Employer's textbook response avoids vicarious liability for sexual harassment
A swift response places an employer in the best position to manage an investigation and should be part of any strategy to minimise any potential vicarious liability.
An employer has recently avoided vicarious liability for sexual harassment because of its quick investigation response. Hughes v Narrabri Bowling Motel Limited  NSWADT 161 has reinforced the importance of a timely response to complaints.
What happened in Hughes?
In Hughes, an employee alleged that she was sexually harassed by the supervisor of a hotel business. One of the three allegations she made before the NSW Administrative Decisions Tribunal (ADT) was accepted, and the perpetrator was ordered to pay $7,500 damages.
Importantly, the applicant also claimed that the company was vicariously liable for the sexual harassment and claimed damages from the company. The ADT rejected this claim against the company, finding that it was "difficult to envisage what more an employer could have done, short of prevention."
What is vicarious liability?
"Vicarious liability" is the rule that holds an employer responsible for the acts of an employee in the course of their employment. An employer will usually not be vicariously liable if they are on a "frolic of their own". Vicarious liability has been a longstanding feature of our laws, and today features prominently in occupational health and safety and discrimination statutes.
In Hughes, the relevant statute was the Anti-Discrimination Act 1997 (NSW), which deems an employer vicariously liable for sexual harassment unless the employer can show that "it took all reasonable steps" to prevent the employee from committing the sexual harassment.
What are "all reasonable steps"?
Most often employers take all reasonable steps to prevent sexual harassment by:
developing and enforcing policies relating to sexual harassment; and
conduct training to ensure employees understand their obligations in such policies.
In Hughes, the employer had a "behaviour handbook" at the workplace but no evidence was led as to the content of that handbook or any training conducted to reinforce the policy.
If there was no evidence about the handbook or training, how did the employer successfully defend against the vicarious liability claim?
When the complaints were made by the first made by the employee, management acted immediately by interviewing her, all potential witnesses and the perpetrator the next day. For the ADT, the swiftness of the response:
demonstrated that the employer took the complaints very seriously; and
resulted in no further incidents of sexual harassment occurring.
The employer received particular praise because it was the first occasion on which a sexual harassment complain was brought to its attention.
Implications for employers
While this view will not be followed by every court or tribunal (many of whom would point out that there was no real evidence of any steps taken – let alone all reasonable steps – to prevent the harassment occurring and that the actions taken were all reactive rather than preventative), Hughes demonstrates that policies and training are not the be all and end all when it comes to minimising sexual harassment and discrimination in your workplace. An effective investigation plan forms a critical part of any strategy. A swift response – like the one in Hughes – places an employer in the best position to manage an investigation and should form part of any employer's strategy to minimise any potential vicarious liability that may arise from the misconduct.
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
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