Oracle decision marks increase in general damages in sexual harassment cases

Insurance eBulletin - 18 July 2014

Summary

A recent decision of a Full Bench of the Federal Court marks an upwards shift in the benchmark for general damages for unlawful sexual harassment – and potentially other workplace discrimination and harassment – with a former employee of Oracle Australia Pty Ltd being awarded total damages of $130,000 for the conduct she suffered at the hands of a fellow employee.

The decision signals the potential for increased exposure for insurers in a range of EPL claims and is therefore relevant to both underwriting and claims teams alike.  In this eBuletin we discuss the case and what the decision means for insurers.

 

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Background

Rebecca Richardson, who was a consulting manager at Oracle Australia, alleged that an Oracle sales representative, Randol Tucker, had subjected her to a string of sexual advances and comments, such as:

  • "We should go away for a dirty weekend sometime";
  • "I love your legs in that skirt. I'm going to be thinking about them wrapped around me all day long"; and 
  • "I love it when you're mean to me. It just makes me think how hot you would be in bed".

Oracle conducted an internal investigation of Ms Richardson's complaints, and subsequently gave Mr Tucker a final warning. Ms Richardson commenced proceedings in the Federal Court.

Justice Buchanan found that Oracle, as the employer, was vicariously liable for Mr Tucker's unlawful conduct under the Sex Discrimination Act 1984 (Cth) (Act), and ordered Oracle to pay Ms Richardson $18,000 in general damages as compensation.

Justice Buchanan rejected Ms Richardson's claim that there was a sufficient causal link between Mr Tucker's conduct, and Ms Richardson moving to alternative, lower-paying employment. His Honour said that, if he was wrong on that point, he would have awarded Ms Richardson $30,000 in damages for economic loss, being the difference between her new salary and her Oracle salary over a three-year period.

Ms Richardson appealed Justice Buchanan's judgment to a Full Bench of the Federal Court on numerous bases, including that the amount of non-economic damages awarded was "manifestly inadequate" and the finding that there was no causal connection between the unlawful conduct and her resignation from Oracle was incorrect.

 

Appeal result: increased damages awarded

On appeal, the Full Bench increased the general damages awarded to Ms Richardson from $18,000 to $100,000, and also awarded her $30,000 for economic loss.

The Full Bench found that the level of damages awarded to Ms Richardson was manifestly inadequate, especially taking into account the nature and extent of Ms Richardson's injuries and prevailing Australian community standards in relation to sexual discrimination.

While Justice Kenny conceded the trial judge's finding that there is "at least for some purposes" a general range for awards of general damages in sex discrimination and sexual harassment cases of between $12,000 and $20,000 (with a number of notable exceptions where the conduct and the victim's injuries were particularly severe)1, her Honour noted that: 

  • academic commentators have remarked on the courts' cautious approach in fixing amounts for general damages for sexual harassment, and had claimed that the courts had not historically accorded much weight or significance "to the emotional loss and turmoil to an applicant occasioned by acts of unlawful discrimination and harassment"

  • commentators have also surmised that the level of damages awarded in such cases run "counter to the beneficial intent" of the Act and had the effect of impeding its social reform intent; 

  • little had changed in the amount of general damages awarded in such cases between 2000 and 2011; 

  • based on previous decisions, the Federal Court appeared to have historically placed a greater value on the loss of enjoyment of life outside the anti-discrimination legislation field than in it; and 

  • there were reasons to believe the Australian public now placed a higher value on the loss of enjoyment of life and compensation for pain and suffering than had historically been the case, including due to recent higher awards of general damages in workplace bullying and harassment decisions.

Ultimately, her Honour found that in sex discrimination cases (including sexual harassment cases), the range of damages awarded had not kept pace with the increases in awards in other fields of litigation. This had resulted in Ms Richardson being awarded damages that were disproportionately low when taking into account the prevailing community attitude to sex discrimination and to the loss and damage Ms Richardson had suffered.

The Court also found that Ms Richardson's resignation and consequent reduction in salary was causally linked to Mr Tucker's unlawful conduct, and awarded her $30,000 for economic loss.

While the Court rejected Ms Richardson's related claim for compensation for "loss of opportunity for promotion and advancement at Oracle" (made on the basis that she should be compensated for the loss of the chance that she would have been paid more had she remained at Oracle), it accepted that approach "in principle". Their Honours said that, although the material before the trial judge was not sufficient for the purposes of assessing the claim in this instance, they accepted that the approach was consistent with the approach taken in a previous decision.

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Key points

  • The Full Bench's decision appears to mark a shift in the amounts of compensation which will be awarded in cases of unlawful sexual harassment. Where an insured business is found to be vicariously liable for unlawful sexual harassment carried out by one of its employees, the amount of general damages awarded, at least in the Federal jurisdiction, could be much higher than what has historically been the case. 

  • The effect of the decision in Oracle may also extend to the assessment of compensation for pain and suffering and loss of enjoyment of life in other decisions concerning conduct in the workplace, including the broader discrimination field (for example, age and racial based discrimination) and, potentially, workplace bullying and harassment. 

  • In light of the decision, it is conceivable complainants may have increased expectations regarding settlement amounts, which could well factor into settlement discussions and the complainant's considerations of the costs of litigation versus the potential benefit to them. 

  • The decision may therefore signal an increase in the potential exposure for insurers in a range of EPL claims. This is something for insurers to consider when assessing quantum and setting reserves in future claims. It may also be prudent to review reserves in existing claims to ensure that sufficient allowance has been made for general damages. 

  • Underwriters should also be aware of this increase in the potential value of EPL claims when assessing risk. To the extent possible, insurers may wish to reinforce the need for insured businesses to take all reasonable steps to minimise the risk of sexual harassment and discrimination occurring. Including questions in a proposal form about whether an insured's anti-discrimination policies and training are up to date may be one way of seeking to achieve this.

Authors
Gavin Hollamby, Senior Associate
Annika  Anderson, Lawyer

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Further information


1 Lee v Smith [2007] FMCA 59, where a general damages award of $100,000 was made, and Poniatowska v Hickinbotham [2009] FCA 680, where a general damages award of $90,000 was made.

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