On 17 June 2010, WorkCover NSW launched a nine-month anti-workplace bullying campaign targeting employers in the retail, hospitality, manufacturing, health and education sectors.

The very next day, a high profile CEO resigned from his position following an allegation of sexual harassment. In an unprecedented move by a Board of an ASX 200 company, the CEO’s termination payment was severely curtailed, and immediate action taken to stamp out any other instances of sexual harassment within the organization. This made front page news of major metropolitan newspapers.

On July 2010. The St Vincent de Paul Society’s NSW State Council was placed under temporary administration by the National Council amid allegations of bullying and harassment by staff.

Workplace bullying and sexual harassment are now front and centre issues in boardrooms across the country.

Workplace bullying is often defined as “repeated, unreasonable behaviour directed towards an employee or employees that creates a risk to health and safety”. However, bullying can be isolated one-off event.

Over the past two years WorkCover has investigated 1,165 complaints relating to bullying and WorkCover’s statistics show there have been around 2,400 workers compensation claims relating to bullying costing a total of more than $60 million.

WorkCover’s renewed focus on workplace bullying and harassment reflects the huge emotional and monetary toll that workplace bullying can have on employees alike.

The daily costs for employers of workplace bullying include: decreased productivity; low employee morale; increased absenteeism; and increased staff turnover. Reducing these costs should, on its own, be enough incentive to prioritise prevention of bullying.

Employers seeking simultaneously to improve productivity and to avoid the scrutiny of WorkCover, can draw lessons from the outcomes of recent high profile bullying and harassment cases.

Perhaps ominously for employers, the three decided cases summarised below are from three different areas of law: workers’ compensation; occupational health & safety; and unfair dismissal. While the statement of claim in the fourth case has been publicly available, the other case is yet to playout in a court.

Workers Compensation (workplace negligence)

The recent workers’ compensation case of Bailey v Peakhurst Bowling & Recreation Club Ltd [2009] NSWDC 284 (3 November 2009), also sends a clear message to employers about the seriousness of workplace bullying.

Justice Levy of the NSW District Court found that due to severe and sustained workplace harassment and bullying buy her supervisor at the Peakhurst Bowling & Recreation Club, Ms Bailey, a bar worker, would never be able to work again. Justice Levy awarded Ms Bailey damages of $507,500 plus costs. The bullying occurred over a period of two years and included the following conduct:

• repeated indications by Ms Bailey’s supervisor that her employment was precarious or in jeopardy;
• use of “extremely vulgar language” in Ms Bailey’s presence;
• placing undue pressure on Ms Bailey by causing her to repeatedly break liquor licensing laws;
• demanding that Ms Bailey resign from her union;
• changing Ms Bailey’s shifts from day to night including on Christmas Eve; and
• wrongfully implying that Ms Bailey was responsible for an alleged shortage in the cash float at her cash register.

Occupational Health & Safety

One of the most widely publicised recent bullying cases is the prosecution by WorkSafe Victoria of the employer which operated Café Vamp in Melbourne after and ex-employee committed suicide following “relentless bullying” at the hands of her fellow café staff.

The employer was fined $110,000 for breaching its obligations under the Victorian Occupational Health & Safety Act (Victoria) (“Victorian OHS Act”) to provide and maintain systems of work that are safe and without risks to health.

The company’s director was fined $30,000 in his capacity as director for failing to provide information, instruction, training or supervision to prevent risk.

Perhaps most significantly is that three fellow employees including one manager were fined $45,000, $30,000 and $10,000 respectively for breaches of the Victorian OHS Act which imposes a duty upon employees to take reasonable care for their actions to prevent risks to the health and safety of other persons. In Victoria and New South Wales, the prosecution of employees for safety breaches has, until now, been very rare.

Again, while the employees engaged in the bullying conduct, the employer allowed a culture of bullying to flourish at the café and did not take any steps to investigate or prevent the bullying. The individual liability of the employees and the high penalties awarded appear to show an intention to send a clear message to employers that workplace bullying and harassment is an issue which must be taken extremely seriously.

Unfair Dismissal

Failure to investigate allegations of bullying was a key issue in the recent unfair dismissal case of Adam James Harley v Aristocrat Technologies Australia Pty Ltd [2010] FWA 62. In this case, Mr Harley successfully argued that he was constructively dismissed from his sales role having received a “show case” letter from the company and being required to attend a meeting with management to respond to allegations of alleged poor performance.

Fair Work Australia (“FWA”) found that Mr Harley had been subjected to a course of harassment by his manager which culminated in the company’s attempt to terminate his employment. Despite Mr Harley making complaints about his manager’s constant criticisms, the company did not take the complaints seriously, and did not investigate the complaints.

FWA found that the Applicant had been unfairly dismissed and awarded the maximum of six months’ compensation to Mr Harley. FWA was particularly critical of the company’s Human Resources department for failing to investigate the matter, despite being a large multi-national company with ample resources including a dedicated human resources team.

Trial by media

The recent allegations of sexual harassment made by a female staff member from a high profile company marketing department against its CEO resulted in a shock resignation from the CEO, who had been widely regarded as one of Australia’s most talented executives.

When announcing his resignation, the CEO released a statement acknowledging that he had ‘acted inappropriately’ towards the staff member at two company functions and as a result had ‘inexcusably let down the female staff member’.

The company lost the CEO who helped quadruple the company’s market value during his seven years reign. The company’s share price plummeted in the immediate wake of the resignation announcement. Arguably, the brand, which had been carefully crafted for over a century, suffered the most damage. A company with a predominantly female customer base. 70 per cent female staff, and many female shareholders, could not have relished the extensive publicity surrounding the resignation.

Some commentators have praised the Board of the company for acting promptly and for paying out a relatively small termination payment to the CEO, allegedly stripping him of significant share entitlements. Other commentators have praised the CEO for publicly acknowledge his inappropriate behaviour and resigning.

The company’s quick, public, and seemingly decisive steps should be of particular interest to employers. According to statements issued on behalf of the company, it is conducting and independent inquiry into sexual harassment within the company and has created an anonymous hotline for employees to report instances of harassment. These measures appear to be positive steps, designed to avoid a large damages award to the complainant. However, allegations if proven, that sexual harassment at the company was commonplace, or that there were previous complaints which were not properly investigated or resolved may prove problematic for the company. Employers “must do” list.

The above cases show that an employer must negotiate through a maze of obligations it has to its employees. With the economic, social and legal costs and risks so high, what should employers do to ensure they maximise productivity and do not get caught in WorkCover’s nine month campaign or face similar situations to those detail above?

• Develop policies which specify what types of workplace behaviour will not be tolerated and the consequences of breaching these policies.
• Policies and the corresponding processes should allow confidential internal complaints and thorough and transparent investigation processes so that any complaints can be dealt with promptly, discretely and thoroughly.
• Policies must be reviewed and updated regularly and adapted to suit the needs of the employer and its employees.
• The policies must be enforced consistently and fairly. Best practice is to ensure good workplace behaviour is part of the employer’s culture.
• Employers should ensure that policies are supported by training so that employees understands the subtleties and consequences of poor workplace behaviour.
• Employees must know they can make a complaint about a fellow employee regardless of seniority or status within the organisation.
• Management and human resources staff must be properly trained to investigate and handle complaints appropriately.
• Employers should keep detailed records of any complaints, investigation of complaints and the outcome of complaints including contemporaneous meeting notes and copies of all correspondence.
• All complaints should be investigated promptly and taken seriously.
• Finally, complaints, alleged perpetrators and any witnesses should be treated with respect at all times. All parties should be afforded procedural fairness.