Gelle’s behaviour did not change following this conversation and, three months later, Ms Trolan made a workers compensation claim. She was assessed as having significant psychiatric illnesses as a result of Mr Gelle’s repeated and humiliating pattern of sexual harassment, including post-traumatic stress disorder, depression, anxiety and social withdrawal.

A key issue in this case was whether the Employer was negligent and whether it could be held vicariously liable for Mr Gelle’s conduct.

Decision

NSW District Court Judge Leonard Levy found that the alleged conduct did occur and had a ‘lasting and permanent deleterious effect on the plaintiff’s ability to lead a normal life’.

Judge Levy noted that the Employer owed a non-delegable duty of care to Ms Trolan to ensure she was not bullied, intimated or sexually harassed in the workplace. The Employer had breached this duty by failing to provide Ms Trolan with a safe place of work, failing to take reasonable steps to care for her psychological wellbeing, and exposing her to the peril of Mr Gelle’s continuing and repeated harassment.

The Court found that the Employer was vicariously liable for Mr Gelle’s conduct because Mr Gelle was the controlling mind, will and embodiment of the Employer. In addition, the September 2008 complaint to Mrs Gelle, who was another director of the company, notified the Employer of Mr Gelle’s harassment and required the Employer to take steps to discharge its duty of care to Ms Trolan. This phone conversation made it reasonably foreseeable to Mrs Gelle, and therefore the Employer, that Mr Gelle’s course of conduct was likely to be detrimental to Ms Trolan’s wellbeing.

According to Judge Levy, the problems caused by Mr Gelle’s offending behaviour could have been avoided relatively simply by facilitating counselling or convening mediation between the parties. By not taking steps to cease Mr Gelle’s behaviour, the Employer negligently failed to take reasonable care for the wellbeing of the plantiff in the workplace.

The Court awarded Ms Trolan $733,723 in damages for past and future loss of income and superannuation. The magnitude of this figure was attributed to the long-term loss of earning capacity and chronic psychological problems caused by Mr Gelle’s conduct.