The Federal Circuit and Family Court has handed down the first decision under the Fair Work Act’s sexual harassment provisions, finding a sole director personally liable and ordering just under $60,000 in combined penalties and compensation. This decision marks a shift in the legal landscape for workplace sexual harassment claims, with workers now able to bring proceedings under the Fair Work Act 2009 (Cth) (Act), rather than being confined to the Sex Discrimination Act 1984 (Cth) or state and territory legislation.
Against a backdrop of rapidly increasing claims activity, bullying and sexual harassment applications in the Fair Work Commission is 54% above the five‑year average. A broader regulatory focus on psychosocial hazards, organisations need to be prepared now more than ever to proactively prevent and respond to sexual harassment in the workplace. These types of claims bring a multitude of concerns for organisations, including heightened reputational exposure through significant public and media attention, and key company personnel increasingly being named as individual respondents.
Background
The Federal Circuit and Family Court of Australia (FCFCA) has recently found a sole director of a café business (Mr Kehal) personally liable for sexual harassment of an employee (Applicant), in the first case brought under the sexual harassment jurisdiction of the Fair Work Act 2009 (Cth) (Act).
The Applicant was employed by Capital City Café-Bar Pty Limited (the Café) as a casual waiter in May 2024. Mr Kehal was the manager and sole director and was always at the Café when the Applicant was working.
In July 2024, the Applicant raised a complaint about not receiving pay slips with Mr Kehal. Mr Kehal avoided the issue and instead offered to help her by telling her to go shopping and that he would pay for whatever she wanted. Later that day, the Applicant alleged that while she was standing alone at the kitchen sink washing dishes near the end of her shift, Mr Kehal:
- approached her from behind and made unwelcome physical contact, including wrapping his arms around her in a manner that restricted her from moving freely
- waved his wallet in front of her while telling her to take the money
- leaned forward and kissed her on the lips without her consent when she took a banknote in an attempt to disengage from the situation.
Subsequently, Mr Kehal sent text messages to the Applicant apologising for his actions, asking to keep his conduct confidential and encouraging her to return to work. The Applicant did not return to work and commenced proceedings against the Café and Mr Kehal, contending that, among other contraventions, Mr Kehal breached the Act (discussed below).
Findings
Justice Mansfield accepted that Mr Kehal’s conduct fell within the ambit of section 527D of the Act and that Mr Kehal had admitted to the conduct. In assessing the seriousness of the sexual harassment contravention, Justice Mansfield noted the following relevant factors:
- The Applicant was a relatively young person (being 23 years old), female, a migrant and a person with limited financial resources and social supports
- Mr Kehal was a person of authority, who sought to leverage that authority in combination with the Applicant’s vulnerabilities
- The contravention was a single incident
- Mr Kehal’s remorse, while repeatedly expressed in messages sent after his conduct, was not indicative of acceptance of responsibility, and instead appeared to be motivated by Mr Kehal wanting the incident to be undisclosed
- Mr Kehal initially denied the allegations which forced the Applicant to prepare an affidavit. Mr Kehal only spared the Applicant from the experience of being cross examined, when he made full admissions on the day of the hearing.
Justice Mansfield acknowledged that Mr Kehal and the Applicant had agreed to the following quantums for pecuniary penalties and compensation and accepted that they were within the permissible range and were sufficient to serve the objects of specific and general deterrence:
- $50,000 non-economic compensation for the sexual harassment
- A penalty of $9,390 for the sexual harassment, which is 50% of the maximum penalty that can be imposed on individuals for contraventions of section 527D of the Act
- $30,610 for contraventions relating to underpayment and record-keeping breaches.
- Section 527D of the Act
Section 527D
is a relatively new provision of the Act which commenced on 6 March 2023 following the Respect@Work reforms. The provision introduces a standalone prohibition on sexual harassment in connection with work. It incorporates the definition of ‘sexual harassment’ in the Sex Discrimination Act 1984 (Cth), capturing unwelcome conduct of a sexual nature, in circumstances where a reasonable person, having regard to all the circumstances, would anticipate the possibility that the person harassed would have been offended, humiliated or intimidated. The operation of section 527D is fairly broad, it need only be “in connection with” a worker, prospective worker or a person conducting a business or undertaking, rather than occurring strictly “at work”. Under s 527E, organisations may also be held vicariously liable for contraventions by their employees or agents unless they can demonstrate that all reasonable steps were taken to prevent the conduct. The penalties for contravening section 527D include civil remedies and pecuniary penalties for employers and individuals.
Recommendations
In this context, organisations should have regard to the weight given to the treatment of a vulnerable worker by a person in authority and the significance of post‑incident conduct that falls short of genuine acceptance of responsibility. Organisations should review their policies, training, reporting, response and governance mechanisms to ensure that they are well positioned to proactively prevent sexual harassment and respond to complaints effectively.
Regulators expect proactive risk identification and effective controls, not reactive complaint-handling alone, and where those controls are lacking, organisations and their key personnel face the risk of compliance notices, significant civil penalties, compensatory orders and intensified scrutiny of their broader governance arrangements.
Source: Lexology
