Australia: Landmark sexual harassment judgment opens the gate for significant compensation claims

Clayton Utz Insights

Key Points:

The Oracle case has highlighted a significant upward shift in compensation that may be awarded as a result of sexual harassment in the workplace.

In a landmark sexual harassment judgement, the Full Court of the Federal Court has set a new benchmark for compensation awarded to victims of sexual harassment in the workplace.

In Richardson v Oracle Corporation Australia Pty Ltd [2014] FCAFC 82 the Full Court has mirrored current community expectations about the sum of compensation to be awarded for the pain and suffering caused to victims of workplace sexual harassment. In its decision it significantly increased the damages awarded to an ex-employee of Oracle Corporation Australia Pty Ltd who was subjected to unlawful sexual harassment in the workplace.

What economic loss was caused by the sexual harassment?

In 2010 Ms Rebecca Richardson commenced legal proceedings against her previous employer, Oracle, alleging that she was the victim of multiple incidents of unlawful sexual harassment by a previous co-worker, Mr Randol Tucker.

Ms Richardson's sexual harassment case was based on allegations that she was subjected to multiple humiliating comments and sexual advances from Mr Tucker during her employment with Oracle in 2008. The alleged harassment included comments such as; "Gosh, Rebecca, you and I fight so much, I think we must have been married in our last life", and, "So, Rebecca, how do you think our marriage was? I bet the sex was hot"."

In February 2013, Justice Buchanan of the Federal Court found Oracle vicariously liable under the Sexual Discrimination Act 1984 (Cth) for the actions of Mr Tucker. He ordered that the company pay Ms Richardson $18,000 by way of compensation for her pain, suffering and loss of enjoyment of life resulting from the harassment.

However, Justice Buchanan rejected Ms Richardson's claim for economic loss, on the basis that there was no causal link between the unlawful sexual harassment and Ms Richardson's decision to resign from Oracle. If he were wrong in relation to the causal element, he would have assessed Ms Richardson's economic damages at $30,000 dollars, which was the difference between her salary at Oracle and her new role, over a three year period.

Not just economic loss, but psychological and reputational damage compensated

Ms Richardson appealed the decision to the Full Court of the Federal Court on multiple grounds including that the amount of non-economic damages awarded was manifestly inadequate, and that Justice Buchanan's finding that there was no causal link between the sexual harassment and Ms Richardson's resignation from Oracle was incorrect.

Justices Kenny, Besanko and Perram upheld Ms Richardson's appeal, finding that the damages awarded to her were "manifestly inadequate" and did not reflect the community expectations in relation to the "higher value to compensation for pain and suffering and loss of enjoyment of life".

In her separate judgment, with which Justices Besanko and Perram agreed, Justice Kenny made reference to the elevated community standards of recent times and referenced two Victorian bullying and harassment decisions where large sums of compensation were awarded to the victims. She found that there was no in-principle difference between the compensable values of awards for damages for victims of sexual harassment in comparison to bullying, as both categories of victims may suffer psychological injuries and distress of a comparable kind.

On this basis, the Full Court held that $18,000 did not adequately compensate Ms Richardson for the psychological and reputational damage that she suffered. The Full Court also held that Ms Richardson was entitled to compensation for the detriment the harassment caused to the sexual relationship with her partner. As a result of these findings, damages were increased from $18,000 to $100,000.

Further, the Full Court found that there was a connection between Ms Richardson's resignation from Oracle and the unlawful sexual harassment. It held that Mr Tucker's conduct was a material cause of Ms Richardson's decision to resign from Oracle and accept a lower paid position. The Full Court ordered Oracle to pay Ms Richardson $30,000 for economic loss, as calculated by Justice Buchanan at first instance.

Implications for employers

The Oracle case has highlighted a significant upward shift in compensation that may be awarded as a result of sexual harassment in the workplace. The Full Court has emphasised the strong community expectations in relation to the seriousness of sexual harassment in the workplace and is responding accordingly.

Damages for sexual discrimination have only been available in federal law for around 30 years, which is a comparatively short period of time. If the Oracle case sets the new foundation for compensation awarded in cases of workplace sexual harassment, there may be a significant increase in complaints lodged by employees and the compensation sought. This in turn increases an employer's exposures to sexual harassment claims, as the value for pursuing such claims to the court room will become a more viable option for many employees.

To minimise exposure to such claims, employers must ensure that their sexual harassment policies and training procedures are up to date and compliant with Australian legislative standards. The consequences associated with an employer's failure to adhere to discrimination and harassment legislative requirements, or to reasonably ensure that its employees are compliant, will result in significant costs and compensation being awarded to employees who are found to be victims of workplace sexual harassment.

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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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