This is a paper I presented at the Lexis Nexis 5th Annual Industrial and Workplace Relations National Conference 2011 Venue: PARKROYAL Hotel Darling Harbour

1. A star from the early Hollywood movies, Mae West was once asked “What is the problem with today’s youth?” To which she lasciviously answered, “The problem with today’s youth is that he doesn’t arrive until four  this afternoon.”   Under the Commonwealth’s Sex Discrimination Act 1984 that joke might be unlawful. That answer perhaps sums up the dilemma in the workplace of what is okay and what isn’t to discuss or do in the workplace in modern Australia

The definition of sexual harassment under the just mentioned Act is found in section 28A.

Meaning of sexual harassment

(1)  For the purposes of this Division, a person sexually harasses another person (the person harassed ) if:

(a)  the person makes an unwelcome sexual advance, or an unwelcome request for sexual favours, to the person harassed; or

(b)  engages in other unwelcome conduct of a sexual nature in relation to the person harassed;

in circumstances in which a reasonable person, having regard to all the circumstances, would have anticipated that the person harassed would be offended, humiliated or intimidated.

(2)  In this section:

“conduct of a sexual nature” includes making a statement of a sexual nature to a person, or in the presence of a person, whether the statement is made orally or in writing.

1. Cases involving allegations of sexual harassment are not new and regularly occupy significant  space, not just in the law reports, but most particularly in the newspapers and the electronic media.  High profile cases, whether it be involving an ex- President of the United States of America, the President of the International Monetary Fund or the Prime Minister of Italy reveal the problem.  Courts are often called upon to deal with such issues.  What might be acceptable in one era or in one workplace may not be acceptable at another time or elsewhere.  Sometimes the line between behaviour which is acceptable and that which isn’t is difficult to determine.  The criminal law, common law principles relevant to the workplace, such as the duty to provide a safe workplace are relevant, as are the statutory prohibitions against discrimination and harassment.
2. Despite recent cases to which I shall refer in a moment, the identification of unwelcome behaviour of a sexual nature has been around for quite some time.  A celebrated case in the USA dealt with one of the world’s largest law firms ,that is Baker & McKenzie.  A claim was brought by a legal secretary against one of the firm’s superstars, Martin Greenstein.  Mr Greenstein, at the time, was one of the firm’s top income producing partners.  His new secretary was failing in her work.  However, a few weeks into her mistake ridden employment, both she and Mr Greenstein attended lunch at a Sizzler restaurant.  It was alleged by Ms Weeks that outside the restaurant Mr Greenstein grabbed her breast while dropping M&M candies into the pocket of her blouse.  He is then alleged to have held her arms behind her back, thrust her chest forwarded and demanded to know which one of her breast’s was larger.  These charges were denied.  Ms Weeks’ lawyer, in the opening statement to the California Court said that Mr Greenstein had a pattern of harassing women which behaviour was well known amongst the Baker & McKenzie offices, whose  partners and executives tolerated him and on occasions covered up his behaviour.  It was alleged his behaviour was not only well known, but also had been  getting worse and virtually nothing was done to stop it by the firm.  Mr Greenstein’s lawyer, in his opening address said many of the claims against his client “were the result of men and women reviewing the same event from different perspectives”, part of the recent “uncertainty” about “what is okay and what is not okay in the workplace.”  He said the charges were brought by Ms Weeks because of her panic at failing at her new job and that she was “bra less” on the day of the departmental lunch.  Baker & McKenzie, in its defence said the firm dealt appropriately with all the allegations, transferred Ms Weeks to another department and sent Mr Greenstein to counselling.  However, once the court case had commenced other women who had been the subject of Mr Greenstein’s unwelcome attention stepped forward.  However, prior to this happening the firm had described Ms Weeks as a “bounty hunter” with “an extraordinary imagination” and had “irrationally misunderstood behaviour that others had found to be perfectly normal.”  However, this defence fell apart according to internal memoranda kept by the firm about Mr Greenstein’s behaviour over a prolonged period of time.  Punitive damages in the matter of $US6.9 million were awarded against Baker & McKenzie.  The case  not only  in America, but internationally, provoked considerable comment, particularly keeping in mind this was a legal firm which in itself had a set of sexual harassment policies, and advised their clients about such matters.
3. In an article in the New York Times published in July 1994, strategies were discussed as to how to nip such problems in the bud.  The head of a Boston-based consulting firm, Fraeda Klein who conducts retreats for law firms, says she often starts with this rhetorical question to partners at such events, “If you heard tomorrow that you were being sued for sexual harassment, who would you guess the charges were against?”  Such a question was meant to shock, but was also to set in train questions which should be continually asked amongst senior managers and partners, not just at law firms but in all places of employment.  She suggests that the people at such conferences know who is crossing the line, to which she has the obvious follow up question, “Why haven’t you dealt with it?”  To which she hears such answers as, “That’s his style. That’s none of my business.  He had a hard year because his wife left him.  Our clients love him.  We haven’t had a complaint.  Or that really isn’t sexual harassment, is it?” Sexual harassment cases in the US have become significant area of employment law practice with one Californian firm of attorneys with a web site simply called www.nosexualharassment.com . The web site lists some of its more spectacular verdicts in such matters.
4. The old adage of those who forget the past are doomed to repeat its mistakes certainly has currency when one considers the two most recent high profile sexual harassment cases in Australia.  Both of these settled, not without considerable publicity generated prior to resolution.  The allegations in each of the cases revealed similarities to the Greenstein case involving ignorance of how the modern workplace has changed, acceptance of  high-flying executives’ behavioural quirks, and how on one view innocuous events might be misinterpreted or be used to challenge legitimate  performance issues.
5. The first case I look at is Christina Rich v PricewaterhouseCoopers.  Ms Rich was one of PwCs’ most senior female partners, earning close to $1million  a year when she took the extraordinary step in 2005 of suing the firm for $11million in the Federal Court.  After a lot of interlocutory skirmishing and a marathon mediation the parties in October 2009 released a joint statement which read,

“After a mediation with PwC on March 20, 2008, Christina Rich has withdrawn the legal action initiated against PWC in the Federal Court by Ms Rich in October 2005.

Ms Rich’s intention in pursuing her complaints was never to cause stress or concern to any individual, including Mr Stuart Edwards, and she regrets if any such individual has suffered such distress.  Ms Rich accepts Mr Edwards denies the allegation against him, including his denial he placed notes under the door at the Santa Monica conference and accepts that it was his belief that the kisses on the cheek were platonic.  Equally, PwC regrets that this has been a stressful time for Ms Rich.”

1. In an article in The Australian of 29 March 2008, it notes that Mr Edwards was Ms Rich’s boss.  Among the claims made by her was that he had adopted the practice of kissing her hello and goodbye – against her objections and suggested to her that when problems arose, “I just want to give you a big hug to make it better.”  Ms Rich had made other more serious allegations against other partners at the firm.  It was stated in The Australian article that the case, despite confidentiality terms, settled for many millions of dollars, considering her potential earnings per annum, the number of years she had been out of work, together with general damages.  It was clear that legal fees would have amounted to millions of dollars for both the parties, as the case had been going for four years.
2. The more recent case brought by Kristy Fraser-Kirk v David Jones against its CEO, Mark McInnes was also settled, not before it had been exposed to newspaper headlines over many months.  The attention no doubt not only was engendered by the size of the punitive damages claimed, but also the senior position held by Mr McInnes in probably Australia’s most important retail company.  Mr McInnes was the company face of David Jones as its CEO.  He was on  the A List of the social pages . Probably not helpfully to David Jones or to Mr McInnes Fashion designer, Alannah Hill,  reputively had described the $37million David Jones sex harassment case as a “glitch”, saying that she would have gone back to the flat of “hotstuff” former CEO, Mark McInnes “in a heartbeat”.  Like the allegations made against Baker & McKenzie’s, Mr Greenstein, it was alleged against Mr McInnes that he was a player which was known by David Jones which  put up with it on the basis that he was their star attraction.  The case settled  in a blaze of publicity although it is strongly suggested that  the punitive damages claim  formed no part of the case’s resolution.
3. These two cases, whilst not providing much by way of decided principle, do identify that such cases capture  the intense  interest of the media on the principle that sex sells and are  therefore often strategically  fought out  on court steps, by media release or background articles. I might add that a number of such cases are very  quietly  pursued outside the curial system on the basis that publicity ,for abundantly clear reasons, is not sought by any of the parties.
4. However, one recent case which has gone to hearing identifying some of the principles which may come into play was a Full Court  of the Federal Court decision called Employment Services Australia v Poniatowska [2010] FCAFC 92 a decision of 27 July 2010 with the majority judgment written by their Honours Stone and Bennett.  Ms Poniatowska had made a complaint that she had been the victim of sexual discrimination, racial discrimination and sexual harassment.  She had made internal complaints about these and alleged she received no satisfactory response or any investigation  carried out in relation to the complaint about offensive conduct.  A claim had been brought under the Sex Discrimination Act.  This was on the basis that the employer by dismissing her, had treated her in a discriminatory way, rather than what the employer would have done had she been male.  The trial judge found that the employer was confronted with a female who would not accept the behaviour of some co-workers, whose behaviour constituted sexual harassment in what is described as a robust work environment.  Further, the employer had not addressed her legitimate concerns. The trial judge Justice Mansfield in Poniatowska v Hickinbotham [2009] FCA 680 awarded damages which claims for pain and suffering ,$90,000[353],past loss of earning capacity $200,000[355].future loss of earning capacity $140,000 [356] future medical expenses $3000[357] and $30,000 for interest [360] plus costs [364]Leave was granted to either the applicant or to ESA to apply to have  the compensation or  have part of the paid by one or more of the other respondents[364] .No order was made for exemplary or aggravated damages[361] On a number of bases, the majority dismissed the employer’s appeal both on the challenge to the factual findings and the principles used by the trial judge.  The majority also found that it was apparent from the judge’s description of this working environment that on the evidence it was an environment in which women would be targeted and would be uncomfortable and accordingly, more likely to complain than would men.  That it was said would lead to a situation that a male employee of this company would not have been sexually harassed in the first place, nor would have found the work environment intolerable.  He would not therefore have been a complainant.  That is, Ms Poniatowska became a complainant because of her sex [112].
5. Another very important aspect and potentially expensive result of someone being affected by sexual harassment at the workplace comes under common law damages for negligence and/or under workers compensation legislation.  If someone is a known sexual harasser left unchecked and that person continues to act unlawfully towards employees that may establish common law negligence rights with tortious damages flowing.  In any event, workers compensation legislation does not require there to be negligence, but merely requires there to be an injury.  This issue was dealt with by Chief Justice Spigelman in State Transit Authority of NSW v Fritzi Chemler [2007] NSWCA 249 when he was dealing with an argument as to whether the perception of the events were real and could cause injury, even though the resulting injury may  not have  occurred  to a person of normal fortitude.  His Honour said this at [40]:

“In this area of law, as in negligence, the talem qualem principle is applicable. That is employers take their employees as they find them.  With respect to psychological injury there is a “egg shell psych”  principle which, like the equivalent “egg shell skull” principle is a rule of compensation not of liability.”

1. The element of foreseeability required by the law of negligence is not the basis of the “egg shell psyche principle” which  applies to claims for compensation under the Workers Compensation Act.  In that case, there was found to be no erroneous perception based on the conduct in the workplace which was found to have been proven at [47]-[49], where it was said:

“It also recognised that the evidence as found established conduct at work which could and was held to be causally linked with the perception of the respondent to psychological injury.”  [48]

1. Accordingly, in sexual harassment cases if there are grounds to establish that the alleged conduct did occur, notwithstanding the level or intensity of the conduct, if the perception ultimately causes psychological injury, then in workers compensation law and  in negligence where there is forseeability, the employer is liable for compensation and/or damages.However the statutory route set out in Poniatowska may be easier and potentially more remunerative for an applicant.
2. In advising your clients or your partners one needs to not only to have policies in relation to sexual harassment which identify it for what it is but also training as to how to detect it ,properly investigate it and stop it. If there is someone in the organisation or someone who deals with the organisation who could be a cast member on Sex Rehab with Dr Drew or someone  who  is a throwback to the era portrayed by the series Mad Men you could have a problem.

This is a speech given by Justice Handley at the book lauch of  “The Law of Unfair Contracts in New South Wales” in November, 2003.

“I would like to thank Jeffrey Phillips SC and Michael Tooma for inviting me to launch their book and thus continue my association with the Commission’s jurisdiction over unfair contracts.

Their book has arrived at an opportune but critical time. In Mitchforce v Industrial Relations Commission the Court of Appeal gave judgment on 13 June this year differing, by majority, from the Full Bench of the Commission in holding that a long-term private lease of a hotel was not a contract whereby work was performed in an industry. The government also appears to be considering legislative amendments which would reinstate the jurisdiction of the Court of Appeal to review for jurisdictional error and exclude commercial contracts from the ambit of s.106.

The authors have had to deal, almost at the last minute, with the judgments of the Court of Appeal in Mitchforce and have had to do a lot of re-writing. Other well known authors have had a similar fate. Harvey MacGregor had a new edition of Mayne on Damages at the proof stage in January 1961 when the Privy Council gave judgment in The Wagon Mound [1961] AC 388, in an appeal from NSW, which changed much of the law of damages overnight and major revisions of his text were necessary.

The authors examine the historical antecedents of the Commission’s jurisdiction in the common law, in equity and in legislation dealing with money lending and hire purchase agreements. Thus there were already some remedies for contracts that were unfair, harsh and unconscionable, but that tautological trinity, to use the words of Sheldon J, has rightly taken on new life in this legislation. An important reason for the vitality of the jurisdiction was and continues to be the culture of the Commission and its predecessors. Because of its award making functions the Commission is accustomed to overriding contracts and imposing fair minimum terms on parties to contracts of employment. One could say that it is varying contracts of employment almost daily. This is in marked contrast with the ordinary courts whose normal function is to enforce existing contracts in accordance with their terms.

It is not surprising then that the powers given by this legislation to the Commission have been vigorously exercised. On the whole the superior courts have supported this jurisdiction and most jurisdictional challenges have failed. Indeed in Stevenson v Barham (1977) 136 CLR 190 the Court of Appeal and High Court took a wider view of the jurisdiction than the Commission had done and mandamus issued to compel the Commission to exercise its true jurisdiction.

One notable exception to this pattern was the decision in Production Spraypainting and Panelbeating Pty Ltd v Newnham (1991) 27 NSWLR 644 where the Court of Appeal held that the outright sale of a business was not a contract whereby work was performed in an industry. The High Court declined to grant special leave. Mitchforce may or may not prove to be another notable exception. On the 22nd of August the Full Bench reserved its decision on an application by the hotel owner to re-open its earlier decision. In due course the jurisdictional issues may reach the High Court.

The authors favour a wide view of the Commission’s jurisdiction, and robustly criticise all the judgments in Mitchforce including, would you believe, my own. They also criticise the judgments in Production Spraypainting. They have comprehensively and systematically collected and reviewed the Commission’s jurisprudence under s.106 and its predecessors. The book contains separate chapters on such important topics as incentive schemes, unfair terminations, franchise agreements, partnerships and relief.

It is surprising that after nearly 40 years of reported decisions on this legislation recently reported cases have shown that much uncertainty still remains. The authors have reviewed the recent case law in the Commission dealing with the application of the section to commercial agreements, its territorial reach, its application to employment covered by Federal workplace agreements, the relevance of post contractual unfairness due to changes of circumstances or unfair conduct and the relief available.

The book brings together and organises a large body of caselaw in the Commission and the superior courts. As a result it will, I am sure, prove invaluable to the judicial members of the Commission, other judges and the profession. The authors are to be congratulated for their efforts on our behalf.

I would like to make two final comments. Parliament has dealt with unfair contracts in different ways in two statutes. Section 106, in a statute dealing with industrial relations, can be seen as part of the statutory safety net for the protection of employees and others who work in an industry in New South Wales. For this reason I believe that the philosophy behind the relief granted by Hungerford J in Mitchforce was wrong. It seems to me that it is no part of the function of s.106 to protect entrepreneurs as such or to underwrite their business contracts.

In Mitchforce I said in paragraph 196 of my judgment that when jurisdiction was attracted in that case “the appropriate relief … was to treat the Starkeys from that time onwards as managers employed at a salary and to write off the arrears of rent, rather than to adjust the contract so as to restore to them the chance of profits and a capital gain with the risk of further losses … It might have been thought that relief of [the latter] kind was more appropriately granted, if at all, under the Contracts Review Act …”.

I do not think that the authors have taken up this point and perhaps for good reason. Nevertheless it seems to me that a working entrepreneur who has been unsuccessful should not get relief under s.106 as an entrepreneur but only as a quasi employee.

In the truck and work cases the quasi employer attempted to convert an employee into an entrepreneur and the relief reversed the process and treated him as an employee. The contractual arrangements that were avoided transferred business risks to someone in the position of an employee who realistically and fairly should not have been asked to assume those risks. The Commission’s orders transferred those business risks back to the real entrepreneur leaving the person who did the work with fair remuneration as if he had been an employee.

If this principle is observed the section can continue to fulfil its proper role as part of the statutory safety net in this State for persons who perform work in an industry.

My final point is based on the extraordinary popularity that this jurisdiction has enjoyed ever since that first decision in Agius v Arrow Freightways in 1965. The section was immediately perceived as providing a much needed remedy for injustice affecting persons who worked in an industry without the protection of an award. The overwhelming impression from reading the facts in worker and quasi-worker cases is that the defendants had indeed acted unfairly or even harshly and that right thinking members of the community would agree with this description of their conduct and with the relief granted by the Commission.

As Mr Justice Haylen said at his private welcome by the Bar Association the contracts of employment, and I would add of quasi employment, that workers make are the most important contracts they will make in their lives. In my judgment the practical results of the exercise of this jurisdiction in true worker and quasi-worker cases have been overwhelmingly beneficial and many injustices have been remedied that otherwise would have gone without remedy.

It is now my pleasure to formally launch Phillips and Tooma on “The Law of Unfair Contracts in New South Wales”.