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11 May 2006

Record award for damages regarding workplace bullying

by Joe Catanzariti

Labour hire and subcontracting arrangements may not reduce the primary employer's obligation to ensure a safe working environment for employees. A policy explicitly prohibiting bullying is insufficient.

Bullying has been estimated to cost Australian industry in excess of $3 billion per year and, for its victims, can have significant psychological and emotional costs.

The legal position

Employers may be liable for workplace bullying under a range of laws, including occupational health and safety ("OHS") law, discrimination law, and workers' compensation. From the perspective of the victims of bullying, these laws often provide inadequate redress. OHS law punishes perpetrators but does not compensate victims; discrimination law is ineffective if the bullying does not occur for a "prohibited reason" such as race or sex; and workers' compensation is frequently limited. Nevertheless, a review undertaken of applications to the Victorian Civil and Administrative Tribunal indicates a significant increase in the number of complaints related to workplace bullying, at least in that jurisdiction. Despite this increase, most jurisdictions have no legislation specifically addressing bullying (the South Australian occupational health and safety legislation is a notable exception).

WorkSafe Victoria has issued a Guidance Note on the Prevention of Bullying and Violence at Work.  A failure to abide with standards set out in these types of guidance notes could form the basis of a prosecution under the Occupational Health and Safety Act 2004 (VIC).  Similar guidance notes may apply in other jurisdictions.

Although an extreme case, the following decision of Naidu v Group 4 Securitas Pty Ltd [2005] NSWSC 618 is an important example of a victim of acute bullying relying on common law to receive compensation for psychological injuries, and how employers can identify a number of steps they may take to minimise potential liability. Significantly, the judgment included $150,000 worth of exemplary damages, intended partly to make an example of the defendant as a deterrent to others.

Facts

Mr Naidu was employed by Group 4 Securitas as a security guard. Although Mr Naidu remained a Group 4 employee, he was assigned to work at a Nationwide News worksite, reported to and was under the supervision of Nationwide News, and was not required to attend Group 4's premises.

Between 1992 and 1996, Mr Naidu's manager at Nationwide News subjected him to violent and financial threats, racial and sexual abuse, excessive and unpaid working hours, and directing Mr Naidu to perform personal tasks at the manager's home. As a result, Mr Naidu developed severe depression and post traumatic stress order. He incurred significant medical expenses, was unable to work, and his marriage disintegrated.

Decision

Justice Adams concluded that over a period of almost five years, Mr Naidu was subjected to a level of bullying that amounted to "brutal, demeaning abuse". Subsequently, he found Group 4 and Nationwide News jointly liable for Mr Naidu's injuries. Damages were apportioned at 35 percent for Group 4, and 65 percent for Nationwide News.

In finding Group 4 had breached its contractual obligations and its duty of care to Mr Naidu, he made the following findings:

  • the discrimination and harassment policy of Group 4 formed a term of Mr Naidu's employment contract asserting that the employer, as far as reasonably practicable, would not subject Mr Naidu to the conduct prohibited by the policy.
  • even without the policy, a non-delegable duty is implied into all employment contracts that employers will protect employees from workplace vilification, threats of physical violence, and subjection to demeaning and abusive conduct.
  • although Mr Naidu did not report the bullying, the presence of other Group 4 employees at Nationwide News, combined with their failure to report the bullying, meant knowledge of the abuse could be imputed to Group 4.
  • the Nationwide News supervisor was an agent, or constructive employee, of Group 4, and his bullying in the course of employment could be imputed to Group 4.

In relation to Nationwide News, Justice Adams found:

  • although the manager's behaviour was expressly prohibited by Nationwide News, the bullying occurred in the course of the manager's employment (with the exception of the sexual abuse and directions that Mr Naidu work at the manager's home, for which Nationwide News was not liable). As such, Nationwide News was vicariously liable for the manager's behaviour.
  • Nationwide News had knowledge of the manager's bullying, as the behaviour had been reported to the manager's supervisor.

Damages of $1.9 million awarded

Justice Adams awarded $1.9 million in damages against Nationwide News (the final determination of damages against Group 4 is still pending). The bulk of this was compensation for Mr Naidu's past and future medical expenses, and income lost from his inability to work.

He also awarded exemplary damages of $150,000 against Nationwide News, given they had direct knowledge of the bullying and failed to act. Exemplary damages, as their name suggests, are intended to punish the wrongdoer and deter future misconduct by making an example of a particular defendant. By awarding exemplary damages of this magnitude, Justice Adams sent a strong signal concerning the significance the court attaches to employers' responsibility to protect employees from abuse of this form and magnitude.

Minimising exposure to liability for bullying

This decision should alert employers to the facts that:

  • labour hire and subcontracting arrangements may not reduce the primary employer's obligation to ensure a safe working environment for employees.
  • a policy explicitly prohibiting bullying is insufficient.

At the same time, Justice Adams' decision provides some insight into steps employers may take to protect themselves and their employees from bullying. These include:

  • Implement policies specifically prohibiting bullying.
  • Ensuring these policies are communicated to all employees, including the consequences of failure to comply. The policies should require employees to report incidences of workplace bullying.
  • Ensuring management is aware of its responsibility to monitor and enforce the policies.
  • Responding quickly and effectively when complaints about bullying are made or bullying behaviour is otherwise drawn to the employer's attention.

This article was written when Joe was a partner at Clayton Utz and does not necessarily reflect his views as Vice-President of the Fair Work Commission.

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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 communication. Persons listed may not be admitted in all States and Territories.