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Avoiding liability for sexual harassment: enforcement of workplace policies

Feature Articles

Cite as: (2005) 79(4) LIJ, p. 46

Employers may be protected from vicarious liability for an employee’s sexual harassment of a co-worker if they have taken reasonable precautions to prevent the conduct.

By Carolyn Sutherland

Under ss102 and 103 of the Equal Opportunity Act 1995 (Vic), an employer will be vicariously liable for sexual harassment or discrimination by its employees in the course of employment unless the employer has taken “reasonable precautions” to prevent the sexual harassment or discrimination. Prior to the recent case of Howard v Geradin Pty Ltd (Howard’s case),[1] no Victorian employer had successfully relied on the reasonable precautions defence, despite the prevalence of equal opportunity policies in workplaces. Although policies could be used in an effort to reduce the likelihood of sexual harassment and discrimination occurring in the workplace, once a claim had been made it was unlikely that an employer could rely on its policies and procedures to avoid liability for the claim. This was somewhat discouraging for employers seeking to adopt a risk management approach in this area.

Previous approaches

In McKenna v State of Victoria & Ors (McKenna’s case)[2], the Victoria Police had distributed information about discrimination and sexual harassment to all its employees with their payslips and had also offered equal opportunity training to employees who volunteered to be equal opportunity contact officers. However, the Victorian Anti-Discrimination Tribunal (the predecessor to the Victorian Civil and Administrative Tribunal (VCAT)) found that the employer had not taken “all reasonable precautions” because the steps taken had no impact on the senior people in the police force who were responsible for sexual harassment and victimisation against the employee. The employer was held vicariously liable for the conduct and was ordered to pay the employee $125,000 in compensation.

Similarly, in Gray v State of Victoria (Gray’s case),[3] VCAT was not satisfied that the Department of Education had taken reasonable precautions to prevent sexual harassment and discrimination of a teacher by the school principal. This was despite VCAT’s acknowledgment that the Department had been a “leader” in equal employment opportunity, had developed briefings on the legislation in conjunction with the Equal Opportunity Commission of Victoria and had widely distributed a comprehensive and up-to-date equal opportunity policy.

VCAT found that: “[d]isseminating a standard package, the lack of any assessment of its effective reception, and the lack of any attempt to educate [the principal] after the complaint was made, indicates an assumption by the Department that no other precaution was needed”.[4] The Department was ordered to pay the teacher $45,000 in damages and the principal was ordered to pay the teacher a further $10,000.

These Victorian cases imposed very high standards on employers, requiring more than the mere distribution of a policy, particularly in the case of larger employers. The cases also suggested that it would be difficult to avoid vicarious liability where the perpetrator of the discrimination or harassment is in a senior position. The very fact that such discrimination had occurred seemed to be viewed by VCAT as evidence that an employer had not taken reasonable precautions to prevent the discrimination.

The background to Howard’s case

VCAT has taken a more lenient approach to vicarious liability in Howard’s case. Ms Howard was employed by Geradin Pty Ltd as an investment portfolio manager from 7 April 2003 until she resigned on 30 June 2003. Shortly before her resignation, Ms Howard was sexually harassed by a co-worker, Mr Lewis. VCAT upheld Ms Howard’s claims that Mr Lewis had made remarks to her to the effect of “put them away” (in relation to Ms Howard’s revealing clothing which exposed her cleavage) and had left a piece of paper on Ms Howard’s desk with the message “show us your tits”.

Mr Lewis argued that the conduct was not unwelcome on the basis that Ms Howard had sent sexually oriented text messages to his mobile phone and to the phones of two colleagues. Ms Howard denied sending the messages and said that the messages purportedly sent by her must have been edited or changed to make them appear sexual. VCAT found that the evidence of all the witnesses regarding the exchange of text messages was unsatisfactory and was unable to be satisfied that Ms Howard had participated in the exchanges. Therefore, it concluded that the conduct of Mr Lewis was unwelcome and constituted sexual harassment.

Vicarious liability in Howard’s case

Prior to the hearing, Ms Howard had settled her claim against Mr Lewis in exchange for $5000 in compensation and an apology. The hearing before VCAT was therefore confined to the complaint against the company on the basis that it was vicariously liable for Mr Lewis’s conduct.

The company claimed that it was not vicariously liable because it had taken reasonable precautions to prevent sexual harassment and discrimination. It was not disputed that such precautions included a sexual harassment policy which was provided to all new employees, including Ms Howard. New employees were required to sign the policy when they signed their contracts of employment. VCAT also heard evidence that the company raised issues concerning sexual harassment from time to time at staff meetings. Although Ms Howard claimed that such issues had not been raised at any staff meetings attended by her, VCAT accepted that there were discussions about the sexual harassment policy on an informal and irregular basis at staff meetings.

Ms Howard had also claimed that the company had been aware of previous complaints of sexual harassment against Mr Lewis and against other employees of the company prior to her complaint. VCAT accepted the evidence of the company that management had not received any previous complaints. VCAT also found that there was insufficient evidence to demonstrate a culture of exchanging sexual text messages and, in any event, management was not aware of such a culture prior to Ms Howard’s complaint. It was implicit in the decision that if management had known about previous examples of sexual harassment it would have been difficult for the company to avoid vicarious liability for Mr Lewis’s conduct.

VCAT relied on cases including McKenna’s case and Gray’s case to outline the preventative measures which would ordinarily need to be taken by an employer to avoid vicarious liability. These include taking appropriate steps to communicate sexual harassment policies to all employees, the implementation of adequate educational programs on sexual harassment and monitoring of the workplace to ensure compliance with the policies.

On the basis that the company had a sexual harassment policy, had communicated the policy to staff and implemented it, and had provided some feedback to staff about sexual harassment on a regular but informal basis, VCAT found that the company had taken “reasonable precautions” to prevent Mr Lewis’s conduct. Therefore, the company was not vicariously liable for the sexual harassment and the complaint was dismissed. In making this finding, VCAT conceded:

“Of course, it might have been desirable for the company to hold formal and regular meetings or seminars for its staff to update them in a formal manner on matters relating to the company’s sexual harassment policy. However, the test to be satisfied is whether the precautions taken were reasonable, rather than ideal”.[5]

Implications for employers

The test of what is reasonable, rather than what is ideal, should give encouragement to employers who would like to rely on their policies and procedures to avoid legal liability for discrimination and harassment. In the earlier cases, an employer may have implemented a reasonable preventative scheme, but if the message had not had an impact on the offending employee, it seemed that the employer would still be vicariously liable. In contrast, Howard’s case should encourage employers to implement measures to prevent sexual harassment and discrimination, knowing that they will be protected from liability even if the message delivered to all employees has not changed the conduct of the particular offender.

Howard’s case suggests that an employer may avoid vicarious liability where it has distributed a sexual harassment and discrimination policy to all employees which outlines the serious consequences of breaching the policy and has reinforced it by some formal or informal discussion.

Employers should nevertheless seek to attain the ideal of avoiding claims of discrimination and sexual harassment altogether. This is much more likely to be achieved where policies are relevant to the workplace, implemented by senior employees and integrated into the organisation’s performance management system. The effectiveness of the policies should be monitored and ongoing training should take place to raise awareness and understanding of the policy and tackle new issues as they arise. For example, the increased use of email and text messaging for instant written communication may generate a level of familiarity between employees which makes sexual harassment more likely. Employers may take the opportunity to remind employees of sexual harassment and discrimination laws as part of their policies and training on the use of new technology.

CAROLYN SUTHERLAND is a lecturer in the Department of Business Law and Taxation at Monash University and a consultant in the employment and industrial relations team at Phillips Fox.

[1] [2004] VCAT 1518 (Deputy President Davis, 6 August 2004).

[2] (1998) EOC, 92-927; upheld on appeal in State of Victoria v McKenna (2000) EOC, 93-080.

[3] (1999) EOC, 92-996.

[4] Note 3 above, at 79,351.

[5] Note 1 above, at para 58.


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