21 Feb 2013

Is this the beginning of the end for mega sexual harassment claims?

by Michael Byrnes

Are the days of the massive sexual harassment claims numbered? High-profile claims such as Kristy Fraser-Kirk's multi-million dollar against David Jones, and the large payout in Poniatowska v Hickinbotham might have encouraged complainants to make ambitious claims, but courts are certainly scrutinising them carefully, if yesterday's decision in Richardson v Oracle Corporation Australia Pty Limited [2013] FCA 102 is any guide.

In that case, the plaintiff is reported to have asked for $450,000 in damages; the judge called this amount "very optimistic" and awarded $18,000. A key part of the decision was Justice Buchanan's view of how liable the employer was for any change in the plaintiff's economic position as a result of the sexual harassment.

The acts of sexual harassment

Ms Richardson was part of a project team with Mr Tucker. They disagreed about certain aspects of the project. Mr Tucker began making sexualised comments about their disagreement, saying it indicated they were married in a previous life and "I bet the sex was hot."

After months of similar offensive and belittling comments, in public and private, Ms Richardson felt she could endure no more, nor resolve the situation on her own. She notified her manager and Human Resources, which initiated an investigation. While that was being conducted, she continued to work in the team with Mr Tucker.

The investigation was completed, Mr Tucker was found to have sexually harassed Ms Richardson, and the two were separated at work (a result Ms Richardson had asked for). She was directed to work on other projects, which she considered a demotion. She decided to resign not long after the investigation concluded, believing she had no future with Oracle. Her resignation letter which alleged victimisation, was probably drafted at least in part by her lawyers, and was clearly a positioning letter, according to Justice Buchanan. She then took a similar job for a slightly lower base pay with another company.

What was her loss?

Apart from the psychological and physical harm caused by the stress of the sexual harassment, Ms Richardson claimed she had been victimised and effectively forced to resign.

While he found she had been sexually harassed and suffered physically and psychologically, Justice Buchanan rejected these last two claims.

She also claimed that she had been forced to undertake a very high level of international travel with her new employer; that it was dislocating to her personal life and personal relations; and that Oracle was ultimately responsible for these adverse consequences as it had effectively forced her to leave her employment. She sought compensation and damages for these disadvantages and consequences, as well as for alleged future economic loss for a period of at least 15 years.

This was also rejected by Justice Buchanan. Even if she had been forced out, this would mean:

"Oracle should be held responsible, and be required to compensate Ms Richardson, for any personal difficulties which this particular period of travel might have imposed on her. The suggestion involves the proposition that Oracle was bound to underwrite her fortunes and guarantee a degree of personal amenity of life, regardless of intervening circumstances. I do not accept that. In my view, any dislocation arising from this period of unanticipated travel was due to new and supervening circumstances for which Oracle was not responsible, whatever period might be appropriate to consider for the purpose of calculating compensation or damages for a proven case of sexual harassment or other cause of action."

How about her salary? Her new employer was paying her a slightly lower rate than she had enjoyed at Oracle, but this was only for the first three years of her time there. She had subsequently caught up, and her salary had been augmented at both employers by fluctuating annual bonuses. As a result, there was what Justice Buchanan called a "large element of speculation" in her claims.

Why was Oracle vicariously liable?

As Mr Tucker was an employee of Oracle, it was vicariously liable unless it too all reasonable steps to prevent his sexual harassment of Ms Richardson. While it took action once it became aware of the sexual harassment, its internal policies and training let it down, because although they said sexual harassment was against company policy, they failed to highlight in clear terms:

  • that sexual harassment is against the law, and the source of the relevant legal standard; and
  • that an employer might also be liable for sexual harassment by an employee, which would emphasise the lively and real interest that an employer will have in scrupulous adherence to its warnings.

Lessons for employers

The key lesson is that courts are looking carefully at large claims for damages in these cases, and this might lead to more appropriate damages claims in the future.

It might also curb the more creative instincts of some lawyers. Justice Buchanan rejected some of the causes of action in this case on the basis that they were tenuous, and warned that "causes of action should arise naturally from the underlying facts, not be invented by some process of creative pleading bearing no relation to the facts."

Nonetheless, the harm that employees suffer from sexual harassment, and the reputational and operational damage to employers, underscore the importance of prevention. As this case show, while having procedures in place to deal with complaints while they arise will be crucial, your advice to employees must also be clear and comprehensive.

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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.