New changes focussed on sexual harassment – What it means for insurers

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By Dr Laura Sowden, Partner, Anna Ly, Associate and Annabel Cheung, Law Graduate

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 amends the Fair Work Act 2009 (Cth) (the Act) in a number of ways. Most relevantly for claims, it includes a prohibition on sexual harassment and provides a new broader avenue for causes of action alleging sexual harassment, and the ability to order civil penalties.

These amendments contribute to the Federal Government’s commitment to implement all fifty-five recommendations of the Respect@Work: Sexual Harassment National Inquiry Report (2020) and is complimentary to the amendments made by the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth).

Changes to the Fair Work Act

There are key changes regarding sexual harassment that commence on 6 March 2023.

The 2021 amendments to the Fair Work Act made by the Morrison Government to imbue the FWC with the power to issue “stop sexual harassment” orders will be rearranged and expanded upon under the terms of the Act.

The amendments to the Act include:

1. Sexual harassment of workers, prospective workers and persons conducting businesses or undertakings is prohibited. Note here the Act captures “workers” rather than just “employees”.

  • This broadens who can make a claim against an insured entity or insured person alleging sexual harrassment.

2. Imposes civil penalties for sexual harassment.

  • Currently, the only remedy available under anti-discrimination legislation is damages, compensation and costs. Imposing a civil penalty is a significant change as this allows Claimants to seek monetary redress even if there is no injury or damage.
  • Insurers would be wise to check what cover for penalties, if any, there is in their policy wording.

3. Prohibiting sexual harassment in connection with work by extending the liability for sexual harassment for businesses and organisations so that they are responsible for the actions of employees or agents. This is similar to the arrangements under current anti-discrimination legislation.

  • This expands who can bring a claim and where the liability may lie.

4. Gender identity, intersex status and breastfeeding is now included in its list of protected attributes.

  • It was identified that the current list of protected attributes in the Act was not up to date with other Commonwealth anti-discrimination laws.
  • This means Claimants who may experience discrimination in the workplace because of gender identity, intersex status or breastfeeding will now be able to commence claims in the Fair Work Commission (FWC).

A new dispute resolution process

The amendments also establish a new dispute resolution process. Harassed persons will be able to apply to the FWC to have their sexual harassment dispute conciliated or mediated, if the parties consent, the FWC can settle the dispute and make orders, including for compensation. The dispute can be brought up to 24 months after the alleged contravention. That is a substantial time period compared with the 21-day time limit for making adverse action applications post-dismissal. This creates a real issue for policies for when claims are made.

For insurers we have seen a very substantial backlog of complaints within the Australian Human Rights Commission (AHRC), providing their own advice can take up to around 8 months. This processing backlog is delaying when claims are made on policies. The new dispute resolution process provides a new avenue for Claimants to make sexual harassment claims, and the FWC avenue may speed up the process for such claims significantly.

A new positive duty to prevent sexual harassment

There are also several changes to the Sex Discrimination Act 1984 (Cth), as a result of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Cth) which affects employers:

5. There is a positive duty to prevent sex discrimination, sexual harassment or victimisation.

  • The positive duty requires employers, persons conducting business or undertakings to take “reasonable and proportionate measures” to eliminate unlawful sex discrimination, sexual harassment and victimisation in their workplaces.
  • What is “reasonable and proportionate” accords to the nature of the business. However, it must be noted that the standard of this study is not as high as the requirement to take “all reasonable steps” to avoid vicarious liability.
  • The positive duty will likely encourage Claimants to bring forth issues as the standard for employers and others has been raised. Insurers need to be aware a high volume of claims may result.

6. It is unlawful to expose a person to a hostile work environment that is hostile on the grounds of sex.

  • A work environment that is hostile on the basis of sex is one where if a reasonable person would have anticipated the possibility of the conduct causing the work environment to be offensive, intimidating or humiliating to a person by reason of the sex of the individual.

7. The AHRC has more powers.

  • The AHRC is empowered by the Act to enforce the positive duty, the Federal Government is providing additional funding to assist it to do so. The Australian Human Rights Commission Act 1986 (Cth) is amended, enabling the AHRC to:
    • publish guidelines, promote public undertaking, make inquiries in relation with the positive duty;
    • make inquiries into and issue compliance notices addressing compliance with the new positive duty;
    • apply to the Court for an order directing a person to comply with such a compliance notice; and
  • The AHRC has the power to inquire into any matter that may relate to systemic unlawful discrimination – i.e. that (a) affects a class or group of persons or (b) is continuous, repetitive or forms a pattern. This means insurers are on notice that more compliance activities are available to the AHRC, and this may give rise to investigative cover or claims on policies that have no loss and are not covered to an insured’s disappointment.

Employers have until 12 December 2023 until the AHRC has power to “monitor and assess compliance” with the positive duty.

What does this mean

For insurers, it is important to note that the amendments:

  • Provide for additional causes of action for sexual harassment
  • Allow for penalties to be imposed;
  • Encourage more claims activity in the sexual harassment and discrimination space;
  • There will be forum shopping as Claimant workers and employees can pursue their dispute through the FWC, the AHRC or applicable state and territory anti- discrimination
  • Insurers must also consider the impact and potential claim prospects that may arise from the new positive duty on employers, persons conducting business or undertakings.
  • With these changes there is more complexity in the claims landscape which is a challenge when refining policy wordings.
For further information, please do not hesitate to contact us.

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