Introduction

The Full Federal Court (Full Court) has foreshadowed that previous considerations of a perceived acceptable range for awards of non-economic loss for pain and suffering in harassment and discrimination claims are no longer indicative of community standards.  In its decision in Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, the Full Court increased the damages awarded to Ms Richardson from $18,000 to $130,000, holding that the initial award was manifestly inadequate.  This decision has significant implications for employers, both in emphasising the importance of ensuring the workplace is free from harassment in the first place, and in determining how to respond to any claims that are made.

Facts

Ms Richardson brought proceedings against Oracle Corporation Australia Pty Ltd (Oracle) alleging that she had been sexually harassed over a period of eight months by Mr Tucker, a fellow employee at Oracle.  Ms Richardson alleged that she felt compelled to seek other employment and that she suffered economic loss as a result.  She further alleged that she suffered physical and psychological injury as a result of both Mr Tucker’s sexual harassment of her and as a result of the need to change employment.

Findings at first instance

Justice Buchanan found that Mr Tucker unlawfully sexually harassed Ms Richardson and that Oracle was vicariously liable for Mr Tucker’s conduct.

While Ms Richardson had sought compensation in the vicinity of $450,000, she ultimately received $18,000 in general damages.  The damages were confined to compensating her for the distress suffered as a result of the unlawful conduct, with no damages awarded for economic loss as Justice Buchanan held that Ms Richardson’s decision to resign from her employment was not linked to the sexual harassment to which she had been exposed.  In assessing the level of general damages for distress, Justice Buchanan referred to previous decisions evaluating the impact of sexual harassment.  Those previous decisions generally awarded damages for distress and pain and suffering within a range of $12,000 to $20,000.  Damages would only be awarded outside this range if the cases involved features of aggravation such as psychological trauma, resulting in incapacity for work.

Findings on appeal at Full Court

In its landmark decision, the Full Court, comprising of Justices Susan Kenny, Anthony Besanko and Nye Perram, has heralded change to the assessment of non-economic loss in sexual harassment cases. Justice Kenny, in her judgment (with which Justice Besanko and Perram agreed) found that currently “an award for sexual harassment, though within the accepted range for such cases, may be manifestly inadequate as compensation for the damage suffered by the victim, judged by reference to prevailing community standards”. She held that this adherence to a perceived “range of damages” had failed to shift despite the community generally gaining a “deeper appreciation of the experience of hurt and humiliation that victims of sexual harassment experience and the value of loss of enjoyment of life occasioned by mental illness or distress caused by such conduct”. As a result, the Full Court found that whilst Justice Buchanan had correctly had regard to the earlier decisions, ultimately “having regard to the nature and extent of Ms Richardson’s injuries and prevailing community standards” the low level of damages initially awarded was an error.  As a result, the Full Court found in favour of Ms Richardson, and increased her general damages award to $100,000 with an award of $30,000 for her economic loss.

Costs implications

The decision at first instance received significant publicity.  A large part of this publicity related to the costs implications of that decision.  At first instance, Ms Richardson was liable to pay Oracle’s costs because although she succeeded in her claim, she had rejected Oracle’s offer to settle her claim for $55,000 plus costs.  Ultimately Ms Richardson was awarded damages less than the amount offered by Oracle.  Ms Richardson had made a counter offer to Oracle, which was rejected by Oracle.  The damages awarded by the Full Court are in excess of Ms Richardson’s settlement offer.  The Full Court has asked for submissions to be made in relation to the costs of the hearing at first instance.  The decision of the Full Court will of course impact upon the initial award of costs, but the extent of that impact remains to be seen.  Justices Besanko and Perram have foreshadowed that the decision as to costs will be notable as “whilst we have concluded that the award in this case was manifestly inadequate, the award given by the trial judge was not out of step with some past awards in cases of this kind” giving rise to a possible argument that Oracle “ought not be criticised for rejecting an offer which was out of line with those other awards”.

Implications for employers

This decision is of real significance for employers.  Whilst there have been a number of high profile cases in which significant damages have been sought in sexual harassment claims,  employers knew that if they were prepared to defend the matter at hearing, it was likely that any ultimate award of general damages for pain and suffering would be low.  This is no longer the case. 

Whilst regard can be had to previous decisions in determining the likely award or settlement offer, ultimately, a new test appears to have been introduced, that has regard to the community’s estimation of the value to be placed on matters of sexual harassment and discrimination.  Justice Kenny appeared to recognise that the community has gained a deeper understanding of the damage that can be caused as a result of sexual harassment and that the damages awarded by the Court should reflect this. 

Employers will have to take this decision into account in determining where to pitch any settlement offers, particularly once litigation has begun, in order to protect their costs position.

This decision reinforces the importance of ensuring that employers are not exposed to sexual harassment claims in the first instance.  This decision is a timely reminder that employers should:

  • review their harassment and discrimination policies to ensure that they are up to date and reflect the current state of the law;
  • ensure that those policies are effectively implemented in the workplace;
  • provide training on appropriate workplace behaviour to all workplace participants, both at induction and on an ongoing basis;
  • train managers on how to identify inappropriate conduct and the steps that they need to take to deal with it before complaints are made; and
  • ensure a robust grievance and investigative process is in place.