Under what act may employers be liable for breaches resulting from the activity of employees?

Federal and State anti-discrimination legislation makes it unlawful for employers to discriminate against or harass a person in their employment. The legislation also places liability on employers for the discriminatory conduct of their employees.

This means that if an employee is found to have acted in breach of anti-discrimination legislation, their employer may also be found to be in breach as a result of the employee’s actions.

An employer will not be vicariously liable for the conduct of its employees if the employer took all reasonable steps to prevent employees from unlawfully discriminating against or harassing others. The onus rests with the employer to prove that it is not vicariously liable for the unlawful conduct of its employees by demonstrating the steps that it took to prevent the conduct.

The recent decision of Von Schoeler v Allen Taylor and Company Ltd trading as Boral Timber (No 2) [2020] FCAFC 13 considered whether an employer had taken “all reasonable steps” to prevent employees from sexually harassing another employee, examining in particular its workplace policies and the training provided to employees.

The female employee, the complainant in this case, was employed as a timber grader for the employer. She made a number of allegations of discrimination in breach of the Sex Discrimination Act 1984 (Cth) (SD Act). The allegations included that she was sexually harassed by another employee, was discriminated against on the basis of her sex by other employees and was victimised by other employees because she made a sexual harassment complaint. The employee also alleged that the employer was vicariously liable for the discriminatory and harassing conduct of its employees.

At first instance, a single judge of the Federal Circuit Court found that the employee had been sexually harassed by another employee but was not satisfied that other employees had discriminated against the employee on the basis of her sex or had engaged in victimisation of the employee. Moreover, the judge found that the employer was not vicariously liable for the sexual harassment committed by the other employee.The employee appealed to the Full Court of the Federal Court of Australia against the finding that the employer was not vicariously liable for the conduct of its employees.Before the Full Court, the employer submitted that it had taken all reasonable steps to prevent the employee from engaging in sexual harassment. As evidence of the reasonable steps it took, it relied upon its “Working with Respect” policy and the associated training on the policy that had been carried out in the days before the alleged sexual harassment.The Full Court held that the vicarious liability provision of the SD Act required employers to demonstrate that it took all reasonable steps to prevent employees from engaging in unlawful discrimination or sexual harassment and that these steps were communicated to employees and reinforced.

The Full Court noted that employers commonly rely upon policies and training provided in the workplace to demonstrate that they are not vicariously liable for the conduct of their employees. However, in this instance, the evidence relied upon by the employer in respect of its policy and the training did not demonstrate that it took all reasonable steps. In particular, there was no evidence:

Of the content of the training undertaken, rather the employer relied upon the presentation slides from refresher training which only included the definition of sexual harassment;
That employees were instructed that disciplinary action would be taken if an employee was found to have engaged in sexual harassment; and
That employees were instructed during the training that sexual harassment was against the law, that the employer would take sexual harassment seriously and it could be held liable for breaches.

For the Full Court, the failure of the employer to train employees on the seriousness and the consequences of sexual harassment meant that it did not take all reasonable steps to prevent the employee from engaging in sexual harassment. Accordingly, the employer was found to be vicariously liable for the conduct of the employee. The matter was remitted to the Federal Circuit Court to assess the amount of damages.

Lessons for employers

Employers are reminded of their obligations to prevent unlawful discrimination and harassment in the workplace. It will not be enough for employers to simply rely on having a policy in place, it is essential that the policy is communicated to employees and employees are regularly trained in its contents. As the Full Court noted in this decision:

The significance of effective policies and training includes that they deter unlawful discrimination and sexual harassment. They do so through education about the effects of such acts upon victims and about the consequences for the perpetrators and their employers.

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

1 Name of Act

This Act may be cited as the Employees Liability Act 1991.

2 Commencement

This Act commences on a day or days to be appointed by proclamation.

2A Police officers

For the avoidance of doubt, a police officer is declared to be an employee of the Crown for the purposes of this Act.
s 2A: Ins 2003 No 74, Sch 1.

3 Employee not liable where employer also liable

(1) If an employee commits a tort for which his or her employer is also liable:
(a) the employee is not liable to indemnify, or to pay any contribution to, the employer in respect of the liability incurred by the employer, and
(b) the employer is liable to indemnify the employee in respect of liability incurred by the employee for the tort (unless the employee is otherwise entitled to an indemnity in respect of that liability).
(2) Contribution under this section includes contribution as joint tortfeasor or otherwise.

4 Abolition of action against employee for loss of services of fellow employee (per quod servitium amisit)

An employee is not liable in tort to his or her employer merely because the employee has deprived the employer of the services of any other employee of the employer.

5 Act not to apply to serious misconduct of employee or to conduct not related to employment

This Act does not apply to a tort committed by an employee if the conduct constituting the tort:
(a) was serious and wilful misconduct, or
(b) did not occur in the course of, and did not arise out of, the employment of the employee.

6 Employer subrogated to rights of employee under insurance policy

(1) If:
(a) an employer is proceeded against for the tort of his or her employee, and
(b) the employee is entitled under a policy of insurance to be indemnified in respect of liability that the employee may incur in respect of that tort,
the employer is subrogated to the rights of the employee under that policy in respect of the liability incurred by the employer arising from the commission of the tort.
(2) In this section, insurance includes indemnity.

7 Act to prevail

This Act has effect despite:
(a) any other Act or law, or

(b) the provisions (express or implied) of any contract or agreement entered into before or after the commencement of this section.

8 Act binds Crown

This Act binds the Crown in right of New South Wales and, in so far as the legislative power of Parliament permits, the Crown in all its other capacities.

9 Act to apply to previous or future liability