Vicarious liability

Contributed by The Victorian Equal Opportunity and Human Rights Commission and current to 24 March 2023

Employers can be held legally responsible for acts of discrimination or harassment that occur in the workplace or in connection with a person's employment. This is known as vicarious liability.

In order to minimise their liability, employers need to demonstrate they have taken all reasonable steps to prevent discrimination or harassment from occurring in the workplace and they have responded appropriately to resolve incidents of discrimination and harassment.

Section 109 of the Equal Opportunity Act provides:

Section 110 goes on to provide a defence against vicarious liability. It relevantly provides:

In proving a claim of vicarious liability, therefore, both the following need to be established:

• the conduct complained of must have occurred in the course of employment or while acting as an agent for another
• the employer or principal has not taken reasonable precautions to prevent the employee or agent from contravening the Equal Opportunity Act.

In the course of employment

Various cases have tested how far reaching the concept of 'in the course of employment' can be.

In Coyne v P & O Ports [2000] VCAT 657 (Coyne v P & O Ports) the Victorian Civil and Administrative Tribunal (VCAT) considered whether the employer was vicariously liable for the conduct (in this case, sexual harassment) of its employee, Mr Buttigieg.

The employer argued the conduct did not occur 'in the course of employment'. The claim related to an act of inappropriate sexual contact by Mr Buttigieg with the complainant, Ms Coyne. The employer's position was that Mr Buttigieg's conduct was not in the course of his employment as it was 'plainly tortious (and) the wording of section 102 of the Act, read ordinarily, does not cover a plainly tortious conduct of its employees'. The employer sought to rely on the principles of vicarious liability under the 1995 Act with common law notions of vicarious liability. VCAT summarised the employer's position as follows:

By contrast, the complainant argued the term 'in the course of employment' ought to be given a wide interpretation and that this was consistent with past decisions. Reference was made to Hopper v Mt Isa Mines Ltd [1997] QADT 3; Tran v Swinburne University [2000] VCAT 1083; McKenna v State of Victoria [1998] VADT 83; Gray v State of Victoria [2000] VCAT 1281 and Greenhalgh v National Australia Bank [1997] HREOCA 2.

VCAT concluded common law concepts of what amounts to 'in the course of employment' ought not be applied to the interpretation of section 102 of the 1995 Act. It came to this view for the following reasons:

• applying the common law concepts would not further the objects of the Act
• the 1995 Act is beneficial and remedial legislation and, therefore, 'should be given a "fair, large and liberal" interpretation' and ought to be given an interpretation that as far as possible aides the elimination of sexual harassment (citing IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1)
• the concept of 'in the course of employment' in the 1995 Act ought to be construed by reference to 'the intention of the legislature underlying the Act … the Act is an example of legislation protecting human rights and dignity'. (Reference was also made to the comments of Justice Dawson and Justice Gaudron in _[[http://www.austlii.edu.au/au/cases/cth/HCA/1997/30.html][IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1]]_ in which they stressed 'there is special responsibility to take account of and give effect to the purpose of legislation designed to protect basic human rights and dignity')
• the mere fact that Parliament used words that had a common law meaning did not necessarily evidence that it intended that meaning to be attributed to those words in this instance
• section 102 must contemplate that an employer may be held vicariously liable for conduct that it had not expressly authorised, otherwise section 102 (which establishes the defence to vicarious liability would be unnecessary).

VCAT sought guidance from cases in the workers' compensation jurisdiction in interpreting the term 'in the course of employment'. In reviewing the case law on this point, VCAT noted the courts' approach to this issue has moved to a fairly flexible one. At page 12 (of Coyne v P & O Ports), VCAT summarised the interpretation given in the workers' compensation context as follows:

VCAT went on to say:

Applying these principles to the facts in this case, VCAT considered Mr Buttigieg's conduct occurred in the course of his employment for the purpose of the vicarious liability provisions of the 1995 Act.

An employer may, therefore, be held liable for conduct that occurs even where that conduct occurs outside normal working hours and even at times where that conduct occurs outside work premises. See, for example, South Pacific Resorts Hotels Pty Ltd v Trainor [2005] FCAFC 130; Cooper v Western Area Local Health Network and Locke [2012] NSWADT 39.

Acting as an agent

Under section 109 of the Equal Opportunity Act, principals can also be vicariously liable for the conduct of their agents while they are acting as an agent. The Equal Opportunity Act does not define the term ‘agent’. However, section 4 defines a ‘principal’, in relation to a ‘contract worker’, as a person (including an organisation or individual) who contracts with another person for work to be done by employees of the other person. A ‘contract worker’ is defined as a person who does work for a principal under a contract between the person’s employer and the principal.

Other than a contract worker who may act as an agent for the purposes of section 109, there is currently limited case law providing guidance on the scope of agency relationships under the Act. In TIA v Australian and New Zealand College of Anaesthetists [2020] VCAT 1053, VCAT found that a medical college could not be vicariously liable for the conduct of its fellows or members in hospitals where one of its trainees was employed. This was because a fellow or member could not be an agent of the college merely by reason of being a fellow or member [96]. VCAT noted that the college ‘did not have control in any material sense’ [95] and although this was not determinative, it was relevant to whether the hospitals or their doctors were agents of the college [95].

Reasonable precautions defence

If a complainant can establish an employee or agent engaged in conduct that, if engaged in by the employer or principal, would constitute a breach of the Equal Opportunity Act, then both the employee/agent and the employer/principal will be held liable. The exception is when the employer/principal can show they took all reasonable precautions to prevent the discrimination, sexual harassment or victimisation.

The steps that need to be taken to avoid liability under section 110 are not specified in the legislation. The definition of what is a 'reasonable precaution' will vary, depending on factors such as:

• the size of the business or operation
• the nature and circumstances of the business or operation
• available resources
• business and operation priorities
• practicability and costs of the measures.

However, some of the steps that employers/principals may be expected to take include:

• identifying potential areas of non-compliance
• developing a compliance strategy, such as undertaking training or developing policies
• reviewing or improving compliance policies or strategies where relevant.

The Victorian courts have considered what practical steps are required of a duty holder to discharge this burden.

In Oliver v Bassari [2022] VCAT 329, VCAT was not satisfied that the respondent employer had taken reasonable precautions to prevent sexual harassment. The employer had made an employee handbook containing information on sexual harassment electronically available to staff and discussed it in ‘a rudimentary manner’ at one staff meeting [61]. However, this fell ‘well short’ of what would be considered reasonable precautions in the circumstances [63]. In particular, the employer failed to ‘implement any, let alone an adequate’ educational program on sexual harassment, monitor the workplace to ensure compliance with its sexual harassment policies or take appropriate steps to communicate its sexual harassment policies to all employees. [62]

VCAT commented that what would have amounted to reasonable precautions would have been for the employer to ensure that employees ‘received, read and had a sound understanding’ of policies in the handbook [64]. For example, having employees undertake a short questionnaire, conducting ‘regular but not necessarily frequent’ training on the handbook, and monitoring the employer’s CCTV footage of the workplace to ensure compliance with its handbook [64].

In Howard v Geradin Pty Ltd t/a Harvard Securities [2004] VCAT 1518 for example, the employer avoided being held vicariously liable for claims of sexual harassment. It had in place a sexual harassment policy, informed all employees of it, implemented it and provided regular informal feedback about sexual harassment. While it was held the steps taken had not been 'ideal', or of the highest possible standard, they were sufficient to provide a successful defence.

A similar interpretation of the 1995 Act was offered in Walgama v Toyota Motor Corporation Australia Ltd [2007] VCAT 1318 in which Mr Walgama claimed he had been discriminated against because of his race and that he had been subjected to several instances of sexual harassment.

In considering whether Toyota had taken 'all reasonable precautions', VCAT considered the following steps taken by Toyota were sufficient to discharge the burden:

• rolling out a workplace policy to all employees, which had been done three years prior to the incident in question
• meeting with all employees to discuss the policy
• issuing all employees with a booklet explaining the policy.

In discussing what is reasonable for the purposes of avoiding vicarious liability, VCAT noted the criteria for duty holders is 'not very high or very exacting'. VCAT went on to say 'management cannot be expected to supervise every word that comes out of the mouth of a worker' [98].

VCAT's focus in each of these cases was on the relevant policies that the respective duty holders had in place, the implementation of these policies, and that employees had been trained on these policies. These steps were crucial in establishing successful defences to the allegations of discrimination, without the policies, implementation or training having to be of optimum standards.

The importance of an employer having effectively communicated its policies to its employees was emphasised in State of Victoria v McKenna [1999] VSC 310 (discussed in Inferring a reason for the treatment). In this case, Victoria Police had distributed a folder on sexual harassment obligations to senior officers. It also made the training a prerequisite for promotion. However, none of the key players in that case had received any training. The materials distributed had been aimed principally at managers, supervisors and contact officers of the police force. A copy had been kept at the office of the officer in charge of each station. On this basis, VCAT held the burden on the employer to take all reasonable precautions had not been discharged.

In a sexual harassment complaint, the New South Wales Administrative Decisions Tribunal, in Cooper v Western Area Local Health Network [2012] NSWADT 39_ (_Cooper v Western Area Local Health Network) found the employer had discharged its obligations by requiring employees to:

• commit to abiding by the company's code of conduct (which explicitly prohibited sexual harassment)
• attend training on sexual harassment and bullying

at the time of employment and again when the employee was promoted.

In considering whether the employer had taken all reasonable steps to prevent the employee from contravening the Anti-Discrimination Act 1977 (NSW), the Tribunal noted:

In this case, the steps taken by the employer were considered sufficient to meet the defence. The Tribunal found it had taken all steps it could have to ensure its employees were aware of the various policies affecting their conduct at work and the necessity to abide by them, including penalties if they did not do so. As a result, the employer was not found to be vicariously liable for the sexual harassment that had occurred.

Zareski v Hannanprint Pty Ltd [No 2] [2012] NSWADT 65 provides an example of the level of training required for employers to avoid liability for discrimination claims.

Mr Zareski brought a number of complaints of race, disability and carer's discrimination against Hannanprint. These complaints were not upheld, but the Tribunal found that Mr Zareski's team leader had victimised him by mocking him for bringing the discrimination complaints.

As a consequence, the Tribunal ordered further training that Hannanprint must provide to its human resources specialists, managers and supervisors.

Hannanprint proposed to the Tribunal that several training sessions would be provided by an external law firm. Each session would be attended by a maximum of 12 people. The sessions would cover areas such as complaint handling procedures, processes for conducting formal investigations, and recording interviews. The Tribunal approved this proposal. Though no finding of liability was made regarding the allegations of discrimination, bullying and harassment, the Tribunal also said that refresher training in these areas must be provided.

The New South Wales legislation regarding vicarious liability in discrimination matters and the 'all reasonable steps' defence does not differ significantly from the Victorian legislation. The decisions discussed above indicate the standard expected of employers to demonstrate that all reasonable precautions were taken to prevent the alleged act(s) has not been set high. See Howard v Geradin Pty Ltd [2004] VCAT 1518. Where there is a finding of vicarious liability, specific and detailed orders can be made for future training requirements with which the duty holder must comply.

Multiple respondents

In the matter of Chopra v Department of Education & Training [2016] VCAT 1452 VCAT made the following observations about multiple parties in cases of vicarious liability:

• here vicarious liability exists, the person who commits a wrongful act and the one who is held vicariously liable are jointly liable. Each person is liable for the entire loss. If one person satisfies the loss, the liability of the others is discharged.
• it is unnecessary to name individual employees as respondents to establish an employer's vicarious liability. A complainant may choose to sue one or all the possible respondent.
• if the first respondent does not propose to call a person the complainant wishes to obtain evidence from, the complainant may seek to have that person summoned to attend under section 104 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) [16]–[21].