Summary

  • Employers can be held vicariously liable for acts of sexual harassment committed by their employees in the workplace. However, employers may have a 'defence' to such claims if they can demonstrate they took 'reasonable steps' to prevent the sexual harassment.
  • The recent Federal Court case of Richardson v Oracle Corporation Australia provides helpful guidance on what ‘reasonable steps’ an employer should take to prevent sexual harassment. In particular, it sets a high threshold for the content requirements of sexual harassment policies and training. 
  • Whilst employers may take issue with some aspects of the decision, we nevertheless recommend that employers revisit their policies, training and supporting systems to ensure that they provide employees with the necessary guidance on and understanding of acceptable workplace conduct and interactions.
  • These proactive steps, supported by ongoing engagement with, and education of, employers will in turn place employees in the best possible position to defend (or limit their liability in) sexual harassment claims.

Background

In the case of Richardson v Oracle Corporation Australia Pty Limited,1 Ms Richardson alleged that she had been sexually harassed over a period of eight months by Mr Tucker, a fellow employee. The acts of sexual harassment included a series of sexual comments, advances and connotations which made Ms Richardson feel ‘uncomfortable and humiliated’, culminating in psychological injury in the form of a chronic adjustment disorder.

Findings

Justice Buchanan found that Ms Richardson was sexually harassed by Mr Tucker. In considering Oracle’s vicarious liability for Mr Tucker’s conduct, the court considered the sufficiency of Oracle’s policies, training and investigation process.

‘Reasonable steps’?

Oracle argued that it had taken sufficient ‘reasonable steps’ to prevent Mr Tucker’s conduct. At the time of the sexual harassment, Oracle had in place:

  • a Global ‘Code of Ethics and Business Conduct’ (Code), which included a prohibition of sexual harassment, and
  • compulsory online sexual harassment training, to be completed by employees every two years.

Mr Tucker had received a copy of the Code on commencement of employment, and had twice participated in the online training.

Buchanan J found that the Code and online training were insufficient to meet the test that ‘all reasonable steps’ had been taken to prevent the sexual harassment (a test which he conceded ‘is a difficult one to satisfy’). In particular, Buchanan J found that the Code and training:

  • failed to state in clear terms that sexual harassment is against the law,
  • failed to identify the source of the legal requirement, and
  • failed to provide that an employer might be vicariously liable for sexual harassment by an employee.

Buchanan J held that these elements were necessary ‘to bring to the attention of employees’ the consequences of a breach of policy, and to demonstrate ‘the lively and real interest that an employer will have in scrupulous adherence to its warnings’.

Further, Buchanan J said that the fact that Oracle later issued an Australian Workplace Diversity Policy and face to face training program demonstrated additional steps that Oracle could reasonably have taken to prevent the sexual harassment that occurred seven months earlier.

Ms Richardson’s counsel had also criticised Oracle for using online training, arguing that employees could work through the training without paying any real attention to it. However, Buchanan J did not accept this argument, noting that the two employees involved were ‘mature adults, with serious responsibilities…well-educated and professional’, and could be trusted to take their obligations seriously. He also noted that there was no evident culture of sexual harassment in Oracle’s operations.

As to Oracle’s investigation of Ms Richardson's complaint, Ms Richardson had argued that a ‘formal complaint’ and investigation was not necessary and was against her wishes. However, Buchanan J found that Oracle could not be faulted for treating Ms Richardson’s concerns seriously, asking her to state her complaints precisely, investigating them and taking formal action relating to them. He found that these were minimum requirements consistent with ‘prudence and fairness’.

Damages

Although Ms Richardson was reported to have claimed $450,000 (described by the court as ‘substantial’ and ‘very optimistic’), she was ultimately awarded $18,000 in general damages.

The damages were confined to compensating her for the distress suffered as a result of the unlawful conduct. This was limited to Ms Richardson’s response to Mr Tucker’s conduct, and did not extend to the distress which she alleged she had suffered as a result of the litigation or the perceived inadequacy of Oracle’s investigation.

Buchanan J indicated that an aggravating factor such as incapacity for work or psychological trauma would be required to award damages in excess of $20,000, which was not present here.

Implications for employers

Employers now have a Federal Court decision that elaborates on the reasonable steps an employer should take to prevent a finding of vicarious liability for sexual harassment in the workplace. The damages awarded also indicate that the courts are not inclined to award astronomical damages and are willing to reject ambitious claims.

Whilst the ‘reasonable steps’ threshold set out by Buchanan J is arguably a change to what was previously thought necessary, employers are advised to revisit their workplace behaviour policies, procedures and training to minimise the likelihood of sexual harassment claims arising and to limit their liability in the event of a claim being made.

Specifically, employers:

  • Need to assess the content and frequency of the training they provide. We advise regular training, with a preference for face to face, rather than online training, particularly where behavioural change is sought or a culture of inappropriate behaviour is present.
  • Should check and update existing policies on sexual harassment. Policies and training should specifically:
    • state that sexual harassment is unlawful,
    • provide that sexual harassment is against company policy,
    • state that an employer might be vicariously liable for sexual harassment by an employee, and
    • refer to the applicable Federal, State or Territory anti-discrimination laws.
  • Who operate globally need to tailor their policies and training to the Australian workplace environment. A ‘one-size-fits-all’ global policy or training package might not be sufficient.
  • Need to assess the adequacy of their investigation and complaint handling procedures. In particular, employers need to ensure that they promptly investigate complaints and impose appropriate sanctions on perpetrators.

In this case it was the inadequacy of internal policies and training, rather than complaint handling procedures, that let Oracle down. It is therefore crucial that both be revisited so that employers can best protect themselves against vicarious liability if sexual harassment occurs in the workplace.

Ms Richardson is currently considering her options for appeal.