Court awards increased damages in sexual harassment case but rules investigation conducted properly

A landmark anti-discrimination ruling that set a new standard in sexual harassment payouts has also shown that damage to employers can be limited by a well-conducted workplace investigation.

The full Federal Court has found community standards now demand higher compensation for non-economic loss in sexual harassment cases, and has increased a former software company manager’s overall damages award from less than $20,000 to $130,000.  However, the Court rejected the manager’s argument that the company’s investigation of her complaint had caused her compensable losses, limiting further potential financial impositions on the employer.

The employee at the centre of the case, a Sydney-based manager, was recruited by the company from the US in 2002.  She came in contact with the Melbourne-based sales representative when they both became part of a team bidding for a major access security project.

The employee alleged that the sexual harassment began from their first face-to-face meeting in April 2008.  She had asked to be taken off the project in August 2008 but gave no reason for it, and her request was declined.  The comments she alleged the sales representative made – some during meetings with both colleagues and external clients – included:

• “You and I fight so much … I think we must have been married in our last life” (during their first team meeting), followed by, “How do you think our marriage was? I bet the sex was hot;”

• “We should go away for a dirty weekend sometime;” and

• “I love your legs in that skirt. I’m going to be thinking about them wrapped around me all day long;”

• “I love it when you’re mean to me. It just makes me think how hot you would be in bed;”

While the sales representative denied making some of the comments, maintained others were “innocuous” and that a third group were simply “blue banter”, the judge held that his conduct was “persistent and ultimately callous”. The company gave him a first and final warning as a result of its investigation.

In February last year, the original Court case found that the company was vicariously liable for the sales representative’s sexual harassment of the manager over a six-month period in 2008, and ordered the company to pay her $18,000 for pain and suffering and loss of enjoyment of life.

The initial judge rejected the manager’s claim for economic loss, finding there was no link between the unlawful harassment and her decision to resign and begin working at another company. He said if he was wrong about this, he would have assessed her loss at $30,000 — the difference between her old salary and her new one over a three-year period.

The manager appealed the ruling, and the Court upheld her challenge to the amount of general damages awarded and to the finding that there was no link between the harassment and her resignation.

The full court increased her general damages to $100,000 and added $30,000 for her economic loss. In their joint judgment, the Court upheld the manager’s challenge to the judge’s finding that her resignation and consequent loss of salary was not caused by the sales consultant’s harassment.

However, the Court found nothing unlawful in the raft of allegations the manager put to the court about the company’s handling of the matter, among which included that it forced her to make a formal complaint when she wanted the matter dealt with informally; required her to remain in phone and email contact with the sales representative for a month while the investigation took place; and that her new job’s punishing travel schedule compounded the physical and psychological injury she suffered from the sexual harassment.

iHR observes that employers can avoid or minimise costly and time consuming legal risks if they follow procedure when sexual harassment allegations occur. One way of ensuring correct procedure is followed is via thorough and expert workplace investigations. iHR provides a range of investigation services, from dealing with informal complaints to significant and complex formal investigations. We are experienced in handling complaints from operational to senior executive and board level, including liaising with unions involved in representing parties to a complaint. iHR can also review your internally-conducted workplace investigations, providing advice or recommendations, and can help ensure that these investigations are sound and will stand up to external testing.