Who Can Be Liable For Workplace Sexual Harassment Under The Fair Work Act? - Expanding The Frontline Of Workplace Sexual Harassment Liability

Workplace sexual harassment liability is not limited to employers and employees. A recent court decision confirmed that contractors, customers, and other third parties can be directly liable where their conduct occurs “in connection with work”.

In Eklom v Marshall [2026] FedCFamC2G 772, a contractor and a customer were held directly liable under the Fair Work Act 2009 (Cth) (FW Act) for sexual harassment of a worker and ordered to pay $116,000 in compensation and penalties.

This Federal Circuit and Family Court of Australia decision signals a practical shift by the Courts as they continue to interpret recent changes to the FW Act designed to address sexual harassment.

What happened in this case?

The Applicant worked at a storage facility, performing duties equivalent to a site manager. He initially sued his employer (though this aspect of the claim did not proceed), as well as a customer (who became a contractor and performed services at the Applicant’s place of work) and another regular customer. The Second Respondent and Third Respondent (the contractor and customer) were found to have made sexualised and degrading comments towards the Applicant, and to have perpetuated unwelcome physical contact towards him.

The conduct escalated into persistent humiliation, causing psychological harm. The Applicant made a complaint, but this went unaddressed and was shockingly met with allegations he had breached Queensland privacy legislation by showing recorded footage of the interactions as evidence. Following a period of personal leave, the Applicant was dismissed from his employment.

Neither the Second Respondent nor the Third Respondent meaningfully participated in the proceeding, and the Court entered findings of contravention.

What did the Court decide?

The Court found that both the Second Respondent and Third Respondent contravened section 527D of the FW Act, which prohibits sexual harassment ‘in connection with work’. The Court emphasised:

• the proper focus is the status of the person harassed as a worker, not the status of the harasser; and
• liability can attach even where the perpetrator is not an employee, agent or representative of the business.

The Court ordered:

1. $90,000 in compensation for the Applicant, to be paid jointly by the Second Respondent and the Third Respondent; and
2. $13,000 in pecuniary penalties against each of the Second Respondent and the Third Respondent.

What does this mean for employers and insurers?

The decision reinforces that ‘workplace’ protections are activity-based, not contract-based. If conduct occurs ‘in connection with work’, the net of liability is cast wide enough to capture:

• customers;
• contractors; and
• other participants in the work environment.

Historically, inappropriate behaviour by customers or contractors was treated as a customer service issue rather than an employment law risk. Eklom is a reminder that third parties can also be considered:

• primary wrongdoers capable of direct liability; and
• indirect sources of employer exposure through safety and compliance obligations.

Unlike many earlier decisions dealing with harassment, the respondents in this case did not hold formal positions of authority over the applicant. The Court made clear that:

• the absence of a hierarchy does not diminish seriousness; and
• harassment can be equally unlawful in peer-like or customer-facing interactions.

This is particularly significant for industries where workers regularly interact with the public and clients, such as retail, hospitality, finance and professional services.

Insurers and employers must understand exposure is not confined to employment relationships. The case illustrates how quickly ‘joking around’ can be judicially characterised as serious statutory contraventions The Courts will impose significant compensation for psychological harm, and use pecuniary penalties to deter third-party misconduct.

The decision raises practical questions around:

• coverage triggers for non-employee wrongdoing;
• the intersection between EPL, public liability, and statutory liability policies; and
• vicarious liability where individuals (rather than corporate insureds) are primary wrongdoers.

Frequently Asked Questions

Can a customer be liable for workplace sexual harassment?
Yes. As confirmed in Eklom v Marshall, liability can attach to third parties where conduct occurs in connection with work.

Does the harasser need to be an employee?
No. The Court made clear the focus is on the worker’s status, not the perpetrator’s role.

What industries are most affected?
Customer-facing environments such as retail, hospitality, and services are particularly exposed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.