Vicarious Liability of Employers & Business

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Vicarious Liability of Employers and Businesses

Vicarious Liability for Employers and Businesses

6 August 2019

It is important for employers, executives and employees to know that vicarious liability may extend to employers or businesses for workplace issues. What this means is that an employer may be held legally responsible for the actions of others in the workplace, such as for workplace bullying, sexual harassment, or discrimination. Vicarious liability for work health and safety breaches is also common, although I have covered that separately: Employer Liability for Work Health & Safety Breaches.

Today I am going to cover some issues associated with vicarious liability for employers and businesses that relate to workplace bullying, sexual harassment and discrimination. In doing so, I will address three areas where employers may be vicariously liable, which can result in compensatory payouts.

While I hope this information will be beneficial to people interested in the issue, I really should caution this is a complex area of law and what I propose to address is not legal advice and should not be used as a substitute for legal advice. Vicarious liability may arise in many different ways across many different industries. The legal issues will always be highly specific to the individual circumstances so I would really recommend getting legal advice for issues of this kind.

Vicarious Liability of Employers – A Starting Point

It is obvious that our law may hold people responsible for the consequences of their own direct actions. It is a more complex issue when the law is extended and people are found vicariously liable for something done by somebody else.

Vicarious liability is understood to mean the responsibility an employer has for employee conduct during any work-related circumstance.  If the conduct by the employee or agent is unlawful, then the employer may be held legally responsible.

There are a number of steps employers can take to prevent or minimise the risk of being legally pursued on the basis of vicarious liability. Executives and employees should be minfdul of their own rights and responsibilities in the workplace, including the duty of care that may be owed to them by an employer or business.

The good news is that employers can take preventative steps to help minimise the risk of being legally pursued by an aggrieved employee who has been subject to harassment or discrimination in the workplace.

Related: Employment Law: Disciplinary ActionRelated: Employment Law: Disciplinary Action

Australian Laws

For employers in Australia, the operation of ‘vicarious liability’ differs depending on the type of legal claim being made. While Parliament has enacted laws that specifically create vicarious liability for employers in certain circumstances, employers can also be held liable under the common law, such as for negligence.

It may assist to address the different ways liability can arise.

Vicarious Liability for Employers under Federal Laws

At a federal level, it is nationally recognised to be unlawful when a person discriminates against another based on their age, disability, race, sex, intersex status, gender identity and sexual orientation in certain areas of public life including education and employment.  While there is an absence of a single united piece of legislation, there are four (4) specific legislative instruments that cover anti-discrimination laws at a Commonwealth level being:

Only two (2) of the above four (4) legislative instruments refer to ‘vicarious liability’ for employers: section 18A of the Racial Discrimination Act 1975, and section 106 of the Sex Discrimination Act 1984. 

Essentially, under both laws vicarious liability may arise-

where an employee or agent of a person does, in connection with the employment of the employee or with the duties of the agent as an agent …. does an ‘unlawful act’ ……then this Act, applies to that person (‘the employer) as if that person had also done the act.

The employer may have a defence-

if it is established that the person (‘the employer’) took all reasonable steps to prevent the employee or agent from doing acts of the kind referred to in that paragraph.

So the ‘defence’ for a person (companies can be a ‘person’ for the purposes of the law) that they ‘took all reasonable steps’ really shows that it is prudent for employers and businesses to take preventative steps to minimise the risk of successful claims being made against them. It is the sort of work employment lawyers routinely do in assisting businesses develop appropriate policies and procedures.

State / Territory Laws

At a State and Territory level in Australia, each have their own anti-discrimination legislation.  What is notable, is that where individuals have grievances related to discrimination, harassment, and bullying, each jurisdiction will deal with this differently.

For example, Queensland has enacted the Anti-Discrimination Act 1991 (Qld), which addresses vicarious liability at section 133:

  1. If any of a person’s workers or agents contravenes the Act in the course of work or while acting as agent, both the person and the worker or agent, as the case may be, are jointly and severally civilly liable for the contravention, and a proceeding under the Act may be taken against either or both.
  2. It is a defence to a proceeding for a contravention of the Act arising under subsection (1) if the respondent proves, on the balance of probabilities, that the respondent took reasonable steps to prevent the worker or agent contravening the Act.

The purpose of this law is made clear by section 132, which states “one of the purposes of the Act is to promote equality of opportunity for everyone by making a person liable for certain acts of the person’s workers or agents”. The purpose is “achieved by making a person civilly liable for a contravention of the Act by the person’s workers or agents”.

I should note that the Queensland law, while broadly covering anti-discrimination, also provides narrow areas of anti-discrimination to include freedom from sexual harassment.

If you find yourself questioning whether vicarious liability may apply to you under Anti-Discrimination Act 1991 (Qld), I have set out in the table below what I hope is a useful summary of the type of employees or workers that may or may not be covered.

An employer may be held vicariously liable unless they can demonstrate they took ‘reasonable precautions’ to prevent the discrimination from occurring.

An employer cannot generally be held liable for discrimination by a visitor to a workplace under the Anti-Discrimination Act 1991.

An employer is not generally held vicariously liable for the actions of a contractor’s employee unless the perpetrator is acting as the agent of the employer. In the event the contractor’s employee is acting as an agent of the employer, it will be necessary to demonstrate the employer took ‘reasonable precautions’ to prevent the discrimination from occurring.

Both original and host employers may be held vicariously liable for the actions of a secondee to a workplace unless they can demonstrate they took ‘reasonable precautions’ to prevent the discrimination from occurring.

An employer may be held vicariously liable for the actions of a volunteer unless they can demonstrate they took ‘reasonable precautions’ to prevent the discrimination from occurring. However, liability for volunteers is also subject to protections under the Civil Liability Act 2003 (Qld).

Under the Civil Liability Act 2003, a volunteer does not incur any personal civil liability in relation to any act or omission they make in good faith:

  • when engaging in community work organised by a community organisation; or
  • as an office holder of a community organisation.

This does not extend to situations in which the volunteer engages in misconduct, such as criminal conduct, being intoxicated or acting contrary to reasonable instructions. As such, the question of vicarious liability for employers can be more complex with respect to volunteers.

Negligence Claims

Aside from laws passed by Parliaments that can make employers vicariously liable for the actions of their employees or workers, the ‘common law’ also recognises other situations where compensation may be ordered, such as for the tort of negligence.

An example of a successful negligence claim against an employer for a breach of their duty of care is seen in the Queensland Supreme Court decision from Cairns in 2017 ([2017] QSC 165). In that case, the plaintiff successfully brought a civil action against her former employer seeking damages in negligence. The applicant alleged that after managerial mistreatment, she had sustained an irreparable psychiatric injury which ultimate lead to the loss of her career.  In setting a bar for the required test to determine psychiatric injury as a result of workplace bullying, reference was given to comments by the then Chief Justice of New South Wales in another case ([2007] NSWCA 377), in which it was stated:

“[I]t is now well established that workplace stress, and specifically bullying, can lead to recognised psychiatric injury. That does not, however, lead to the conclusion that the risk of such injury always requires a response for the purpose of attributing legal responsibility. Predictability is not enough. …

An employer can be liable for negligence because of a failure to protect an employee against bullying and harassment. However, the existence of such conduct does not determine the issue of breach of duty. …

One of the elements required to be assessed is the degree of probability that the risk of psychiatric injury may occur, even when the reasonable foreseeability test of a risk that is not farfetched and fanciful, has been satisfied.”

Despite there being workplace policies in place to address workplace harassment, the Supreme Court of Queensland held that repeated failures had occurred in investigating the eight Workplace Incident Forms (“WIFS”) the applicant had lodged containing allegations of bullying and harassing conduct.  The Court held that the employer was vicariously liable for two reasons:

  1. The failure to prevent further incidents of managerial mistreatment; and

  2. The failure to provide ‘timely and determinative action’ on the applicant complaints.

The quantum of damages awarded to the applicant was in the order of $1.4 million.

Summary of Vicarious Liability Laws in Australia

There are commonalities in both federal and state laws as to where vicarious liability issues arise and what defence an employer may use in defending an action against workplace discrimination or harassment. That defence will require examining what “all reasonable steps” or “reasonable precautions” may look like.

For this reason, I will address some of the steps a workplace can take to protect employees, as well as how employers can minimise the risk of being held vicariously liable for workplace incidents. In looking at some of the steps a workplace may take (it will always depend on the specific needs of a workplace), it may assist to look at some case examples showing how vicarious liability may or may not be established for certain claims.

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Vicarious Liability – Case Examples

Whether you have a small or medium size business, or a complex large corporate structure, what may constitute ‘all reasonable steps’ or ‘reasonable precautions’ to avoid vicarious liability will be variable. It will always be assessed and determined on a case-by-case basis.

It is obvious that the size of an employer and the sophistication of their business will impact on their ability to implement policies and procedures to minimise the risk of workplace bullying, sexual harassment, or discrimination occurring. While it shouldn’t be expected that you must – as an employer – spend vast sums of money and significant time to meet your duty of care, there are some insights that can be gained from a few simple case studies.

Case Example: Workplace Bullying

In a 2018 decision before the Fair Work Commission ([2018] FWC 6037), the applicant sought a stop bullying order within the workplace against three employees of the Australian Taxation Office (ATO).  The applicant argued that the ATO had conducted ‘token investigations’ which culminated in a further ongoing bullying at work by the individuals in question.  The Fair Work Commission received evidence that the employer had taken steps to investigate, in accordance with their normal procedures.  The conclusion of the investigation resulted in facilitating a relocation of the applicant to alternative employment at a different location and reassurance that he would not be returned to the previous role.

The Fair Work Commission was not satisfied that this was a case where the risk of future workplace bullying required a stop bullying order. It accepted the actions taken by the employer to ensure that future interactions between all parties would not occur in the future. This case indicates that the Fair Work Commission will not intervene in situations where it considers an employer has acted reasonably to address workplace bullying issues.

Case Example: Sexual Harassment

In 2018, the Federal Circuit Court of Australia decided a case ([2018] FCCA 3932) involving an female applicant who alleged she had been ‘touched on the buttocks’ by an employee while performing her job. The applicant alleged that her respondent employer was vicariously liable for the employees offending conduct.

In this case, the Federal Circuit Court found that the respondent employer had taken ‘all reasonable steps’ necessary to prevent an act of sexual harassment in the workplace which was evidenced by:

  • developing a “Working With Respect” Policy; and

  • conducting in-house training sessions where employee attendance was kept; and

  • providing a hard-copy print out of the slides for the in-house training session.

The Federal Circuit Court did note that while the training session slides were detailed, and addressed  ‘bullying and sexual harassment’, they did not discuss ‘discrimination’ at all.  The Court noted that while they were satisfied that the respondent employer had successfully raised the defence in this case, they were of the opinion that had the employee raised a breach of ‘discrimination prohibitions of the Act’ then the defence would not have been successful.

This case reveals the importance of education and training of staff, as well as having comprehensive workplace policies and procedures to address all types of issues that may arise in a workplace.

Case Example: Discrimination

In a 2018 decision before the Queensland Civil and Administrative Tribunal ([2018] QCAT 131) an applicant alleged both direct and indirect discrimination based on a number of impairments that the applicant had including that she had mobility restrictions, a speech impairment and was profoundly deaf.  The alleged conduct resulted from the immediate supervisor failing to provide reasonable adjustments in the workplace because of her impairments.  The applicant also argued that the first respondent (the State of Queensland) was vicariously liable for the immediate supervisor’s discriminatory behaviour.

Here, the Federal Circuit Court formed the view that perhaps the applicant had unrealistic expectations and perceptions of the immediate supervisor’s role in providing a ‘trouble-free path’.  Further, that any work-related requests were actioned in ‘reasonable timeframe’ ultimately proving that there were no discriminatory acts undertaken by the immediate supervisor towards the applicant during the course of the employment.

While the applicant further alleged being ‘victimised’ as a result of the discriminatory practices of her immediate supervisors, thus holding his employer vicariously liable for the supervisor’s discriminatory conduct, the Federal Circuit Court were not convinced of the argument.  They expressed that while there is a ‘degree of crossover’ between direct discrimination and victimisation with the latter justifying the former’s alleged conduct, there was no evidence available to support the claims

In 2014, the Federal Circuit of Australia ([2014] FCCA 1170) an applicant alleged he was the victim of age discrimination when the first respondent terminated his employment upon his 65th birthday.  He also held the second and third respondents (dual directors/shareholders of the corporation) to be vicariously liable on the basis that they were aware of the decision, and were involved in the contravention, being age discrimination.  The Federal Circuit Court agreed stating that there was a ‘deliberate decision to dismiss the complainant when he turned 65 years of age’ and that while they accepted the conduct of the respondent’s appeared to be an ‘lack of understanding’ in their statutory obligations saying that the ‘law protects that right’, that is, an employee can elect to work beyond the retirement age. The second and third respondents were held to be ‘accessorily liable’ to the first respondents conduct.

Conciliation Conferences

For unfair dismissal claims, a ‘Conciliation Conference’ represents an informal, confidential and voluntary opportunity for both parties to resolve a dispute.  The Commission employs a team of trained mediators experienced in resolving workplace disputes to assist parties to an unfair dismissal claim to settle it without a contested hearing.

The role of the Commission Conciliator is to aid in resolving the dispute only.  They cannot offer legal advice, nor do they offer personal opinions. Conciliators do raise issues with the parties and test the arguments underlying an application or the response to a claim. As a ‘neutral third party’, they try to engage in genuine problem solving and interest-based negotiations.

Consistent with the informal and efficient processes required of the Fair Work Commission, conciliations are generally held by the telephone. It reduces travel costs and often means that the different parties, their lawyers and the conciliator may all be in different locations.

The length of a conference is typically an hour and a half, therefore there is only a short amount of time that both parties can potentially resolve the unfair dismissal claim through this process.

If there is an agreement reached, generally the parties will both sign a deed of agreement and release, which formally sets out the terms of the settlement. Confidentiality surrounding the agreement may be one of the matters agreed by the parties.

While finality of a case might be achieved at a Conciliation Conference, there are times that the parties to the matter won’t be able to reach an agreement. In those circumstances, the case will then need to proceed to a more formal method of dispute resolution, namely a hearing.

Hearings before the Fair Work Commission

While a Conciliation Conference is conducted in a confidential setting with agreements generally also being kept confidential, the same cannot be said for contested hearings. In the event a matter is contested and proceeds to a hearing, when the Fair Work Commission makes a decision, the result will generally be publicly accessible. Sometimes, decisions involve important legal issues or novel circumstances, which make them newsworthy. Individuals and businesses often lose control over the privacy of the issues at this point. In my experience, reputational worries for litigants generally increase rather than decrease as disputes drag on.

A hearing is a formal process, which calls on both sides to produce evidence to support their arguments, as well as call witnesses as necessary. It can be a lengthy, time-consuming and costly endeavour. For businesses, it can divert significant time away from ‘getting on with the job’. Experience also shows that the expectations for both sides can be such that when a decision is made by the Fair Work Commission, both sides can be disappointed with the outcome.

For a litigant who is aggrieved by a decision of the Fair Work Commission, it is possible to appeal to the Full Bench of the Fair Work Commission.

Appealing Decisions of the Fair Work Commission

Appeals to the Full Bench of the Fair Work Commission are time specific (within 21 days after a Commission hearing decision) and permission must be sought by the Commission on the grounds that an error of law or fact has been made by the primary decision maker, and it is in the public interest to permit the appeal.

 What should be said is that the when assessing the test of ‘public interest’ it is said to be discretionary one that involved “broad value judgment” where the Commission must not grant permission to appeal unless it consider it is “in the public interest to do so” ([2011] FCAFC 54).

Not all matters will meet the public interest test.  For example, in a recent 2019 decision before the Full Bench ([2019] FWCFB 223), an applicant challenged a Fair Work Commission ruling on the basis that errors of both fact and law had occurred when determining the question of award coverage.  The applicant argued that the provision of equine services he delivered in a private veterinary practice should fall within the coverage of the Animal Care and Veterinary Services Award 2010. The applicant sought to establish that it was in the public interest to allow the appeal because of the injustice and that there was an expectation that an employer would comply with the relevant Award.  The Full Bench was not persuaded, denying the appeal because it did consider the original decision “manifests an injustice or leads to a counter intuitive result when result”.

By contrast in a 2018 decision before the Full Bench ([2018] FWCFB 5960) an appeal was upheld on the basis that it was in the public interest to allow the appeal where errors of fact had occurred when calculating the amount of compensation to be awarded to the applicant.

Decisions of the Full Bench of the Fair Work Commission demonstrate that it will closely examine the legal and factual issues involved but also strictly considers the public interest in permitting appeals.

Summary

However you may think an unfair dismissal application may be best resolved in your case, any resolution short of a contested hearing requires two sides to agree. A successful resolution often requires both sides to think about short-term and long-term objectives. Unless an applicant understands (1) what remedies are actually possible through an unfair dismissal application, and (2) why certain outcomes may not be realistic in their case, it can be difficult to properly negotiate with the respondent former employer.

The key to a successful resolution is to understand the strength of your position and properly advocate for your interests. Any attempts at resolving your unfair dismissal claim before a Commission should have a clear purpose and end goal.  Knowing all potential risks is fundamental in ensuring your future employability in the profession or industry you are working in.

Even if you are one of those people who has an “I’ve got this!” attitude, it can be difficult to foresee all of the risks or possibilities if you’ve never faced an unfair dismissal application previously.  If you want to take advantage of our free case assessment with a member of our team here at Anderson Fredericks Turner, contact us to see how we may be able to help in your situation.

Let me just finish by thanking my colleague Karen Wilson for her work in researching and preparing the information I’ve been able to outline about resolving and settling unfair dismissal claims.

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The information contained on this page is general in nature and specific advice ought to be obtained from a lawyer before acting on any general information with respect to any legal matter.

Anderson Fredericks Turner has lawyers across Queensland who can provide specific advice with respect to issues involving employment law, including for issues relating to unfair dismissal applications. Our lawyers operate from local offices in Brisbane, Beenleigh, Maroochydore, Toowoomba and Townsville, although we have the capacity to advise and represent people nationally.

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