The media is frequently reporting stories of inappropriate or illegal behaviours in the workplace (see an example here). These cases can be very expensive for employers found to be vicariously liable for the unlawful acts of their employees. In this article we explore the concept of ‘vicarious liability’ and how businesses can reduce their risks.
What is vicarious liability?
The principle of vicarious liability of employers is well established: it is the concept that an employer is liable for acts committed by an employee during the course of his or her employment.
Some criteria must be met for an employer to be vicariously liable. The offence must have taken place:
- During the ‘course of employment’
- While the employee was acting within the scope of his or her authority, and
- While the employee was performing his or her employment duties, or acts incidental to his or her employment duties.
- In the NSW case of Cooper v Western Area Local Health Network(i) the employer was not liable for the sexual harassment committed by one of its employees because:
- The employee who committed the sexual harassment was required to abide by the employer’s code of conduct, and
- He had been trained on sexual harassment and bullying.
Court rules: online compliance training just as effective as face-to-face training.
The more recent decision in Richardson v Oracle Corporation Australia Pty Ltd (ii)  FCAFC 82 highlighted the significant implications for an employer found to be vicariously liable.
In 2013 the complainant, Ms Richardson, was found to have been harassed by another Oracle employee while they were both employed by Oracle. The court found that Oracle was vicariously liable for the sexual harassment.
Oracle had trained its employees in sexual harassment using online training. Ms Richardson’s lawyers sought to argue that the online sexual harassment training run by Oracle was insufficient, and that face-to-face training would have been better. The Court rejected this argument entirely. Justice Buchanan confirmed, ‘I do not accept the validity of criticisms of this kind’ (iii) , making it clear that online compliance training is just as effective as face-to-face training.
However, the sexual harassment training provided by Oracle to Ms Richardson in this case was found to be insufficient because, ‘It made no reference to the legislative foundation in Australia for the prohibition on sexual harassment’ (iv). Oracle was found to be vicariously liable for the sexual harassment of Ms Richardson in the workplace.
In February 2013, the Federal Court awarded Ms Richardson $18,000 in damages for the sexual harassment she was found to have suffered. On appeal the Full Bench of the Federal Court awarded Ms Richardson $130,000.
This decision is a warning to employers about the significant effects that failing to protect themselves against claims of vicarious liability can have on their business. The case suggests that courts will tend towards more generous awards in cases like these going forward.
What can you do to protect your business?
An observation to make when looking at these cases is how the courts determine whether or not an employer is vicariously liable depending on the training it provides to its employees.
To significantly reduce the risks of being found vicariously liable for your employees’ conduct, it is important to:
- Provide training on appropriate workplace behaviour, e.g. training about sexual harassment, bullying, and equal opportunities in employment
- Clearly educate employees on your organisation’s code of conduct
- Provide online or face-to-face compliance training (the courts having demonstrated that online compliance training is just as effective as face-to-face compliance training)
- Reference the relevant laws in your compliance training content, ensuring that your employees are aware of the consequences of inappropriate conduct in the workplace.
Learning Seat has previously published an article which explores the definition of the workplace in the context of vicarious liability. Read What constitutes sexual harassment in the workplace?
Your compliance training options
Learning Seat has partnered with leading independent Australian law firm Lander & Rogers to develop a suite of legally compliant training courses which can help you meet your compliance training needs and help to make your workplace safe, appropriate, fair and equitable. For more information about these compliance training solutions click here.
(i)  NSWADT 39
(ii)  FCAFC 82
(iii) Richardson v Oracle Corporation Australia Pty Limited  FCA 102 (20 February 2013)
(iv) Richardson v Oracle Corporation Australia Pty Limited  FCA 102 (20 February 2013)