In the most significant decision for employers this year, the Full Federal Court has increased the damages available for pain and suffering in a sexual harassment claim by a factor of five.

In Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82, a female manager employed by Oracle, Rebecca Richardson, was found to have been sexually harassed by a male sales consultant based in Melbourne for six months in 2008. The harassment ceased only when Richardson reported the conduct to her manager. Both the trial judge and the Full Court were critical of Oracle's investigation in four key respects. Firstly, Oracle permitted contact between Tucker and Richardson during the investigation. Secondly, Tucker was required only to give a written, evasive apology. Thirdly, Tucker was not dismissed but given a first and final warning. Finally, Oracle representatives encouraged Richardson not to visit its Melbourne offices again. Richardson resigned and took up elsewhere shortly after the completion of the investigation. 

The trial judge found that Oracle was vicariously liable because it had not done everything reasonable to prevent the harassment of the sales manager. Accordingly, the trial judge awarded her $18,000 in damages for pain and suffering. The trial judge noted that he would have awarded her $30,000 for economic loss caused by taking up a lower paid position if the evidence proved a link between that decision and the harassment.

Richardson appealed many aspects of the decision but succeeded upon two, namely that damages for pain and suffering were inadequate and that there was evidence establishing economic loss such that she should have been awarded the $30,000. As to pain and suffering, Justice Kenny of the Full Court held that the award did fall within the range of damages available for pain and suffering. However, that range was now inadequate. Community standards now placed a higher value on quality of life than when the range was first set down. Furthermore, a restrictive approach to damages is inconsistent with the beneficial intent of the Sex Discrimination Act under which the claim was made. 

Accordingly, it was found that the pain and suffering Richardson endured merited an award under this head of $100,000 instead of $18,000. As to there being no evidence of the harassment causing economic loss, Justices Besanko and Perram found that statements made by Richardson to others at the time of the investigation—that she had lost confidence in Oracle and her acceptance, soon after, of lower paid employment—established the necessary link. 

Key Takeaway

The key takeaway for employers is that there are two points at which they may mitigate their exposure to a sexual harassment claim. The first is at the stage of establishing vicarious liability, and the second is in the damages calculation. To prevent a finding of vicarious liability, employers should demonstrate that they have done everything reasonable to prevent the sexual harassment. To do this, employers should hold sexual harassment seminars regularly to warn employees of the seriousness of that conduct. 

Furthermore, the contract of employment should provide that proven sexual harassment will justify summary dismissal. As to minimizing damages, employers should prevent the subjects of investigations from contacting complainants. Those complainants, whether or not their claims are substantiated, should be given counseling at the employer's expense. Implementation of these strategies should help employers to avoid sharing the fate of Oracle. 

Andrew Berriman