Employment litigation is an increasing risk for business in Australia. Over the last 5 years or so there have been a number of emerging trends in employment litigation, such as the advent of claims against individual managers and directors, multiple claims, higher value claims and adverse action claims. Following a number of tragic suicides attributed to workplace bullying history, recent amendments to the Fair Work Act 2009 (Cth)(FWA) were made which are likely to see workplace bullying claims emerge as the latest trend in employment litigation facing Australian business.

Anti-bullying reforms

On 1 January 2014 amendments were introduced to the FWA which introduced new jurisdiction to deal with applications from workers who believe that they are subject to bullying at work.  

The amendments mark a significant change in the Australian employment law landscape because they give the Fair Work Commission (FWC) jurisdiction to hear complaints from workers who claim they are ‘bullied at work’.  Previously, there were no specific anti-bullying laws in Australia, other than limited State-based criminal provisions and a generalised duty owed by employers under Work Health and Safety (WHS) laws to provide a safe working environment without risks to health, so far as is reasonably practicable. Whilst insurers may be familiar with stress claims arising from bullying and resulting compensable damages, this new jurisdiction will increase EPL exposures for most employers and their insurers.

The new legislation requires the FWC to deal with ‘Stop Bullying Applications’ within 14 days.   The FWC has the discretion to seek information, conduct a conference or hold a formal hearing.   Key issues may include whether the applicant is a ‘worker’ (an employee, contractor, apprentice or work experience student) and whether bullying conduct has occurred. 

The concept of ‘bullying conduct’ is defined broadly but it must involve repeated unreasonable behaviour while the worker is at work and it must create a risk to health and safety.  It does not include ‘reasonable management action taken in a reasonable manner’, so it remains open for employers to ‘performance manage’ their workers so long as they act reasonably in doing so.  In contrast to WHS laws, an employer responding to a Stop Bullying Application cannot defend the Application on the basis that it provides a safe working environment without risks to health ‘so far as is reasonably practicable.’   

If the FWC is satisfied that the worker has been bullied and there is a risk that the bullying behaviour will continue it may impose a ‘Stop Bulling Order’ directed to the worker’s employer or principal, the alleged bully’s employer or principal, an alleged bully, or co-workers.   Examples of orders open to the FWC include:

  • stopping a group of individuals from continuing the bullying conduct;
  • regular monitoring of conduct by the employer;
  • requiring compliance with the employer’s workplace bullying policy;
  • requiring the employer to review their workplace bullying policy; and
  • directing the employer to provide information and extra support and training to workers.

Any person or business who subsequently contravenes a Stop Bullying Order is exposed to a civil penalty (of up to AUD$10,200 for individuals and AUD$51,000 for corporations per contravention).

Practical steps for employers

Australian employers must consider ways to minimise and manage risks, particularly in the context of current labour market trends and their effect on workplace culture.  FWC is anticipating a significant number of applications of alleged workplace bullying. Risk management tools which employers can implement to minimise this exposure include the following:

  • Ensuring the workplace has an anti-bullying and grievance policy with a complaints resolution process.
  • Providing training at induction and at regular intervals to reinforce grievance procedures.
  • Encourage employees to approach a manager about workplace issues rather than seeking an external remedy.
  • Training managers to understand their responsibilities when they receive a complaint.
  • Responding swiftly to bullying complaints by conducting an investigation and taking disciplinary action, if appropriate.  It may be wise to engage an external investigator through a lawyer so that legal professional privilege attaches to internal communications and the final report.

EPL insurance

Early preventative action is an employer’s best means of limiting the risk of exposure to loss (damages and defence costs) flowing from a claim for bullying. However, the anti-bullying reforms simplify and expedite the claims process and the anticipated upturn in claims of this nature is likely to impact even the most diligent and pro-active employer.

In Australia there is a good take up of EPL insurance or Management Liability policies covering EPL which provide indemnity in respect of defence costs and losses flowing from a range of employment practices liabilities including anti-bullying claims. Generally these polices exclude damages for personal injury but cover payments for hurt and humiliation.  In the area of bullying it is important that underwriters make clear this distinction in policy drafting because the penalties recoverable from the FWC are significantly less than damages at common law which can potentially reach significant 6 figure sums.

EPL policies tend to have a reasonable costs inclusive deductible applied and low limits of cover, generally not exceeding AUD$500,000.  We anticipate, because the cover is relatively affordable and often forms part of a management liability or D&O cover, that there will be an increase in the take up of this form of cover by employers and a commensurate proportionate increase in claims for indemnity.