Company vicariously liable for sexual harassment of employee

Rachel Drew

Holding Redlich Partner Rachel Drew and Associate Hilary Uhr discuss the recent Queensland Court of Appeal decision in Oaks Hotels & Resorts Limited v Knauer & Orswhich affirmed the reasoning of the below tribunals about the difference between principles of vicarious liability at common law and in the Anti-Discrimination Act 1991(Qld).

Hilary Uhr

On a related note, Holding Redlich Partner Ben Marshall will present on the topic, Strategies and Developments in Enterprise Bargaining and Industrial Disputation at conferences in Perth on Wednesday, 6 March; in Sydney on Friday, 8 March; in Brisbane on Wednesday, 13 March; and in Adelaide on Friday, 15 March.

The concept of what occurs “in the course of, or arising out of” employment is frequently contested when it comes to workers’ compensation claims and allegations of negligence.

Similar words appear in the Anti-Discrimination Act 1991 (Qld) (the ADA). A person (or company) will be vicariously liable for contraventions of that Act if a worker or agent contravenes the Act “in the course of work or while acting as agent” (s.133). The Supreme Court of Queensland recently considered how this phrase should be construed, in a case concerning sexual harassment.

Oaks Hotels & Resorts Limited v Knauer & Ors [2018] QCA 359 was an application for leave to appeal a decision of the Queensland Civil and Administrative Tribunal (the Tribunal), where the Tribunal found the company vicariously liable.

The case has some procedural history. The relevant events occurred in 2010 and concerned a hotel management company and its wholly owned subsidiary, a night caretaker, and a guest service agent. The night caretaker was a man of nearly 70 years, and lived onsite. He was a contractor with Oaks Hotels & Resorts Limited (the holding company). The guest service agent, Natasha Knauer, was a 21 year old woman, and an employee of Oaks Hotels & Resorts (Qld) Pty Ltd, an associated entity. The company arranged for the young woman to share the apartment of the night caretaker, and occupy a spare room.

On the first night that Ms Knauer stayed in the accommodation, she woke to find the night caretaker sexually assaulting her.

The assault fell within the meaning of sexual harassment in the ADA. The victim commenced an anti-discrimination claim in the Tribunal, seeking compensation for psychiatric injury and economic loss. The proceedings were subject to non-publication orders and the parties given pseudonyms.[1]

The central question for determination was whether the sexual harassment occurred in the course of the work of the night caretaker.

Vicarious liability is defined in section 133(1) of the ADA as:

If any of a person’s workers or agents contravenes the Act in the course of work or while acting as agent, both the person and the worker or agent, as the case may be, are jointly and severally civilly liable for the contravention, and a proceeding under the Act may be taken against either or both.

Member Fitzpatrick found that the Oaks Hotels & Resorts Limited (the holding company, under the pseudonym JKL Limited) was vicariously liable for the night caretaker’s actions and breach of the ADA.

Oaks Hotels & Resorts Ltd (JKL Limited) appealed that decision to the Appeal Tribunal.[2] It was argued that to find vicarious liability in these circumstances would be to impose a form of strict liability on principals whose employees or agents committed acts of sexual harassment.[3] The Appeal Tribunal rejected this proposition, reasoning that in the context of anti-discrimination legislation:

    • the phrase is not to be construed in the way “similar but different” expressions have been construed in tort law and workers’ compensation law. In those areas of law, it is required that there is some “close or significant connection with the carrying out of a work activity by the perpetrator”[4]
    • to fall within the course of work for the purposes of the ADA does not require the actual performance of a work task, and it is not necessary to consider the employer’s authorisation, permission nor facilitation of any act.[5]

The Appeal Tribunal dismissed the appeal.

Queensland Court of Appeal

Oaks Hotels & Resorts Ltd then appealed to the Queensland Court of Appeal. The central contention again concerned the meaning of the words “in the course of work”. Oaks Hotels did not contest the fact that its contractor had breached the ADA, but contended that the Appeal Tribunal erred in law in finding that the conduct occurred in the course of work under the night caretaker’s contract for services.

Fraser JA, Gotterson JA and Bond J agreeing, dismissed the appeal. Fraser JA, in his reasons, rejected the applicant’s propositions that “work” requires some kind of active obligation, that “passive” obligations were not in the course of work, and that the night caretaker, at the time of the sexual assault, was not actively working because he was not responding to a call, alarm or incident.[6]

At [13], Fraser JA disposed of this argument with the following example:

“… it seems most unlikely that, for example, although s 133(1) imposes vicarious liability upon an employer whose employee sexually harasses a passer-by whilst painting a building, it would not apply whilst the painter is waiting for a co-worker to finish some task which is required before the paint may be applied”.

The Court of Appeal affirmed the reasoning of the below tribunals regarding the difference between principles of vicarious liability at common law and in the Anti-Discrimination Act.

Under the ADA, “in the course of work” is a broader concept, and is to be interpreted in light of the purpose of the Act, which is to remove certain anti-social conditions, including sexual harassment.

Key points

    • vicarious liability was established where the perpetrator was a contractor of one company and the victim an employee of a separate but associated entity
    • the concept of “in the course of work” in anti-discrimination legislation is not the same as in workers’ compensation and tort
    • the prohibition on sexual harassment in anti-discrimination legislation is remedial in nature, and to be interpreted broadly
    • whether or not an employer is vicariously liable for a breach of anti-discrimination legislation will turn on the facts of the individual case.

Rachel Drew is a highly experienced workplace lawyer specialising in employment & industrial relations issues, including industrial bargaining, workplace disputes, Federal Circuit Court & Fair Work Commission litigation, employee misconduct investigations, professional misconduct defence, business sponsorship and migration, defamation disputes, work health and safety, contract disputes, discrimination, managing discipline and dismissal, and transmission of business. Rachel has extensive industry experience in government, education, medical & allied health and construction & resources sectors. She is a certified professional member of the Australian Human Resources Institute and also a Registered Migration Agent specialising in successful business visas. Rachel’s specialties are: workplace law, workplace misconduct and employee conduct investigations, Federal Circuit Court & Fair Work Commission disputes, business migration, industrial relations, public sector employment, and work health and safety investigations. She is selected for inclusion in the Asia Pacific Legal 500 Publication for Corporate/M&A, and selected for inclusion in Best Lawyers: Australia (2014-2019) for Labour and Employment. Contact Rachel at or connect via LinkedIn

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[1] STU v JKL (Qld) Pty Ltd & Ors [2016] QCAT 505
[2] JKL Limited v STU & Ors [2018] QCATA 29
[3] JKL Limited v STU & Ors [2018] QCATA 29 at [103]
[4] JKL Limited v STU & Ors [2018] QCATA 29 at [103]
[5] JKL Limited v STU & Ors [2018] QCATA 29 at [105], referring to relevant considerations in tort and workers’ compensation
[6] Oaks Hotels & Resorts Limited v Knauer & Ors [2018] QCA 359 at [10], [13]

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