Giving clear directions to workers prohibiting harassment and bullying connected to the workplace, as well as at the workplace, has become more important than ever as an award of $476,613 in damages for harassment, including at an off- site location after work, is upheld on appeal to the Federal Court. Partner, Tim Lange, and Lawyer, Hannah Linossier, put the decision in context.

The Federal Court of Australia has upheld on appeal a significant damages award in the case of Vergara v Ewin [2014] FCAFC 100, following serious sexual harassment by a contracted male accountant of a senior female manager. The harassment occurred both in and out of the workplace, including at a nearby pub and in the corridor outside the employer’s offices.

The decision confirms the long term trend towards recognition of social contact between workers outside the office as an area of exposure for employers. Managing this exposure by taking steps to prevent the social contact descending into unlawful harassment, bullying and worse is a crucial aspect of managing a modern workforce.

What happened?

In May 2009 Mr Claudio Vergara worked as a contracted accountant working at Living and Leisure Australia Ltd (LLA). Ms Ewin was LLA’s Group Financial Controller at the time, and they both worked at LLA’s Melbourne office.

The harassment occurred both in and out of the physical workplace. It included Mr Vergara turning off the lights in their shared office and refusing the turn the light back on unless she agreed to come and talk to him. Ms Ewin eventually agreed and they went to the Waterside Hotel, a nearby bar, where Mr Vergara proposed that they have an affair, and Ms Ewin refused. As they left the CBD, Mr Vergara tried to kiss Ms Ewin, which she resisted.

The next day Mr Vergara repeated his sexual proposition and made other sexual comments about Ms Ewin to her, and the following day Mr Vergara said to Ms Ewin “what are you doing to keep Claudio [Vergara] happy?”. The same evening, after attending a work function outside the office, Ms Ewin and others attended the Waterside Hotel. After they left, Mr Vergara tried to kiss Ms Ewin on King Street. Mr Vergara and Ms Ewin returned to a corridor at LLA offices where the court found Mr Vergara engaged in sexual intercourse with Ms Ewin and touched and stroked her, including her breasts and genitalia. Ms Ewin had no memory of the incident and believed she had had her drink spiked but was unable to prove this. Ms Ewin accused Mr Vergara of rape but no charges were ever laid.

When the case was first heard, LLA settled Ms Ewin’s claim against it, while Mr Vergara contested the claim of sexual harassment, including by asserting that some of his conduct did not occur “in the workplace” and could not amount to harassment for which he would be liable under the Sex Discrimination Act 1984 (Cth) (the SD Act).

The trial judge found that the incidents described above, and complained of by Ms Ewin, occurred and amounted to conduct “in the workplace” under the SD Act. The trial judge later gave judgement for Ms Ewin for an award of damages of $476,613 (Mr Vergara was required to pay $210,563 of this, taking into account the settlement by LLA of Ms Ewin’s claim against it).

Did the conduct outside the office occur at a “workplace”?

The  SD  Act  prohibits  unwelcome behaviour “of a sexual nature” in the workplace. “Workplace” has an extended meaning, and includes a “place at which a workplace participant works or otherwise carries out functions in connection with being a workplace participant”.

Mr Vergara claimed the conduct in the corridor outside LLA’s offices and at the Waterside Hotel did not occur at the workplace. The initial decision, and the appeal decision (by majority), rejected his argument.

The appeal decision determined that the mere circumstance of Ms Ewin and Mr Vergara both being “workplace participants” was enough to extend the boundaries of the workplace to the Waterside Hotel including in relation to the initial sexual proposition. The appeal decision included that because the harassment had started at the LLA offices, then although both participants had moved to the Waterside Hotel, the move was in order to “deal with that incident of harassment” by Mr Vergara and the conduct remained sufficiently connected to the workplace.

Controlling off-site and virtual conduct that is connected to the workplace

The SD Act is only one of a number of areas in which conduct connected to the workplace will lead to an employer’s vicarious liability for the conduct of its employees, or where an employee’s conduct may lead to disciplinary action. For example, where employees engage in “cyber-bullying” of co-workers, there are significant exposures for employers. It is also well established that employees who engage in conduct outside but sufficiently connected to the workplace can be disciplined over that conduct.

More and more, including by decisions such as Vergara v. Ewin, employers are expected to exercise their capacity to control off-site behaviour.

Employers who take adequate steps to prevent unwelcome conduct in and outside the workplace will be able to reduce their exposure to significant financial and reputational risk. This includes ensuring that relevant policies and complaint handling procedures exist and that employees are aware of them, as well as conducting regular training about what constitutes sexual harassment and in light of this case, where it can occur.

Lessons for employers:

  • Review your policies to ensure they cover obligations amongst all workers regularly in the workplace, not just employees.
  • Ensure direction is given about appropriate conduct in off-site and “virtual” scenarios that have a workplace   connection.
  • Act quickly to prevent further damage while a workplace investigation is undertaken, as soon as the employer becomes aware of potential misconduct.