Sexual harassment in the workplace is a significant issue for Australian employers, not only in terms of the impact on individual employees who experience it, but also to the organisation in both monetary and non- monetary terms. Most employers are aware of their obligations in preventing discrimination and harassment, however, many organisations are less familiar with the question of potential liability where the sexually harassing or discriminatory behaviour is conducted by a customer or client towards their employees.

This article explores potential avenues of liability of employers in the context of sexual harassment by customers or clients and describes ways in which employers can minimise exposure, address their positive obligations to ensure the health and safety of all workers in the workplace, and be leaders in best practice strategies.

According to the Australian Human Rights Commission’s 2012 national telephone survey, workplace sexual harassment affects around 21% of people aged 15 years and older, with estimates of 25% of women and 16% of men experiencing sexual harassment in the workplace in the last five years. Of those targeted, 9% were harassed by a customer or client.¹ Employees working in service industries such as retail, accommodation and food services have been recognised as particularly vulnerable as employees are often unsure about how their rights fit with the common view that the “customer is always right”. This can be compounded where there are other vulnerabilities, such as the age of employees, the nature of the work performed, and the employees’ level of understanding of their employment conditions and rights.

Provision of goods and services 

Under the Sex Discrimination Act 1984 (Cth) (the “SD Act”), it is unlawful for any person to sexually harass another in the course of seeking or receiving the provision of goods, services or facilities from another person. This provides formal protection for workers against sexual harassment from customers or clients and an avenue for employees to make a complaint and seek a remedy. However, often employees have little information about the customer perpetrator, which makes instituting proceedings or making a formal complaint against the perpetrator difficult.

Research by Rae Cooper and Laura Good into sexual harassment by customers in the service industry also identifies other reasons why employees may not make complaints, either formally or informally, about customer-based sexual harassment.² These reasons include the idea that the customer holds the power in the service relationship, and that employees are often encouraged by employers in the service industry to maintain friendly relations with customers or clients, irrespective of how they behave.

The risk in ignoring the signs 

The research identifies that employees are more likely to take informal rather than formal action to address problems in relation to customers or clients, such as by speaking to co-workers or line managers, particularly in circumstances where there are no specified policies or grievance procedures around sexual harassment by customers or clients or about making a complaint where such conduct occurs.³

An employer (or anyone) who “causes, instructs, induces, aids or permits” another person to do an act that is unlawful under the SD Act may be found to be liable for the conduct.⁴ Employers on the whole appear to be less familiar with this type of liability. However, the risk of potential liability is significant and may arise where an employer is aware of sexually harassing behaviour by others in the workplace that affects their employees and the employer has the capacity to influence that behaviour, but does not take steps to stop that behaviour. As a consequence of their inaction, an employer may be construed as permitting the person to engage in acts that are unlawful under the SD Act and may be found to also be liable for the conduct. An example of where an employer may fall foul of the provisions is where an employee alerts a manager about the sexually harassing conduct of a customer or client and the manager does not take any action and turns a blind eye to the behaviour.

Work health and safety laws 

Employers also have an obligation under work health and safety laws to ensure the health and safety of workers. An employer may have exposure under this regime if the sexual harassment causes a risk to the health and safety of a worker or group of workers, and the employer has not taken steps to eliminate these risks.

Not only are employees covered by work health and safety laws, but contractors, sub-contractors, outworkers, apprentices, trainees, work experience students and volunteers also fall within the definition of “worker” and an employer has an obligation to ensure the health and safety of all workers in the workplace.

A failure to comply with work health and safety legislation does not give an individual affected the ability to take proceedings against the employer, but it could result in a criminal prosecution against the relevant company and managers involved.

An employer (or anyone) who “causes, instructs, induces, aids or permits” another person to do an act that is unlawful under the SD Act may be found to be liable for the conduct.

Hints and tips to avoid liability

Most employers are aware that having a workplace behaviour policy in place is an integral part in mitigating any potential exposure to sexual harassment claims and that active and on-going engagement with addressing the risk of sexually harassing conduct is required. Policies should be amended to include procedures around dealing with sexual harassment by customers or clients, particularly if the organisation is in the service industry and employs potentially vulnerable workers. However, employers should also take note of the following:

• having a policy in place, by itself, is not enough to avoid liability
• employers should ensure employees are fully aware of their rights and obligations
• employers should be proactive and speak directly with customers or clients who exhibit this type of behaviour
• employers must act in accordance with any policy in place, particularly regarding procedures for dealing with complaints
• employees should be encouraged to speak up about conduct that is harassing, including conduct from customers or clients
• employers must clearly communicate that sexually harassing behaviour from any source will not be tolerated; the customer is not “always right” and it may be necessary, in extreme cases, to ban certain customers or clients

1. Australian Human Rights Commission. Working without fear: results of the sexual harassment national telephone survey (2012) p. 12.
2. Laura Good and Rae Cooper “But its your job to be friendly’: Employees Coping With and Contesting Sexual Harassment from Customers in the Service Sector” (2016) Gender, Work and Organization (forthcoming), p. 6.
3. Ibid p. 10.
4. Sex Discrimination Act 1984 (Cth) s 105.